Minnesota had set a price floor for dairy products. A new bill could remove it

For one month a year in Minnesota — June, national dairy month — a grocery store can run a below-cost discount on milk prices.

The rest of the year, though, such deals are illegal.

But a bill proposed Monday in the Legislature aims to do away with such a floor price.

"In Minnesota, it is against the law to sell dairy products too cheaply," said Sen. Jordan Rasmusson, R-Fergus Falls, who introduced the bill. "If we repeal this law, every month can be dairy month."

The measure, which the Minnesota Department of Agriculture also supports, would allow consumers to purchase milk, yogurt and cottage cheese at lower costs amid this inflation-spiked economy. Retailers would market the products as loss leaders or products sold below market value to stimulate sales elsewhere in the store. Similar to potato chips and soft drinks, below-cost milk prices could attract customers, allowing grocers to make a profit.

Supporters also argue dairy farmers would see more of their product fly off the shelves.

On Monday afternoon, Department Commissioner Thom Petersen told the Senate committee on agriculture, broadband and rural development that dwindling numbers of Minnesota dairies — dropping below 2,000 in the past few months — means legislators need to think creatively about generating income for farm families.

"We used to really have some really big knock-down drag-outs about this," Petersen said of past price debates. "But the last 10 years, we've lost about half our dairy farms in this state for a multitude of reasons."

Petersen noted that the rise in nondairy milks, which retailers can price lower than cow's milk, has left dairy farmers at a competitive disadvantage. Moreover, state regulators have heard only five complaints since 2018 about below-cost milk sales.

The state's dairy lobby, the Minnesota Milk Producers Association, testified Monday in support of the repeal, although a lobbyist for the state's grocery stores asked for a year's interim to study the measure.

Minnesota enacted the protectionist law in 1957 to aid rural economies. Opponents of Rasmusson's bill said the measure could lead to unintended consequences.

"We feel that a race to the lowest price in the long term would result in lower prices paid to farmers," said Josh VanDerPol, a Minnesota Farmers Union executive committee member and a farmer from Chippewa County.

Marin Bozic, a University of Minnesota economics professor specializing in dairy policy. said as vertically integrated retailers — from Walmart to Kwik Trip — bottle their own milk, it's difficult for state regulators to track what dairy farmers actually earn. Still, he cautioned against overstating the impact such a repeal might have on dairy sales, saying milk's appeal was inelastic.

"When the price goes higher, you still try to have your breakfast," Bozic said. "And when the milk [price] goes really low, it's not like you're having a second breakfast."

The amount of cow's milk Americans drink, per-person, has been declining since the 1940s, according to the USDA. Nevertheless, milk remains a staple in the average American kitchen.

The Senate ag committee did not vote on Rasmusson's bill Monday. Lawmakers will consider rolling the measure into a larger ag policy bill later this spring.