[Congressional Record Volume 145, Number 94 (Tuesday, June 29, 1999)]
[House]
[Pages H5073-H5079]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      MILK, A CONTROVERSIAL ISSUE

  The SPEAKER pro tempore (Mr. Peterson of Pennsylvania). Under the 
Speaker's announced policy of January 6, 1999, the gentleman from 
Minnesota (Mr. Gutknecht) is recognized for 60 minutes or less.
  Mr. GUTKNECHT. Mr. Speaker, tonight we are going to talk about an 
issue which I suspect most of our colleagues and anyone else who might 
be watching on C-Span tonight would say, how in the world can the issue 
of milk be a controversial issue?
  I think if they pay any attention tonight, they will find that milk 
is an enormously controversial issue, particularly for those of us in 
the upper Midwest. It is a very difficult issue I think for the average 
person to completely understand, and we hope that we do not bore our 
colleagues who may be watching tonight.
  It is a little like the story of the little boy who came in and asked 
his mother a question. His mother was kind of busy and she said, well, 
why don't you ask your dad? The little boy, said, well, I didn't want 
to know that much about it. I suspect a lot of people who may tune in 
tonight may say, well, I did not want to know that much about milk 
policy here in the United States.
  To start off, though, I think we have to kind of look at this chart 
and begin to understand the history. First of all, let me say that this 
is June. It is Dairy Month.

                              {time}  2115

  Some people know that. A lot of people do not know that. But June is 
dairy month for a very interesting reason.
  Back in the thirties, farmers recognized that in June, we reach what 
is called the peak of the spring flush. That is when dairy cows produce 
the most amount of milk they are going to produce all year. At the same 
time, schools get out, a lot of kids go home, they drink less milk, 
more soft drinks, more lemonade and so forth, and so at the very time 
milk production goes to its peak, consumption drops.
  Back in the thirties the Chain Drugstore Association got together 
with the Dairy Association and had the first dairy month. Now it has 
become a very big event, particularly in the upper Midwest, and we 
encourage people all over the country to enjoy milk, but, more 
importantly cheese and cottage cheese and yogurt, ice cream, all the 
other things made from the real thing, dairy products, real cheese, 
real milk.
  Back in the thirties we were suffering from some rather difficult 
financial circumstances for all Americans, but for farmers in 
particular, and they came up with a rather convoluted system back in 
1937 as part of the agricultural marketing agreement in 1937 to create 
various regions around the country and price milk based on where it 
came from and what it went into.
  We are going to talk about this whole issue a little bit tonight, but 
I want to talk about the disparities that this system is creating.
  This is the 1998 average blend prices for current Federal milk 
marketing orders. What it demonstrates, and I think the numbers may be 
too small to really pick up on the television screen, so any of the 
Members who may be watching in their offices who would like a smaller 
version of this so that they can actually look at it and read the 
numbers, I am going to read some of them for you. But in effect what we 
have is a system where milk is priced to the dairy farmer based on what 
it goes into and where it comes from.
  Now, this may seem bizarre, but in 1937, Eau Claire, Wisconsin, was 
considered the epicenter of the dairy production area in the United 
States. Anybody who has ever watched a Green Bay Packers game 
understands that there is an awful lot of cheese produced in Wisconsin. 
There is also a lot of cheese produced in my district. As a matter of 
fact, there is one cheese plant in my district that produces 500,000 
pounds of cheese every single day. That is a lot of cheese, and, of 
course, we cannot eat all of that cheese in the upper Midwest. But what 
they did is they created this system because they decided that Eau 
Claire, Wisconsin, was the epicenter of the dairy production area for 
the United States.
  They said the closer you are to Eau Claire, Wisconsin, the less you 
will get for your milk. Because of all the cheese plants and because 
back in 1937, we did not have the interstate highway system and 
refrigerated trucks, it probably made some sense back in 1937 to have a 
system so that it would encourage production in places like Texas, Los 
Angeles, the Pacific Northwest, particularly out here in the populated 
areas of the eastern seaboard, Boston, New York, Washington. They 
wanted to encourage more dairy production in those areas relative to 
Wisconsin, Minnesota, northern Illinois and Iowa.
  So they came up with this rather convoluted system, which may have 
made some sense in 1937, but, guess what, since 1937, we built the 
interstate highway system, we have refrigerated trucks that can now get 
milk almost anywhere in the United States within a matter of a few 
days, while the milk is still absolutely fresh, delicious and wonderful 
to enjoy.
  But we still have the system. It is interesting, once you create a 
Federal Government program, in fact, Mark Twain once observed the most 
permanent thing on Earth is a temporary government program. Back in 
1937 they created this system, and to give you some of the numbers that 
are shown on this chart to kind of give you an idea of the differences, 
the average blended price for the upper Midwest, including Minnesota, 
most of Wisconsin, the eastern Dakotas, part of northern Iowa, and I 
think it actually gets into northern Illinois, the average blended 
price last year that was paid to dairy farmers was $13.57 per hundred 
pounds of milk.
  Now, that is another thing most people do not understand. The dairy 
farmer always receives his milk check based on the number of hundreds 
of pounds of milk. So the average dairy farmer in the upper Midwest got 
$13.57. That was what the Federal Government mandated. ``Mandated'' is 
an important word. We are going to talk about that a little bit.
  Now, if you were a dairy farmer for example in Washington or Oregon, 
the Federal Government mandated a price of $14.75. If you were in 
central Arizona, that price was $14.90. But if you lived down here in 
the southeast, one of the States that produced milk, for example in 
southern Tennessee, Mississippi, Alabama, Georgia, that dairy farmer 
got $16.13, mandated by the Federal Government. If you lived in 
southern Florida, for example, down in the Tampa Bay region, your price 
was $16.82. The differential, $13.57 if you live in my district, or 
Wisconsin or parts of Illinois, $13.57, but if you are down in Florida, 
it is $16.82.
  Again, that may have made sense back in 1937 when we did not have the 
interstate highway system, did not have refrigerated trucks, but it 
does not make a whole lot of sense today. So we are here tonight to 
talk about this and sort of raise some of the questions, rhetorical 
questions, and ask if anybody can honestly defend a system that says to 
dairy farmers that your product will be based on where it comes from 
and what it goes into.

