[Congressional Record Volume 145, Number 60 (Thursday, April 29, 1999)]
[Senate]
[Pages S4446-S4448]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRAMS (for himself and Mr. Feingold):
  S. 917. 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

  Mr. GRAMS. Mr. President, I rise today in order to call attention to 
one of the most onerous barriers currently facing American agriculture. 
It is a regional price-fixing cartel, which benefits only those 
producers within its own boundaries, at the direct expense of 
consumers. It is a patently unfair, unabashed attempt to distort basic 
principles of market forces. It is the Northeast Interstate Dairy 
Compact, which has been in effect in New England States since July 
1997.
  Today, Senator Russ Feingold of Wisconsin and I introduce the Dairy 
Fairness Act, which would repeal the Northeast Interstate Dairy 
Compact. As many southeastern States are passing enabling legislation 
to lay the groundwork in forming their own compacts, we feel it is 
necessary to once again review the notorious history of the Northeast 
Interstate Dairy Compact, and its negative impact on consumers and on 
all dairy farmers--with the notable exception, of course, of the 
largest dairy industries within the compact region.
  The 1996 FAIR Act included significant reforms for diary policy. It 
set the stage for greater market orientation in dairy, including reform 
of the archaic Federal milk marketing orders. Yet despite a strong vote 
by the Senate to strip the Northeast Interstate Dairy Compact from its 
version of the FAIR Act, and the deliberate exclusion of any compact 
language from the House version of the bill, a Northeast Interstate 
Dairy Compact provision was slipped into the conference report. This

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language called for the termination of the compact upon the completion 
of the Federal milk marketing order process. That would have been in 
April of 1999. Well, through last year's appropriations process, the 
implementation of USDA's Federal Milk Marketing Order reforms have been 
delayed by 6 months. Of course, this was not at the request of the 
USDA. With the delay came an automatic extension of this compact. This 
political maneuvering is outrageous, and it comes with a high price tag 
attached--a high price tag to be paid by milk drinkers, and the rest of 
the Nation's dairy farmers.
  The goals of the Northeast Dairy Compact have been clear since its 
inception. That was--to increase the profits of producers within the 
compact region, but at the expense of everyone outside of the compact. 
And by now, the obvious ramifications have been realized--higher milk 
prices within the compact region. This, not surprisingly, has led to a 
decrease in milk consumption. According to data from the Northeast 
Dairy Compact Commission, the compact, since it has been in effect, has 
added $46.5 million to the cost of milk in New England. As the fluid 
milk prices which consumers pay rise, the burden falls 
disproportionately on low-income families, particularly those with 
small children. Low-income families spend a greater percentage of their 
income on food. They are harmed as a direct result of this compact.
  The compact is having other dramatic effects as well. The increase in 
prices which producers receive for their milk has led to surplus 
production, which has had a negative effect on other producers around 
the country. Conversion of this surplus milk into cheese, butter, and 
powder drives down prices for these products in other non-compact 
regions. Take milk powder, for instance. Some of the compact's excess 
supply has been converted into nonfat milk powder. Between October 1997 
and March 1998, New England produced 11 million more pounds of powder, 
60 percent more than it did in the same period of the preceding year. 
During that time, nonfat powder production in the U.S. increased by 
only 2 percent. Furthermore, between October 1, 1997 and March 31, 
1998, the nonfat milk powder glut in the U.S. drove prices so low that 
USDA had to spend nearly $41 million to buy surplus milk powder from 
dairy processors. Dairy producers outside of the compact region clearly 
are harmed as a direct result of the compact.

