WHOLESALE MILK PRICES DIP; RETAIL SEEING MIXED RESULTS

CHRIS YTUARTE

WASHINGTON -- A 22-year low in wholesale milk prices is bringing about a drop in the retail cost of all dairy products, though prices still remain high.

According to the Bureau of Labor Statistics, here, a gallon of low-fat milk averaged $2.83 in November, down from $2.94 the month before. Still, one year ago it was $2.76 and two years ago $2.53.

While a host of factors is at play, experts say that heavy production in the Western United States is expected to help lower the shelf prices, especially in those states.

But suppliers elsewhere are crying over the glut, prompting the U.S. Department of Agriculture to distribute $125 million in direct cash payments to dairy farmers hurt by the wholesale drop, as well as $500,000 to help small farmers and ranchers market and export their products.

After distributing $200 million to dairy farmers last summer, the USDA came to the rescue again this month with its Dairy Market Loss Assistance program, which provides payments based on an operation's milk production.

The changes came as the federal government implemented a new milk pricing system that was put into effect Jan. 1, 2000. The revised plan includes the consolidation of marketing regions from 31 to 11, minor changes in the basic price paid to dairy farmers and a different method of determining the value of raw milk, though supermarket competition, state laws and local milk consumption habits continue to be the primary influence on prices.

Last month East Coast dairy farmers in Annapolis, Maryland, began urging the government for help when the drop in milk prices left them facing financial ruin. As the federal minimum price fell to $9.63 per 100 pounds, the lowest it's been since 1978, farmers across the nation began petitioning for relief.

Farmers from Maryland, Pennsylvania, New York and Alabama rallied outside of the Maryland State House demanding fairness in milk pricing.

Daniel Dienner, an Amish dairy farmer from Lancaster County, Pa., said that all 30 families in his county once supported themselves with milk sales, but that number had recently been reduced to seven, he said.

The drastic reduction in dairy farmers' incomes is also expected to ignite another effort in Congress this year to allow more states to unite and set prices that bottlers can pay to producers, an issue that became one of the most heated on Capitol Hill in 1999.

National milk production was up 3.4% through November,1999, with prominent rises in the Western states, while a state like Wisconsin only saw a 1% increase.