Date: January 14, 2008

Author: Laura Rivera

Source: Newsday

In a bid to bring down milk prices, Sen. Charles Schumer (D-N.Y.) announced legislation yesterday that would temporarily repeal a tariff on foreign ethanol, freeing up more supplies of corn for dairy farmers.

A boom in government-subsidized ethanol production has increased demand for the same corn that farmers use to feed dairy cows, helping to drive the steady climb in milk prices, Schumer said.

Pressed by increasing production costs, farmers are passing them on to milk-guzzling consumers. On Long Island, the average price of a gallon of milk jumped 38 percent, to $4.27 last week from $3.09 last January, according to a survey by Schumer's office of 90 groceries and supermarkets in New York City and on Long Island.

"When the price of milk goes up while we're on the edge of a recession, that's very bad for everybody," Schumer said after a news conference yesterday. "In the past, the ethanol tariff seemed abstract to people. Now it's hitting them right in their pockets."

Schumer said the surge in U.S. ethanol demand and production has made the tariff of 54 cents per gallon of imported ethanol obsolete. The tariff was instituted in 1980 and set to expire in 2009.

Spurred in part by spiraling oil prices, a federal law passed in 2005 mandated adding more renewable fuel sources to gasoline, sparking a wave of investment in ethanol. The federal government offers incentives, too, including a tax credit of 51 cents per gallon to companies that blend ethanol - foreign or domestic - with gasoline.

In 2006, the United States produced almost 5 billion gallons of ethanol, according to the Department of Agriculture, using about 14 percent of total corn output in 2005-2006. Rising demand for corn among ethanol producers has helped increase the price of corn feed. The USDA reports corn cost $3.88 per bushel in December, up 87 cents from December 2006.

Teacher Nancy Sherman, 50, of Jericho, who was buying a half-gallon of organic milk with her husband, Paul, at Fairway in Plainview last night, said repealing the tariff makes sense if it will lower milk prices.

"We're deeply concerned, especially for young families with children who can't have these staples because they're just so expensive," she said.

Schumer said he planned to introduce the bill on Jan. 22. A similar proposal died in Congress in 2006, despite the support of President Bush.

COST OF A GALLON

The average price of one gallon of fresh, whole fortified milk in U.S. cities was $3.90 in November, up from $2.99 in November 2006.

Below, increases in average prices of a gallon of milk as of last week, compared with January 2007

$4.27 On Long Island up from $3.09

$4.52 In Manhattan up from $3.52

$4.24 In Queens up from $3.20