  In fact, the only real winners have been the largest industrial 
dairies of the Northeast. It is really no surprise. Just consider it: 
if the compact pays a premium per hundredweight of milk, and large 
industrial dairies are able to produce, for example, 15 to 20 times 
more than the ``typical'' traditional dairy farm that the compact was 
supposedly going to protect, who do you think the big winners are? It 
certainly isn't the traditional dairy farm. They are also put at a 
competitive disadvantage, and thanks again to regional politics. And so 
are dairies outside the compact region.
  We must keep sight of the fact that a dairy compact, or any sort of 
compact for that matter, is essentially a price-fixing scheme, which so 
abuses interstate commerce that it requires a special authorization of 
Congress. Otherwise it would violate Federal antitrust laws. We have 
come to the point where we must ask ourselves, as a nation, in which 
direction will we proceed concerning dairy policy. USDA has just 
presented its recommendations for Federal Milk Marketing Order reforms. 
It is not a great step in the way of reform, but at least it represents 
a rational attempt to decrease Federal interference in the dairy 
business and to treat producers all over the country a little more 
fairly. A national patchwork of compacts would render the Federal Milk 
Marketing Order reforms meaningless. It would essentially kill any hope 
for the beginning of real Federal reform. Interstate commerce in the 
milk industry would be so confusing it would be a confusing maze that 
harms consumers. While dairy was not included in the farm bill, it was 
always envisioned that a later dairy solution would conform to the free 
market concept of that farm bill.
  We all know that it is difficult in Washington to have the courage to 
bypass any of those quick-fix issues in favor of a long-range view 
which would produce better and sound dairy policies. But that is 
exactly what we need today. That is where real leadership comes into 
play. So let's be advocates for the traditional dairy farmers, not just 
the mega-dairies. What is required now is a complete overhaul of this 
backward-looking and just plain unfair compact legislation. Senator 
Feingold and I will continue to fight the Northeast Interstate Dairy 
Compact, and any other dairy compact that may be proposed. And we urge 
our colleagues to give all dairy farmers, in all areas of our country, 
the ability to compete on a level playing field.
  To this end, and in order to underscore the need for significant 
reform, Senator Feingold and I today also introduce the Dairy Reform 
Act, which would equalize the minimum adjustments to prices for fluid 
milk marketing orders at $1.80 per hundredweight of milk. This 
legislation, again, represents real reform, and a level playing field 
that will allow farmers to compete fairly and not have the Federal 
Government stand on the neck of dairy farmers in one area of the 
country while supporting those in others. It would allow producers to 
compete in a system where efficiencies--efficiencies--would be rewarded 
and they would be important according to market principles. The current 
system is so weighted against the Upper Midwest that our dairy farmers 
have to be twice as good just to be able to break even. The Dairy 
Reform Act proposes a marketing system which would truly be fair.
  Mr. FEINGOLD. Mr. President, today I rise in support of the Dairy 
Reform Act of 1999, introduced by my colleague from Minnesota, Senator 
Rod Grams.
  The Federal Dairy Program was developed in the 1930's, when the Upper 
Midwest was seen as the primary reserve for additional supplies of 
milk. The idea was to encourage the development of local supplies of 
fluid milk in areas of the country that had not produced enough to meet 
local needs. Six decades ago, the poor condition of the American 
transportation infrastructure and the lack of portable refrigeration 
technology prevented Upper Midwest producers from shipping fresh fluid 
milk to other parts of the country. Therefore, the only way to ensure 
consumers a fresh local supply of fluid milk was to provide dairy 
farmers in those distant regions with a boost in milk price large 
enough to encourage local production--that higher price referred to as 
the Class I differential. Mr. President, the system worked well--too 
well. Wisconsin is no longer this country's largest milk producer. This 
program has outlived its necessity and is now working only to 
shortchange the Upper Midwest, and in particular, Wisconsin dairy 
farmers.
  The Dairy Reform Act of 1998 is very simple. It establishes that the 
minimum Class I price differential will be the same, $1.80/
hundredweight, for each marketing order. As many of you know, the price 
for fluid milk increases at a rate of approximately 21 cents per 100 
miles from Eau Claire, WI. Fluid milk prices, as a result, are nearly 
$3 higher in Florida than in Wisconsin, more than $2 higher in New 
England, and more than $1 higher in Texas. This bill ensures that the 
Class I differentials will no longer vary according to an arbitrary 
geographic measure--like the distance from Eau Claire Wisconsin. No 
longer will the system penalize producers in the Upper Midwest with an 
archaic program that outlived its purpose years ago. This legislation 
identifies one of the most unfair and unjustly punitive provisions in 
the current system, and corrects it. There is no substantive, equitable 
justification to support non-uniform Class I differentials in present 
day policy.
  USDA's Federal Milk Marketing Order reform proposal was recently 
published. Although the USDA was successful in narrowing Class I 
differentials, discrepancies still exist. It is long past the time to 
set aside regional bickering and address the problems faced by dairy 
producers in all regions. The Dairy Reform Act of 1999 will make a 
change to USDA's proposed rule which will make the entire package more 
palatable for Wisconsin's producers. It will take USDA's proposal a 
step further and lead the dairy industry into a more market oriented 
program. Also producers will still be able to receive payment for 
transportation costs and over-order premiums.

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 This measure would finally bring fairness to an unfair system. With 
this bill we will send a clear message to USDA and to Congress that 
Upper-Midwest dairy farmers will never stop fighting this patently 
unfair federal milk marketing order system. After over 60 years of 
struggling under this burden of inequality, Wisconsin's dairy industry 
deserves more; it deserves a fair price.
                                 ______