War between dairy farmers over milk 'cartels'

As Stanley Scribner rushes to get his corn in and his 300 cows milked, he's also got an anxious eye on Capitol Hill.

This week, lawmakers could decide the long-term future of Scribner's farm and thousands of other dairy operations in the Northeast and South, where farms are going under at an alarming rate.

At the heart of Mr. Scribner's hopes - but some Midwestern farmers' fears - is a bill that would extend what's called the Northeast Dairy Compact and authorize the Southeastern states to create a similar pricing cooperative.

If that happens, supporters contend consumers around the country will continue to have a fresh supply of local milk at affordable prices. And family farms, which preserve open land, will be able to survive in densely populated areas.

"It's critical, we need it, it's the only stability there is in the dairy industry right now," says Scribner who's worked his farm here for the past 41 years.

But the bill's critics, farmers from the Midwest and the corporate milk processors, contend the compacts are nothing more than "price-fixing cartels" that jack up the price of milk.

"Compacts [have] disastrous implications for Wisconsin's dairy farmers who are forced to operate outside of the protectionist walls these price-fixing cartels throw up," says Sen. Herb Kohl (D) of Wisconsin, who filibustered the bill after it won majority support this August.

The New England compact was authorized three years ago as an experiment and is due to expire Oct. 1.

It was originally designed to stem the loss of New England farms by ensuring that Northeast dairy farmers, whose costs of doing business are higher than those in the Midwest, get a stable price for their milk. The national price, set by the federal government, fluctuates wildly.

The way the compact works is simple. A local commission sets a floor for fluid milk within the compact region. When the federal price drops below that, processors - the milk bottlers - pay farmers the higher compact price, known as the premium.

The experiment has been so successful that other Northeastern states want to join, including New York and Pennsylvania. More than a dozen Southern states want to create a compact of their own.

"There are significant regional differences not just in the cost of production, but far more important, in milk utilization," says Kenneth Becker, executive director of the Northeast Dairy Compact Commission.

The East Coast drinks a lot more milk than, say, in Idaho where most the milk goes into making cheese.

But critics argue compacts are anti-competitive. Because New England farmers get higher prices for their fluid milk at certain times, they contend that Midwestern farmers who aren't in the compact are penalized.

And, they add, so are consumers. "If you increase the price to a processor higher than the price set by [the federal government] it's going to increase the price to consumers, it's that simple," says Allen Rosenfeld, a consultant for the International Dairy Foods Association, a processor's trade group in Washington.

But that argument infuriates compact supporters. They counter that milk processors are the ones who have benefited unfairly during the past 10 years. From 1983 to 1996, the price farmers received for their milk went up 13 percent. During that same time, the price that consumers paid went up 38 percent. The difference, they argue, is still going into the pockets of processors - exactly the situation the compacts are designed to remedy.

"The processors have found they can't be in the position of gouging both the farmers and the consumers as they had in the past," says Sen. Patrick Leahy (D) of Vermont. "And the price of milk to consumers in New England is less than in the two states that are fighting it: Minnesota and Wisconsin."

Still, opponents say New Englanders are paying more for their milk than they would if there were no compact.

In the South, advocates are more worried about the prices consumers will pay if they lose their local farms and are forced to truck in all their milk from other regions. That, they contend, will cost far more in the long run than the premium processors would have to pay in a Southern compact.

"Locally produced milk will always be cheaper to deliver to consumers than milk that has to be brought in from far away," says Charles Garrison, executive director of the South East Dairy Farmers Association in Washington. "And it will be fresh."

But Rosenfeld contends compacts do nothing to stem the loss of family farms. And he points to Vermont for proof. In the two years before the compact went into effect, the state lost 145 farms. In the two years since it's been in operation, another 150 farms have went under. And just like in the South, most of the farms that failed were small farms.

But Vermont state officials blame that on a change in the capital-gains tax that went into effect at the same time as the compact. They point to the most recent data from the state, which shows only 41 Vermont farms went under during the past six months, the lowest during that time period since 1991.

(c) Copyright 1999. The Christian Science Publishing Society