Rhode Island supermarkets used the Northeast Dairy Compact as an excuse to make higher profits on milk sales, according to a recent University of Connecticut study. Supermarkets captured 13 cents a gallon in extra profits since the compact began in 1997, while farmers received less than three cents a gallon more, the study found. Stop & Shop was cited as the worst profiteer.

Congress is debating whether to extend the dairy compact or let it expire September 30. By setting a minimum milk price for Northeast farmers -- often more than what the federal government guarantees -- the program boosted the average New England dairy farmers' income by $8300 a year, says Daniel Smith, executive director of the compact commission. It also encourages dairy farmers to stay in business, rather than selling their land to developers. Large Midwestern farmers and consumer groups, however, charge that the compact subsidizes small inefficient farms and increases retail milk prices.

Without doubt, the compact saved some local dairy farms from closing, says Alfred Bettencourt, executive director of the Rhode Island Farm Bureau. Bettencourt says one area farmer recently told him, "If the dairy compact goes out, he's going out." Rhode Island has only 23 dairy farms, down from 32 in 1997, according to the state division of agriculture.

By comparing supermarket scanner data with the milk prices received by farmers, UConn professor Ronald Cotterill and research scientist Andrew Franklin concluded, "Firms increased their bottom line profits and attributed their underlying price increases to the compact and increased dairy farmer income." The US Department of Agriculture-financed study states that Stop & Shop, Maine-based Hannaford/Shop 'n Save, and huge processor Suiza Foods Inc. "led the move to higher prices."

For the year prior to March 1997, Stop & Shop consistently sold milk at prices lower than other stores in the Providence market. But immediately after Stop & Shop and Edwards stores were bought by Dutch corporation Royal Ahold, Stop & Shop raised its profit margin on milk and increased prices above competitors, the study concluded.

Stop & Shop spokeswoman Kelly O'Connor referred questions to the Rhode Island Food Dealers Association (RIFDA). RIFDA president Anita San Antonio says the group has no position on extending the compact, and in a brief faxed statement, she cites any report that blames retailers for milk price increases as "faulty."

The UConn study also reveals that Shaw's Supermarkets' milk prices were consistently lower than those of Stop & Shop while Rojack's was a serious competitor in Rhode Island. But when Rojacks folded in early 2000, Shaw's raised its prices to the level of Stop & Shop's.

Issue Date: September 7 - 13, 2001