In the past few months, the government has been supporting everything from banks to automakers to the housing market. But if the federal milk pricing policy is not amended soon, it may have to add dairy farms to that list.
The combination of the bad economy and the federally mandated price system for milk has placed many Connecticut dairy farms in precarious financial positions. Although the Senate Appropriations Committee is scheduled to vote today on a bill that may give farmers financial support, some are skeptical that the milk bailout will succeed.
“There is no question putting local milk on our kitchen tables is good for the economy and good for our families,” state Sen. and President Pro Tempore Don Williams Jr. said at a March rally in Hartford. “It is important that Connecticut’s dairy farms don’t get plowed over by global economic forces that are beyond their control.”
A ‘SAFETY NET’
The federal government has mandated the price of milk since the 1930s, when surplus and soaring prices caused many farmers to go out of business. That mandate still exists today. National milk prices are set by trading done by the Chicago Mercantile Exchange. The problem, many state dairy farmers have said, is that those prices are set based on farms in the Midwest — which are often larger-scale, cheaper operations — and do not take into account the higher production costs in New England.
In the past two years, over 50 dairy farms have gone out of business in Connecticut — a quarter of the total number of then-operating farms. The Northeast Interstate Dairy Compact, which set the wholesale price of milk to keep regional dairy farmers afloat, dissolved in 2001, and efforts to recreate it have been unsuccessful. In January, the wholesale price dropped from $20 per hundredweight to $11.30, meaning that farmers have been selling their milk for $1.00 per gallon, even though their average cost is $1.90.
Yale Dining’s Strategic Sourcing Manager Gerry Remer said Yale prioritizes local farms in purchasing decisions. Yale Dining serves Organic Valley milk from the New Briton, Conn., branch of Guida Dairy; Remer said the price Yale pays has fallen in the past year because of drop in the wholesale price.
The price drop has prompted vocal criticism from many state dairy farmers, who are proposing that the state institute a “safety net” to help local farmers when the market price gets too low.
Peter Orr, who runs Fort Hill Farms in Thompson, Conn., with his wife, Kristin, was one of the many dairy farmers who gathered in Hartford last month to call for legislative action.
“When those Midwest and far West are overproducing milk, it impacts our price,” he said. “But there’s no such thing as surplus milk in southern New England.”
COSTS AND BENEFITS
Orr maintained that the bill has gotten “good bipartisan support” from state officials like Sen. Williams and Rep. Denise Merrill. But Paul Miller, owner of Fairvue Farms in Woodstock, Conn., said he was unsure whether that local farmers’ verbal backing would actually help the bill go through.
“It’s very difficult to get any expenditure bill through the legislature,” Orr said.
The challenge, he said, is finding a source for the funding. Some possibilities would be a tax on soda or a fee to milk retailers, he said, adding that state buffering for its dairy farmers would only require about 1.4 to 3 percent of the value of the industry — “a very good risk versus reward scenario,” he said.
Many argue that the government should let the farms go under if production is less expensive elsewhere, deferring to the free market system. But local farmers maintain that the industry is pivotal for Connecticut. Dairy farms require 36 cents of public services for every tax dollar, Orr said, as opposed to the $1.50 that residential areas use per dollar. The $1 billion-per-year industry also contributes about 4,000 to 5,000 jobs to the state.
But the state will face a projected $8-million budget deficit over the next three years, and cuts have already been made to farm business grants and tax exemptions on farming equipment.
“Farmers have every right to be upset,” Gov. M. Jodi Rell said at a Agriculture Day rally in March. “Unfortunately, the state just doesn’t have the money this year.”
CONNECTICUT STATE PRIDE
Other New England states have addressed the problem of sinking dairy farms through tax credits and subsidies. In 2003, Maine set up a fund which guaranteed minimum prices for its dairy industry. In 2008, Massachusetts created a system of income tax credits when the wholesale price of milk is lower than production costs.
Miller said Connecticut is being left behind: “We’re not going to be able to compete with other states,” he said.
Dairy farms provide thousands of acres of open space that contribute to residents’ quality of life, Orr pointed out. He and his wife purchased their 1,200-acre farm about 13 years ago.
“What people in the city don’t realize is that when they go to the country,” Kristin Orr added, “if there are no dairy farms, there won’t be any solitude.”
Melina Shannon-DiPietro, director of the Yale Sustainable Food Project, agreed that losing Connecticut farms is not an option: “Once a farm is put under cement, we’ve lost it forever,” she said in an e-mail.
Miller, whose family-run farm has been operating since 1961, said the farm currently receives the same price for milk it did when he started. He added that he has had to borrow $50,000 to $80,000 per month to pay expenses, and that even if today’s bill does go through, it might not allow him to pay off his debt.
“I know three farms going out of business in Connecticut,” Miller said. “One of those farms — their cows went to Massachusetts.”