DOWNTOWN

Milking consumers

By Steve Bailey, Globe Columnist, 3/20/2002

[N] early five years ago when the Northeast Interstate Dairy Compact went into effect, retailers immediately jacked up the price of milk 20 cents a gallon to cover the new ''tax'' increase on consumers. Now that the compact is dead, I have a question: Where's my tax cut?

My free-market bones have never been comfortable with price-setting schemes like the dairy compact, which established a minimum price for milk sold by New England and some New York farmers. But watching what has happened since the compact died on Oct. 1 makes a very bad joke of all that whining that came from dairy processors and retailers about the raw deal the poor consumer was getting from farmers.

The punchline: We're still paying compact prices, but the money is going to fatter profits for retailers and processors, not to New England farmers.

If your family drinks a lot of milk, like mine does, you might want to know what has been happening to your dairy dollars. According to the Massachusetts Department of Agriculture, the average price of a gallon of whole milk in the Boston area was $2.99 in January and February last year, when the compact was still in effect, and in the same two months of this year, when the compact had expired. But the milk processors were paying farmers about 15 cents less a gallon for milk in the first two months of this year than they were a year earlier.

Where did that 15 cents go? Not back to you and me once the milk ''tax'' disappeared, that's for sure.

John Bunting takes more interest than most in such things. At age 60, Bunting and his two sons have about 500 acres in the western foothills of the Catskills (nearest town: Delhi, N.Y., pop. 5,000) where they struggle to stay afloat with their 40 Jersey cows. Bunting's night job: writing for a muckraking little dairy tabloid, ''The Milkweed,'' published monthly by editor Pete Hardin out of tiny Brooklyn, Wis. ''Consumers are not benefit ing from the end of the compact,'' says Bunting, who developed the data on the Boston milk market using monthly state and federal pricing reports.

Massachusetts agriculture officials say Bunting is right on the numbers and right on his analysis of who has been profiting on the end of the compact. ''The issue is profits,'' says James Hines, director of the state's division of animal health and dairy services. ''There is no logical explanation other than the fact that the money that was going to the farmers is now going to the supermarkets or the processors. They used the compact to raise prices; they didn't use the end of the compact for dropping prices.''

Who is to blame: the supermarkets or the processors? ''They both take a chunk of it, though the retailers make a higher percentage,'' says Jay Healy, who just stepped down as the state's agriculture commissioner.

A spokeswoman for the International Association of Dairy Foods, which represents the processors (in New England that means Dean Foods, which controls more than 70 percent of the market), said she had not seen the Boston milk numbers and could not comment. ''Our cost are relatively the same from last year and our retail prices are relatively the same from last year,'' said a spokeswoman for Stop & Shop, New England's largest supermarket chain.

One year ago dairy processors were paying $1.46 a gallon for their milk; last month they were paying $1.31. Why am I still paying the same $2.99 for my milk?

Addendum: On the day that Acting Governor Jane Swift said that she would not be running for election, Jay Healy is a reminder of the hidden cost of bad leadership. Healy, appointed by Governor William Weld, retired last week as agriculture commissioner after a nine-year run during which he helped make his tiny little agency a model of how to protect family farms and the environment. Yesterday he said he quit, in part, because he could no longer tolerate Swift: ''She was a pretty nice lady who was a pretty poor governor,'' he says.

Steve Bailey can be reached at 617-929-2902 or by email at bailey@globe.com.

This story ran on page D1 of the Boston Globe on 3/20/2002.
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