LV dairy industry facing extinction

Thursday, Sept. 2, 1999 | 11:31 a.m.

What it means to the consumer:

If Southern Nevada's lone milk processor, Anderson Dairy, operated under the Arizona-Las Vegas Milk Marketing Area's proposed milk pricing differentials, farmers would be paid more for milk. The Nevada Dairy Commission says that would result in consumers paying an additional 6 cents per gallon for 3.5 percent homogenized milk as well as higher prices for most other dairy products.

If the Dairy Commission takes jurisdiction of Las Vegas and implements a lower pricing differential, Executive Director Stacy Jennings said milk prices probably would stay the same or be slightly lower.

While dairy farmers all over the country voted overwhelmingly to approve an overhaul of the nation's milk pricing system, Southern Nevada dairies say the overhaul will ruin them and are working to bail out of it.

A contingent of farmers, milk processors and government leaders is supporting a plan for Southern Nevada to become independent of the federal milk marketing order system, implemented in the 1930s.

If the plan is successful, Southern Nevada milk producers would be regulated by the state Dairy Commission like their counterparts in Northern Nevada. If they fail, representatives of Anderson Dairy, Southern Nevada's only milk processor, fear the company will be forced out of business.

The U.S. Department of Agriculture was ordered in 1996 to come up with an alternative to the milk-pricing plan that was adopted to stimulate milk production in areas where it was scarce. The system adopted in the Depression era guaranteed that farmers in the South and West would receive up to $3 per hundred pounds more for their fluid milk than producers in the Midwest and divided the country into 31 "milk orders."

The USDA's alternative plan consolidated the milk orders into 11 areas and would have a major impact on Las Vegas. Instead of being a part of the Great Basin Federal Order with portions of Utah and Idaho, Las Vegas would become a part of the Arizona-Las Vegas Marketing Area, putting Southern Nevada's four dairy farms with Arizona's 200.

The USDA proposal was sent to farmers nationwide in the form of a referendum in early August. Earlier this week, results of the referendum were announced. Farmers, including those in the Arizona-Las Vegas Marketing Area, overwhelmingly approved the new plan.

After the vote was announced, farmers said it wasn't so much an endorsement of the new system but a vote to have any system in place. Some feared chaos if the original plan expired without something to replace it. Others have approached their lawmakers in a bid to return to the old system.

"The referendum was a choice between the lesser of two evils. The most egregious evil is having no federal order program. ... It's no surprise that dairy producers very grudgingly and with a great deal of reservation did vote in the USDA proposal," Chris Galen, a spokesman for the National Milk Producers Federation, said.

His group estimates that farmers would lose $200 million a year compared to the current system.

In a letter to the USDA, the largest dairy cooperative in the nation, Dairy Farmers of America, said its members were approving the pricing plan reluctantly. "Our 'yes' vote does not mean that dairy farmers can live with the final rule. They cannot. Economically, the income and livelihood of many dairy farm families will suffer significantly under your proposal," the group said.

The House Agriculture Committee voted 32-15 earlier this month to block the USDA plan and implement an alternative proposal that is closer to the existing system. The legislation is sponsored by more than 220 lawmakers, a majority of the House.

While the majority of farmers in the Arizona-Las Vegas Marketing Area voted to support the plan, Nevada producers were firmly against it. The reason: The proposed changes in price differentials would favor Arizona dairies and hurt Nevada's.

Under the revised plan, Anderson Dairy would have to pay 65 cents more per 100 pounds of milk -- about 11 1/2 gallons -- while Arizona dairies would pay 97 cents less per 100 pounds.

Anderson Dairy officials say they could not absorb the 41 percent increase in costs and would have to shut down, putting 200 people out of work. The four Southern Nevada farms -- two each in Clark and Nye counties -- would have difficulty transporting their milk to another processor, putting 200 more jobs at risk.

Anderson Dairy said it would be required to pay a higher differential due to a faulty computer model.

Under the new plan, other dairies providing milk in Las Vegas would be under different pricing rules.

Smith's Food and Drug, which stocks its Las Vegas stores from dairies in Arizona, would pay an additional $1.55 per hundred pounds, down from the current $2.52. Dairies in Salt Lake City that stock Northern Nevada Smith's stores would pay an additional $1.50 per hundred pounds, down from the current $1.90. Southern California dairies, which aren't federally regulated, would pay an additional $1.55 per hundred pounds of milk in supplying Vons and Albertson's stores.

Because dairies in Arizona, Utah and California have lower production costs because of those differentials, supermarkets stocked by dairies in those states can offer their milk products for less than Anderson Dairy and still make a profit. While Anderson Dairy's production costs would rise 41 percent, those in Arizona and Utah would fall 38 percent and 21 percent, respectively.

Why is Las Vegas' differential so much higher than everywhere else? A U.S. Department of Agriculture computer model showed a large quantity of milk being shipped into Clark County from out of state. What the computer didn't show was that the milk was going to "captive markets" -- dairies producing exclusive store brands for their respective supermarkets.

Because the computer model showed a "need" for more milk in the county, a higher differential was placed on milk produced in the county as a production incentive.

The Nevada dairymen took their concerns to Sens. Harry Reid and Richard Bryan, both D-Nev., and enlisted support from Gov. Kenny Guinn and Stacy Jennings, executive director of the Dairy Commission. Their plan: secede from the proposed new federal milk marketing area.

An amendment that would exempt Clark and Nye counties' dairies from the federal rules and place them under the jurisdiction of the state Dairy Commission was attached to a $68.1 billion agriculture spending bill that includes some farm disaster aid and was approved in the Senate by a voice vote.

Jennings said a conference committee will take up the legislation when lawmakers reconvene next week. The spending bill must clear the House and be signed by President Clinton before it can become law. Nevada's congressional delegation is monitoring the bill to make sure the amendment survives.

Jennings said the USDA won't try to block Nevada's move since producers, processors and government officials are united in their opposition.

"Usually, producers will take one side and processors will take the other," Jennings said. "But since we all opposed it, the USDA isn't standing in our way."

The Dairy Commission is close to adopting a set of pricing rules if Nevada's dairies become independent of the federal milk order program. Commissioners will meet in Las Vegas later this month to consider adoption of the rules.

Jennings said setting milk prices wouldn't be new to the commission. Northern Nevada dairies -- known officially as the Western Nevada Marketing Area -- have been under the Dairy Commission's jurisdiction for years. Jennings said those dairies and their prices operate similarly to Northern California's dairy industry.

The Associated Press

contributed to this report.