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STATE REPORT SAYS RETAILERS GAIN FROM CHEAPER MILK

Supermarkets and other retailers, not consumers, have benefited from the sharp drop in milk prices that have hurt New York dairy farmers during the last half of 1990, said Agriculture Commissioner Richard T. McGuire in a report to Gov. Cuomo.

Figures supplied by the Western New York Milk Marketing Area, the state's official pricing and monitoring agency, show that during December farmers were being paid 27 cents for each quart of drinking milk. That's 10.1 cents per quart under the price they received last February.

After estimating that retailers' milk profit margins rose 28 cents per gallon between January and December, McGuire said that he would like to see some of those profits kept by milk producers.

A recent study by a Cornell agricultural economist found that dairy farms with fewer than 100 milking cows could not show an operating profit if farm gate prices dropped by $3 per hundredweight or 6.5 cents per quart. Since February, they have dropped from an unusually high $17.23 per hundredweight or 37.1 cents per quart to this month's $12.55 per hundredweight or 27 cents per quart.

The commissioner told the governor that while prices received by dairy farmers have been plunging, the prices paid by consumers have remained almost stable, creating substantial improvements in retailers' margins.

Retail prices in Western New York currently range from 99 cents in independent dairies to $1.09 in supermarkets for half-gallons of 2 percent milk. Smaller stores sometimes charge more.

"Consumers have a vested interest in seeing that New York's dairy industry remains competitive," McGuire said, noting that they have enjoyed the benefits of an adequate milk supply of locally produced milk.

The commissioner coupled his discussion of retail milk prices with an advisory that dairy farmers cannot survive at the current $10.10 support price that the government will pay for unsold milk. He urged milk dealers in their own interest to pay more for their milk supplies.

"I would hope that dealers would see it to be in their own interest, as well as consumer interest, to maintain the premiums (above monthly set government minimums) so that the New York dairy herd can be maintained," McGuire said.

A two-year farmer-organized premium program fell apart in August 1989 when shortages caused milk prices to soar. But they have been dropping steadily since February 1990 to their current low level.

McGuire added that he will continue to work closely monitoring prices with Richard Kessel, chairman of the governor's Consumer Protection Board.

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