June 24, 2013

Milk price proposals miss mark for Maine

Congress weighs a change that ends U.S. subsidies, but farmers here prefer a plan that could cost consumers.

By Kevin Miller kmiller@pressherald.com
Staff Writer

WASHINGTON — It was one of the simplest yet most acclaimed marketing strategies in recent decades.

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Filler operator Chris Roberts keeps a eye on controls at the Oakhurst Dairy plant in Portland.

John Patriquin/Staff Photographer

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Tom Brigham, co-president of Oakhurst Dairy in Portland, gets "quite involved" in dairy policy at the state level but not as much with federal policy. He said there is a consensus among Maine farmers that reforms are needed.

John Patriquin/Staff Photographer

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Got milk?

A simple slogan for a seemingly simplistic staple of the American diet --  and one that belies the absurd complexity of the policies that undergird the nation's multibillion-dollar dairy industry.

Dale Cole's dairy operation is a case in point.

Cole Farm is in Sidney, about 60 miles from Oakhurst Dairy's processing and pasteurization facility near downtown Portland. Within 48 hours of being loaded onto tanker trucks at the farm, milk from Cole's 85 cows could be chilling in the dairy case at the Hannaford supermarket one-quarter mile from Oakhurst's plant or the Shaw's about 10 miles from Cole's farmstead.

But despite the hyperlocal nature of that milk, the price that Cole and other farmers are paid isn't based on local feed, fuel or energy costs. Instead, those payments are determined by -- among other things -- how much "cheese traders" paid for cheddar on the Chicago Mercantile Exchange, and the national price of skim milk multiplied by 0.965 plus the price of butterfat multiplied by 3.5.

Confused yet? You're not alone. "There are many people who work in the industry that don't fully understand it," said Tom Brigham, co-president of Oakhurst Dairy and, although he doesn't admit it, probably one of the few who actually does understand.

Milk can also be political.

Regional tensions and power struggles pitting farmers against processors -- or big dairies versus small -- frequently surface in Congress. Just last week, a massive Farm Bill affecting all of agriculture failed in the House at least in part because late changes to a dairy safety net program prompted some milk state lawmakers to walk away.

With consensus building for an overhaul of federal dairy policies, the House and Senate are considering proposals to replace government "safety net" subsidies with a voluntary price insurance program.

But many Maine dairy farmers, who argue that under the current system there is little to no correlation between their production costs and the federally set minimum prices they receive, are also less than enthused about the proposed reforms.

"What we really need is a regional approach to it because one shoe doesn't fit all of the regions of the country," said Cole, who currently serves as president of the Maine Dairy Industry Association.


But why should consumers in Maine care about dairy policies set in Augusta and Washington, D.C.? Or about the regional politics that sometimes pit New England's much-smaller dairy industry against powerhouse milk-producing states in the Midwest?

For one, the federal government sets minimum milk prices (and retail prices for a gallon rose 31 percent between January 2003 and January 2013). But for Maine and its New England neighbors, the old farmhouses, large barns and tended fields visible from scenic byways are often integral to both the agriculture and tourism economies.

"Depending on prices, it is either the largest or second-largest piece of Maine's nearly $1 billion agriculture industry," said Walter Whitcomb, commissioner of the Maine Department of Agriculture, Conservation and Forestry and himself a dairy farmer. "And people like to see that land."

The financial plight of Maine's dairy industry has been well documented. Squeezed by rising fuel and feed costs, many of Maine's roughly 300 dairy farms have struggled to recoup enough money from milk sales to stay in the black in recent years.

State and federal programs designed to help dairies weather volatility in the milk industry have provided a lifeline for many farms, with one federal program funneling more than $3.5 billion in subsidies to dairy farmers nationwide since 2002. But that safety-net program -- called the Milk Income Loss Contract program -- would be eliminated under the House and Senate proposals to offer farmers a voluntary "margin insurance" to help cover losses.

(Continued on page 2)

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