Milk Dispute Reaches High Court

Massachusetts plan to save its dairy industry alarms dealers, out-of-state producers

MASSACHUSETTS set out three years ago to protect its threatened dairy farmers and ended up this year in the United States Supreme Court, accused of impeding interstate commerce.

The Bay State's plan was to collect a fee on all milk sold within its boundaries and use that money to bolster the incomes of its dwindling dairymen.

``We were faced with a dying industry and were petitioned by dairy farmers to declare an emergency,'' says Tara Zedah, general counsel for the Massachusetts Department of Food and Agriculture.

The number of dairy farms in the state had shrunk from 800 to 400 over the 10 years before the plan was put into effect, according to Doug Gillespie, government relations director with the Massachusetts Farm Bureau Federation. The attrition is continuing, he says, with 10 more lost in the past year.

Milk producers here, as throughout the Northeast, face high production costs. The cost of feed grain, for example, is about $30 more a ton here than in the Midwest, says Frank Matheson, a Littleton, Mass., dairy farmer whose family has been working the same land for two centuries.

Minimum price set by government

But the minimum milk price set by the federal government is keyed to conditions in Wisconsin and Minnesota. That price doesn't allow farmers here ``to reach their cost of production,'' says Mr. Matheson. Many of his fellow dairymen have sold out. ``When they're offered $5,000 to $10,000 for house lots, they can't resist it,'' he says.

After a series of hearings to gauge the depth of the dairy problem, the state's Department of Food and Agriculture decided to set a price of $15 per hundredweight (100 pounds) for milk produced in-state, about two and a half dollars above the federal minimum price.

But Massachusetts farmers did not receive that price directly from wholesalers. Instead, all milk sold to dealers in the state was made subject to a fee based on the difference between the higher price set by the state and the federal minimum price. That money was pooled and paid out to Massachusetts producers.

``It was the only scheme I could figure out that would work here,'' says Ms. Zedah.

Farmers were enthusiastic, but some of the state's milk dealers - who buy from both Massachusetts and out-of-state farmers - were not. One of them, West Lynn Creamery, Inc., refused to pay the fee on milk sales and sued the state. Their contention that the scheme discriminates against out-of-state producers and burdens interstate commerce was rejected by the state courts, but it's very much alive before the high bench in Washington. Arguments were heard on March 2 and a decision will probably come by early summer.

It's ``doubly unconstitutional,'' says Stephen Rosenbaum, the Washington, D.C., attorney who argued West Lynn's case before the Supreme Court.

First, he says, the Massachusetts fee system tends to equalize the price of all milk bought by wholesalers in the state and prevents them from taking advantage of lower prices from out-of-state producers. Second, he says, the proceeds from the fee go only to in-state farmers, ``so it's openly discriminatory.''

Neighboring Vermont, whose producers sell a lot of milk in Massachusetts, filed a brief with the Supreme Court supporting Mr. Rosenbaum's clients. ``The way we saw it,'' says Eileen Elliott, an assistant attorney general in Vermont, ``it was an assessment being imposed on all milk, but only going to Massachusetts farmers. So a lot of our milk was aiding their farmers.''

The charges of hurting out-of-state farmers don't wash, Zedah says. People in-state or out-of-state were getting the same federally determined prices they would have in any case, regardless of the Massachusetts regulations, she argues.

Michael Altman, a Boston attorney representing the West Lynn Creamery, says ``protectionist'' schemes similar to that of Massachusetts have been attempted since the 1930s and have failed in court. He argues that the state's fee structure clearly prevents out-of-staters from competing on the basis of price and thus dampens interstate commerce.

Mr. Altman also points out that other states with struggling dairy sectors are watching this case and could rush to enact similar measures if the Massachusetts regulation stands.

Market vs. protection

Whether the scheme stands or falls before the Supreme Court, the question of how, or whether, to protect threatened farmers will live on.

Some feel that market forces should be allowed full play, with inefficient producers being culled. On the other hand, the legislatures in most Northeastern states have passed a resolution calling for a compact to set milk prices on a regional basis. That proposal would need congressional approval.

Another approach concentrates on the land itself rather than the dairy farmers' current cash-flow problems. Bob Wagner, Northeast regional director for the American Farmland Trust, applauds the Bay State's Agriculture Preservation Restriction program. It allows farmers to sell development rights to the state, which then permanently protects the land for agricultural use.

That doesn't solve all a farmer's economic problems, ``but at least the land doesn't go with the farmer when he leaves,'' says Mr. Wagner.