Agriculture Secretary Bob Bergland is expected to urge President Carter to raise the government's milk support level by 74 cents, a move that could raise retail prices by a few cents a half-gallon.
Bergland has settled on three options for raising the support price, sources said, and any notion of maintaining or lowering it has been rejected. At the same time, a much larger increase, as sought by some members of Congress, has been discarded.
The current support level for milk is $8.26 for each 100 pounds. Of three possible increases, Bergland is said to favor one setting a new support level of $9 for each 100 pounds. Since farmers are currently selling at the support level, any increase could raise retail prices unless dairies and stores absorb it. An Agriculture Department source said such a rise "definitely would" boost prices while a congressional source said "it is not a given."
Milk was selling from 79 cents to 87 cents a half-gallon at four area chain stores yesterday. The 74-cent increase in the support level translates to about 4 cents a half-gallon.
The $9 level is within the range supported by Carter during his presidential campaign, but it is more than that sought by one dairy group, the National Milk Producers Federation. The recommendation also goes against that of the Council on Wage and Price Stability, which urged a reduction.
An unexpected rise in milk production last year has depressed prices paid to farmers. As a result, the government is purchasing an estimated $330 million in butter, cheese and non-fat dry milk this year to prop up dairy prices, according to the Agriculture Department. The products are used in domestic and foreign food aid programs.
The Congressional Budget Office estimates that those purchases could rise to a maximum $552.5 million in the coming 12 months if supplies are so abundant that the government must make purchase.
One source said of the possible rise in consumer prices that if farmers don't get help now, milk production will be decreased, leading to possible tight market later, as in 1973 and 1974. Then, prices shot up.
Bergland has characterized such agricultural swings between boom and bust as economic disasters for producers and consumers.
"All we are trying to do is stabilize the market," said a congressioanl source involved in the process. "THis way [$9], no one gets cheated. The dairy farmer stays in business, and the consumer does not get ripped off."
The law requires that milk prices be supported to assure an adequate supply now and in the future. That minimum support is achieved through government purchases, if necessary, designed to create a market price.
The support level, by law, must be between 75 and 90 per cent of parity. Parity is an index of farmers' purchasing power in the years 1910-14. Thus, a parity level of 90 per cent assures a dairy farmer of 90 per cent of that 1910-14 purchasing power, with some adjustments since then.
The three options Bergland is said to be sending to the White House are 80 per cent of Parity, 85 per cent and the one he favors - 82.5 per cent. With a current parity index of $10.84, price support levels would be $8.67, $9 and $9.21 for the three suggestions. The current support level of $8.26 is 76 per cent of parity.
During his campaign, Carter said he would have signed a bill vetoed by President Ford mandating an 85 per cent parity level.
The parity level is set April 1 each year for the following year.
In 1971 the Agriculture Department announced there would be no increase in the ten-existing support level. Shortly after that, three milk producer cooperative organizations began making thousands of dollars in contributions to the Nixon re-election campaign, and the administration announced a 27 cents increase in the support level, to $4.93.