Puerto Rico’s dairy farmers, represented by the Puerto Rico Farm Bureau, will publicly expose their sector’s economic problems during a hearing Tuesday by the Milk Industry Regulatory Office (ORIL, by its initials in Spanish) to determine whether there is a need for a hike in the price of fresh milk.
During the hearing, the farmers will have their advisor, farming economist Pat O’Brien, testify and explain the impact of the problems the sector faces. In recent years, 20 dairy plants have sought protection from the U.S. Bankruptcy Court, and another 25 could follow suit, according to the Bureau’s Dairy Sector.
Although farming in general has been hard-hit in recent years by the economic downturn and other problems, including harsh weather, the dairy sector has also been navigating through ongoing increases in production costs that have taken a bite out of their bottom lines.
In the last two months, farmers said, the cost of feed — which represents about half of a dairy farmer’s production costs — has increased by 20 percent.
Because the dairy sector is regulated, it cannot implement price fluctuations on its own. It is up to ORIL to approve adjustments. Two years ago, ORIL agreed to conduct a comprehensive census of variable costs and capital base to determine what the fair price would be to pay to the farmer for milk.
The result was that just compensation to farmers should be no less than .94 cents a quart. However, ORIL decided to fix the price at 76.5 cents per quart.
At present, consumers pay $1.40 for a quart of fresh milk, $2.80 for the half-gallon, $5.60 for the gallon, and $1.82 for a box of UHT milk.
At that time we warned them and we have continued to reiterate to ORIL that that decision was unfair, arbitrary, misguided and lacking of a scientific based, the only thing that it would bring would be countless bankruptcies,” said Gabriel Cordero, head of the Bureau’s Dairy Sector. “The result of this misunderstanding and inability to understand, recognize and accept the true costs of farmers has been witnessing an unprecedented increase in bankruptcies in the dairy sector.”
Back then, ORIL said the price of feed and petroleum had both dropped, so a higher price for the quart of milk was not justified.
But now, Cordero said the price of feed has jumped by more than $2 for every 100 pounds, so ORIL should be compelled by law to order a hike of no less than 4 cents per quart on the price of milk, which should go directly to farmers.
According to the latest figures released by the U.S. Census Bureau, the island’s dairy sector has seen a reduction in the number of farms, as well as in the value of their production.
In 2007, the latest figure offered by the U.S. Census, the dairy sector milk sales reached $184.5 million, a 5 percent drop from the $194.1 million reported in 2002. Farmers produced 30 million fewer quarts during the same five year period, the statistics show.
Those totals should be drastically different now as a result of the bankruptcies that have been filed recently.
On Tuesday, the farmers filed a lawsuit against ORIL at the U.S. District Court for Puerto Rico, asking the federal forum to obligate the government agency to comply with Regulation 12.
These rules mandate ORIL to automatically compensate farmers when there’s a sudden change in critical production elements, in this case the cost of feed concentrate. Regulation 12 also requires ORIL to issue a new price order that’s fair and scientific, taking into consideration costs and reasonable profits.
“We are hopeful that since ORIL is not assuming its responsibility as it has to, the Federal Court will force them to do so because it has been in full violation of the provisions of the court,” Cordero concluded.
Business reporter with 27 years of experience writing for weekly and daily newspapers, as well as trade publications in Puerto Rico. My list of former employers includes Caribbean Business, The San Juan Star, and the Puerto Rico Daily Sun, among others. My areas of expertise include telecommunications, technology, retail, agriculture, tourism, banking and most other segments of Puerto Rico’s economy.