[[Page H5074]]

  Incidentally, to make things even more complicated, yes, milk is 
priced based on what it goes into. If your milk goes into fluid milk, 
the stuff that comes in containers that you drink and everybody loves, 
good for your body, gives you a white mustache, if it goes into fluid 
milk, it is worth more than if it is going into what is called Class 2 
milk, which is spoonable. That would include ice cream, cottage cheese, 
yogurt. Class 3 milk is products like cheese and butter. Class 4 milk 
is powdered milk.
  So we have four classes of milk, and, again, that determines the 
price that the dairy farmer gets that does all of the work, that gets 
up every morning at 5 o'clock in the morning because cows have to be 
milked at least twice a day. This is not a job for the faint of heart. 
Anybody who wants to go into the dairy business, see me, because there 
are lots of people looking for folks who want to get up at 5 o'clock 
every single morning, 365 days a year, and milk those cows. That is 
what they have to do.
  But the real problem is if you live in Minnesota, Wisconsin, what we 
call the upper Midwest region, the eastern Dakotas, you get $13.57. If 
you live in southern Florida, you get $16.82. Now, is it any wonder 
that some of our producers in the upper Midwest say, this is not fair? 
It is absolutely not fair. That is a system that we hope to change.
  I started this conversation tonight by saying you would not think 
that milk is a particularly controversial issue. Well, it is, because, 
believe it or not, the people in Florida think this is a pretty good 
system. What is wrong with the system that pays our dairy farmers 
$16.82? In fact, I am in my third term in Congress. I have learned in 
those three terms that whenever you talk about leveling the playing 
field, you can always bet that at least half of the people 
participating in that debate do not want to level the playing field. 
Why? Because relatively speaking, their constituents lose.

