Dairy gets squeezed by the feds

In its 85 years of existence, Smith Brothers Dairy in Kent has survived all manner of misfortune and mistakes.

There was the Depression, when milk sales plummeted. There were cow-killing floods. There were modern times, when it appeared the old-fashioned idea of fresh milk delivered to the doorstep had died.

And there was the crackdown when society realized cow manure could be as toxic to fish as anything produced at a nuclear plant.

"None of that compares to this," says Alexis Smith Koester, 60, dairy president and granddaughter of the founder, Ben Smith. "This is the biggest threat we've ever faced."

She's talking about the federal government.

The U.S. Department of Agriculture has proposed new rules that could force Smith Brothers to either give up half its business or close up shop entirely, Koester says.

What are the feds trying to stop? They're trying to keep Smith Brothers Dairy from selling its milk for less.

And we call this a capitalist country.

The dairy, which is small enough that the president answered the phone when I called, is being punished for doing too much too well.

For 75 years, milk has been heavily regulated by price and marketing controls.

People who know more about it than I do say the system works well. It protects those who own only one part of the milk business — say, a farmer with cows but no milk-processing plant — from being gouged by big agribusinesses.

But Smith Brothers has always been exempt from these regulations because it is so independent. It does it all. It is one of only 11 dairies left in the Northwest that raise and milk the cows as well as pasteurize and bottle the milk.

Its business model is so antiquated that most dairies like it long since went under.

Smith Brothers survived by discovering that what was old is new again. Home delivery of milk is hot. Especially if people know who owns the cows so there's a guarantee no growth hormones were used.

Remarkably, Smith Brothers now delivers milk to 40,000 homes in and around Seattle, the most in its history. And it is so efficient it does so at the same or lower prices you get in many stores.

Yet the feds, backed by the biggest dairy processors in the West, want to force Smith Brothers and other do-it-yourself dairies to sell through the government-regulated system. They say this will help the small farmers who already sell milk to big processors.

But Smith Brothers, no milk monopoly with just 1 percent of the market, would have to pay subsidies to its competitors that exceed the dairy's yearly profit. Or it would have to break up its business, and no longer provide its unique cow-to-carton-to-doorstep service.

So what we have is the government, prodded by large corporations, saying it is helping small family farms by destroying one of our most successful small family farms.

Come to think of it, I guess that is American-style capitalism after all.

Danny Westneat's column appears Wednesday and Friday. Reach him at 206-464-2086 or dwestneat@seattletimes.com.