Milk-price bill sweet to some, sour to others Possible effect on cost at store is central issue

Maryland in the middle

House Bill 504 has caused some to switch sides

February 17, 1997|By Ted Shelsby | Ted Shelsby,SUN STAFF Larry Phillips of the Business News Department contributed to this article.

A bill in the General Assembly designed to help stabilize Maryland's declining dairy industry by allowing the state to set a minimum price on milk has become the center of one of the most heated controversies in the industry since Mrs. O'Leary's cow was accused of kicking over the lantern that ignited the Great Chicago Fire.

Maryland's dairy industry, the third largest segment of agriculture with farm sales of $180 million a year, is being clobbered, proponents of the bill say, because the state is caught between two states -- Pennsylvania and Virginia -- that have price-support programs which allow them to undercut the market in Maryland.

Maryland has lost more than 40 percent of its dairy farms since 1988, and the number of milk processing plants has fallen to five from about 35 in the mid-1970s.

Cloverland Green Spring Dairy, the sole surviving dairy in Baltimore and an employer of 500 workers, has expressed concern that it could be the next to close its doors.

But the fate of House Bill 504 -- the Fairness in Milk Marketing Act of 1997 -- will likely be decided by a single issue: What will happen to the price of milk at the grocery store.

Opponents of the legislation range from Bea Gaddy, advocate for Baltimore's homeless, to the largest supermarket chains in the state. All contend that milk prices will rise and the bill ineffective in trying to halt the loss of dairy farms.

Supporters, including Gov. Parris N. Glendening, disagree. "Who says it's going to increase the cost of milk," the governor said. "I happen to believe it will reduce the price of milk."

Both sides could be right.

What consumers pay for milk varies greatly throughout the state. A spot survey of 35 retail outlets by The Sun last week found prices for a gallon of 2 percent milk -- the most popular among consumers -- ranged from $1.95 to $2.89. Shoppers can pay nearly 50 percent more for milk depending on where they buy their groceries.

The survey covered stores -- big and small -- in Baltimore and Baltimore, Harford, Carroll, Frederick, Howard, Anne Arundel, Prince George's and Montgomery counties.

It found that prices can vary greatly at stores within the same chain. A Safeway store in Frederick, for instance, sold milk for $1.96 a gallon, while another in Jacksonville sold it for $2.69. A Giant store in Westminster charged $2.11 while the chain's Rotunda store charged $2.67. While stores will sometimes run a special on milk and sell it at a loss to lure customers, David A. Larson, vice president of processing operations at Giant, said the Westminster store was probably breaking even on its $2.11 price.

Pennsylvania, which has had a minimum-price program for 60 years and currently sets a minimum price at $2.29, may provide a clue to what would happen to milk prices in Maryland if H.B. 504 is approved.

When asked how Maryland's proposed legislation might affect the market here, Tracey Jackson, a spokeswoman for the Pennsylvania Milk Marketing Board, responded: "To be honest, you won't see any more $1.95-a-gallon milk." But at the other end of the spectrum, she said, many of the stores that charge $2.89 or even more than $3 a gallon would be under extreme pressure to reduce their prices.

"What we see here [in Pennsylvania]," Jackson said, "is that about 85 percent of the stores sell milk at the state minimum."

"We don't set a maximum price," said Jackson, "and there are stores in Pennsylvania that still charge high prices. Prices in the Philadelphia area, like the Baltimore area, are the highest in the states."

Although it will affect milk prices, H.B. 504 is intended to address a unique situation that threatens Maryland's rapidly declining dairy industry.

Maryland is between two states, Pennsylvania and Virginia, that set minimum prices on milk.

Supporters of the legislation argue that this gives milk processors in Pennsylvania and Virginia an unfair advantage.

They can take the profits from the milk they sell in their states and use their excess milk to grab additional customers in Maryland by "dumping" milk on the market here at below their production cost, said Boyd Cook, a former manager of Mid-America Dairymen and an active participant in a legislative task force that spent 18 months examining the financial status of the Maryland dairy industry.

"The old rule of the industry was, 'If you steal one of my customers, I'll take two of yours,' " said S. Patrick McMillan, director of intergovernment relations at the Maryland Department of Agriculture. "That no longer applies. The way things stand now, milk processors in Maryland can't retaliate because Pennsylvania and Virginia control prices. Our processors can't go into these states and sell below the minimum price set by the states."

"Basically, this is an anti-dumping bill," Cook said of H.B. 504. "All it does is prohibit milk processors in Pennsylvania and Virginia from selling milk in Maryland below their production costs."

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