By CLAUDIA ASSIS
Capital News Service
November 18, 1999

WASHINGTON - Maryland would not be allowed to join a multistate milk pricing organization under a tentative agreement reached Nov. 18 in Congress, temporarily blocking a move dairy farmers had seen as crucial to their existence.

But the House-Senate agreement would extend the life of the Northeast Dairy Compact until Sept. 30, 2001, giving Maryland dairy farmers hope that they may yet be able to join.

The agreement was reached early Thursday and included in a budget bill that was debated by the House in the evening. The issue was expected to reach the floor of the Senate sometime late Thursday night, a congressional aide said.

"It was the only deal they could cut this year," said Valerie Connelly, director of government relations for the Maryland Farm Bureau. She said it was very important that negotiators were able to extend the compact, because Maryland dairy farmers will continue their efforts to get in later on.

The agreement to extend, but not expand, the compact also means that Delaware, Pennsylvania, New Jersey and New York will not be allowed to join for now, as legislators in those states had hoped. Maryland legislators voted to join the compact in early 1998.

The organization, created in 1996, establishes a price for fluid milk in member states above the federally set minimum price. Processors pay the compact the difference between the federal and the regional prices, and that money is distributed to dairy farmers based on their production.

The dairy compact expired Oct. 1, but a federal judge in Vermont issued a temporary restraining order blocking imposition of federal milk-pricing regulations that would have taken effect if the compact expired.

The bill that would have allowed Maryland and the other states to join the compact was hung up in Congress by Midwest lawmakers who objected to provisions that would have raised milk prices higher in other areas of the country than in the Midwest. Lawmakers from the Midwest relented on that provision, but only if the Northeast compact was not allowed to expand.

Consumer groups say that while the compact can help some dairy farmers, it does so at the expense of consumers.

"It clearly has raised prices in New England," said Art Jaeger, assistant director of the Consumer Federation of America. "And benefits are, at best, mixed."

Jaeger said milk prices in New England have risen by 15 cents a gallon since the compact was established in 1996, increasing the total cost to consumers by $65 million in that time.

"That is a substantial cost, specifically for low-income families," he said.

But supporters say the compact actually stabilizes prices for consumers, by minimizing the fluctuations in milk prices.

"Prices go up, but not at the retail level. It means better payment for the milk that leaves the farmer," said Connelly.

She said most of the increase in milk costs have been driven by grocers. While a farmer got $1.30 on a gallon of milk that sold at the grocery for $1.90 in 1984, she said, the same farmer got only a dime more in 1996, even though stores were charging $2.80 a gallon.

Connelly said about 10 Maryland dairy farms go out of business every year. The number of dairy farms dropped from 1,140 in 1991 to 869 in 1998, according to the Maryland Department of Agriculture, she said.