[Congressional Record Volume 144, Number 47 (Friday, April 24, 1998)]
[Senate]
[Pages S3585-S3586]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRAMS:
  S. 1982. A bill to equalize the minimum adjustments to prices for 
fluid milk under milk marketing orders; to the Committee on 
Agriculture, Nutrition, and Forestry.


                      THE DAIRY REFORM ACT OF 1998

  Mr. GRAMS. Mr. President, I rise today to introduce legislation that 
seeks to restore fairness to the nation's dairy system--fairness that 
has long been missing, particularly in the Upper Midwest and especially 
in my home state of Minnesota.
  When Minnesotans are asked to name my state's leading industries, 
agriculture will certainly be at or near the top of most every list. 
Farming and farm-related business plays a critical role in Minnesota's 
economy. One out of every four Minnesota jobs is tied in some way to 
agriculture, and 25% of the state's economy is dependent upon farmers 
and agri-business, most of it focused in the dairy industry.
  What many people do not realize is that, despite those statistics, 
our state's dairy industry is in real trouble.
  Since dropping to number five in milk production--behind Wisconsin, 
California, Pennsylvania, and New York--Minnesota has been slowly but 
steadily losing its clout among the top dairy states in the nation. We 
have lost over 10,000 dairy farms in just the last decade, and today, 
dairy farms are drying up at a rate of about three every single day. 
Milk production has dropped significantly as a result--nearly 20% in 
the last decade.
  What makes this especially troubling is that much of the decline in 
Minnesota's dairy industry can be traced

[[Page S3586]]

