[Congressional Record Volume 143, Number 149 (Thursday, October 30, 1997)]
[Senate]
[Pages S11494-S11495]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     STUDY OF THE IMPACT OF THE NORTHEAST INTERSTATE DAIRY COMPACT

 Mr. FEINGOLD. Mr. President, the Agriculture appropriations 
bill, H.R. 2160, which the Senate has approved today contains a 
provision, section 732, requiring the director of the Office of 
Management and Budget to conduct a comprehensive economic evaluation of 
the direct and indirect economic impacts of the Northeast Interstate 
Dairy Compact on consumers within the six-state compact region and on 
producers outside of the region. The Senator from Minnesota [Mr. Grams] 
and I offered this amendment with Senators Kohl, Levin, Abraham, and 
Wellstone during Senate consideration of the bill, because, to date, 
there has been no comprehensive analysis of the short and long-term 
impacts of the Compact from this perspective.
  Wisconsin farmers, and many farmers throughout the nation, are 
extremely concerned that the artificially high milk prices under the 
Northeast Dairy Compact will place nonCompact farmers at an unfair 
competitive disadvantage. Compact producers, who on July 1 of this year 
began receiving a Class I price of $16.94, have been insulated from the 
market prices which farmers throughout the country have faced in 1997.
  Wisconsin farmers are concerned about surplus production the inflated 
Compact price is likely to generate about the impact of potential milk 
surpluses on national milk prices. Furthermore, there is concern that 
this Compact, while ostensibly affecting only Class I milk, will result 
in surplus Class I milk being processed into cheese, butter and other 
products which are sold nationally. If the supply of manufactured dairy 
products rises due to increased manufacturing in the Northeast, 
national markets for manufactured products will be negatively affected 
and milk prices to producers may fall nationally. In addition, if milk 
production rises in the Compact region due to artificial production 
incentives, excess milk may be shipped out of the Compact region to 
fill cheese vats elsewhere, further depressing cheese and milk prices. 
So these secondary effects of the Compact must be examined.
  Section 732 of this bill is very specific. It directs OMB to 
carefully examine changes and projected changes in levels of milk 
production, the number of cows, the number of dairy farms and milk 
utilization in the Compact region due to the Compact. OMB must compare 
changes in those factors resulting from the Compact to levels of 
production, cow numbers, dairy farms, milk utilization and disposition 
of milk that would have occurred in the absence of the Compact. It is 
extremely important that OMB compare Compact effects not with national 
averages, but rather with production, cow numbers, and other effects 
that would have occurred had Compact producers been subject to the 
market conditions facing dairy farmers nationally.
  Section 732 also directs OMB to look at a number of economic 
indicators, such as changes in disposition of milk produced in the 
Compact region and changes in utilization of Compact milk, that will 
aid them in determining the impacts of the Compact on farmers outside 
of the Northeast.
  There is also substantial concern about the consumer impacts of the 
Northeast Interstate Dairy Compact which taxes 14 million Northeast 
consumers to benefit just over 4000 dairy farmers in the six states. It 
is not surprising that consumer prices for fluid milk have risen since 
the Compact price has been in effect. The Compact raises Class I prices 
specifically because demand for Class I milk is less responsive to 
price than other dairy products and more revenue can be extracted from 
the consumer's pocket. OMB must examine the effects of milk price 
increases on consumers and, in particular, on low-income consumers.

  The study must also examine the impacts of the Compact on USDA's 
vital nutrition programs that provide milk and dairy products to low-
income women, children, infants and the elderly. OMB is directed by 
section 732 to study the impact of the Compact on both actual and 
projected changes in program participation, on the value of benefits 
offered under these programs and on the financial status of the 
institutions offering the programs. Will the purchasing power of food 
stamps fall because of the higher milk prices? Will schools offering 
school lunch and breakfast suffer from an effective lower per meal 
reimbursement rate? Will participation in the WIC program offered by 
the six northeastern states fall due to increased milk prices? Is the 
reimbursement scheme established by the Compact Commission adequate to 
compensate WIC for increased milk costs? These questions should be 
answered by OMB's analysis.
  Finally, OMB must evaluate the impact of adding additional states to 
the Northeast Dairy Compact on all of the factors mentioned above. The 
Northeast Dairy Compact allows Delaware, New Jersey, New York, 
Pennsylvania, Maryland, Virginia, and any additional states contiguous 
to participating states, to join the Compact and benefit from inflated 
Class I milk prices. If that happens, a much larger volume of milk, 
perhaps over 20 percent of national production, will be priced under 
the Compact and a much larger number of farmers will have artificial 
incentives to increase milk production. Congress must have information 
about the potential economic impact of adding more states to the 
Compact on farmers in Wisconsin, Minnesota, Idaho, California, New 
Mexico and other major milk producing states. Furthermore, consumer 
impacts will be magnified if additional states are added and we need to 
be able to quantify that impact.
  Mr. President, the amendment which Senator Grams and I offered, which 
was adopted by the Senate and included in the final bill by the 
Conference Committee, lays out very clear direction for OMB on the 
issues they should evaluate regarding the Northeast Interstate Diary 
Compact.
  However, the Senator from Vermont [Senator Leahy] made a statement 
shortly after this provision was adopted as part of the Senate FY 1998 
Agricultural Appropriations Bill that implied that OMB should study 
issues much broader than stipulated by section 732. The Senator from 
Vermont [Mr. Leahy] was not a cosponsor of the amendment adopted in the 
Senate and he is incorrect with respect to the issues the bill directs 
OMB to evaluate. There was no agreement between the authors of section 
732 of this bill and the Senator from Vermont, or any other Senators, 
that any of the items he mentioned in floor statements subsequent to 
the passage of the amendment were to be included in the study. OMB 
should look at the requirements of section 732 and at the statements 
made by the amendment authors in setting the parameters of this study 
and the intent of Congress.
  As a principal coauthor of the provision requiring OMB to study the 
impact of the Northeast Dairy Compact, I want to make clear what the 
Agriculture Appropriations Bill requires and what it does not require 
of OMB's evaluation.
  The study does not require that OMB conduct a comprehensive 
evaluation of retail, wholesale, and processor milk pricing in New 
England and OMB should not include such a broad analysis in their 
study. The authors of the study provision did not intend for OMB to 
examine farm-retail asymmetry issues. OMB's study should not address 
whether those in the marketing chain should be passing on all or a 
portion of the increase in farm level milk costs to consumers. This 
study should provide an objective analysis of the direct impacts of the 
Northeast Compact on the wholesale and retail cost of fluid milk not a 
subjective review of how Compact associated price increases compare to 
price increases or decreases resulting from market conditions in the 
past.

