Are Milk Prices Too Low?

A proposal working its way through Congress would seek to boost milk prices by reducing supply. Introduced this summer by Sen. Bernie Sanders, I-Vt., the plan would provide the U.S. Department of Agriculture with $350 million to buy dairy products. The USDA has already allocated nearly $1 billion for dairy product purchases and farmer subsidies for the 2009 fiscal year.

The National Milk Producers Foundation, which supports the Sanders proposal, held a meeting last week to discuss how else to tackle the dairy price problem.

"Eventually, there has to be a point of equilibrium where farmers can make money at a price where consumers are willing to play right now," said NMPF spokesman Chris Galen.

But consumer prices aren't the only ones under scrutiny. Some dairy farmer supporters, including Sanders, question whether large milk processors like Dean Foods are using their market influence to hold wholesale milk prices down.

Christine Varney, head of the Justice Department's antitrust division, is scheduled to testify on the issue at a hearing of the Senate Judiciary Committee to be held in Vermont Saturday.

In an e-mailed statement, Dean Foods said it was paying "paying the highest possible price for raw milk" under federal milk pricing rules -- which set regional minimums for how much processors pay farmers -- and that the company "does not control dairy prices or the dairy market."

Fewer Farms, Higher Prices?

Analysts like Bill Lapp believe that measure intended to boost prices will have the desired effect.

Lapp, the president of Advanced Economic Solutions, an Omaha, Neb.-based economic forecasting firm serving the food industry, said he expects milk prices to recover next year thanks to a combination of government dairy purchases, cattle slaughter and an expected increase in demand.

"It's not a non-profit endeavor," he said. "Eventually, we're going to have less milk at higher prices."

But industry supporters caution that if relief efforts don't work, more farmers could go out of business -- in New England alone, at least 71 dairy farms have shuttered their barns this year.

The closure of local farms, Bothfeld said, could mean that milk products will have to travel further before reaching store shelves. Transportation costs, she said, would ultimately bump up prices again.

Shoppers like Annette Roberts, 60, of Newton, Mass., say they're worried about dairy farms disappearing, but not necessarily for price reasons.

"I'm a big fan of buying locally," she said, "and supporting the people around me who are working so hard."

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