Free Market Milk

March 24, 1994

Price commissions seldom work for the consumer's benefit. If the commodity is in high demand, the price rises (above or under the table) or the item becomes unavailable. If demand is low, many consumers will find the product or service elsewhere at a market price; the disadvantaged will be forced to pay the artificially set higher price.

The proposal to create a state milk price commission is one such animal, even though its dairy farmer advocates claim it would not increase consumer prices. Happily, the measure has been herded to summer pasture for further legislative study, where we hope it will remain.

Maryland farmers are understandably concerned that they are losing money and their livelihood by having to sell their milk at low prices or dump it. The market price is undercut by cheaper milk from other states that is sold in Maryland.

Virginia and Pennsylvania have milk commissions that set a minimum price for raw milk sold to processors -- but only for a limited amount of product. The excess production can be dumped at below-cost prices in unregulated states such as Maryland. About half the milk consumed in Maryland comes from Maryland farms.

The main problem is that dairy farmers everywhere are becoming more efficient at producing more milk from fewer cows, while consumer demand is in decided decline. Concerns about fat content of dairy products and worries about cholesterol are among the factors. Other beverages and low-calorie dairy-food substitutes are capturing bigger shares of milk's consumer market.

Statistics show that the number of milk cows in Maryland shrank by 15 percent between 1986 and 1992. The number of Maryland dairy farms dropped by 30 percent over the past decade.

Carroll County, the second largest producer of milk in Maryland (behind neighboring Frederick County), obviously has strong economic interest in minimum milk prices. But surveys show that Marylanders could pay a dime more per gallon under price controls, which is a greater disadvantage.

There is no local shortage of milk production, and no sign of significant future reductions. Indeed, federal approval of a new growth hormone for dairy cattle will further swell the ocean of milk produced, if not in Maryland, at least in neighboring states that sell to processors here.

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