Wednesday, July 18, 2007

Dairy farmers’ regulation plan facing resistance

Producers want a new state panel created to control prices

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Dairy farmers who crafting a plan for a state commission to regulate milk product prices are meeting resistance from the state’s three milk processors.

The farmers, including many in Frederick County, want a state board to set the price processors pay for milk products to help Maryland’s declining dairy industry remains competitive with those in neighboring states. The farmers’ plan was to pitch the idea to Gov. Martin O’Malley (D) in October, but processors are protesting the price controls, saying it would increase retail prices for consumers.

At a Dairy Industry Oversight and Advisory Council meeting last week in Frederick, processors ramped up their opposition to the plan, saying alternatives such as tax credits may prove better options.

‘‘Anything that benefits the dairy farmer and does not increase the price of milk for the consumer is a win,” said Jody Vona, co-owner of Dairy Maid Dairy in Frederick. The dairy processes and bottles more than 21 million gallons of milk annually — about 400,000 gallons per week — and is one of only three dairies in Maryland.

Vona, who purchases about 50 percent of his milk from Maryland farmers, said processors, like dairy farmers, have taken a cut in profits in the past five years. Both farmers and processors have been squeezed by corn and fuel costs, which have tripled, he said.

Maryland dairy farmers for several years have mulled proposing a state dairy commission similar to those in Virginia and Pennsylvania, to ensure they are paid enough to recoup operation costs, and perhaps draw a small profit. In the past year, the Advisory Council, formed in July 2006, has been hammering out the details at meetings in Frederick and has welcomed processors to participate in the discussions.

While consumers pay a steady price for milk, the price processors pay farmers fluctuates, with farmers absorbing any loss. Regulating the price would ensure farmers are paid enough to cover their costs, while the processors absorb more of the fluctuations. Chuck Fry has operated Rocky Point dairy farm in Tuscarora since 1981, now milking 200 cows twice a day, but said it is his Virginia farm that keeps his finances afloat. Many Maryland dairy farmers are at a crossroads, he said, torn between remaining in the industry or selling their land to developers.

‘‘The problem in Maryland is we are not protected,” Fry said. ‘‘We cannot sell milk at a loss and stay in this business. ... If we lose at that rate, we’re going to lose a lot of the naturally protected open spaces to business and development.”

The past two years, most Maryland dairy farmers have been operating at a loss, though the industry has seen a profit in the past quarter. Over the past decade, the number of dairy producers in Maryland has dropped by 50 percent, from roughly 1,200 farmers in 1996 to 600 last year, according to the U.S. Department of Agriculture.

The council so far has determined at least two funding options: a fee paid by dairy farmers or tax dollars. The latter could cost the state $12 million. Members will next meet Tuesday.

‘‘There’s got to be some pain on both sides,” said Chuck Fry, vice president of the Maryland Farm Bureau and a Tuscarora dairy farmer. ‘‘I was hoping we could work together as one, but you can tell processors are making money and don’t want to address” the fact that dairy farmers are struggling.

With 51 percent of its land devoted to agriculture, Frederick County is the top milk producer in the state, according to the Maryland Farm Bureau. In 2001, an estimated 26,000 dairy cows produced 388 million pounds of milk in the region.

The county’s dairy farmers are selling more than $50 million worth of dairy products a year, making it one of the nation’s top 75 counties for dairy products, according to the Frederick County Office of Economic Development.

Randy Sowers of South Mountain Creamery in Middletown since 1981 says his farm, with 300 dairy cows and a milk delivery to 18,000 customers, is expecting his first small profits this year. With almost $4 million in debt, he suspects a state commission may not be enough to keep farmers in business.

‘‘You just can’t cover your cost and you can’t make any money. You’re better off selling your land,” Sowers said. ‘‘The state always says they’re with the farmers, but they’ve never helped me. ... We’re trying to hold on.”

This report originally appeared in The Business Gazette.