  Well, the point that we have been making in the upper Midwest since 
1937, now, let me do a little arithmetic, it is now 1999, less 37, that 
amounts to, what, 62 years. For 62 years the dairy farmers in our 
region have been receiving less money relative to dairy farmers in 
anywhere else in the United States. So for 62 years we have been saying 
it is time to level the playing field.
  I have got another chart here, and, again, if anyone would like a 
copy of these charts, we would be more than happy to send them out. If 
you contact my office we will send them to you. But this gives some 
idea of the producer Class 1 blended price benefit.
  A regional average, it shows how the differences work out between the 
northeast, the average, what the average is in the Appalachian region. 
Florida, for example, as I mentioned, you can see by this bar chart, 
Florida receives the best of all the deals, and, unfortunately, the 
region that we represent is down here way at the bottom.
  Again, we are not asking for special privileges, we are not asking 
for special favors, but we are asking in the day and age when we have 
the interstate highway system, we have refrigerated trucks, all we are 
asking is for equal pay for equal milk.
  I have joining me tonight a couple of my colleagues, one from 
Illinois and one from the State of Wisconsin, and I want to yield some 
time to my colleague, a freshman member, the gentleman from Wisconsin 
(Mr. Ryan), from, I believe, the First Congressional District. I 
represent the First Congressional District in Minnesota the gentleman 
from Wisconsin (Mr. Ryan) represents the First Congressional District 
in Wisconsin. I wonder if you want to talk a little bit about this and 
what the dairy farmers are talking about and ultimately the unfairness 
of the system we have.
  Mr. RYAN of Wisconsin. I thank the gentleman for yielding. I would 
like to thank the gentleman from Minnesota for your leadership on this 
issue. As you know, I am a new Member of Congress. I was just elected 
in this last November elections. I was elected as a Republican based on 
the free market, thinking that we were here to make sure as we go into 
the next century, we will do so based upon the principles that built 
this country, that the individual is the nucleus of our society, the 
individual is the nucleus of our economy, based on the principles of 
the market.
  When I had come to learn the kind of system we have, that binds our 
dairy markets, it is absolutely amazing that we still have a dairy 
market, that we still have a dairy policy that is based upon a 
geographical location in the middle of the United States, in Eau 
Claire, Wisconsin. Well, I come from Wisconsin.
  There is something else that is happening for Members that are 
viewing this in their office. There are Members of the Republican Party 
who are advancing legislation right now to try to solidify the status 
quo. We are actually trying to move toward the market direction and the 
USDA is actually moving in that way. I would like to go through some 
remarks first and then I would like to ask my senior colleague from 
Minnesota a few questions.
  Today I am here to join you, to express strong opposition to the 
legislation that is being introduced by the gentleman from Missouri 
(Mr. Blunt), a Republican. This legislation is scheduled to be marked 
up in the Committee on Agriculture actually tomorrow.
  This legislation would essentially say that we are going to force the 
status quo on the rest of the country. Not only are farmers who lived 
under the current system for 62 years have to do so, this legislation 
proposes that farmers continue to live under the current system.
  What does this do? This system forces a continuation of this welfare 
system that will be funded on the backs of hard-working farmers in the 
Midwest, and particularly in the upper Midwest. The USDA has a proposal 
which goes moderately in the right direction toward a market-based 
system. It does not go all the way, but it goes a good step in the 
right direction.
  The USDA proposal reflects a step toward a more market-friendly 
system. As Republicans, I think it is important to be fighting for this 
system, not against it. But I do not see this as really a partisan 
issue. This is just an issue about fairness and equity.
  As representative from Wisconsin, which as everybody knows, is 
America's dairyland, if you see anybody drive by in Wisconsin, you see 
the license plate says ``America's dairyland.'' The problem in 
Wisconsin is we are losing dairy farmers every single year. We are 
America's dairyland right now; we have been America's dairyland 
forever.
  My fear is we will not be America's dairyland in the future, because 
just last year we lost 2,000 dairy farmers because of this antiquated 
system. That is 2,000 dairy farmers.
  I just enjoyed participating in the Kenosha County Dairy Day 
breakfast. You mentioned June is dairy month. I participated in the 
Kenosha dairy breakfast about 2 weeks ago in Kenosha, Wisconsin, out in 
the county area. What was wonderful was to see all the children running 
around enjoying milk. The Dairy Days in Wisconsin is an opportunity for 
people in the cities to come out and see how farm operations work, to 
see how farmers work, to see how you have to get up so early in the 
morning to milk the cows and you have to do it twice a day, to 
appreciate nature, to appreciate rural America, something we are so 
prideful of in Wisconsin.
  My fear is if we keep this antiquated system in place, we will not 
see those days, at least in Wisconsin, because we are losing so many 
dairy farmers.
  Well, as a representative from Wisconsin, from America's dairyland, I 
feel it is my duty to address the devastation this bill will cause, not 
only for the farmers in my personal district in Wisconsin that I serve, 
but also for other Midwest regions.
  The dairy farmers in the Midwest have long been operating under this 
system that penalizes them for being more efficient and more 
productive. These are principles that we as a Nation should be 
advocating. However, I stand before you today, and I see other Members, 
other Members of Congress from all these other regions, fighting to 
keep this antiquated system in place.
  So when you come to Congress and you think we are going to fight for 
fairness, we are going to fight for equity in this country, it is not 
always the case. The system that we have today may have been 
appropriate in the 1930s, as the gentleman from Minnesota mentioned, 
but the need for

