Milk price dispute warms Controversial bill goes under scrutiny in Senate tomorrow

Farmers vs. retailers

Measure would let Maryland join Northeast Compact


March 02, 1998|By Ted Shelsby | Ted Shelsby,SUN STAFF

Milk -- the center of one of the most heated debates in the legislature last year -- moves to the front burner again tomorrow when a Senate committee takes up a controversial bill that would allow Maryland to join the Northeast Interstate Dairy Compact.

The milk issue is not expected to be any cooler this year.

The two sides -- farmers and retailers -- are so far apart and so deeply entrenched that Gov. Parris N. Glendening believes that trying to negotiate a compromise would be futile.

Unlike last year's proposed legislation, which would have allowed the state to establish minimum wholesale and retail prices, the compact sets the price farmers receive for Class 1 (drinking) milk. It includes Maine, Vermont, New Hampshire, Rhode Island, Connecticut and Massachusetts, and it first began setting prices in July.

Opponents, including the state's major grocery retailers, say the legislation is nothing more than a milk tax that would burden consumers, especially the poor, and benefit fewer than 900 farmers, mostly large dairy operations.

"This bill creates a classic price-support tax structure where farmers set the rules and their profits that are paid for by Maryland consumers," said Alan M. Rifkin, a lobbyist for retailers and the state's milk processors.

Barry F. Scher, vice president of public affairs for Giant Food Inc., the state's largest grocery chain, said it would be better for the state to offer farmers a tax break or some other subsidy.

Those in favor of the bill say the poor are already burdened by retailers who charge up to 30 percent more for milk in the Baltimore area than in rural regions.

Farmers, along with Glendening, say the legislation is necessary to halt the sharp decline in the number of dairy farms that pump $200 million into the state's economy each year and preserve much of the state's open space.

"Our dairy farmers continue to suffer terribly," the governor said. "Last year alone, 82 dairy farms went out of business."

The state has lost 25 percent of its dairy farms since 1991 and 40 percent over the past 12 years.

There's concern that if Maryland loses its dairy industry and milk needs to be shipped in, supermarket prices could escalate. The price of milk increases 3 percent for each 100 miles it's transported, according the industry officials.

"I don't want to sound like I'm whining, but this is a very critical period for dairy farmers in the state," said Phyllis Kilby, a 50-year-old Cecil County farmer who is heading the Maryland Dairy Industry Association's legislative efforts this year. "There are a lot of farmers out there hanging on by the skin of their teeth.

"We need to make a profit. We need to be able to pay our bills."

According to Kilby, the store price of milk has risen 43 percent since 1984 while the farmers' price has gone up only 4 percent.

The compact would seek to close that gap. It is designed to stabilize prices at the farm level and the supermarket, according to Dan Smith, executive director of the Northeast Dairy Compact Commission, which administers the compact.

The compact's actions are controlled by state panels made up of three to five members. Smith said federal law requires that at least one be a farmer and one be a consumer. In July, the commission set the farm price of Class 1 milk at $16.94 a hundredweight, or $1.46 a gallon, up from $13.94, equal to $1.20 a gallon.

Thus far, the price has been maintained at that level -- which amounts to 7 cents a gallon below the price of Class 1 milk in Maryland. "If Maryland were to join the compact today," Kilby said, "milk prices at the grocery store should decline."

Despite the lower price initially, Maryland farmers believe that, over time, the compact will help them by evening out the wide price fluctuations that occur from month to month and by setting a price that allows dairy farms to be viable.

Over the past 14 months, the Class 1 price in Maryland has ranged from less than $15 a hundredweight to more than $19.

The retail price of milk will be at the heart of the legislative battle.

Scher said that milk prices rose 10 cents to 25 cents a gallon in New England after the commission set the farmers' price.

A study by the Office of Management and Budget concluded that milk prices in the Northeast rose 5 cents to 15 cents a gallon when the compact went into effect in July but were 8 cents a gallon less than at retail stores outside the compact region by the end of the year.

A spot survey of a dozen New England stores last week found prices for 2 percent milk ranging from $1.88 a gallon to $2.99. Most were in the range of $2.39 to $2.49.

Scher said any rise in price would be especially hard on low-income consumers in Baltimore.

But, like other grocery chains, including Safeway, Giant charges more for milk at stores in the Baltimore area than in other parts of the state.

A Giant outlet in Frederick sells a gallon of 2 percent milk (the most popular among consumers) for $2.15. Stores in the Baltimore area charge $2.81.

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