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Oregon dairy fights price hike

Wednesday June 8, 2005
BY EMILY STUTZMAN
Albany Democrat-Herald

Due to proposed USDA regulations, milk prices on Spring Valley and Mallorie's milk could go up at least 15 cents in the next six months.

The Department of Agriculture is proposing an expensive change for producer-handler dairy farms that do everything from raising the cows to delivering the milk to the store.

If the proposed USDA regulation passes, Mallorie's Dairy in Silverton, the largest producer-handler in the state, could go out of business.

Mallorie's milk, also known as Spring Valley milk, is sold at Shop-N-Kart, Roth's IGA and many local convenience stores.

"This could take us off the market," said Teri Kilgus, operator of animal health at Mallorie's Dairy and daughter of the dairy's founder, Robert Mallorie.

In a recommendation issued in April, the USDA is proposing a policy change with producer-handler pricing regulations.

Currently, producer-handlers are exempt from the federally regulated dairy pricing which allows them to sell their milk 11 to 33 cents cheaper per gallon. The exemption has been in place for more than 70 years. The problem the USDA sees is that over that time the volume producer-handlers put out has greatly increased.

The USDA is saying the price producer-handlers can sell their milk at is no longer fair. Producer-handlers were very small in the past and the difference in price wasn't significant, but with their growing size their advantage in the market can be harmful to smaller dairy farmers, according to the department. The USDA claims the proposed change is meant to help small dairies and keep the playing field equal with no price exemptions for producer-handlers.

Dairy farmers in the area surrounding Mallorie's and the other producer-handler dairies will be the ones who vote and decide on the proposed regulation.

If the regulation goes through, dairies such as Mallorie's will be forced to sell their milk at the federally regulated price just like all the other dairies.

"If this happens, it's going to cost us an extra million dollars a year to stay in business at the current size we have, and we already don't make a million dollars a year," Teri said. "The only other choice would be to downsize to the size the USDA says we should be."

If Mallorie's decreases production from their 520,000 gallons per month to the USDA suggested 350,000 gallons per month, they can avoid the pricing difference and maintain production. But such a change could only be supported by a company downsizing,

If Mallorie's does choose to downsize the production, the cutback would be around 40 percent. The family-run company would have to sell animals, lay off many of their 86 employees and the price of the milk per gallon would increase for consumers.

Mallorie's dairy is not sitting back and watching the change take place. Rather, the family has been working together with two dairies from Washington and one from Arizona , advocating for a reconsideration of the proposed policy change.

Mallorie's encourages concerned citizens who enjoy their milk and dairy products to write to the USDA and express their desire to see the regulation that has been in place for the last 70 years to remain the same.

Mallorie's has set up a Web site: www.keepmilkpriceslow.org for interested people to learn more about the problem and allows them to fill out and send in a form to the USDA discouraging the new regulation.

The dairy has also placed stickers on all of their distributed milk cartons encouraging customers to help save their family farm.

This week Rick Mallory, Teri's brother and the farm's business manager, and Charlie Flanagan, who has been with the company for 27 years, are in Washington D.C. in meetings with Rep. Darlene Hooley and Sens. Gordon Smith and Ron Wyden discussing the USDA proposal and the devastation their family farm would incur with such a change.

The USDA is accepting comments until June 13. After that time a decision will be made regarding the producer-handler procedure and taxing.

Mallorie's farm was started in 1954 by Robert Mallorie, a veterinarian. It has grown to 4,500 cattle (1,900 milking cows).

Mallorie's employs 86 people, 30 percent of whom have been there for over 10 years.

"We've spent 51 years building this business to what it is today," Teri said with a catch in her voice. "Now we're just hoping'..."

Producer-Handlers

Producer-handlers "do the whole thing", from farming, feeding and raising the stock to milking the cows, bottling the milk and delivering it to the store.

Mallorie's Dairy is the largest producer-handler in Oregon .

Large milk cooperatives in the Pacific Northwest account for 96 percent of the milk supply, while 9 family-owned producer-handlers produce 4 percent.

Since the 1960s, the number of producer-handlers in the U.S. has dropped from more than 450 to fewer than 60 today.