  OMB should not evaluate broader issues of what the appropriate profit 
margin for those in the marketing chain could or should be or what 
level

[[Page S11495]]

of price increase is justifiable or appropriate. That is a question far 
exceeding the scope of this study. OMB should not look at regional 
variations in pricing as they have little relevance to the impact of 
price increases in New England. OMB should not examine all the factors 
that affect the price of milk. The amendment offered by Senator Grams, 
myself and others directs OMB to examine only the impact of the Compact 
on consumer prices, not the price of feeds, transportation costs or 
other factors. In the absence of the Compact, those factors would not 
have changed, and have no bearing on this study. The only change in the 
status quo is the Compact milk price increase and that is what the 
study directs OMB to evaluate. The study requirement in this bill 
merely requires the OMB to report on what impact the inflated Compact 
Class I price has had on wholesale and retail prices and on consumers 
generally.
  OMB cannot and should not, based on the directive of the study 
provision in this bill, compare increases in retail milk prices to 
consumers resulting from the Compact to benefits they might receive by 
using coupons, shopping at discount stores, or other methods consumers 
use to reduce overall food bills. Consumers should not have to utilize 
coupons or other methods to reduce food costs in order to offset milk 
price increases caused by the Compact as the Senator from Vermont has 
suggested.
  OMB should not compare the impact of the Compact on USDA nutrition 
programs to the impact of the recently passed welfare reform bill on 
these same programs. Welfare reform is being implemented differently by 
each state. It would divert OMB resources to undertake a comprehensive 
review of the impact of welfare reform on each of these programs in 
each of the Compact states relative to the overall impact of the 
Compact on consumers. That issue is well beyond the scope of this 
study.
  OMB should focus their evaluation on the impact of increased Compact 
milk prices on the purchasing power of USDA's nutrition programs, the 
number of recipients served, and the institutions offering the programs 
in terms of increased costs or financial burdens.
  Lastly, OMB should not evaluate the supposed direct and indirect 
``positive benefits'' the Compact may bring to farmers, land use 
patterns and tourism in participating Northeastern states. There is no 
mention of this in the study provision in this bill and OMB should not 
evaluate these issues. Presumably, the Secretary of Agriculture and 
policy makers in the Northeast have already examined these factors and 
duplicating such efforts will be a waste of taxpayer dollars.
  Section 732 of FY 1998 Agriculture appropriations bill requiring OMB 
to study the impact of the Northeast Interstate Dairy Compact on 
Compact-consumers and on non-Compact dairy farmers and manufacturers is 
very specific. OMB should stick to the directives of this Section and 
provide Congress with an objective and unbiased analysis of the 
Northeast Dairy Compact's impact on these stakeholders.
  Mr. President, there will likely be efforts to politicize this study 
and I will work with OMB and the analysts conducting this analysis to 
be sure that doesn't happen. I plan to meet with OMB Director Franklin 
Raines on this subject. Consumers and non-Compact farmers and 
manufacturers have a right to know how the Compact will impact them 
without interference by Compact proponents who wish to downplay the 
negative impacts of this price fixing scheme. This is especially 
critical given that farmers outside of the Compact region have suffered 
from extremely low milk prices throughout this year. If the Compact 
will further drive down milk prices nationally and increase milk 
supplies, farmers, consumers and taxpayers have a right to know. I, and 
the other cosponsors of section 732, will hold OMB accountable for the 
accuracy and objectivity of this study.

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