Democrat wants to find source of disconnect in prices

By JESSICA M. PASKO
Associated Press

ALBANY, N.Y. -- Sen. Charles Schumer last week called for a federal investigation into why a decline in retail milk prices hasn't matched the steep drop in what dairy farmers are paid for what they produce.

While the price paid to farmers has fallen by nearly 50 percent since January 2008, the price consumers pay in stores is down just 15 percent, Schumer said. He asked for an investigation by the Department of Justice and the Federal Trade Commission.

The U.S. Agriculture Department announced last month it would temporarily raise the price paid for milk and cheddar cheese through a dairy price support program. The price paid by dairy processors to farmers is set by the government, based on commodity markets that rise and fall with global demand.

"At a time when our dairy farmers are struggling just to make ends meet, it is absolutely essential to find out why they are seeing such a small share of the profits from retail milk sales," Schumer said.

The New York Democrat said a gallon of whole milk costs around $3 right now, but farmers are getting paid less than $1 per gallon. Specific prices vary across the state because of market conditions and regulations.

"As a result of these plunging wholesale prices, family dairy farms across the country have gone out of business or are in severe danger of doing so," he said.

Profits of one of the nation's largest milk producers, Dean Foods, have increased in the last year, even as dairy farms around the country are struggling and consumers aren't seeing a drop in prices, Schumer said.

Schumer said it's important to identify the source of the disconnect between the prices consumers pay and the prices farmers receive so it can be corrected.

"The price Dean Foods and other dairy processors pay farmers for raw milk is set primarily by the USDA under the federal milk marketing order program," said Dean Foods spokeswoman Marguerite Copel in a written statement. "As a company, we understand that some farmers are hurting right now but are confident that with USDA's price support programs, in conjunction with naturally occurring forces of supply and demand, the market will adjust, just as it always has."

New York may be more stable than some states because of the milk price threshold law, under which retailers are prohibited from pricing milk at more than 200 percent of the wholesale price paid to farmers, said Dean Norton, a dairy farmer and president of the New York Farm Bureau.

"I'm concerned from a consumer's point of view. I want to make sure the consumers aren't getting price gouged," Norton said. "But I also want to make sure farmers aren't being taken advantage of."