[[Page H5075]]

that kind of system is gone. We have the interstate highway system, we 
have refrigerated trucks. Advances in technology and transportation 
have simply eliminated the need for this type of antiquated system.
  Other regions in this system enjoy surpluses in dairy production. The 
surplus State is no longer just Wisconsin. We have surplus States all 
over the country. Your ability to get milk no longer depends on how 
close or far you live away from Eau Claire, Wisconsin. In my opinion, 
it is time to stop punishing Midwest farmers based on this horse and 
buggy perception of the world around us.
  Now, in 1996, Congress recognized this. They recognized that this 
system has outlived its usefulness. In 1996, the farm bill required 
that the USDA reform the milk marketing order in a fair and equitable 
manner.

                              {time}  2130

  We relied on the USDA to develop a proposal that would serve all 
farmers in the country in the best possible way. This was a wise 
decision by Congress in 1996. The only objective of the USDA was to 
create a more fair and more equitable system based on market forces.
  So what we have before us today, after the USDA floated two rival 
proposals, one we call 1-A and one we call 1-B, 1-A was more or less 
the status quo, 1-B was going more toward the market-driven area, so 
the location on where one lived did not have such a bearing on the 
price a farmer gets for the milk he produces. What the USDA came out 
with was something in between, a step toward 1-B, a step away from the 
status quo. This will take place if nothing else is done. But there are 
forces that are building here in Congress to stop this small reform 
from taking place.
  One of the things that the Members of Congress who are from these 
other regions have been saying, they have been using these exaggerated 
claims that this kind of reform, this small reform toward the market-
based system, will devastate farmers across the country. They are using 
exaggerated estimates. I would like to address that for one moment.
  Contrary to these exaggerated claims that this will result in huge 
losses to dairy farmers across the country, the USDA estimates that 
this change will result in a loss of revenue of approximately $2.8 
million on average in all Federal order regions. Let me put that in 
perspective. The total loss per hundredweight, per hundred gallons of 
milk, is estimated to be about .02 cents under the new regulation 
proposed by the USDA, not the massive losses that the proponents of the 
status quo are saying.
  Now, this nominal change in revenue will make all the difference to 
the farmers in the first district of Wisconsin, which I represent; in 
northern Illinois, as my colleague, the gentleman from Illinois (Mr. 
Manzullo), will soon talk about. I urge my colleagues to rely on the 
expertise of the USDA and allow the reform decision of the USDA to 
stand. I urge my colleagues who are thinking of freezing in place the 
status quo to think about the principles that built this country. Do we 
want to freeze in time 1937? Because today is 1999. We do not live 
under 1937 circumstances. We have the technology, we have the 
transportation, we have the advances to allow the milk pricing system 
to set up in a fair and equitable way.
  There is one other way of looking at this issue, because I know this 
dairy issue can be quite complex. We have Class 1, Class 2, Class 3, 
and Class 4 milk. We have all of these different milk marketing orders. 
Let us put it in this kind of perspective.
  What about orange juice? Do orange producers get a higher price for 
orange juice if they live farther away from Florida? It is sort of like 
saying that since I live in Janesville, Wisconsin, I should pay a 
higher price for the orange juice I purchase because it is made in 
Florida, but someone who lives in South Carolina will pay less for 
their orange juice.
  It is like saying a country music singer is going to get a lower 
price for producing country music if they live in Nashville, Tennessee, 
than if they are a country music singer out in California. This is a 
crazy system.
  Mr. GUTKNECHT. If the gentleman will yield, it is even more 
convoluted than that. It is one thing if the country music industry or 
the orange juice industry or the taconite industry or the automobile 
industry, if they decide that it does make some sense to have regional 
differentials, that is one thing, because that would be the market 
determining that. The difference here is the Federal Government sets 
this price.
  There is no other example, and we have searched in vain, whether we 
are talking orange juice, country music, computers, software, ice 
water, hockey sticks, there is no example anywhere else in our entire 
economy where we have a product where the Federal Government sets the 
price that the producer is paid based on where it comes from and what 
it goes into.
  We produce taconite in the upper--what we call the iron range of 
Minnesota. They also produce taconite on the upper peninsula of 
Michigan. There is no Federal agency that says, well, if that taconite 
goes into automobiles, if that taconite that is ultimately produced and 
is melted down and produced as steel that goes into automobiles, well, 
it is worth one price; but if that taconite is melted down and it goes 
into refrigerators, then it is worth a different price.
  Now, if the market decided that that was true, because we know that 
stainless steel is worth more than rolled steel, and we know I beams 
are probably worth less than other fine steel, but, again, that is not 
determined by the Federal Government, that is the market that sorts 
that out.
  So I wanted to just make that point that there are a lot of areas 
where there are regional differentials. We probably do pay more for 
orange juice in Minnesota than they do in Tampa, Florida, but that is 
because of transportation costs and other factors where the market 
determines. It is not determined by the Federal Government.
  Mr. RYAN of Wisconsin. That is a wonderful point to make. Because if 
we look at today in society and look at the marketplace, why should the 
government be dictating the price of milk based on where we live in 
relation to Eau Claire, Wisconsin? It is absolutely asinine. It is just 
crazy. But that is the world we are living in today.
  What is more, the USDA is trying to move moderately away from that 
policy toward more of a market-based system so that it is fair and 
equitable for all farmers, especially those who have been punished for 
62 years under this antiquated system. Yet there are Members of 
Congress here today, here in this body, here in the majority who are 
trying to stop that from happening, who are trying to freeze in place 
this crazy antiquated system where, just as the Member from Minnesota 
mentioned, they mandate the price the producer gets based on how far 
from Eau Claire, Wisconsin, one lives.
  In my hometown of Janesville, and I am so proud of this fact, we have 
a General Motors plant. And in Janesville, Wisconsin, in our General 
Motors plant, we produce Chevy Tahoes, which I drive. It is a great 
truck. It is good for four-wheeling. We produce Suburbans, we produce 
Yukons. These are wonderful trucks. Actually, the sales really took off 
when they added the four doors onto the Chevy Tahoe and the Yukon. 
Before it was a 2-door vehicle, and the sales were only okay. Once we 
added those four doors onto the Tahoes and the Yukons the sales took 
off. They really just took off. And anyone can buy a Chevy Tahoe all 
over this country, but no one is getting a different price for a Chevy 
Tahoe because they farther or closer away from Janesville, Wisconsin, 
where they are produced.

