Right to the Point (8/20/09)

A peek at Vermont’s dairy industry

By Mike Benevento

Aug. 20, 2009

As Vermonters know, dairy farms are vital to both the state’s economy and character. In a recent letter, Senator Bernie Sanders wrote, “The dairy industry has been, and remains, a vital part of Vermont’s economic engine and a central part of the fabric of our communities.”

However, the Ethan Allen Institute, an independent Vermont think tank, points out that since 1975, the number of Vermont farms has decreased from 3688 to 1050. In addition, large business-intensive farms have replaced many small dairy farms throughout the state.

As posted on the Institute’s website, “Like it or not, small dairy farms are becoming less and less viable…The dynamics of the national dairy market are shouting ‘get big or get out’ more loudly than ever.”

Sen. Sanders wrote, “All Vermonters understand that if family-based dairy farming is to continue in any significant way in our state and throughout the country, America’s dairy farmers must receive fair prices for the products they produce.”

According to the U.S. Department of Agriculture, the All Milk Price paid to dairy farmers dropped nearly 70 percent over the last year. Despite the drop, consumers have not seen a corresponding fall in the price of milk.

Vermont’s congressional delegation and dairy farm proponents believe that along the farm-to-store supply chain, everyone but the farmer is making surplus profits.

This is not a recent phenomenon. In the past, Sen. Patrick Leahy raised many of the same concerns Sanders currently voices. “Vermont farmers are not getting a fair share of the retail price of milk, while giant corporate processors are raking in windfall profits as they raise prices…,” Leahy said in 2000.

Sanders asked the Department of Justice to begin an antitrust investigation into the dairy industry, especially targeting Dean Foods. He wrote that Dean Foods nationally controls 40 percent of the fluid milk market and 70 percent in New England.

The Obama administration intends to step up enforcement of antitrust laws. Per Scott Kilman of the Wall Street Journal, a Justice Department official said earlier this month that the administration will take an extensive look at concentration in U.S. agriculture as part of its increased emphasis on antitrust enforcement.

According to Michelle Monroe of the St. Albans Messenger, Sanders said antitrust investigations, a growth management plan, and a revision of the milk pricing system are part of the solution to the problems facing Vermont’s dairy farms.

In order to ensure they receive a fair price for their milk, dairy organizations have spent a great amount of time and money lobbying the federal government to fix milk prices. According to the Ethan Allen Institute, in 1935 the federal government created a complicated dairy program to set minimum prices that handlers must pay farmers for milk.

Since then, the government has employed many different strategies in an effort to boost the amount of money farmers get for their milk. This included the creation of the Northeast Interstate Dairy Compact in the mid-90s, which taxed consumers and passed the proceeds to dairy farmers.

Championed by Sen. Leahy, Sen. James Jeffords, and then-Rep. Sanders, the Compact artificially raised the price of milk in New England. At the same time, it prevented cheaper milk from entering from outside the region.

The Ethan Allen Institute notes that government-forced subsidies in effect prop up inefficient farmers at the consumer’s expense — especially the poor and young families who consume more milk. While subsidies help keep small farms alive, government support results in lower overall dairy industry efficiency.

Recent state efforts include the passage of S.89, “An Act Relating to Stabilization of Prices Paid to Vermont Dairy Farmers.” Sponsored by Peter Shumlin and Robert Starr, Gov. Douglas signed the bill into law in late May. The act directs the Vermont Milk Commission to deliberate imposing an “assessment” on processors who buy milk from Vermont farms.

What is unspoken is that milk producers will most likely not absorb the tax, but will pass it on to consumers.

Dan McLean of the Burlington Free Press writes that the proceeds could go to create an emergency fund to help local dairy farmers during price downturns.

Nevertheless, the Ethan Allen Institutes sees a more sinister plan unfolding: An unaccountable commission levying a hidden milk tax on consumers with proceeds distributed to members of Bobby Starr’s special interest group.

Instead of more taxes, the Institute advocates dropping government support for dairy farms over time. After doing so, Vermont’s farmers will prosper from innovation, efficiency, and hard work — rather than relying on undependable government subsidies.

Michael Benevento is a former Air Force fighter jet weapon systems officer. He has a bachelor’s degree in Military History and a master’s in International Relations. Mike resides in Williston with his wife Kristine and their two sons, Matthew and Calvin.