Maine legislators seek solution to milk prices

Posted April 14, 2009, at 8:25 p.m.
Last modified Jan. 29, 2011, at 7:26 a.m.

AUGUSTA, Maine — All 186 Maine state legislators have signed a resolution asking Congress to fix what they call a broken federal milk pricing system.

The resolution maintains: “The recent operation of the federal milk pricing program largely ignores the regional character of the nation’s primary fluid milk markets, including the different regional costs of production …”

It also calls the current milk pricing crisis a “broad and substantial threat to the public interest caused by this now chronically ineffectual national program.”

“This is a joint resolution that recognizes that dairy farmers up and down the East Coast need a base of support if they are going to stay in business,” dairy farmer and former legislator Walt Whitcomb said at a press conference at the State House on Tuesday.

Meanwhile, state legislators grappled with a shortfall in Maine’s milk subsidy program — the only one of its kind in the country — that could push even more farmers out of business.

“New England has lost a stunning 75 percent of its dairy farms since 1980,” Sen. Kevin Raye of Washington County said at the press conference. He said Maine’s subsidy program is “a state solution to a federal problem. Got milk? We do right now, and so we must take steps to ensure a continued supply.”

Milk is the only U.S. commodity that does not set its own price. The U.S. Department of Agriculture sets the price for milk monthly, based on the price of cheese at the Chicago Mercantile Exchange.

Raye said the price farmers are paid for milk has nothing to do with what it costs to produce it.

“The cost of production has gone up, the cost of fuel, fertilizer, feed and bedding has gone up, yet the price being paid our farmers is at 1979 levels,” he said.

Majority Leader John Piotti, D-Unity, said, “The failed federal price system has put dairy farmers across the country in jeopardy. Our resolution is not just about keeping farmers in business, but is about maintaining a fresh, local food supply.”

The bipartisan effort has the full support of Maine’s congressional delegation, Piotti said. “It is critical that we take a national role in this,” he said. “Maine can be a leader.”

Raye said that Maine’s dairy industry is “more than just milk. It is the stewardship of 700,000 acres of farmland, 4,000 jobs, $570 million of the Maine economy.”

Moments after the press conference, nearly two dozen farmers left and gathered before the Legislature’s Joint Standing Committee on Agriculture, Conservation and Forestry, to learn the latest cost-of-production statistics.

They were dismal.

A study by the University of Maine School of Economics revealed that it costs Maine dairy farmers between $24.51 and $16.73 to produce a hundredweight of milk. In March, they were paid $15.73. Dairy experts predict a slight increase by the end of the year to $18.50.

Dr. George Criner, the study’s author, said the majority of Maine farms fall in the small category, with fewer than 85 cows. Last month, those farms lost $8.78 on every hundredweight produced.

The cost of production survey is vital to Maine’s milk subsidy system, which kicks in when the price of milk drops too low, and its payments are based on the cost of production.

Because milk prices have crashed, there is an expected shortfall in the program and legislators have been grappling with funding the program at a full or reduced level.

The Maine subsidy is funded by the General Fund and offset by a fluctuating handling fee paid into state coffers by milk processors, such as H.P. Hood and Oakhurst.

Depending on the cost of milk, the fee can range from nothing to 36 cents a gallon.

The problem this year is that there will be an expected shortfall in the program. Estimates range from $5 million to $25 million depending on figures used and how much revenue the handling fee brings in.

The subsidy is based on the cost of production and categorizes Maine’s dairy farmers into three slots: small, medium and large. But that program has been based on 2004 figures. Criner’s new figures change the equation.

Legislators are trying to determine whether changing the subsidy program will save money, save farms and be more fair, or have the opposite effect.

Tim Drake, director of the Maine Milk Commission, presented the committee with a variety of options that included leaving the program as is, using the latest cost-of-production figures, cutting the program by either a graduated or straight percentage, or changing the program structure to make a separate category for Maine’s largest dairy farms.

Key to making those decisions were accurate revenue projections, which no one on the committee seemed to have.

After more than two hours of discussion and conjecture, Rep. Jeffrey Gifford summed up the panel’s frustration: “We’re just paddling in the water. We can’t do nothin’ because we don’t know nothin.’”

Rep. Wendy Pieh, D-Bremen, co-chair of the committee, said no one wants to cut the subsidies. “If we make cuts, it’s like passing out lottery tickets to see who will survive. But this is so complicated. We, ourselves, are confused and are getting different answers on revenue projections.”

She said she and co-chair Sen. John Nutting, D-Leeds, will meet with revenue administrators and bring accurate figures back to the full committee so a plan could be crafted to present before the Appropriations Committee, which will to act on funding the subsidy program in early May.

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