Excerpts taken from http://www.yaledailynews.com/articles/view/28921
The combination of the bad economy and the federally mandated price system for milk has placed many Connecticut dairy farms in precarious financial positions. Although the Senate Appropriations Committee is scheduled to vote today on a bill that may give farmers financial support, some are skeptical that the milk bailout will succeed.
The federal government has mandated the price of milk since the 1930s, when surplus and soaring prices caused many farmers to go out of business. That mandate still exists today. National milk prices are set by trading done by the Chicago Mercantile Exchange. The problem, many state dairy farmers have said, is that those prices are set based on farms in the Midwest — which are often larger-scale, cheaper operations — and do not take into account the higher production costs in New England.
In the past two years, over 50 dairy farms have gone out of business in Connecticut — a quarter of the total number of then-operating farms. The Northeast Interstate Dairy Compact, which set the wholesale price of milk to keep regional dairy farmers afloat, dissolved in 2001, and efforts to recreate it have been unsuccessful. In January, the wholesale price dropped from $20 per hundredweight to $11.30, meaning that farmers have been selling their milk for $1.00 per gallon, even though their average cost is $1.90.
The price drop has prompted vocal criticism from many state dairy farmers, who are proposing that the state institute a “safety net” to help local farmers when the market price gets too low.
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