Milk panel sets hearing on prices Crisis blamed on powder import

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AUGUSTA – With dairy prices at a 20-year low, the Maine Milk Commission Friday responded to what is being termed a dairy crisis by taking the first step toward raising what Maine farmers get paid for their milk.

MMC members, using a University of Maine study released last week which found that it costs Maine farmers $1.59 per hundredweight more to produce milk than any other New England producers, set a public hearing for Dec. 20 that will allow farmers to press their case for a minimum price increase.

There then will be a 10-day comment period and a decision on the raise will be made on Jan. 14. Too late to affect the January payments from milk processors, any raise would not be felt by farmers until February.

Consumers are not expected to be affected by the raise.

Although farmers at the meeting said they appreciate any raise, it may come too little, too late for some.

Maine Agriculture Commissioner Robert Spear said at the start of Friday’s meeting that Maine ranks second in the country for the rate of dairy farmers quitting the business. “We are in danger of losing a significant amount of farms this winter,” said Spear. He said that since the price paid to farmers has dropped 11 of the 12 past months, even large farms are now getting desperate.

Farmers have been getting between $11 and $12 per hundredweight for their milk over the past year.

Fairfield dairyman Brian Wright was at Friday’s meeting. “It costs me $3 more than I’m getting paid to make the milk,” he said. “If it goes up $1.59, I’m still losing money, but it might help me survive until the prices come back up.”

The Maine Milk Commission action comes on the heels of farmers dumping thousands of gallons of milk into a manure pit in Fairfield two weeks ago in protest of milk prices that are below what it costs to produce the product.

“The past year has been a financial disaster,” said Ralph Sayer, a dairy farmer from Canton. “We’ve had a 36 percent drop in income this year combined with a 103 percent increase in expenses. We couldn’t afford diesel and didn’t want to take credit because we didn’t know when we could pay it back, so we just set the tractors in the field.”

Although raising the minimum price will bring some relief to Maine’s farmers, other action is being considered. The state’s congressional delegation and agriculture officials are working to slow the importation of a dried milk protein that is flooding the market and dropping the demand for U.S. milk.

At Friday’s meeting, MMC members briefly discussed a bill that will be proposed in the next legislative session to mount a four-cents-per-gallon handling tax on milk purchases. Dairy officials estimate that such a bill could bring $1,656,000 into the general fund, based on 41.4 million gallons sold in Maine annually. While such a tax would put money into the general fund, dairy industry officials are planning to ask for emergency farmers payments to help balance the fluctuating market.

Although the two proposals cannot legally be linked, they are mutually beneficial.

Powder import blamed

Milk protein concentrate, a little known ingredient in many common prepared foods that is being imported in massive amounts, is being blamed by farmers for the plummeting milk prices. Although Maine consumes most of the milk it produces, it does export milk and it does compete for price on the open market.

As more and more milk protein concentrate is imported, less and less U.S. milk is required. This situation has created an artificial surplus which is actually a case of diminished demand. Congress is being heavily lobbied by the dairy industry to place tariffs on MPC imports to give American farmers a level playing field. By allowing MPC to flood the U.S. marketplace, farmers said the government has shot the American farmer in the back.

Maine’s agriculture leaders and U.S. senators are working to implement such tariffs.

Sen. Susan Collins said, “It doesn’t make sense to allow foreign producers, especially ones that subsidize their dairy industry, to exploit a loophole in the law while our domestic producers are struggling under a depressed market.”

MPC is imported from 33 countries. In 2000, imports from Canada, from the provinces of Quebec and Ontario, equaled a line of tractor-trailer trucks 268 miles long, according to an industry expert. The U.S. General Accounting Office said 805 metric tons were imported in 1990, while 44,878 were imported in 1999.

MPC displaces up to 25 percent of the domestic milk that would otherwise go into cheese production, say industry experts.

“The problem is twofold,” said Collins. “First, MPC is not covered by tariffs or quotas under the existing World Trade Organization agreement, because MPC is a relatively new product and its importation was not an issue when the agreement was completed in the early 1990s. Now that MPC is manufactured and imported like any other dairy product, this oversight needs to be corrected.”

Collins also recognized that many countries are blending nonfat dry milk powders and other dairy proteins and passing them off as MPC to avoid the tariff on nonfat dry milk.

Proponents of a tariff also point out that MPC imports increase the cost to taxpayers of dairy safety net programs. Since virtually all of the blended product imported into the U.S. is heavily subsidized, U.S. farmers are forced to compete on a playing field that is not level. The taxpayers bear part of the cost of the unfair trade policies of some other countries.

Legislation stalled

Legislation to install a tariff on MPC has been languishing in congressional subcommittees since March 2001. Sen. Mark Dayton, D-Minn., proposed some of the tariff legislation. “Once again, we open our doors on these trade policies and we let others come in and bankrupt our farmers,” he said. “Then we say, ‘We’re for free trade and fair trade’ when we’re not engaged in either.”

According to the National Milk Producers Federation, the limits imposed by Dayton’s bill would increase dairy producer income by $694 million during the next 7 years.

According to Peter Hardin, editor of The Milkweed, a dairy marketing report for farmers, MPC is currently being imported from, among others, Canada, Mexico, Russia, Spain, Sweden, United Kingdom, Japan, Italy, India, France, Germany, and China, with New Zealand and Australia being the two largest importers.

Dairy imports rose from 3.1 percent in 1995 to 5 percent in 2000, according to the National Milk Producers’ Federation. Some specific products rose by 154 percent.

“Imported products such as MPC and butter substitutes were rarely seen less than a decade ago, but now we are bringing in larger quantities of them and those products are displacing similar domestic products. Over time, these trends reduce U.S. farm income and the U.S. dairy market,” said Jerry Kozak, NMPF president.

Kozak said, “The U.S. Customs Service is the gatekeeper for these imported dairy products, but they’ve been asleep at the switch on this issue for too long.”

What does this mean to Maine’s 412 dairy farmers?

Crisis prices for their milk – prices at a 1978 level – said Robert Spear, Maine’s Agriculture Commissioner. Ten percent of Maine’s dairy farms went out of business over the past twelve months and the future doesn’t look any brighter.

Sen. Olympia Snowe said Friday that she is a co-sponsor of the legislation to place a tariff on MPC imports.

“Foreign exporters are circumventing trade laws, causing milk protein concentrate to surge more than 600 percent in the past six years,” said Snowe. “I hope [a tariff] can assure a fairer return on milk prices for farmers in Maine and the United States.”