This past summer the New England Interstate Dairy Compact — one of the most anti-consumer measures enacted in Washington in years — went into effect. Because of the compact, milk handlers are now required by law to pay an additional $3.00 per hundredweight for fluid milk. When that price was decreed, it amounted to an estimated 21 percent increase in the bulk price of milk. New England consumers are paying about 25 cents a gallon more for milk at the grocery store.
According to a Burlington (Vt.) Free Press feature story, last July a typical 75-cow Vermont farm collected an additional $1,500 or so from the cartel-required over-order price. That $1,500 will come in very handy for struggling dairy farmers. Proportional benefits will flow to both the smallest and weakest dairy farm and the largest and most profitable one. The owners of a 1,500-head operation will get a compact check for an additional $30,000.
The federal dairy program was created in the 1930s to make sure that milk for local or regional markets was produced by dairies in the region. To keep milk surpluses from driving down prices and putting the least efficient farmers out of business, the Commodity Credit Corporation buys all the butter, cheese and milk powder brought to it by processors who can’t sell those products at a higher price in the market.
Federal marketing orders require handlers to pay a different price in each region of the country to keep lowest-cost Minnesota-Wisconsin fluid milk from moving around the country and displacing higher-cost local milk (notably in Florida). Strict import controls keep foreign products from coming in and driving down the price for cheese and butter.
Now on top of all this, the compact is increasing the price of milk in New England. Last July, for instance, a hundredweight of milk cost dairy handlers $16.94, up from $13.94 in June. Out-of-region producers who might want to sell lower-priced milk are thus excluded from the six-state New England market.
With all this government-sanctioned price fixing to confer higher incomes upon dairy farmers, somebody has to produce the money to be distributed. Until this year, in other agricultural programs such as wheat and feed grains, the government (i.e., taxpayers) made subsidy payments to farmers whenever the commodity price dropped below a target price set by Congress. But that turned up as an unacceptably large item in the federal budget and so became politically vulnerable.