Milk-price report finds farmer at disadvantage 'It didn't take any investigation to tell me this'


November 19, 1998|By Ted Shelsby | Ted Shelsby,SUN STAFF

A new federal government report confirms something that Harold Lenhart has known for years: There is very little correlation between the price dairy farmers get for their milk and what consumers pay for the product at the supermarket.

"It didn't take any government investigation to tell me this," said Lenhart, a dairy farmer who milks 270 cows on a 110-acre farm near Lewistown in Frederick County.

"I've been saying for years that there is no correlation in what I get for my milk and the prices I see in the grocery store when I go shopping," Lenhart said as he flopped onto his kitchen table an 18-pound box of Land O Lakes butter purchased at a discount cooperative warehouse.

"I'm getting about the same price for milk today as I was in 1985 and '86, while the price of dairy products, including butter, has shot up in the stores."

A study released this week by the General Accounting Office, the investigative arm of Congress, found that retail milk prices rose in 27 of 31 marketing areas of the United States over the 26 months that ended in February.

In contrast, the farm price of milk fell in 27 markets and remained constant in the four others.

The GAO report noted that as a result of price changes, the farm-to-retail price spread increased in 27 of the 31 markets, including the Washington market, which encompasses most of Maryland.

The study was requested by Sens. Patrick J. Leahy, a Vermont Democrat, and James M. Jeffords, a Vermont Republican, to answer charges by food retailers that the trend toward states' joining together in regional dairy compacts to set the farm price of milk will lead to higher consumer prices for dairy products.

Congress will consider legislation next year to extend the Northeast Dairy Compact and allow it to take in new member states, including Maryland.

The Northeast compact currently includes Maine, Vermont, New Hampshire, Rhode Island, Connecticut and Massachusetts.

Compacts are designed to halt the sharp decline in the number of dairy farms in Maryland and other parts of the country over the past 10 years.

The Washington market (which includes all of Maryland except the two westernmost counties, Delaware, Northern Virginia and southeastern Pennsylvania) was one of four regions where retail prices declined in the period covered by the study.

Edward J. Barren, an aide to Leahy, noted that the retail price of a gallon of 2 percent milk in this region dropped 8 cents over the study period, while the farm price was down 13 cents.

"This report again confirms the tenuous link between farm and retail prices," said Leahy. "Mounting evidence continues to show that dairy farmers get stuck with the short end of the dairy-pricing stick. That's why we need the dairy compact."

John Schnittker, senior economist with the consumer group Public Voice for Food and Health Policy, disagreed with the GAO's findings. "The data I look at shows that every time the price that the producer gets goes up, the increase is almost immediately passed on to the consumer.

"The old argument that farmers are always getting ripped off is not true. Their milk prices are at record levels."

Kevin McNew, an economist with the University of Maryland, agreed that the farm price of milk rose to an all-time high this year. He attributed it to weather problems in California that limited production and increased demand for butterfat. He said prices are expected to fall early next year.

An earlier GAO report, released in April, also concluded that store prices for milk vary widely around the country, without apparent regard for production or the prices that bottlers pay farmers.

Among 28 markets surveyed in the earlier study, Seattle had the highest average store price last year, $3.15 a gallon. That was $1.97 more than bottlers paid to farm cooperatives for the milk.

Baltimore's average retail price was in the middle for the 28 cities, said Laura Kopelson, a spokeswoman for the GAO, but the store price was double what the farm cooperatives were paid.

She said stores in Baltimore charged an average of $2.68 a gallon last year, while the average farm price was $1.34.

"Study after study demonstrates the continuing stretch of the farm-to-retail price spread giving us more proof of just how critical the dairy compact is to our farmers and consumers," said Jeffords.

The new study found that the farm price of 2 percent milk dropped 9 cents a gallon in all six compact states while the retail prices rose 19 to 35 cents a gallon.

The cost of a gallon of 2 percent milk was lower in four of the Northeast compact states than in the Washington market, but higher in Vermont and New Haven, Conn.

Pub Date: 11/19/98

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