Consumer Dairy Prices Steady, Despite Compact’s Demise

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(Host) Despite the fact that farmers are being paid a lot less for milk these days, consumers are not paying less at the store. When the Northeast Interstate Dairy Compact started up five years ago, supermarkets immediately raised the price of milk. The compact expired in September. Wholesale milk prices dropped sharply in December. But the retail price has stayed the same.

VPR’s John Dillon reports.

(Dillon) Milk prices at the retail level seem to defy the laws of gravity. The wholesale prices paid to farmers dropped about 20% earlier this winter. If the dairy compact had been in effect, it would have stabilized prices.

But the compact expired at the end of September. Farmers in New England saw smaller milk checks when the wholesale price fell. At the supermarket, however, the prices in the dairy case have stayed about the same.

Each month the state’s Department of Agriculture checks prices at 26 stores around Vermont. The state’s survey shows that a gallon of whole milk averaged just over $3 from September through February. Byron Moyer runs the department’s dairy division:

(Moyer) “I think it’s fair to say there has been no adjustment to date in retail milk prices since the discontinuance of the compact.”

(Dillon) Moyer says that when wholesale prices rise, stores quickly pass through the increase. He says that doesn’t seem to happen when wholesale prices fall.

The dairy compact has been out of business for five months. Dan Smith, its former executive director, says if the compact had been in effect this winter, farmers would have gotten about 15 cents more for a gallon of milk.

Smith says the compact didn’t hurt consumers, it just skimmed off some of the milk industry’s profits and sent it to farmers:

(Smith) “What the compact price regulation did was usurp some of that profit taking…. That 15 cents would have gone back to the farmers. That 15 cents is now being kept by the processors and supermarkets.”

(Dillon) Bernard Rogan, a spokesman for the Shaws Supermarket chain, says his company sets its prices based on what the milk processors charge. He says the company now pays a wholesale price of $2.10 for whole milk. Last year, he says it paid $2.17:

(Rogan) “There’s no chicanery on our part, believe me. It’s a matter of having to respond to what the dairies are doing. I think the question might be better put to the dairies, rather than the retailers.”

(Dillon) The International Dairy Foods Association, the trade group that represents milk processors, said the processors are not responsible for retail prices. The group referred questions back to the retailers.

For Vermont Public Radio, I’m John Dillon.

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