Northeast dairy compact had little impact on farms’ decline, government report says

WASHINGTON – Price controls on milk in New England boosted the region’s farm income without significantly harming producers in other major dairy states, according to a congressional report.

However, the price-setting system has had little impact on the decline in farms in the Northeast, the General Accounting Office said Friday.

The New England dairy compact is set to expire Sept. 30 unless Congress agrees to extend it. Farmers in Minnesota, Wisconsin, Idaho and other major dairy states have strongly opposed the system, arguing that it would encourage overproduction and drive milk prices down nationwide.

Congress is considering proposals to expand the New England compact to include all Northeastern states and create a similar system in the South for milk.

The New England compact, which sets a minimum price that the region’s farmers must be paid for raw milk, caused a small drop in income for upper Midwest dairy farmers in 1999 of $4 million to $9 million in 1999, or 0.09 to 0.2 percent, the GAO report said.

Had the Southern compact and the expanded Northeast system been in place that year, Midwest farm income would have dropped more, by an estimated 0.6 percent to 2.9 percent, or $26 million to $133 million.

“This report confirms our long-standing concerns about dairy compacts: Farm loss continues, costs to consumers have climbed, and the upper Midwest stands to lose more than a hundred million dollars a year if its national dairy market is taken away,” said Sen. Herb Kohl, D-Wis., who requested the report.

But Daniel Smith, executive director of the commission that runs the New England compact, said the study showed that the price controls had only a marginal impact on other areas of the country.

“It’s hard by any calculation to conceive of any impact on the national market coming out of New England because of the small amount of milk that’s being regulated,” Smith said.

The commission says farmers have earned an extra $146 million since 1997 because of the price controls.

GAO agreed that some of that income is probably due to the compact but said that farmers likely would have received some of that money anyway.