Milk commission responds to national milk surplus

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(Host) Dairy experts say a national surplus will keep milk prices low for the rest of the year. The price forecast came as a state commission met recently to consider ways to boost Vermont’s troubled dairy industry.

VPR’s John Dillon reports:

(Dillon) The Vermont Milk Commission has the power under state law to regulate milk prices. But when the milk commission met last week, members decided price regulation wasn’t an option unless other New England states went along.

So the commission is supporting several short and long-term strategies to help farmers. The measures include a proposal to eliminate the statewide education tax on farm building, and expanding a low interest loan program.

Agriculture Commissioner Steve Kerr chairs the commission. He says his department recently looked at the spread between the prices paid to farmers, and the price paid by consumers at the grocery store.

According to the study, when wholesale prices fell sharply in December 2001, the price in the store barely fell at all. Kerr says the study shows that farmers’ profit margins have fallen, while retailers and processors have been able to boost their profits:

(Kerr) “Over the period of time that the time series reviewed, farmers share of the pie dropped 21 cents a gallon, where the combined share captured by the wholesale and retailer has risen by almost 27 cents. So it tells me is that they grabbed everything that the farmer lost, plus they got a few pennies besides.”

(Dillon) Milk processors dispute some of the state’s figures. John Thomas of Thomas Dairy in Rutland is a member of the milk commission. He says the state failed to take into account the extra premiums paid by many dairy processors. Thomas Dairy pays premiums for milk quality, and also pays local farmers more for not using artificial growth hormone on their cows.

Thomas says not all processors pay as much as his company, but all pay some premium above the federal wholesale price.

(Thomas) “And just lately, beginning with the February prices of milk, Thomas Dairy began a special premium to subsidize our producers. It’s tied to the new federal milk subsidy program, just to help our guys our a little bit until milk prices get a little better.”

(Dillon) Thomas says his side of the dairy business is competitive, and can’t do much to pay more for milk.

(Thomas) “The truth of the matter is the reason the price of milk is down is because there’s a surplus of milk. Now, there may not be a surplus in the Northeast, but the price of milk is a nationally set thing. And we have to keep a lid on how much milk we produce if we want to get top dollar for it.”

(Dillon) Dairy experts predict that wholesale prices will remain low through this year as the surplus continues.

Farmers are trying to confront the surplus issue. Agriculture Commissioner Kerr says one of the most exiting developments in the industry is a proposed voluntary program that’s aimed at getting farmers to make less milk.

For Vermont Public Radio, I’m John Dillon.

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