Wednesday May 2 12:34 AM ET
             Report: Milk Prices Being
             Gouged

             By ADAM GORLICK, Associated Press Writer

             Supermarket chains and dairy processors in New
             England have been gouging milk prices ever since a price
             control program was created to keep small dairy farmers
             from going out of business, according to a newly issued
             report by the University of Connecticut.

             The report, conducted by the university's Food
             Marketing Policy Center, and released Tuesday, says that about $50 million of the
             $130 million increase in milk sales across New England has been pocketed by the
             supermarkets and dairy processors during the first three years since Congress
             passed the Northeast Dairy Compact in 1997.

             ``They've been using the compact to widen their profit margin,'' said Ronald
             Cotterill, director of the Food Marketing Policy Center. ``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.''

             The compact comprises the six New England states and is set to expire this fall
             unless Congress reauthorizes it. It boosts consumer milk prices in New England by
             setting a minimum milk price paid to area dairy farmers by dairy processors, who
             are trying to kill the compact.

             Chris Flynn, president of the Massachusetts Food Association, which represents
             the state's major supermarkets and dairy processors, said he had not seen the
             report Tuesday and could not comment specifically on its findings.

             ``The supermarket business is extremely competitive,'' he said. ``But the charges
             are something I'm highly suspect of.''

             According to the study, milk prices increased from an average of $2.49 a gallon
             just before the compact, to $2.78 a gallon by 2000. The increased profits by dairy
             processors and supermarkets account for 11 cents of the 29-cent increase,
             Cotterill said. In contrast, the increase caused by the dairy compact was 4.5 cents
             a gallon, he said.

             ``The processors have said they're just matching the increases caused by the
             compact,'' Cotterill said. ``But they locked in a much higher retail price and were
             making huge profits.''

             The study also blames higher milk prices on a monopolization of dairy processors.
             It singles out Dallas-based Suiza Foods Corp. for controlling about 85 percent of
             the supermarket milk business in eastern Massachusetts, eastern Connecticut and
             Rhode Island.

             Amy Nelson, a Suiza spokeswoman, would not comment on the report and
             referred calls to the International Dairy Foods Association, a Washington-based
             lobbying group.

             Officials from IDFA did not immediately return telephone messages left Tuesday
             by The Associated Press.

             The study didn't surprise consumer advocates.

             Connecticut Attorney General Richard Blumenthal said he and attorneys general
             from other New England states, including Massachusetts, are planning legal action
             against retailers and dairy processors.

             ``There are too few producers and sellers of milk, and little competition allowing
             consumers to get better prices,'' Blumenthal said.