State Asked to Roll Back Milk Price Hike : Petition: Consumers Union calls last year’s boost in prices paid farmers unjustified. It says the poor are being hurt.

Consumers Union, the nonprofit publisher of Consumer Reports magazine, asked state regulators on Monday to reverse a decision of last November that resulted in retail milk price increases of up to 30 cents a gallon.

Consumers Union, in a petition filed with the California Department of Food and Agriculture, said there was no justification for the department-ordered increase in what dairy farmers are paid for milk. Consumers Union said that milk production costs have remained fairly stable and consumer demand for milk has declined, factors that argue against a price increase.

Consumers Union’s petition is unusual, coming from outside the dairy industry and asking the department to take the rare action of reversing itself. Previous petitions have come from dairy farmers or milk processors, a group that includes major supermarket chains.

“It appears that the CDFA has undertaken to set producer (milk) prices without relationship to demand, without reference to what it costs to produce milk, and without regard to the needs of California milk drinkers,” the petition said.

The increase will cost Californians $155 million a year, an outlay that is especially burdensome to poor families, Consumers Union said.

A spokeswoman for the Department of Food and Agriculture said the agency had not received the petition and could not comment.

Henry Voss, director of the agency, has 30 days to either reject the petition or accept it and order a hearing. The director has accepted nine of 17 milk-pricing petitions submitted since November, 1989, but has not been asked to reverse a prior decision.

The department sets raw milk prices but does not regulate retail milk prices. However, gains in raw milk prices are almost always passed on to consumers.

Responding to a request from dairy farmers, the department last November approved a 14% hike in raw milk prices. The department said it acted because half the state’s dairy farmers were not covering their costs.

The increases were phased in over two months, boosting retail prices in Los Angeles and San Francisco by an average of 20 cents a gallon and as much as 30 cents a gallon. In Los Angeles, retail milk prices rose above $3 a gallon for the first time.

Consumers Union said the cost of producing milk was slightly higher in 1993 than in 1992, but below what it cost to produce in 1990, when farmers’ costs peaked. The retail price of a gallon of milk in Los Angeles was about $2.33 in 1990, significantly less than now.

Representatives of Western United Dairymen, the organization of dairy farmers that sought the price increase, could not be reached for comment. But dairy farmers in the past have argued that supermarkets are making huge profits on milk and could absorb increases in raw milk prices.

The Dairy Institute, an organization representing milk processors, had no comment on Consumers Union’s petition. Institute Director Craig Alexandar said it was unclear how higher prices had affected retail milk sales. Milk sales were flat in January, rose in February and are expected to be down in March, he said.

Consumer advocates have argued that because there is no substitute for milk, people continue to buy it despite rising prices. Consumers Union said the price increases are especially hard on poor families, who are forced to allocate a greater share of their food budget to milk. Many doctors consider milk important to children’s health.

Paul Lynch, program director at the San Francisco Food Bank, said the boost in milk prices has strained the budgets of some agencies that serve the poor. He said that the Casa de las Madres battered women’s shelter has had to substitute less-expensive powdered milk.