The price control programme created to protect smaller New England dairy farmers is simply serving to make supermarket chains and dairy processors richer, according to a new report by the Food Marketing Policy Center (FMPC) of the University of Connecticut.

The Northeast Dairy Compact, which was adopted in six New England states in 1997, sets a minimum milk price for the local dairy farmers. Consumer prices have increased dramatically in the last three years however, from an average of US$2.49 to US$2.78 a gallon. And it has been left to the retailers and processors to pocket nearly US$50m from the US$130m generated in increased milk sales.

The increase in price directly attributable to the compact amounts to 4.5 cents of the 29-cent increase per gallon, according to Ronald Cotterill, director of the FMPC, and yet the dairy processors and supermarkets have taken profits amounting to 11 cents.

“The processors have said they’re just matching the increases generated by the compact,” he explained: “But they locked in a much higher retail price and were making huge profits.

“They took advantage of the compact. They’ve maintained that the bulk of the increases in milk prices has been because of the dairy compact, not because they’ve increased their profits.”

Richard Blumenthal, Connecticut Attorney General and consumer advocate, revealed that in light of the report, legal action has been planned against the profiteering retailers and dairy processors: “There are too few producers and sellers of milk, and little competition allowing consumers to get better prices.”

Representatives of the state’s supermarkets and dairy processors declined to comment on the report, however. Chris Flynn, president of the Massachusetts Food Association, stressed that he had not seen the report but he believes that “the supermarket business is extremely competitive […] the charges are something I’m highly suspect of.”

The compact is due to expire this autumn, and its continuation is subject to whether Congress re-authorises it.