Village Farm, Freedom - Photo by C. Parrish
Village Farm, Freedom - Photo by C. Parrish
Vermont, the home to Cabot cheddar and Ben and Jerry's ice cream, lost half its dairy farms in the past 10 years. New Hampshire lost even more.

In Maine, Republicans and Democrats, farm families and the top brass at Hannaford got together and hacked out a compromise towards a common goal: to keep Maine dairy farms from going under. It worked. Even after being whomped in 2009 when grain and fuel prices rose and milk prices fell, Maine lost just 20 percent of its 381 dairy farms.

Milk is such a simple, straightforward food. Straight from the cow, pretty much straight into the bottle. But milk policy is anything but simple: it is mucky with 50 years of federal add-ons and political posturing that has become deeply embedded in the federal milk pricing system - a system so gut-wrenchingly complicated, according to those involved in milk policy, that it's enough to make the biggest cheese lover lactose intolerant.

States can't change the federal price; they can only tweak it. So, the Maine Legislature decided it made sense to provide some relief to farmers when the federal milk price falls below the price of production.

The answer was the Maine Dairy Relief Program, created in 2003. Known as the tier system, the Maine Dairy Relief Program puts a fee on every gallon of milk that, in a round-about way, goes back to dairy farmers to help them from going bankrupt when the federal milk price drops.

The fee is not passed on to consumers. Grocery stores, like Hannaford, eat it.

And they do so willingly.

Maine retailers volunteered to participate in the tier system. The retail mark-up for milk is high enough so retailers still make a considerable profit on milk even after paying the fee.

Large grocery retailers like Hannaford also don't want to lose Maine dairy farms. Right now, the supply chain for milk in the state is simple. In Maine, if you drink a glass of milk, it comes from a Maine cow. The tier system works in Maine, and is hard to replicate elsewhere, because roughly the same amount of milk produced by Maine cows gets guzzled by Maine consumers, so the fee stays in Maine and goes back to Maine dairy farms.
In truth, it is not quite a closed loop. Some Maine milk goes out of state to New Hampshire and Massachusetts, and yogurt, cheese and ice cream come in from elsewhere, but it roughly equals out.

And, incidentally, none of the Maine milk, regardless of the brand, comes from cows treated with bovine growth hormones, because the top commercial processors won't accept it.

But back to the fee: if the fee is 25 cents on a gallon to retailers, most of that quarter gets back to a Maine dairy farm. A common question is: Can the tier system be replicated elsewhere?

The short answer is no.

Vermont cows, for example, produce six times more milk than Vermonters consume, so only one-sixth of a dairy relief fee would get back to Vermont farmers - hardly enough to keep dairy farms alive or to build a political constituency.

In Maine, it's all very tidy. Two big grocery chains, four big processers who process the name brands and the no-name brands, 304 commercial dairy farms, and the same amount of milk produced in the state being consumed in the state.

John Piotti, executive director of Maine Farmland Trust and a former state legislator who helped craft the Maine Dairy Relief Program, said the tier system is revisited every other year. So far, it has had bipartisan support.

"Groceries get a huge margin on milk. Under the tier system, the grocery is getting less of a margin when the federal price drops," said Piotti. It's still a huge margin, he said, so retailers can afford to absorb the fee.

"The fundamentals of dairy farming are still good," said Piotti. "If federal price levels get fixed, which we hope they will, Maine will be a very good place to grow milk."

The Farm Bill, which is reauthorized every five years and runs out September 30, controls dairy pricing and it should be radically changed, according to Maine Department of Agriculture Commissioner Walt Whitcomb, who is a former dairy farmer from Belfast.

One version of the 2012 Farm Bill passed the Senate this summer with an amendment sponsored by Senator Olympia Snowe that would remove the discussion about federal dairy pricing from the highly politicized Congress and shift pricing decisions to a professional and deliberative body. The amendment passed the Senate by two-thirds.

Whether it will remain in the final version of the Farm Bill is anyone's guess. The Senate and House versions of the bill will need to be reconciled, but final passage of the 2012 Farm Bill is unlikely before the November election and is likely to slop over into 2013.