AUGUSTA — Friday will be the last day of production at the Garelick Farms milk processing plant in Bangor, bringing to an end 110 years of local dairy production. And the situation Maine’s dairy industry finds itself in, and which likely led to Garelick’s closure, are not improving, according to the Maine Milk Commission, which met Thursday.
The Maine Milk Commission gathered to determine the minimum price dairy farmers will receive for their milk in February, as well as discuss whether the minimum price processors like Oakhurst receive from retailers should be increased.
Julie-Marie Bickford, executive director of the Maine Dairy Industry Association, said the meeting saw “great discussion, but significant inaction.”
Part of the reason for the inaction, Bickford said, is that the commission is somewhat limited in what it can do.
The federal government sets the minimum price Maine farmers get for their milk, a number influenced by the global commodities market for dairy products. The Maine Milk Commission has a few mechanisms to increase the price Maine farmers receive, including what’s called the “producer margin,” which is a premium placed on top of the federal minimum price that is supposed to reflect the cost of production for Maine farmers.
According to new estimates supplied by the commission, on average it costs Maine dairy farmers $30 to produce a hundredweight of milk — which is approximately 12 gallons. Farmers, however, will only receive roughly $20 per hundredweight for their milk in February, according to the commission’s data.
“There aren’t too many things swinging the dairy farmers’ way, quite honestly,” Bickford said. “About one-third of our total costs are not being covered by the minimum price set by the federal government and it’s not covered by any of [Maine’s] safety nets. It means dairy farmers are digging a deeper hole for themselves. It’s not a very pretty picture.”
Despite the fact the federal minimum price dropped 76 cents in February, the commission opted to keep the producer margin where it was in January, at $1.53. The reason was that raising that premium to try to help the farmers would have the potential to harm the processors and the retailers.
Richard Cook, a member of the commission, spoke directly to the half dozen dairy farmers in the audience. He called the situation the milk commission finds itself in is a “catch-22.”
“It’s like putting a cup of water into a stream,” he said. “The little things we can raise doesn’t do very much for anybody or anything. It does a little bit for farmers, but we’re getting to a point where raising it might help the farmer or hurt the farmer. It might mean the producer then can’t take the milk and we lose the farms anyway. I feel terrible about it.”
Testimony presented by Hannaford stopped any discussion of increasing what’s called the “dealer margin,” the minimum price milk processors receive from retailers, in its tracks.
Hannaford said, in essence, that if the price retailers have to pay for Maine milk increased much more, the reality of the market would force retailers to consider buying milk from out-of-state producers to remain competitive. “This could lead to a weakening of the Maine milk industry,” Stephen Culver, Hannaford’s VP of government relations, wrote in written testimony.
If Hannaford, which currently sources more than three million gallons of Maine milk for its private-label milk, decided to source its milk elsewhere, it would be a big hit to Maine’s dairy industry. But the company, which is owned by Delhaize, a Belgian company, is not threatening to buy all its milk from out of state, a decision it would make “very reluctantly,” according to Mike Norton, a Hannaford spokesman.
“[The testimony] doesn’t portend a business decision,” he said. “It’s a statement about how markets work.”
Tom Brigham, co-president of Oakhurst Dairy in Portland, said Hannaford’s testimony is a worrying sign of the challenges the dairy industry faces.
“Not only have they been a very good customer for us, but they have been very supportive of local producers of all sorts of food products and the Maine dairy industry, in particular,” Brigham said. “It would be very disappointing to see them turn to out-of-state processors for their supply. The fact that they could be in a position where they might consider that shows how difficult this situation is, and underscores how much of a challenge this is for all of the stakeholders in all facets of the dairy industry.”
Bickford expressed some frustration at Hannaford’s testimony.
“The thing that was frustrating is Hannaford came in at the very last day of the comment period with comments after not participating in process prior to that, and then said ‘don’t do any of this, we’ll take our business elsewhere,’ which is kind of a big stick,” she said. “We’re not used to that because Hannaford has been one of the retailers that has stepped forward as more of a team player. But, again, we have to remember they’re not our Hannaford anymore — they’re Delhaize.”
Bickford said dairy farmers understand that processors and retailers are all under pressure from rising costs. However, while farmers have both hands tied behind their back and can’t access competitive markets, retailers have the flexibility to raise the price of milk they sell to consumers to increase their profit margin and make up some of the difference, she said.
“I wish we had a system where we were on a level playing field and we could talk equitably between the sectors about achieving profitability, but for the farmers, we don’t have that luxury. We’re talking about surviving. We’re not talking about profit margins or even return on investment. We’re talking about pure out survival,” she said. “I wish there was a magical solution, but there isn’t. I just want to be able to be back here in a few months, a year, a couple of years, and still be able to have these conversations, and not have the conversation be, ‘Well, there’s not enough milk in Maine to supply the plants.’”