During his campaign for governor in 2014, Congressman Mike Michaud often uttered the talking point “We’re gonna make Maine the breadbasket of New England.” Presumably, one accomplishes this by reviving our state’s declining agricultural output.
While I don’t know much about bread, I have maintained a keen interest in the exploits of the Maine Milk Commission, and by extension, our state’s dairy production for many years. Recalling the former congressman’s comments on agriculture, I decided to check up on the Maine dairy industry and the government organ concerned with it.
I was quite surprised to stumble into an excellent case study, both of the effects of governments attempting to prop up “desirable” industries, and of the effects of politicians attempting to reward supporters through the state. The Maine Milk Commission’s price-fixing activities attempt to reduce the cost of doing business for dairy farms, only to pass the expense on to you, the taxpayer and consumer.
The Maine Milk Commission was established in 1935 and now falls under the auspices of the Department of Agriculture, Conservation, and Forestry. Its mandate is to fix wholesale prices for Maine dairy farmers to sell their milk to distributers.
There are specific guidelines for conducting the annual assessment of Maine milk prices, which are kept artificially high through the commission’s authority to determine the wholesale price of milk for the State of Maine. The inflated prices are meant to ensure the profitability of state dairy farms by keeping wholesale revenues greater than the cost of production. Farmers are then given a direct subsidy from the commission’s humorously-named “Maine Milk Pool” to offset the costs of production.
This is where the activities of the commission end and the repercussions begin. The dairies and distributers (such as Oakhurst and Hood) are forced to pay an inflated price for wholesale milk, which can only logically result in an inflated the retail price. And so it is the consumer who ultimately pays the commission’s inflated price to indirectly subsidize the farmers.
As for direct subsidies, the funds from the Maine Milk Pool originate, of course, with the Maine taxpayer. Rather than erase the cost of producing milk, the State of Maine has simply distributed it among consumers and taxpayers.
At this point you may be thinking that a few taxpayer dollars are worth sacrificing to help our local farms. Most of these operations are small and family-owned, right? How much could it really cost each taxpayer? The answer is not much. The commission spends less than $8 million annually out of a state budget of about $3.3 billion, so it amounts to just a few dollars per taxpayer. It is also true that Maine dairy farms are almost exclusively small, family-owned operations. Is it not worth this small sacrifice to maintain a tradition of locally-produced dairy products?
As it turns out, no such tradition is being maintained. In the last ten years alone, the number of dairy farms in the state has declined from 500 to around 250, a 50 percent decrease. Indeed, Maine dairy farms have been gradually decreasing in number throughout the commission’s existence, down roughly 90% from 1935. No, the cost to the individual taxpayer or consumer is not onerous. Yes, it is hard to say no to sustaining a generations-old tradition of small-farm activity. But at the end of the day, the negligible cost to the people of Maine is failing to achieve the goal, and the tradition seems poised to decline in spite of measures the State has taken to prevent it. In practice, the Maine Milk Commission is wasting tax dollars.
The ultimate irony of this whole situation is the reason for the decline in the state’s dairy industry. There are obviously numerous factors in the decline of this industry from rising costs of feeding cows to a deteriorating infrastructure for hauling milk from the farms to the dairies. The greatest factor killing Maine dairy farmers is that they are basically getting out-subsidized. Corporate milk from the western United States goes to market at much lower prices than Maine-made milk due to more generous subsidies for milk production from the federal government, the cost of which is only a few pennies to each American taxpayer. Unable to compete with the cheaper product, Maine farmers are forced to close their doors.
Maine dairy farmers had enough political clout in the 1930’s to see the Maine Milk Commission established. Today, massive dairy operations from other states send millions in campaign contributions and armies of lobbyists to Congress to give them the competitive edge against pesky mom-and-pop dairy farms like ours here in Maine. If all dairy subsidies vanished tomorrow, it is unlikely that family-owned operations would triumph against the Goliath of corporate dairy production.
But the fact that the federal government is picking the winners and the state government is trying to prop up the losers should give us all pause. It is time to allow the free market to decide.