Maine milk fee enacted Tuesday

AUGUSTA – Broad bipartisan support allowed enactment Tuesday of the Maine milk-handling fee, an innovative program that provides a safety net for Maine’s dairy industry.

Maine’s proposal would assess a fee or tax on Maine vendors, not consumers, of about 5 cents per gallon of milk when the price paid to farmers drops below the federal level of $16 per hundredweight.

The fee proposal could generate about $4 million a year.

Dairy experts across the country have been keeping an eye on Maine’s program as other state’s look for dairy price solutions.

“This program was never conceived [in other states] until Maine considered it,” Robert Wellington of Agri-Mark, a dairy cooperative, said Tuesday afternoon. Wellington said the program will be particularly helpful in the coming months, when milk prices paid to farmers are expected to drop dramatically.

Maine has always led the nation in innovative agriculture solutions, Wellington said, including the creation of the Maine Milk Commission and a similar vendors fee, enacted 12 years ago, that was the forerunner to the Northeast Dairy Compact.

“All of these programs stabilize prices for the farmers,” Wellington said.

Although state legislators have been careful not to link the revenue from the handling fee to specific agricultural programs, it is no secret that the money that would be collected and funneled into the General Fund would be sliding out the other end to help farmers when prices crash.

The proposal passed 115-15 in the House and 33-0 in the Senate.

Sen. John Nutting, D-Leeds, who co-chairs the Legislature’s Agriculture, Conservation and Forestry Committee and is a dairy farmer himself, said, “The Legislature appreciated the fact that the bill was drafted so it only kicks in when we have a price drop.”

In 2004, milk prices dropped below the federal level six times, according to U.S. Department of Agriculture statistics. So far this year, the prices have dropped below that level twice. That means that the 12-cent fee would have kicked in for eight of the past 18 months. It is expected that wholesalers and retailers would absorb the fee and not pass it on to consumers.

Wellington said there are two situations that could have a serious impact on Maine’s dairy farmers by the end of this year: the opening of the border with Canada to cow importation and the increase in production in Western states.

“Milk production in the West is rising strongly again,” Wellington said. “They could easily drive the amount of milk 2 to 3 percent above demand by the end of this summer. If that happens, we historically would see milk prices paid to farmers drop by 20 to 30 percent.”

Wellington said that if the border with Canada is opened up for cow importation, which has been closed due to mad cow disease, the market would become further flooded, driving prices even lower.

“It could be a double disaster,” he said.

Nutting said that when the border will open is “the $64 million question. One day we hear it could be next month and the next day we hear next January. Who knows?”