Quote:City facing potential milk crisis
Financial woes of Italian firm which controls much of metro area's supplies could have big impact here
Friday, February 06, 2004
By REGINALD PATRICK
STATEN ISLAND ADVANCE

The potential fall of dairy giant Parmalat, owner of the nation's largest milk-processing plant, could trigger widespread milk shortages on Staten Island and in other parts of the city and state, experts warn.

But the state Department of Agriculture, which has been watching the statewide milk supply since the Italian-based firm declared bankruptcy weeks ago, says it has "security measures" in place to avert any supply problems.


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"Consumers can rest assured there are an adequate number of companies serving the metro New York region to avert any shortages," said NYSDA spokeswoman Jessica Chittenden.

Parmalat, which has plants around the world, currently has what she called the "lion's share" of the milk market in the New York metropolitan region. Some industry analysts put the firm's market share at more than 50 percent.

Set up in 1961 as a small dairy in Parma, Italy, Parmalat owns the distributors Farmland Dairies (Wallington, N.J.), Welsh Farms ( West Caldwell, N.J.) and Brooklyn-based Sunnydale Farms, the largest fluid processing plant in the United States.

"There are other players in the market," Ms. Chittenden said of the region.

When asked to name a major player in the metro region not under Parmalat's control, she came up with Elmhurst Dairy.

"There's not going to be any problem," Ms. Chittenden repeated.

It is unclear whether Queens-based Elmhurst or other milk distributors are moving to increase production on the expectation that Parmalat could be on the way out. Elmhurst owner Henry Schwartz did not return a phone call seeking comment. But one staffer, who did not give his name, said Elmhurst was "not preparing to dance on Parmalat's grave."

ITALY COMES FIRST

Combined, the three Parmalat distributors Farmland, Welsh Farms and Sunnydale Farms receive over 100 million pounds of milk per month, say industry analysts, meaning they are major processors in the American milk supply chain.

Other milk distributors in the metropolitan region include Beyers Farms in Brooklyn, Hermany Farms in the Bronx and Krinos Foods in Long Island City.

Dairy industry analyst John Band believes Parmalat must focus on shoring up the Italian portion of its operation and would be more likely to consider dumping its American holdings.

"What happens to Parmalat's business outside Italy is far less of a concern to them," Band said.

In a statement last month, the firm said it plans to maintain the status quo.

But Staten Island businesses who get milk products from Parmalat's distributors believe they have reason to sit up and take note.

John Mulvey, chairman of the Staten Island Restaurant and Tavern Association, said local restaurants rely on a steady supply.

Mulvey, owner of Bridget's Public House in West Brighton, said "we go through three to four cases of milk a week" during busy weeks.

DISRUPTIONS COULD OCCUR

Local delis and small coffee shops have similar supply needs, he added.

Supermarkets on Staten Island are also locked into the supply chain.

For example, ShopRite in Port Richmond gets all its skimmed milk from Farmland Dairies, a manager at the store said.

Waldbaums Supermarket in Bulls Head relies on Farmland for its milk supplies. When asked what would happen if Farmland's supply, for whatever reason, disappeared, the manager, who declined to give his name, shot back: "We'd just have to find another supplier."

But industry experts warn that filling the gap left by the loss of a Parmalat plant would be a major disruption.

Parmalat employs 3,100 workers in the United States. To quell their fears, the company's North American division issued a statement last week saying the firm has "no plans to divest any North American assets." But many of its workers are still uneasy.

In December, Parmalat revealed a $3.95 billion hole in its books and investigators now believe it may be as much as $10 billion in the red.

New York state has set up a $5.2 million fund to pay upstate dairy farmers should Parmalat's distributors default on payments, Ms. Chittenden said.