State Dairy Industry In Jeopardy

Author: Deborah Jones

Local artist Woody Jackson's 70 paintings of Holstein cows may best be known for gracing Ben and Jerry's ice cream containers, but they are also considered representative of Vermont's longstanding dairy tradition. Yet the pastoral culture of the state stands in a precarious position as the small family farms particular to the Green Mountains fall into unrecoverable debt. This issue has become increasingly important with the expiration of the Northeast Interstate Dairy Compact last fall.

What was the Compact?

The Northeast Interstate Dairy Compact legislation, which was denied reauthorization by the U.S. Senate, set the floor price of milk sold to processors by producers in New England states at $16.94 per hundred pounds of milk, or hundredweight, or $1.46 per gallon. These price supports were agreed upon by the participating states in 1996 with the intention of relieving dairy farmers of the burden of stable or rising economic costs of maintaining their businesses.

However, since the Compact affected interstate commerce, the ability to enforce its provisions constitutionally necessitated federal approval. For five years, New England states had the ability to set a floor price for fluid milk that sometimes fell above that established price by the federal government.

When the price was below that of regional law, processors — those using raw milk to make other products — were required to pay out the difference to the Compact, which then redistributed the money to the dairy farmers in accordance with their total milk production. In other words, the processors were responsible for 'filling in the gap' when federal prices fell.

Certainly, the processors were not as pleased as the producers about this agreement. Dan Smith, executive director of the Northeast Dairy Compact Commission, explained that substantial lobbying efforts by some of the larger processing companies played a key role in the Compact's defeat for reauthorization last fall. He lamented "companies' concerns with market power … and the way they keep Congress from understanding the real issue."

He noted, that the processors' protest is only one of three major reasons why the legislation failed. Smith also cited "opposition to the idea of giving states control over interstate commerce" and "internal Congressional opposition" as contributing to its downfall. For example, Midwestern states, particularly Wisconsin with its enormous cheese industry, were concerned that price supports on milk in New England states would negatively affect their business in that region.

What does the Compact's expiration mean for Vermont?

In a state like Vermont, where the dairy industry accounts for $1.9 billion in trade, the expiration of the Northeast Interstate Dairy Compact was met with substantial disappointment. A recent study estimated that the presence of the Compact curtailed the failure of dairy farms by up to two and a half times.

During the past decade, Vermont has been losing the equivalent of a dairy farm every four and a half days. It currently has just 1,522 farms left, half of what existed in 1985. Already economically depressed, the state's rural regions appear set to lose even more as farmers find it impossible to keep up with rising production costs as milk prices continue to fall.

Monument Farms in Weybridge, Vt., which provides all the milk in Middlebury College dining halls, has not been as affected by the expiration of the Compact as other producers because the company also operates a processor.

Treasurer Millicent Rooney explained that the company essentially operates as two firms in one in which the processing portion buys the raw milk from the actual dairy farm. Most producers sell their raw milk to a co-op that then sells it to processors.

Monument is one of just two independent processors in the state of Vermont. She stressed, however, that other dairy farms have been falling into tremendous debt as a result of the lowered price floor.

Currently, the statistical price per hundredweight of raw milk with average components is about $12.50.

"The Compact buffered the really strong dips in prices so that the dips weren't as deep and the normal high points were unaffected by the Compact," noted Jon Rooney, vice-president of operations at Monument Farms.. "Without the Compact, the price is $4.50 less per hundredweight this month than three months ago."

"If this is prolonged," M. Rooney continued, "it can be very detrimental to farmers. Four or five months of this and you still have to buy your feed … they're really going to be in a bind, especially coming up onspring."

Subsidies: an alternative solution?

Last December, raw milk prices dropped by nearly 20 percent while store prices remained stable. The U.S. Department of Agriculture expects prices to continue to fall throughout 2002.

In Washington, D.C., Vermont Senators Jim Jeffords and Patrick Leahy have been working to pass a new Farm Bill that would include subsidies for dairy farmers. However, many farmers are concerned that the majority of subsidies would only go to the enormous crop farms of the Midwestern and Southern states. An amendment passed by the Senate last Thursday aims to alleviate this problem by capping subsidies at $275,000 per farm, thus shifting funds away from large plantations and toward family businesses. The current cap is $550,000.

Nevertheless, many area dairy farmers consider subsidies a last resort after the failure of renewal for their Compact. Jon Rooney was critical of the proposed subsidy's use of taxpayer money. "It's a straight handout and it's subject to the whims of government whereas the Compact as established was a much more structurally sound manner of distributing the money. A handout just looks like a handout. There's no more foul word than subsidy."