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Got milk? Don’t bet the farm on it.
Maine dairy farmers are accustomed to waiting for the cows to come home. Nowadays, they also wait for politicians in Augusta to decide if the state’s milk industry is worth keeping – and at what price. That decision also has ramifications for the University of Maine.
Maine’s dairy industry has declined steadily in the past few years. In 1996, there were 650 dairy farms in the state. Today, the number is less than 400 and still dwindling.
Plummeting milk prices are a primary cause for the thinning number of Maine farms. Under the Northeast Dairy Compact, which expired in 2001, farmers were guaranteed $1.65 of every gallon of milk sold. After the compact expired, their return on a gallon of milk fell to $1.10. Decreased revenues and ensuing financial burdens have survivors discussing the sale of their farms.
One theory states that after Sept. 11, 2001, with a weakened economy, fewer people were eating out.
“The consumption of fluid milk and cheese decreased-fewer pizzas and cheeseburgers,” said Timothy Dalton, assistant professor with UMaine’s Department of Resource Economics and Policy. “The shift to drinking soy milk and bottled water also decreased milk consumption. Now the U.S. has a surplus of cheese and butterfat, which drives down milk prices.”
Another theory asserts that overproduction by large dairy farms in other regions is expanding into Maine, glutting the market and causing milk prices to fall.
“Farmers in Maine cannot compete with the large western farms,” said Marcy Guillette, livestock program manager at Witter Farm. “We must preserve the small dairy farms, even though this is no longer the [state's] primary way of life.”
Yet, consumers continue to pay high prices for a gallon of milk.
“Across campus, the UMaine community consumes approximately 180 gallons of milk daily,” said Martin Kahler, associate director of Dining Services, Marketplace and Retail Operations. “The University bids out to milk processors to ensure the lowest price. I have not seen a decrease on incoming prices as a result from the drop in amounts paid to Maine farmers.”
So where is the money going? The Maine Milk Commission builds in minimum margins to protect retailers, but a ceiling on profits does not exist. The difference between the amount paid to farmers and the cost to consumers goes directly to processors and retailers – an estimated annual income of more than $22 million.
Ron Cotterill, director of the Food Marketing Policy Center at the University of Connecticut, conducted a study that shows retailers are making excessive profits on milk. His study evaluated the impact of the Northeast Dairy Compact.
“Supermarkets not only raised the price of milk to cover the cost of the compact, about three cents per gallon, they also increased the retail price, an additional 14 cents for their own profit, and attributed the entire 17-cent increase to the compact,” Cotterill said.
Last spring, Gov. John Baldacci signed into law a plan that provided immediate relief for Maine’s dairy farmers in direct payments totaling more than $3.9 million through September, 2003.
“This funding was a short-term process that the governor put in place to stem the red ink on farmers’ books,” Dalton said. “It was not intended to be a solution, merely a means to see the farmer through until policies could be enacted.”
UMaine’s Witter Farm received state subsidies, but the amounts did not fully cover expenses, Guillette said.
“Although Witter Farm is a teaching and research farm, cows must pay for themselves. The drop in milk prices has affected the budget, and the farm is considering selling some cows to recover the loss of income,” she said.
The governor also formed a task force to research the state’s dairy crisis and to make recommendations. The goals were to maintain or increase the number of dairy farms, to improve cost competitiveness, to develop state policies that support dairy farmers and to create a price support system to insulate Maine farmers against price fluctuations.
“The findings are intended to provide long-term policies that address topics such as property tax relief on farmlands and generates an improved business climate,” Dalton said.
But many Maine farmers don’t want government money; they want to earn it from the marketplace.
“It’s important for Maine farmers to develop sustainability via a niche market – making cheese to sell to neighbors and local farmers’ markets,” Guillette said.
Still, industry leaders maintain that there are viable solutions to historically low milk prices.
“Reinstatement of the Northeast Dairy Compact would be helpful, [as would] preservation of open spaces for agriculture,” Guillette said. “The value of land in Maine is increasing and [no longer affordable to] farmers. Houses are being built on formerly fertile agricultural land.”
Dairy in Maine is a $100 million industry and accounts for about one-fifth of all agricultural activity in the state. The dairy industry also acts as an anchor for smaller industries such as goat, sheep and equine.
“Farmers get animal feed from the same dealers,” Dalton said. “Should dairy farming in Maine close its barn doors, the feed mills would shut down. Large animal and veterinary clinics would also close. Dairy is the cornerstone to other agricultural industries in the state.”
The next legislative session is expected to debate the task force’s recommendations. But, until a solution is found, consumers will continue to face inflated shelf prices while retailers profit from milk sales – and farmers struggle. Sustainability for Maine’s dairy farmers and stabilization of milk prices are crucial to the industry’s future. Otherwise, the “Got Milk?” question soon will be more than rhetorical in Maine.
Bangor Daily News