Report: Dairy processors, supermarkets milk profits

Supermarket chains and dairy processors in New England have been gouging milk buyers ever since a price control program was created to keep small dairy farmers from going out of business, according to a University of Connecticut study released Tuesday.

The report, conducted by the university’s Food Marketing Policy Center, says about $50 million of the $130 million increase in milk sales across New England has been pocketed by the supermarkets and dairy processors during the first three years since Congress passed the Northeast Dairy Compact in 1997.

“They’ve been using the compact to widen their profit margin,” said Ronald Cotterill, Food Marketing Policy Cente director. “They took advantage of the compact. They’ve maintained that the bulk of the increases in milk prices has been because of the dairy compact, not because they’ve increased their profits.”

The compact is made up of the six New England states and is set to expire this fall unless Congress reauthorizes it. It boosts consumer milk prices in New England by setting a minimum milk price paid to area dairy farmers by dairy processors, who are trying to kill the compact.

Chris Flynn, president of the Massachusetts Food Association, which represents the state’s major supermarkets and dairy processors, said he had not seen the report Tuesday and could not comment specifically on its findings.

“The supermarket business is extremely competitive,” he said. “But the charges are something I’m highly suspect of.”

According to the study, milk prices increased from an average of $2.49 a gallon just before the compact to $2.78 a gallon by 2000. The increased profits by dairy processors and supermarkets account for 11 cents of the 29-cent increase, Cotterill said. In contrast, the increase caused by the dairy compact was 4.5 cents a gallon, he said.

“The processors have said they’re just matching the increases caused by the compact,” Cotterill said. “But they locked in a much higher retail price and were making huge profits.”

The study also blames higher milk prices on a monopolization of dairy processors. It singles out Dallas-based Suiza Foods Corp. for controlling about 85 percent of the supermarket milk business in eastern Massachusetts, eastern Connecticut and Rhode Island.

Amy Nelson, a Suiza spokeswoman, would not comment on the report and referred calls to the International Dairy Foods Association, a Washington-based lobbying group. Officials from the IDFA did not immediately return telephone messages left Tuesday by The Associated Press.

The UConn study didn’t surprise consumer advocates.

Connecticut Attorney General Richard Blumenthal said he and attorneys general from other New England states, including Massachusetts, plan legal action against retailers and dairy processors.

“There are too few producers and sellers of milk, and little competition allowing consumers to get better prices,” Blumenthal said.