New England, milked

The Northeast Dairy Compact, which since 1997 has established minimum prices for milk to help that farmers stay in business, has raised the price of a gallon of milk by an average of 29 cents during the last three years. No one much liked institutionalizing the price increase, but the added cost has been properly considered a fair exchange for the benefits it produced.

Now, a University of Connecticut study concludes that much of the added cost is produced not by farmers but through price gouging from supermarket chains and dairy processors throughout New England. If true – the New England congressional delegation should investigate this serious charge – the compact will turn out to have a much smaller actual cost for those same benefits, removing much of the complaint about it and giving Congress even more reason to reauthorize the compact this year.

Like agricultural supports across the nation, the dairy compact helps keep not only farmers in business but keeps the grain dealers, truck drivers and farm machinery sales people going too. Local dairy farms connect the region to an important part of its food supply and account for 1.3 million acres in New England, providing much-needed open space in the southern part of the region.

The UConn study, by Ronald Cotterill, director of the university’s Food Marketing Policy Center, was conducted independently the compact commission or any lobbying group. It concludes that during the first three years of the compact approximately $50 million of the $130 million increase in milk sales across New England is due to increased profits by the supermarkets and dairy processors. Another significant cost can be attributed to the exercise of market power by a few large supermarket chains and the dominance of just a couple of dairy processors.

For instance, almost all of Boston, Providence and much of Connecticut convenience stores and supermarkets get their milk from a single plant owned by Dallas-based Suiza Foods. The amount of increased cost attributed to the actual farms was a mere 4.5 cents of the 29-cent total.

Rep. John Baldacci, on the House Agriculture Committee, points out accurately that the compact is supposed to be between the farmers and shoppers. But consolidation, Professor Cotterill reports, has allowed that processors and supermarkets to widen their profit margins while blaming the increase on farmers. These results have provoked several state attorneys general to announce planned legal action against the retailers and dairy processors, according to Richard Blumenthal, the Connecticut attorney general. Maine’s AG, Steven Rowe, refused to comment on the issue.

For a Congress reluctant to continue a program designed to benefit small diary farmers against the larger agri-business of states to the west, the study should tell them that they have a lot less of a problem than they once did. After announcing the proposal to reauthorize the compact last Wednesday, Rep. Baldacci said that support outside New England, particularly in the Southeast, shows that the benefits of the compact are being recognized. Operated honestly, it could be a small cost for a significant benefit, providing help to farmers without costing consumers nearly as much as they are being currently charged.