Farmers Again Seek Hike in Raw Milk Prices : Agriculture: Increase is called necessary to cover a jump in feed costs. But consumer groups say prices are already too high.

Fueling a growing controversy over milk prices in California, the state’s 2,200 dairy farmers are asking the state Department of Food and Agriculture to approve an increase in raw milk prices that failed to get through the Legislature earlier this year.

California’s dairy farmers contend they need the unusual increase--the second in nine months--to cover a temporary jump in feed costs resulting from floods that destroyed Midwestern crops.

But consumer organizations say the increase is not justified, saying it exceeds what farmers need to cover their costs and that milk prices are already too high. Consumers Union, publisher of Consumer Reports magazine, said if the increase is approved, Californians will pay up to $150 million more a year for milk, adding close to $30 a year to the food bill of an average family of four in the Los Angeles area.

The request is drawing attention because it is unusual for dairy farmers to seek back-to-back price hikes in the same year. That is because the department automatically adjusts raw milk prices monthly to account for changes in farm costs.

The department is expected to make a decision on the proposed increase next week, perhaps as early as Monday. It has not indicated how it might decide.

Consumer organizations contend that grocers are taking huge profits on milk, particularly in the Los Angeles area, where retail prices are an average of 20% higher than in San Francisco, Sacramento or in the Inland Empire.

California’s leading grocery chains--Vons, Ralphs, Lucky, Alpha-Beta and Stater Bros.--face three class-action lawsuits alleging antitrust violations and restraint of trade. In papers filed in Los Angeles County Superior Court, the supermarket chains have denied the allegations.

Retail milk prices, unlike raw milk prices, are not regulated in California.

Sharp increases in retail milk prices over the last three years have annoyed dairy farmers, who want a share of those gains. Earlier this year, the dairy farmers sponsored legislation that would have turned some of the Department of Food and Agriculture’s decades-old power to set raw dairy prices to farmers themselves.

The legislative proposal, part of a broader farm package, would have given dairy farmers most of the price increases they are now seeking while permitting dairy farmers to vote on future pricing changes. The legislative proposal, which was opposed by Consumers Union and milk processing groups, was discarded in a state Senate committee.

Dairy farmers contend that the last increase, granted in March before the Midwestern floods, is not enough. They said the price of hay has increased by 20% since summer. Feed accounts for half a dairy’s operating costs.

However, feed prices are expected to fall somewhat. L.J. Butler, an agricultural economist at UC Davis, said he expects feed prices in 1994 to be only 10% higher than pre-flood prices.

The dairy farmers’ proposal shifts much of the increase to low-fat milk, which is gaining in popularity with consumers. According to the proposal, the price of raw low-fat milk would increase by 12.5% while the price of raw whole milk would go up by 5.5%.

Dairy farmers argue that their proposed increase need not boost retail prices. Jay F. Goold, vice president for Western United Dairymen in Modesto, said supermarkets are making so much money on milk that they can absorb the increase.

Craig Alexander, executive director of the Dairy Institute, an industry organization dominated by the state’s grocery chains, retorted, “I don’t think he’s done any studies on what retailing costs are.”

Consumers Union said price increases have historically been passed on to consumers. The organization estimates that a Los Angeles family of four would pay an additional $28.33 for milk a year, while the same family in San Francisco would pay $18.35 more a year.

Consumers Union also calculates that Californians would pay an estimated $31.7 million more for low-fat milk and $20.6 million more for whole milk, if the increase is approved.