directly to farm policies mandated outside of Minnesota's control, in 
Washington. And the outdated federal milk marketing orders program is a 
serious part of our dairy problems.
  The Midwest is one of the best places in the country for dairy. It 
should be growing and expanding in the Midwest, but because of the 
Government's outdated policies and programs, it is hurting and killing 
the dairy industry in the Midwest.
  The milk marketing orders is yet another example of a well-
intentioned scheme dreamed up by Washington bureaucrats that has gone 
seriously awry. Instead of helping Minnesotans, the milk orders 
actually hurt the state's economy and penalizing its taxpayers, while 
benefiting dairy farmers outside the Midwest.
  The problem can be traced back to 1937, when Congress enacted the 
``Agricultural Marketing Agreement Act.'' The legislation was created 
to encourage the milk production near the nation's major population 
centers and set a minimum price paid to dairy farmers for Class I milk. 
That federal ``nudge'' was necessary in some instances, because without 
refrigerated trucks, fluid milk could not be transported over long 
distances.
  In 1985, as part of that year's farm bill, Congress expanded the milk 
orders program to aid the dairy industry outside the Midwest by 
increasing the minimum price for Class I milk based on a ridiculous 
formula.
  This basically helps producers outside the Upper Midwest, while 
making dairy production less profitable for producers inside the Upper 
Midwest region.
  That is not because of anything that the farmers are doing, their 
productivity, the land, the climate, whatever. The only reason for the 
decline, again, is because of an outdated Federal dairy policy.
  This process is unfair and archaic. Above all, it is opposite in 
every way to the free market.
  The Upper Midwest dairy industry, one of the most efficient in the 
world, is only asking for a fair shake in this process. And so, Mr. 
President, the legislation I introduce today will amend one of the most 
inequitable components of the Agricultural Marketing Act of 1937--the 
Class I milk price differentials.
  USDA is currently in the process of reforming its system of Federal 
Milk Marketing Orders. Unfortunately, the Class I differentials 
proposal released earlier this year was disappointing. Two options have 
been offered under the proposal. Option ``1A''--the status quo option--
is plainly unacceptable. Option ``1B'' does take a small step in the 
right direction, but it does not go far enough. However, a small step 
for reform is most certainly preferable to a step backward as ``1A'' 
would do.
  As short-term progress, I support Option ``1B'' because, as I have 
said, it is the only option USDA is currently considering that makes a 
move toward fairness in federal dairy policy. My bill would continue 
the reform beyond the small gains for equity that ``1B'' establishes. 
We cannot allow ourselves to become satisfied until we secure 
substantive federal dairy reform.
  Common sense would tell us that USDA's proposal of a small step 
toward market-policy is the compromise position for dairy reform. 
However, as you can imagine, there has been the typical, standard-fare 
outcry against any sort of reform--even the minimal reform that was 
offered in the form of Option ``1B.'' And surely that is little more 
than an acknowledgment on the part of USDA that equity and fairness 
really do matter in national dairy policy.
  USDA has explicitly expressed its preference for ``1B.'' However, my 
optimism is guarded, given the fact that ``the status quo option'' is 
being seriously considered as a measure of reform.
  It is all too likely that they may move us a step backward and call 
it reform. There is every reason to believe that USDA will succumb to 
the pressure of maintaining the unjustifiable status quo.
  So many constituencies have been built up around this antiquated 
dairy pricing policy, and now to try to put any fairness into the 
system we are going to have these outcries from across the country.
  So, in addition to the objective of shaping the policy debate beyond 
short-term fixes, I believe that we in the Upper Midwest must now 
proceed with progressive dairy reform in the event we once again, find 
ourselves standing alone in the name of justifiable, equitable, dairy 
policy.
  The Dairy Reform Act of 1998 establishes a uniform Class I price 
differential of $1.80 for each marketing area subject to an order. The 
newly proposed 11 Federal Milk Marketing Orders will remain in place to 
provide necessary over order premiums that would raise the $1.80 in 
some areas. This legislation directs us toward market-oriented reform 
because it removes the arbitrary, artificial price structure and its 
resulting interference with the market itself.
  As far as dairy policy is concerned, we're at a pivotal juncture. The 
groundwork is being laid for a national patchwork of regional compacts. 
Roughly half the country has either passed enabling compact 
legislation, is debating such legislation, or is involved in the 
Northeast Interstate Dairy Compact. We must either decide to support a 
national system, or regionalize. As I've said, USDA's Option ``1B'' is 
a small step in the right direction for dairy policy. The Dairy Reform 
Act brings us closer yet to substantive reform. The compact 
alternative, on the other hand, is not reform--it is retreat. It is 
anti-market and anti-consumer, by definition.
  There is no substantive, equity-based justification to support random 
Class I differentials. In fact, USDA's current federal marketing order 
system was deemed ``arbitrary and capricious'' by a Federal district 
court judge late last year.
  That is the fourth time that the courts have come out and said that 
the current dairy policies in this country are, again, arbitrary and 
capricious. So, bottom line, it means they are unfair, they are 
antimarket, they are anticonsumer.
  So, the case brought against USDA has been in the courts for 7 years, 
and the judge's ruling was no less than the fourth such proceeding in 
the history of the case. Given the outrageously drawn-out history of 
the case, the judge decided not to grant USDA's request to justify the 
pricing scheme.
  However, the ruling has been stayed now pending the appeal of the 
decision of the eighth circuit. After the courts have been cleared on 
the marketing order system, why is the USDA appealing? Why are they 
appealing to keep in place a system that the courts have ruled four 
times is basically unfair? Why don't they focus their efforts on 
changing the system, as the court has required, but, most important, 
changing the system to make sure that it is fair, that it does not 
discriminate against one part of the country over another, that it does 
not pick winners and losers, and it does not step on the necks of 
farmers in the Midwest?
  Under the current Federal order marketing system, the Government is 
picking winners and picking losers. This system of nonuniform 
differentials is inherently unfair, and I welcome debate of other dairy 
policy proposals for reform as well.
  Mr. President, finally, I just want to say the Dairy Reform Act of 
1998 is simply a call to fairness, just fairness, in dairy policy. It 
is a statement in no uncertain terms that we who represent upper 
Midwest dairy farmers are going to fight for equitable reform, for 
market-driven policy. I urge my colleagues to take a look at it, to say 
what is fair. Why not have everybody on a level playing field? Why not 
give farmers all over the country the same opportunity for success or 
failure? Why not get consumers market-driven prices, rather than unfair 
Federal policies aimed at the Midwest?
  So, I urge my colleagues to give their support.
                                 ______