Problem & Solution

As in any other industry, dairy farmers need to turn a profit in order to stay in business. That means they need to be able to sell their milk for more than it costs them to produce it. However, this is sometimes difficult because farmers do not set the price they are paid for their milk. The federal government, with some regional differences, sets the price nationally.
In recent years, the price paid to farmers for milk has fluctuated widely. In 2006, it dropped to a 25-year record low of $1.14 per gallon. Prices got better in ’07 and ’08 but in February 2009, the situation worsened. Milk prices plummeted to as little as $1.00 per gallon and the cost of grain, fuel and electricity climbed to new highs.
The situation is also difficult because the low milk prices farmers receive are not always evident at the supermarket. Since the 1950’s, the dairy farmers’ share of the retail/consumer dollar has declined from about 50% to about 30% today. When consumers purchase milk at the supermarket, only about 30% of the price gets back to farmers. These factors have contributed to New England losing over 100 local dairy farms in the last two years.

There are programs available through the federal government and some New England states to assist dairy farmers. However, these programs only kick in when prices are low and are designed to offset only a portion of the loss of income to dairy farmers.
Milk prices do fluctuate and in 2009 prices were very low. The dairy farmers that could survive these low milk prices incurred debt that must be repaid when milk prices improve. The Keep Local Farms program will provide assistance to dairy farmers regardless of the price of milk. When milk prices rebound, funds could be pooled in preparation for a milk price down turn. The funds collected could also be used for special projects such as grants for renewable energy or environmental protection on farms.