For the past sixty years, there hasn't been much good news for America's small dairies. Thanks to rising land costs and intensifying price pressures, the bucolic sight of cows grazing in the countryside has become ever less common. Since 1970 alone, the number of dairies has plunged an astounding 88 percent, to 75,000, according to the US Department of Agriculture. The consolidation means that factory-style dairies with between 1,000 and 5,000 cows have become increasingly common.
The one bit of encouraging news for small dairies has been the growing market among health-conscious consumers for unpasteurized milk and dairy products like yogurt, butter and cream. There may be a half-million or more raw-milk drinkers in the United States, with the number growing "exponentially," says Sally Fallon, co-founder of the Weston A. Price Foundation , which encourages consumption of raw milk for its healthful enzymes, bacteria and proteins.
Small dairies have rushed to meet this need via a completely new business model. Instead of selling milk in bulk to processors who offer take-it-or-leave-it prices of $1.50 to $2 a gallon, some small dairies sell directly to consumers at whatever price the market will bear, typically from $5 a gallon to as much as $10 a gallon. At those prices, dairy farmers actually begin thinking in terms of a long-forgotten word: profit.
In New York state, which regulates direct sales of raw milk to consumers by issuing permits to dairies, the number of raw-milk dairies with permits has doubled to twenty from ten in 2005. The same sort of minirevival has occurred in other states that allow raw-milk sales direct from the farm, like Pennsylvania and Massachusetts. In California--one of the few states that allow sales of raw milk via Whole Foods Market and other retail outlets--the largest raw-milk dairy, the 350-cow Organic Pastures Dairy Company, has seen its annual sales climb by 25 percent annually, to more than $5 million.
Arguing that raw milk isn't safe and that consumers must be protected from its dangers, some government regulators and legislators are targeting small raw-milk dairies for tough enforcement actions, focusing most intensively on dairies in New York and California.
State regulators have supplemented inspections by obtaining search warrants, pushing restrictive legislation and even threatening to throw dairy farmers into jail. They've been encouraged by the US Food and Drug Administration, which in a sixty-four-slide PowerPoint presentation  posted on its website last March, exhorted "everyone charged with protecting the public health to prevent the sale of raw milk to consumers...."
Barb and Steve Smith see New York's ever-harsher tactics against their tiny Meadowsweet Farm as closely related to the rising demand for raw milk. They obtained a raw-milk permit in 1997 because they were desperate to extricate themselves and their nine children from the commodity bondage that dominated their lives from the time they purchased the farm in 1995. "We figured by selling milk to the processor we were getting about $1 an hour for our work," says Steve.
The raw-milk option was slow going until 2005 and 2006, when demand began rising sharply. Anywhere from twenty to thirty customers would regularly visit their lonely outpost near Lodi, most of them from Ithaca, the home of Cornell University, which is about forty-five minutes away.
"But our customers always wanted more things raw--butter, kefir, cream," says Barb. New York's Department of Agriculture and Markets prohibits the sale of any raw dairy products except milk and cheese that has been aged at least sixty days.
The expanding customer demands coincided with what the Smiths say was a change in the department's inspection procedures, beginning in the summer of 2006. Minor violations like a tear in a screen door or excessive weeds outside the barn, overlooked in earlier years, now meant fines of a few hundred dollars and automatic thirty-day re-inspections.
One day in February 2007, they received four letters from Ag and Markets announcing violations and fines. On that day, Barb says, she and Steve concluded, "They were not giving us any way to achieve compliance."
Ag and Markets declined recent requests for comment about the Smiths' case, but last July, when a number of dairy farmers with raw-milk permits began complaining about intensified inspections, agency spokeswoman Jessica Chittenden told me, "Even though there is a demand for this product and we have regulations that allow for the sale of raw milk, food safety must come first. Therefore, we take our responsibility in safeguarding consumers from food-borne illness very seriously."
The Smiths decided over the next few months to pursue an increasingly popular avenue among dairies in states that don't allow the sale of raw milk or have very restrictive policies: issuing "herd shares" or "cow shares," legal agreements under which consumers acquire partial ownership of the dairy herd and receive milk and other dairy products from "their" cows.
While some state agriculture officials have challenged these arrangements, they have held up to legal tests in two major states. In Ohio, a small dairy sued the Ohio Department of Agriculture in 2006 over efforts to shut down its herd share, and won in state court. The Michigan Department of Agriculture last year backed off on seeking criminal charges against a farmer who formed a herd share for Ann Arbor consumers, in the face of widespread public opposition.
Last spring, the Smiths established a herd share, in the form of a limited liability company. Simultaneously, they gave up their raw-milk permit. They spread the word in Ithaca that buying shares in the LLC would entitle owners to raw milk and the other high-demand raw-milk products, along with delivery to easy-access drop-off points.
