Published on 05/06/98

Georgia Dairy Farms Facing Financial Failure

The last drop of hope may have trickled from some Georgia dairy farmers at the end of April with the failure of Senate Bill 420 to become law.

The bill would have allowed Georgia dairy farmers to join the Southern Dairy Compact, an attempt to duplicate the Northeast Interstate Dairy Compact in 12 Southeastern states. The measure passed both houses of the Georgia General Assembly, but died with the governor's veto.

"This is definitely a setback for the Georgia dairy industry," said Bill Thomas, an extension economist with the University of Georgia College of Agricultural and Environmental Sciences.

"We don't know if it's a permanent or temporary setback," he said. "There are indications that the bill will be reintroduced next year. Several legislative leaders who supported the compact this year said it would be a top priority next year under a new administration."

The compact would set a minimum price that milk handlers could pay dairies for fluid milk in Southern states. At the same time, though, the U.S. Department of Agriculture is moving to lower minimum prices nationally and let market forces set dairy product prices.

The compact would establish a commission to set a minimum fluid milk price to farmers. Each state would name three to five members of the commission. Georgia members would include at least one consumer, dairyman, processor and school food services representative.

In his veto statement, Gov. Zell Miller said the Georgia Supreme Court ruled a similar arrangement, the Milk Control Board, unconstitutional in 1951.

The ruling said, "Before the General Assembly can authorize price fixing without violating the due-process clause of our Constitution, among other requirements, it must be done in a business or where property involved is affected with a public interest, and the milk industry does not come within that scope."

The ruling was upheld in 1967.

One of the governor's strongest oppositions to the compact was the possibility that it would raise milk prices. That would be "counterproductive after we have removed the sales tax off groceries in Georgia," he said.

Based on what has happened with the Northeastern Dairy Compact, prices probably would rise.

"However," Thomas said, "the price increase Gov. Miller quoted is higher than the increase I expect."

The compact still must pass in Congress to keep farmers' hopes churning. It could be 1999 before the compact prices milk. So Georgia could pass the compact again before the compact price is set. Farmers may not lose out.

"But even if it passes, there is the question of the constitutionality of the compact in Georgia," Thomas said. "It would have to be tested in court. And it likely will be, because ultimately it will raise the price of milk somewhat."

For some Georgia farmers, it's all too little, too late. The cream has already curdled.

"Georgia dairy farmers aren't making a lot of money. We will continue to lose farmers," Thomas said. "The price has already started falling this year. It will drop almost 20 cents per gallon by summer, just when it costs the most to produce milk in Georgia."

Dropping prices and rising production costs keep forcing Georgia dairies out of business. Another 10 percent to 20 percent could close this year.

In 1985, Georgia had 854 dairies. At the end of 1997, that number slipped to 442. Today, the state has just 430. And Thomas said about 400 of those are family farms, and many are on the verge of closing down.

"Unfortunately, the dairy compact was a long-term solution, not something that was going to help us this year," Thomas said. "A lot is unknown about federal reform and the compact. Dairy farmers are facing a lot of uncertainty as they try to make decisions for the future."

Faith Peppers is the director of public affairs with the University of Georgia College of Agricultural and Environmental Sciences.