[Congressional Record Volume 143, Number 46 (Thursday, April 17, 1997)]
[Senate]
[Pages S3350-S3351]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SPECTER (for himself, Mr. Feingold, and Mr. Kohl):
  S. 603. A bill to require the Secretary of Agriculture to collect and 
disseminate statistically reliable information from milk manufacturing 
plants on prices received for bulk cheese and to provide the Secretary 
with the authority to require reporting by such manufacturing plants 
throughout the United States on prices received for cheese, butter, and 
nonfat dry milk; to the Committee on Agriculture, Nutrition, and 
Forestry.
      By Mr. SPECTER:
  S. 604. A bill to amend the Agricultural Market Transition Act to 
require the Secretary of Agriculture to use the price of feed grains 
and other cash expenses as factors that are used to determine the basic 
formula price for milk and any other milk price regulated by the 
Secretary; to the Committee on Agriculture, Nutrition, and Forestry.


                        agricultural legislation

  Mr. SPECTER. Mr. President, I have sought recognition to introduce 
two pieces of legislation which will respond to a very serious problem 
on the falling prices of milk which have occurred in Pennsylvania, 
especially in northeastern Pennsylvania, and across the country.
  In introducing this legislation, I am pleased to have a chance to 
address this issue in the presence of the distinguished Senator from 
Kansas, who was the chairman of the House Agriculture Committee, and is 
making quite an addition to the U.S. Senate. It is not inappropriate to 
note that Senator Roberts is from Kansas, as I am a native of Kansas. I 
was born in Wichita, grew up in Russell, and worked on a farm as a 
teenager and have some appreciation of the problems of the farmers.
  During my tenure in the U.S. Senate, I have been on the Agriculture 
Subcommittee of the Appropriations Committee. There are more people 
living in rural Pennsylvania than live in the rural part of any State 
in the Union. Mr. President, my colleague from Kansas, we have 2\1/2\ 
million people living in rural Pennsylvania. When I last looked, which 
is a while ago, there were not 2\1/2\ million people living in all of 
Kansas, let alone 2 million people--slightly reduced--when I moved into 
Pennsylvania. So I approach this issue with some due regard for the 
expert presiding over the U.S. Senate. Having discussed this issue with 
him before, I am not sure he agrees with me on all aspects.
  I am of the firm opinion that something needs to be done to help the 
milk farmers. I say that because the price of milk has fallen 
precipitously from almost $16 per hundredweight down to $11 per 
hundredweight. It has gone back up a little, but not a great deal.
  In responding to that problem, I asked the distinguished Secretary of 
Agriculture, Dan Glickman, also a Kansan, to accompany me to 
northeastern Pennsylvania, which he did, on February 10. We met a crowd 
of approximately 500 to 750 angry farmers who complained about the 
precipitous drop in the price of milk.
  During the course of my analysis of this pricing problem, I found 
that the price of milk depended upon a number of factors, one of which 
was the price of cheese. For every 10 cents the price of cheese was 
raised, the price of milk would be raised by $1 per hundredweight. Then 
I found that the price of cheese was determined by the National Cheese 
Exchange in Green Bay, WI. At least according to a survey made by the 
University of Wisconsin, there was an issue as to whether the price of 
cheese established by the Green Bay exchange was accurate or not. The 
authors of the report used a term as tough as manipulation. Whether 
that is so or not, there was a real question as to whether that price 
was accurate.
  Since this controversy has arisen--perhaps it brought the matter to a 
head, perhaps not; perhaps it would have happened anyway--it has been 
announced that the Green Bay exchange will close and will be replaced 
by a new commodity market on May 1. In any event, in my discussions 
with Secretary Glickman, I found he had the power to raise the price of 
milk unilaterally by establishing a different price of cheese.
  This subject was aired during the course of his testimony when he 
came before the appropriations subcommittee. It is a very good time to 
find a more-agreeable-than-usual Cabinet officer when a Cabinet officer 
comes in for the appropriations process for his Department's budget.
  During the course of that hearing, we could not explore fully the 
issue of the price of milk and the price of cheese, so our 
distinguished chairman, Senator Cochran, agreed to have a special 
hearing, which we had a couple of weeks later. At that time, Secretary 
Glickman said that they had ascertained the identity of 118 people or 
entities who had cheese transactions that could establish a different 
price of cheese. He told me they had written to the 118 and were having 
problems getting responses. I suggested it might be faster to telephone 
those people.

