ANNAPOLIS – Maryland dairy farmers urged lawmakers Tuesday to support the state’s ailing dairy farms by letting them join six New England states in setting minimum wholesale prices for milk.
But opponents say consumers could end up paying as much as $20 million more a year in higher milk prices if the state joins the Northeast Interstate Dairy Compact.
“I cannot understand how Maryland consumers will not be impacted in a negative way,” by the dairy compact, said Barry Scher, a spokesman for Giant Food Inc.
“You’re asking 5 million Maryland consumers to subsidize 900 dairy farmers. To me, that doesn’t make sense,” he told members of the Senate Economic and Environmental Affairs Committee.
But Frederick County farmer Charles Smith said dairy farmers “can’t make any money any more.” If they cannot join the compact and stabilize prices, he said, farms will continue going under.
“You start economizing at first, but after a while you can’t cut corners any further,” said Smith of the shrinking profits on his 60-cow farm. “You can’t produce milk at prices where you receive less than you received 10 to 20 years ago.”
Northeast compact commission Executive Director Dan Smith — who is not related to Charles Smith — conceded that wholesale milk prices could rise if Maryland joins the compact. But the move could also reduce retail prices in the long run by stabilizing the market for milk, he said.
“This is not a dairy industry initiative aimed at raising the price of milk to farmers, it’s an initiative to restore the state’s ability to regulate the price,” he said.
The federal government now sets wholesale prices according to conditions in the Upper Midwest and on the West Coast. The compact tries to stabilize prices paid to farmers in this region by adjusting the federal price to reflect local conditions.
Since July, the compact has added premiums to the federal price to maintain a price of $16.94 per hundredweight in the Northeast. As the federal price has risen or fallen, the compact has adjusted its premium to keep the local price at that level.
When federal prices were low in July, the compact added $3 per hundredweight — or about 26 cents per gallon — to maintain the local price. By last month, when the federal price had risen, the premium was cut to 41 cents, or about 3.5 cents per gallon.
If the federal price exceeded the local price, said Dan Smith, the Northeast compact would not raise its price to keep pace.
He said that setting a constant local price reduces the need of milk processors to charge more “to protect themselves against unexpected increases in the price.”
But Bill Ewing, executive director of the Maryland Food Bank, said the extra pennies consumers will pay in the short run will hurt low-income families more than most.
“The whole issue’s about discretionary income, and poor people have no discretionary income,” he said. “These people are choosing between heating and eating.”
Mike Canning, a lobbyist for the Pennmarva Dairy Industry, said the dairy compact commission has funds available to help the poor deal with cost increases.
The bid to join the compact is a response to declining numbers of dairy farms in Maryland and declining profits on those farms. Supporters say the number of dairy farms in the state has fallen by 25 percent since 1991, with 82 farms going out of business last year alone.
Opponents say farmers are to blame because of inefficiency and overproduction. But dairy farmers disputed that, saying they compete in a “sell it or smell it” market that is not as easily managed as other areas of farming.
“Anything else you can hold until there’s a different price. With milk you can’t do that,” said Cecil County dairy farmer Phyllis Kilby. “A 5-cents-a-gallon increase is not a big price to pay for keeping those dairy farms.”