Montana prison dairy herd reduced after losing Darigold deal

Seaborn Larson
Montana State News Bureau
Holstein cows are seen at the Montana State Prison dairy operation in May 2021. The Montana State Prison's work program has scaled down its dairy operation from 350 head to about 70, after Darigold ended a 30-year contract.

The last load of raw milk left the ranch outside Montana State Prison on Dec. 27, drying up a decades-long run for the prison's work program that was clipped by a shift in a single company's global commerce policy.

Last year Darigold, the product brand for a dairy cooperative headquartered in Seattle, canceled its 30-year contract with the prison, forcing the state's prison work program, Montana Correctional Enterprises, to scale down its dairy operation from 350 head to about 70, enough to produce milk to self-sustain the Department of Correction's facilities around the state.

Darigold ended its contract after one of its major customers said last year it would begin to phase out all products made with legal prison labor, according to the corrections department. 

In an email with the Montana State News Bureau, Darigold did not identify the customer, and spokesperson Erin Byrne said the company would not identify a customer by name. However, corrections' officials named Costco as the customer during legislative hearings. 

Costco's shifts in labor policies last year touched producers around the world, leading the company to even part ways with a Thai coconut milk producer accused of "forced monkey labor."

The end of the prison program's contract translates to a $1.5 million loss to the work program and a reduced work program for adult male inmates housed at the facility outside of Deer Lodge. A spokesperson for the Department of Corrections said the entire effect of the loss of revenue won't be fully known for about a year as MCE adjusts to the lower capacity.

"At this point, we do not know the entire effect of the loss of revenue as we are still adjusting our inventory levels for feed and supplement for the animals," DOC spokesperson Carolynn Bright told the Montana State News Bureau. "MCE Agriculture is 100% self-supporting and does not receive a general fund appropriation. Instead, the loss is to MCE proprietary funds."

Inmate Mark McGuire feeds a small group of Holstein cows at the Montana State Prison dairy operation in May 2021. The Montana State Prison's work program has scaled down its dairy operation from 350 head to about 70, after Darigold ended a 30-year contract.

Lawmakers in April approved a $1 million for a new venture to fill the gap. House Bill 637, sponsored by Joliet Republican Seth Berglee, did many things, among them establish a new program to raise pheasants at the prison. The allocation was a source of contention among lawmakers during the legislative process: some lawmakers would have rather seen that million spent on wildlife habitat, while Berglee and others argue the money is well spent on bolstering the state pheasant population on public lands, drawing more young hunters into bird hunting.

Montana Correctional Enterprises, a division of the state corrections department, is headquartered outside of Deer Lodge near the Montana State Prison. The work program, including dog trainings, products manufacturing and other services, provides training for approximately 700 inmates, according to MCE's website.

The agriculture operations raise beef cattle and crops, all utilized in-house, MCE Director Gayle Butler told a legislative committee in January. The dairy operation includes a processing plant that churns out non-fat milk, cottage cheese and yogurt. The majority of MCE's raw milk was sold to Darigold.

"We would pick up milk every other day and deliver it to one of their bottle plants across Montana or Idaho," Butler told the legislative budget subcommittee on Jan. 21. 

Inmates working the agriculture jobs stay in dorms outside the prison walls. Ross Wagner, agriculture director at MCE, likened the quarters to a pre-release center. Inmates apply for the open MCE jobs and have to be designated as minimum custody, clear disciplinary records and a high school diploma, or have completed their GED. If inmates are selected for the job, they sign a four-month commitment to the work and stay in the dorms. Thirty-three inmates and five staff run the dairy operation, Wagner said.

Inmate Billy Carter works at making vanilla ice cream at the dairy operation at the Montana State Prison in May 2021. The Montana State Prison's work program has scaled down its dairy operation from 350 head to about 70, after Darigold ended a 30-year contract.

"The guys that come out there, most of them would rather be working as much as possible instead of sitting in their (cell)," Wagner said.

The majority of the prison program's milk production went to Darigold, and in turn much of it ended up in Costco coolers. In 2018, Costco enacted a global policy on prison labor that allowed prison-made products so long as the inmates were paid a prevailing wage, with its first report in 2019. The next year, Darigold notified the prison it would not be able to meet the policy.

"There was no way DOC could accomplish this and remain economically viable as we are a training program," Butler told the committee. "We could operate our dairy with only staff but that does not provide the training and work programs needed for our offenders."

The Department of Corrections tried to appeal to Costco. In a letter to the company the department tallied up the inmates' wages, cost of room and board and health coverage, which included dental and vision, mental health services and savings for the inmates' re-entry after their sentence.

"All came to $22.16 per hour given all these factors," Butler said. "Unfortunately, that was not adequate."

Butler said state officials, too, contacted Costco in hopes they could sway the company, but the effort failed. The Department of Corrections also set out in search of a new partner to purchase the milk.

"After an exhaustive search, we were unable to find an alternate buyer and the dairy needed to reduce its milk production," Department of Corrections Director Brian Gootkin said in an email in March.

The work program sold off the cows, and began exploring new products that could be made at its processing plant. The dairy still produces other dairy products like yogurt and ice cream for the inmates.

Darigold is a marketing and processing subsidiary of the Northwest Dairy Association, a cooperative of 350 dairy producers in Washington, Oregon, Idaho and Montana.

We went above and beyond contract requirements and explored ways to continue, as well as gave MCE ample notice of this decision," Darigold spokesperson Byrne told the Montana State News Bureau in an email. "Unfortunately, the primary reason for this decision was due (to) the fact that MCE could not meet the official policy requirements of a major Darigold customer recipient of their milk.

"Our purpose is to create value for our customers and our Northwest Dairy Association farmer member-owners, including existing member-owners in Montana," Byrne continued. "In this case, certain business conditions existed that made the contract with MCE no longer viable."

The Montana corrections department and Darigold both referenced declining market conditions when asked to comment for this story. In 2020, the U.S. Department of Agriculture reported the number of dairy herds fell by more than half between 2002 and 2019, with an accelerating rate of decline in 2018 and 2019. COVID-19 also caused great uncertainty in the industry.

"Milk prices fluctuate, it's an ag commodity," Wagner said. "When the price of milk drops, we feel it just like anyone else does."

Inmate Tyler Kortan rakes out fresh bedding in a calf barn at the dairy operation at the Montana State Prison in May 2021. The Montana State Prison's work program has scaled down its dairy operation from 350 head to about 70, after Darigold ended a 30-year contract.

Ultimately, however, the department's bid to Costco to reverse its policies may have been too late. In a 2020 statement to investors, Costco said it was going to phase away from prison labor altogether due to "the reduced transparency of prison systems in general," which made it hard to reliably monitor the wages paid out to inmates. In its entire supply chain, Costco had identified 11 facilities that used prison work programs to make products sold on Costco's shelves.

A spokesperson for the Department of Corrections declined to comment when asked if reduced transparency was part of the discussion when Darigold notified the prison it would end its contract with MCE. Darigold likewise declined to comment on Costco's specific policy requirements MCE's dairy program failed to meet. A spokesperson for Costco also declined to comment when asked if any transparency issues with the Montana State Prison prompted the company's decision.

To backfill the reduced dairy operation, MCE will now develop the blueprints for raising pheasants as a new training opportunity for inmates. Just like the inmates, Wagner will be learning a new trade. 

"It's going to be a task, I guarantee you," he said.