By the summer, they had 130 shareholders paying $50 each for shares, plus the equivalent of $6 a gallon for milk, in the form of fees to feed and house the cows; thirty more customers joined a waiting list for future shares. The Smiths were able to reduce their herd to fourteen cows from thirty, generating the same cash flow but with reduced fuel and feed costs.
New York's Ag and Markets immediately showed its displeasure by stepping up its inspection and enforcement efforts. In late August, the department notified the Smiths that fines for "unsanitary plant conditions" totaled $1,700 and needed to be paid within fifteen days to avoid legal action.
Arguing that they no longer had a raw-milk permit and were serving only private shareholders, the Smiths resisted. That led to steady escalation by Ag and Markets, including the quarantining in October of 130 quarts of yogurt, twenty bottles of buttermilk and five gallons of whole milk in the Smiths' cooler.
On December 13, with the support of the recently formed Farm-to-Consumer Legal Defense Fund , the Smiths filed suit against the department and two of its officials. They asked the court to allow members of the dairy LLC to continue to pick up their raw-milk products without harassment from regulators.
The same day, in the middle of a snowstorm, two Ag and Markets inspectors showed up to force the Smiths to dump the quarantined milk, yogurt and buttermilk into buckets while the inspectors poured in bleach. The inspectors returned yet again just before Christmas with a search warrant, but the Smiths' lawyer advised them to refuse the inspection since the warrant didn't allow for breaking into the Smiths' locked cooler.
The entire affair has evolved into a three-front legal battle: an additional Ag and Markets regulatory complaint to shut the Smiths' dairy, the Smiths' lawsuit and, most recently, a show-cause order in state court as to why the Smiths shouldn't be held in contempt for refusing to allow the inspectors access to their locked coolers. If the judge rules in favor of the state and if the Smiths continue to resist, they could be thrown in jail. At a hearing February 28, a state judge took under advisement both the state's request for a contempt finding and the Smiths' request to quash the show-cause order.
While New York agriculture officials have been fighting small dairies via regulations and the courts, California regulators have been fighting a legislative battle. There, the marketplace is much different, since retail sales of raw milk are allowed. But because of high capital costs and the state's tough regulations (for example, requiring automated bottling equipment), only two dairies serve the entire market.
Business was growing so quickly for the largest, Organic Pastures, that at one point last fall, the owner, Mark McAfee, said he was in negotiations with a venture capital firm for funds to significantly expand the dairy.
All that's on hold now. This past October, at the recommendation of California's Department of Food and Agriculture (CDFA), the State Assembly quietly passed tough new standards for nonpathogen bacteria counts that the two dairies argue could make a significant portion of their current milk production unacceptable. The chair of the State Assembly's Agriculture Committee said she hadn't realized the implications of the legislation, and last month she backed an effort to repeal the standards.
At hearings in Sacramento in January, about 700 raw-milk consumers showed up to back the repeal, and the Agriculture Committee unanimously passed it. But it died in the Appropriations Committee, where large-dairy and medical industry interests opposed what they termed a watering down of toughened food-safety standards.
The CDFA has already begun enforcing the new standards, and Organic Pastures failed two of its initial three tests. The dairy can continue selling raw milk, but if it fails one of its next two tests in the coming months, it could be forced to at least temporarily halt production. McAfee argues that the bacteria being measured, coliforms, have no bearing on milk safety, and that the state should focus its efforts on monitoring potential pathogens like E. coli O157:H7. "This is destabilizing; it's a game of harassment," he says.
His dairy and the other California raw-milk producer, Claravale Farm, have joined forces to sue the state and CDFA to block implementation of the regulations. Among their claims: a "denial of due process" because the tough standard "is not rationally related to a legitimate governmental interest."
While the FDA and most state agriculture and health authorities have for many years opposed raw-milk consumption and fill their websites with warnings about its dangers, the crackdown on dairies represents a change in tactics, says Pete Kennedy, a lawyer for the Weston A. Price Foundation. "They're now going after the supply side," he says, since growing numbers of consumers are ignoring the warnings.
Part of the reason for the growing skepticism is that Kennedy last year used the Freedom of Information Act to obtain data from the US Centers for Disease Control showing that from 1973 to 2005, an average of fifty-nine people became ill from raw milk each year--a drop in the bucket compared with the 14 million the CDC says are known to contract food-borne illnesses each year.
Absent a serious health risk, agriculture agencies are charged with encouraging expansion of local farming. New York's Ag and Markets says its "mission is to foster a competitive food and agriculture industry that benefits producers and consumers alike." CDFA says it "strives to support...innovation and agricultural diversity."
Hundreds of small dairies could benefit financially from agriculture department assistance in making the transition to raw-milk production. The Farm-to-Consumer Legal Defense Fund estimates it helps two or three dairies each week convert from conventional production to raw-milk herd-share legal arrangements. But when it comes to small dairies trying to take advantage of an opportunity to become viable businesses, mission statements seem to get tossed out the window.