June 24, 2013

Milk price proposals miss mark for Maine

Congress weighs a change that ends U.S. subsidies, but farmers here prefer a plan that could cost consumers.

By Kevin Miller kmiller@pressherald.com
Staff Writer

(Continued from page 1)

Today's poll: Milk prices

Should the federal government replace milk price subsidies even though an alternative could cost local consumers more?



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Filler operator Chris Roberts keeps a eye on controls at the Oakhurst Dairy plant in Portland.

John Patriquin/Staff Photographer

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Tom Brigham, co-president of Oakhurst Dairy in Portland, gets "quite involved" in dairy policy at the state level but not as much with federal policy. He said there is a consensus among Maine farmers that reforms are needed.

John Patriquin/Staff Photographer

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Milk remains one of the few agricultural commodities that, despite globalization, is often produced and consumed locally, especially in New England.

The towering silos visible at Oakhurst's Forest Avenue processing plant each holds 40,000 gallons of milk, all of which is currently supplied by a network of roughly 70 Maine farmers. Likewise, the other major processor still operating in Maine -- HP Hood's Portland plant -- is also currently buying all of its milk from Maine dairies.

Ten tanker trucks arrive each day at Oakhurst. Inside, empty one-gallon plastic bottles whiz along conveyer belts until they are filled in seconds by a machine, crated and prepared for delivery. From farm to retail store ideally takes 48 to 72 hours, said Oakhurst co-president John Bennett.

Maine's dairy industry is estimated to be worth $570 million annually and employs roughly 4,000 people. Farms range in size from a few cows to 1,500-head herds.

But there's a lot more to milk than meets the taste buds. Hidden behind each gallon is a labyrinth of milk classifications (with milk for drinking, yogurt, cheese and butter each given its own class), minimum price-setting schemes, and federal subsidies. Then there are price differentials based on how far a farm is from a regional hub, which in Maine's case is Boston.

Even the way milk is measured -- by the "hundredweight," equivalent to between 11 and 12 gallons -- can be confusing.

States add their own layers of complexity. In Maine, processors pay a premium of about 13 cents on every gallon that funds a farm support program. Maine taxpayers also finance a separate multitiered program that provides financial assistance at times.

"It certainly makes our business more complicated," Hood spokeswoman Lynne Bohan said of the myriad of state laws that the company must navigate.


Even so, all of this complexity has a simple, even noble goal, according to advocates.

"There's a common perception that the federal (pricing) system is designed solely to set prices for farmers, but I think the purpose ... is to ensure a reliable, safe supply of milk to consumers," said Dan Smith, a Vermont-based consultant involved in federal dairy policy for decades. "It's an old-school, New Deal program to establish regulatory cohesion (across) very different marketplaces to the benefit of consumers as much as to the benefit of farmers."

Neither Smith nor Cornell University agricultural economics professor Andrew Novakovic believes milk policies are as complicated as everyone makes them out to be. Compared with his taxes, federal milk policy seems fairly straightforward, Novakovic said.

That's not to say, however, that they couldn't be streamlined or improved. The question is not only how, but who should pay.

"When you stipulate that the problem is (that) farmers aren't getting enough money, well then, the question is how do you get them more money?" Novakovic said. "There are only two pockets you can go to: you can either go into the consumer's pocket (through higher milk prices) or you can go to the taxpayers' pockets."


Of course, it's an open debate about whether the current dairy price-support systems are helping the farmers who milk their cows -- twice a day, seven days a week, 365 days a year -- in order to satiate our appetite for all things dairy.

Some argue that the federal pricing policies and subsidy program should be scrapped altogether, thereby opening up the dairy industry to the free market.

Sallie James, a trade policy analyst at the Cato Institute, said she believes the myriad of policies are increasing the price that consumers pay for milk by essentially providing "welfare" to some farms, discouraging systemwide efficiency and restricting imports.

(Continued on page 3)

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Today's poll: Milk prices

Should the federal government replace milk price subsidies even though an alternative could cost local consumers more?



View Results


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