Jeffords-Backed Milk Controls Divide Dairy Industry

A milk-pricing system being played as a card in Sen. James Jeffords' political future is also at the center of a bitter dispute among the nation's dairy farmers.

The Vermont lawmaker, chairman of the Senate Health, Education, Labor and Pensions Committee, said Thursday he will leave the Republican Party and become an independent, tipping the balance of Senate power to the Democrats.

The price controls now apply only to milk that's sold in Vermont and other New England states. Some dairy producers want Congress to expand the regional controls to include most of the Northeast and create a similar price-fixing scheme in the South for milk.

However, farmers in big dairy states such as Minnesota and Wisconsin want the regional controls abolished entirely, saying they encourage overproduction. And consumer advocates say that fixing dairy prices to benefit farmers hurts the poor and discourages people from drinking milk.

Regional price controls "benefit some groups of producers at the expense of others," said Mark Furth, chief executive of Associated Milk Producers Inc., a Minnesota-based farmer cooperative. "We need a national dairy pricing system and national dairy policy that is free of regional distortions."

Under the New England system, a commission of farmers, processors and consumers regulates the prices that are paid to farmers for milk that's sold for drinking.

New England was allowed to set up its system, or "compact," as the result of a 1996 congressional deal that secured the support of Sen. Patrick Leahy, D-Vt., for a Republican-authored overhaul of national farm programs.

Authority for the compact was supposed to end in 1999, but Leahy and Jeffords got Congress to extend the program until this September. At the time, the compact extension was viewed as a critical issue for Jeffords' re-election bid in 2000.

Jeffords and Leahy want it extended again. But some GOP aides have whispered that the White House might work against the extension as retaliation against Jeffords for his opposition last month to the size of President Bush's tax cut.

Meanwhile, legislation introduced earlier this month would add five states to the New England compact: New York, New Jersey, Pennsylvania, Delaware and Maryland.

And a proposed new southern compact would comprise Alabama, Arkansas, Georgia, Kansas, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, Oklahoma, South Carolina, Tennessee, West Virginia and Virginia.

Dairy compacts stabilize milk prices but assure farmers that they will be high enough to cover their cost of production, said John Lincoln, a New York farmer.

"The impact on consumers hasn't been significant," he said.

A recent study by the University of Connecticut found that retail prices rose from $2.49 per gallon in 1997 to $2.78 per gallon in 2000. But price controls accounted for only 4.5 cents of that 29-cent increase, with the rest attributed by the study to supermarkets and dairy processors.

However, the New England system hasn't stemmed the decline in the region's dairy farms, opponents say.

Rep. Bob Goodlatte, R-Va., says that allowing states and regions to fix prices for milk is setting a bad precedent.

"How do we draw the line at just milk? Steel manufacturers might like to have a compact or shoe manufacturers," he said.