  Secretary Glickman provided my staff and me with the list of people, 
and we telephoned them and found, after reaching approximately half of 
them, that the price of cheese was, in fact, 16 cents higher by those 
individuals than otherwise.
  I have been pressing Secretary Glickman since. If he has C-SPAN2, or 
if he knows someone who has C-SPAN2 or if he talks to someone who has 
C-SPAN2, my staff has been exhorting his staff daily to act on it, and 
I am going to send him a fax letter before the day is up to try to get 
a determination on this issue, because I am on my way to northeastern 
Pennsylvania again next Monday on a routine trip to the Wilkes-Barre/
Scranton area. The Presiding Officer knows what that is like. There 
will be people who want answers to questions, and I shall answer with 
due diligence, which I think I have. I hope the Secretary of 
Agriculture will note this different price of cheese and act 
accordingly to raise the price of milk.
  The legislation which I am introducing today goes to two points. One 
is to amend the Agriculture Market Transition Act to require the 
Secretary to use the price of feed grains and other cash expenses in 
the dairy industry as factors that are used to determine the basic 
formula for the price of milk and other milk prices regulated by the 
Secretary.
  Simply stated, the Government should use what it costs for production 
to establish the price of milk, so that if the farmers are caught with 
rising prices of feed and other rising costs of production, they can 
have those rising costs reflected in the cost of milk.
  The second piece of legislation would require the Secretary of 
Agriculture to collect and disseminate statistically reliable 
information from milk manufacturing plants on prices received for bulk 
cheese and provide the Secretary with the authority to require 
reporting by such manufacturing plants throughout the United States on 
the prices for cheese, butter, and nonfat dry milk.
  Frankly, I am reluctant to impose this obligation anywhere, but I 
think it is a fair request to make since the Secretary told the 
Subcommittee on Agriculture of the Appropriations Committee that the 
Secretary could not get this information on a voluntary basis. People 
would not comply. My staff found that corroborated when we telephoned 
the individuals who had these transactions. Burdensome as it is, I 
think it is fair to give the Secretary the authority to require this 
reporting.
  Mr. President, I am authorized to say that the distinguished Senator 
from Wisconsin, Senator Feingold, wishes to cosponsor the piece of 
legislation requiring the information to be collected.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SPECTER. Mr. President, I ask unanimous consent that the full 
text of the bills be printed in the Record.
  There being no objection, the bills were ordered to be printed in the 
Record, as follows:

                                 S. 603

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

[[Page S3351]]

     SECTION 1.

       (1) Not later than 30 days after the enactment of this Act, 
     the Secretary shall collect and disseminate, on a weekly 
     basis, statistically reliable information, obtained from 
     cheese manufacturing areas in the United States on prices 
     received and terms of trade involving bulk cheese, including 
     information on the national average price for bulk cheese 
     sold through spot and forward contract transactions. To the 
     extent practicable, the Secretary shall report the prices and 
     terms of trade for spot and forward contract transaction 
     separately,
       (2) The Secretary may require dairy product manufacturing 
     plants in the United States to report to the Secretary on a 
     weekly basis the price they receive for cheese, butter and 
     nonfat dry milk sold through spot sales arrangements, forward 
     contracts or other sales arrangements.
       (3) All information provided to, or acquired by, the 
     Secretary under subsections (1) and (2) shall be kept 
     confidential by each officer and employee of the Department 
     of Agriculture except that general weekly statements may be 
     issued that are based on the information and that do not 
     identify the information provided by any person.
                                                                    ____


                                 S. 604

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. BASIC FORMULA PRICE.

       Section 143(a) of the Agricultural Market Transition Act (7 
     U.S.C. 7253(a)) is amended by adding at the end the 
     following:
       ``(5) Basic formula price.--In carrying out this subsection 
     and section 8c(5) of the Agricultural Adjustment Act (7 
     U.S.C. 608c(5)), reenacted with amendments by the 
     Agricultural Marketing Agreement Act of 1937, the Secretary 
     shall use as factors that are used to determine the basic 
     formula price for milk and any other milk price regulated by 
     the Secretary--
       ``(A) the price of feed gains, including the cost of 
     concentrates, byproducts, liquid whey, hay, silage, pasture, 
     and other forage; and
       ``(B) other cash expenses, including the cost of hauling, 
     artificial insemination, veterinary services and medicine, 
     bedding and litter, marketing, custom services and supplies, 
     fuel, lubrication, electricity, machinery and building 
     repairs, labor, association fees, and assessments.''.

