Written By Michelle Monroe

    ST. ALBANS — “We’ve never seen anything like this before,” Rygate dairy farmer owner Jenny Nelson said during a phone call with reporters Wednesday.

    Nelson is also staff person for U.S. Sen. Bernie Sanders, I-Vt, who was host for the call to inform reporters of a meeting he’d had with Secretary of Agriculture Tom Vilsack to discuss the crisis facing Vermont’s dairy farms.

    While dairy prices have long been known to fluctuate on a cycle, in the past few years that cycle’s highs and lows have been coming faster and have become more marked with the highs going higher and the lows going lower. Last year, farmers were receiving record high prices for their milk. Last month the “pay price” -- the amount paid by the co-ops to farmers -- was nearly half what it was less than a year ago.

    Prices have now fallen to below the cost of production, even for highly efficient farms.

    The issue isn’t simply one of cash flow, Nelson explained, but a loss of equity, as farmers are forced to rely on the equity in their land, equipment and animals to pay operating costs.

    The issue extends beyond dairy farmers to the infrastructure that supports farmers, including grain and equipment dealers and veterinarians. “Dairy farmers buy a lot of services,” Sanders said.

    Vilsack indicated that the U.S. Department of Agriculture (USDA) is trying to increase exports of powdered milk and is trying to distribute more powdered milk to schools and low-income families, according to Sanders, who said Vermont Agriculture Secretary Roger Albee participated in the meeting by phone.

    Farmers are paid for their milk based upon its ultimate use. Class I milk is fluid milk used for drinking. Class II milk goes into dairy products such as ice cream and butter. Class III milk is used for cheese and Class IV milk is powdered milk. The USDA sets a minimum price in each region for Class I and II milk using a formula based on the price for Class III and IV milk.

    By reducing the oversupply of powdered milk, the USDA could theoretically boost the price of powdered milk and ultimately Class I milk.

    Sanders called including the cost of production in the milk price determination, an idea put forth by Maine farmers, a “great idea.”

    In the short-term, Sanders said his office will be working with Vilsack and others in Congress to try to boost payments to farmers under the Milk Income Loss Contract (MILC).  The MILC program makes payments to farmers when the Class I price falls below $16.94 per hundredweight (cwt). Farmers receive 45 percent of the difference between the actual price and the $16.94. However, farmers may only receive payments on 2.95 million pounds of milk.

    In testimony before a House agriculture subcommittee on Tuesday, Congressman Peter Welch, D-Vt, endorsed a proposal put forth by the Northeast Association of State Departments of Agriculture to increase MILC payments to 79 percent and raise the cap.

    Both Sanders and Welch acknowledged that increasing MILC payments is a short-term solution to the problem. “Ultimately farmers don’t want to be receiving federal money. They want a fair price,” Sanders said.

    As part of his efforts to help farmers receive a fair price, Sanders met last week with Christine Varney, head of the anti-trust division at the Department of Justice to urge her to begin an anti-trust investigation into the dairy industry.

    Dean Foods controls 70 percent of the fluid milk market in New England, Sanders said, adding that their market share is similar in other parts of the country. In Michigan, Sanders said, Dean controls 90 percent of the fluid milk market.

    Roughly 40 “local” and regional brands of milk are actually Dean Foods, including Garelick Farms. The company also owns Silk Soy Milk and Horizon Organic Milk.

    For the first quarter of 2009, Dean Foods had profits of $76.2 million, a 147 percent increase over the first quarter of 2008, according to Sanders. Dean Foods profit increases came at the same time as prices paid to farmers fell. “I don’t think it takes Sherlock Holmes to figure out there’s a connection between the two,” Sanders said.

    Asked whether the larger farmers co-operatives, such as Dairy Farmers of America (DFA), should be included in an anti-trust investigation, Sanders replied, “I think the investigation should go where it goes.”

    U.S. Sen. Pat Leahy, D-Vt, announced late Wednesday that more than a dozen senators, including Sanders, had signed a letter Leahy and Sen. Herb Kohl, D- Wis., sent to Vilsack urging USDA to exercise authority granted to it in last year’s Farm Bill to increase the price the federal government pays for butter, cheese and non-fat milk under the Dairy Price Support Program.

    The letter noted that the all-milk price (the price which represents all four classes of milk) for the first four months of this year averaged $4.80 per cwt. Vermont farmers usually receive a price above the all-milk price because Vermont milk is more likely to be used for drinking or Class I, which receives the highest price.

    Noting that there are constraints on how much the federal government can spend on price supports, Sanders compared the crisis facing Vermont and other dairy states to a natural disaster. “For Vermont and perhaps other states, we’re looking at a disaster and we do need federal help,” Sanders said.

    In addition to dairy price supports, Sanders said he has also asked the USDA to increase its hamburger purchases to improve prices for farmers who are trimming their herds.

    “It is absolutely imperative we continue to have decentralized food production,” Sanders said, likening the concentration in the dairy industry to increased concentration in other agricultural sectors.

    Decentralized agriculture is important for food security, Sanders said, adding that smaller-scale is better for the environment and human health.

    “They [consumers] trust family farmers to produce good quality, locally produced foods,” Sanders said.

    If asked, Sanders said, even people in cities such as New York and Los Angeles would say they would rather get their food from the U.S. than China.