Could milk prices hurt U.S. food independence?

Articles
October 01, 2009

Could milk prices hurt U.S. food independence?

If milk is the traffic star of food stores and a nutritional mainstay of America’s families, isn’t it incumbent upon the entire supply chain to keep prices as reasonable as possible, especially in a recession...?

If milk is the traffic star of food stores and a nutritional mainstay of America’s families, isn’t it incumbent upon the entire supply chain to keep prices as reasonable as possible, especially in a recession—and for lawmakers to step in when they feel something is amiss?

Some U.S. Senators are losing their patience with nearly $3-per-gallon retail prices for milk in the Northeast, when dairy farmers are only able to pull in less than $12 per 100 pounds (hundredweight) of milk, down from $21.70 in 2007, according to coverage in the Houston Chronicle. (SupermarketGuru.com estimates the farmers’ current take equates to 96 cents per gallon.) With production costs estimated at a stable $17.58 per hundredweight, legislators suspect the reason behind high shelf prices is too much market share concentrated among a few distributors.

They see two issues here:
•    Saving the dairy farmers, who “are in the worst shape I’ve ever seen,” said Senator Charles Schumer (D-NY)
•    Food security if dairy farms fail, which would jeopardize our ability to consume only “food raised in the United States,” said Senator Tom Udall (D-NM).

Senator Patrick Leahy (D-VT), chairman of the Senate Judiciary Committee, has already held a hearing to explore the “state of competition” in the Northeast dairy industry. “If you go in a grocery store, the price you pay for a gallon of milk does not reflect in any way what the farmers are getting,” the Chronicle reported.

At that hearing, Christine Varney, the top antitrust official at the U.S. Justice Department, said, “Competition is not very well served when you have one player in the market that controls 70% of the market,” Bloomberg News reported. She was commenting on how the “vertical integration” of dairy based on contracts with producers, rather than open markets, reduces pricing transparency.

Whether price supports or milk distribution change as a result of governmental investigations, federal officials are focused on a bigger picture—that our nation’s food independence hinges on inherent fairness in compensation to farmers (not only with milk, but many commodities) and retail pricing to consumers. Lose that, and we collectively risk losing much more.