  Mr. FEINGOLD. Mr. President, I am pleased today to introduce with the 
Senator from Pennsylvania, Senator Specter, a bill which attempts to 
address problems in the dairy industry stemming from the lack of 
adequate price discovery in manufactured dairy product markets.
  There has been a great deal of controversy surrounding the National 
Cheese Exchange [NCE], currently located in Green Bay, WI. The NCE is a 
small cash market that trades less than 1 percent of all bulk cheese 
sold nationally, has few traders, short trading periods, and infrequent 
trading sessions. Those characteristics make this exchange vulnerable 
to price manipulation. Trading on this exchange would not be a concern 
if it did not have such tremendous influence over cheese prices 
nationally. However, because the Cheese Exchange is the only source of 
cheese price information in the country, it acts as a benchmark or 
reference price for most off-exchange cheese sales. There simply is no 
other reliable source of information, no other source of price 
discovery, available for buyers and sellers in this industry to use as 
an indicator of market conditions. Because the price for cheese 
directly and indirectly affects the price of milk, dairy farmers are 
justifiably concerned about the lack of adequate cheese price 
information and the influence of the NCE on prices they receive for 
milk.
  Concern about the Cheese Exchange among dairy farmers, while on-going 
for many years, heightened late last year when cheese prices at the 
exchange fell dramatically in just a few weeks, causing record declines 
in milk prices paid to farmers. While milk prices have recovered 
slightly, they are expected to fall again next month as a result of 
further price declines at the National Cheese Exchange.
  While the National Cheese Exchange is closing its doors at the end of 
this month, a new but nearly identical cash market for cheese is 
opening at the Chicago Mercantile Exchange. It is expected that this 
new market, which appears to share a number of the flaws of the Cheese 
Exchange, will serve as the reference price for cheese throughout the 
country. It is unclear whether this market will be capable of providing 
adequate price discovery for the dairy industry.
  That is why the Senator from Pennsylvania, Senator Specter, and I are 
introducing this bill today. This legislation requires the Secretary to 
collect and disseminate statistically reliable cheese price information 
collected from cheese manufacturing plants throughout the country--a 
provision also included in my bill, S. 258, which I introduced in 
February. A price series of this type will not only provide more price 
information, it will provide more reliable information based on 
transactions throughout the country rather than on one thinly traded 
cash market.
  Secretary of Agriculture Dan Glickman has already begun this process. 
Last August, I asked the Secretary to use his existing administrative 
authority to initiate a weekly price survey of cheese plants to improve 
cheese price discovery and lessen the influence of the small but 
powerful National Cheese Exchange on milk prices. Secretary Glickman 
graciously agreed to conduct such a survey, which formally began this 
January on a monthly basis, and became a weekly survey last month. I 
have been very pleased with the Secretary's response to the concerns 
about cheese pricing and effect of the National Cheese Exchange on 
farm-level milk prices and I appreciate his efforts on this matter.
  Since that survey is relatively new, it is still unclear whether it 
will produce prices which reflect market conditions. That depends upon 
the voluntary participation of those manufacturers reporting prices as 
well as on the integrity of the data reported.

  On March 13, both Secretary Glickman and I testified before the 
Senate Agriculture Appropriations Committee about the problem of the 
Cheese Exchange and the lack of reliable price information in the dairy 
industry and the potential for this new price series to address that 
problem. At that time, the Secretary indicated that if participation by 
cheese manufacturers in his new survey was inadequate, the Department 
may need to consider requiring participation in that survey. However, 
under current law, the Secretary has only very limited authority to 
require cheese price reporting by manufacturing plants.
  The bill we are introducing today requires the Secretary to continue 
his cheese price collection and reporting activities and provides him 
with broader authority to require participation by cheese manufacturers 
in that survey. I want to make clear that this bill does not mandate 
that the Secretary require participation in the cheese price survey, 
but merely provides him with the authority to do so if it is necessary 
to ensure the new cheese price survey is statistically reliable. Under 
the current survey procedures, many cheese manufacturers are already 
participating voluntarily, so this new Secretarial authority may not be 
necessary.
  Mr. President, it is essential that dairy farmers have some 
assurances that cheese prices, which have such a dramatic impact on the 
price of milk, are reflective of market conditions and not vulnerable 
to manipulation. By improving price discovery, the new USDA cheese 
price survey implemented by Secretary Glickman may help accomplish that 
goal. If mandatory price reporting is necessary to produce accurate 
survey data, our bill provides the Secretary with the authority to 
require participation. However, I am hopeful that participation in the 
survey will continue to be high so that mandatory reporting never 
becomes necessary.
  I thank the Senator from Pennsylvania for working with me to devise 
legislation that might effectively improve price discovery in the dairy 
industry and I welcome his interest in this important issue. I urge my 
colleagues to support this legislation.
                                 ______