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Abstract

At the outset we would like to thank the Committee on the Environment for the opportunities to submit this written testimony and to address the Committee on an important issue today. Milk pricing in New England and Massachusetts has been contentious for several years because of two interrelated issues. Those issues are of low milk prices to New England farmers and high milk prices to New England’s consumers. Figure 1 is a graphic picture of the problem. It gives the retail milk prices for Boston and the raw milk prices that farmers received for that fluid milk. The two vertical lines denote the era of the Dairy Compact. Note that the Dairy Compact established a price floor at $1.46 a gallon that shielded farmers from low raw fluid milk prices. Note also that outside of the Dairy Compact period there was considerable volatility in raw milk prices. Also note that before and after the Compact volatility in raw milk prices was not transmitted in any visible or major form to variation in retail milk prices. During the post Compact period within two months of the end of the Compact raw milk prices plummeted as much 50 cents a gallon to dairy farmers. At the time retailers in Boston dropped the price approximately 10 cents a gallon. After that major price drop raw milk prices continued to drift downward, and retail milk prices remained essentially constant, near $3 a gallon. Now we have experienced a 35 cent per gallon increase in the raw milk prices, and retail prices are moving up again.

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