  A Chevy Tahoe is the same price in New York City as in Janesville, 
Wisconsin. People can get a Chevy Tahoe in Denver or in California, 
same as they can in Janesville, Wisconsin. That is the way the market 
works.
  Now, it may be a little more costly to ship a Chevy Tahoe from 
Janesville, Wisconsin, all the way up to California, and maybe the 
buyer will pay a little bit more because it cost to have the Chevy 
Tahoe carted out to California, that transportation cost may be 
factored into the price, but the government is not mandating that.
  Mr. MANZULLO. If the gentleman will yield on that, I think a more 
distinctive example would be if there were Chevy Tahoe plants in every 
State, manufacturing took place in every

[[Page H5076]]

State, but the price of that Chevy Tahoe depended upon how far one 
lived from Detroit, Michigan, for example. And the farther an 
individual got away from Detroit, Michigan, the more expensive it would 
be to buy that particular Chevy Tahoe. And to complicate it, would be 
that it would be sort of impractical to go 500 or a 1,000 miles away to 
buy the very vehicle that a person could get in that particular area. 
And that is what it is with these milk orders.
  And, by the way, there is a Chrysler Neon plant in the district I 
represent. I wanted to make sure we get that on for the Record.
  Now, let's say the government regulated the sale of pineapples. 
Probably a pretty poor example, because Hawaii is the only State in the 
Union where pineapples are grown, but let's say pineapples were grown 
in California and Florida, but the price of pineapples depended upon 
the center being Honolulu, where the price that the producer would 
receive from the processor of pineapples would be lower the closer it 
is to Honolulu; and, obviously, the grower in Florida would get a much 
better price out of it.
  Mr. RYAN of Wisconsin. It would be a government mandated price.
  Mr. MANZULLO. Oh yes, it is. I have a letter here I wanted to read 
from a processor, but had the gentleman finished his statement?
  Mr. RYAN of Wisconsin. Sure. Be happy to yield.
  Mr. GUTKNECHT. We are delighted to have the gentleman from Illinois 
(Mr. Manzullo) join us and be happy to yield some time to him to talk 
about this.
  Mr. MANZULLO. We really have to put a face to what we are doing. We 
are not talking about milk as a sterile commodity that is produced by 
cows with no personalities. We are talking about people. And I want to 
talk about my neighbor, Henry Ebert. He lives on Conga Road, right 
across the street. In fact, our pastures come together underneath the 
little bridge that separates Conga from our pastures; and we share the 
creek there. I have beef cattle, usually sell them in the fall; and, of 
course, dairy cattle have to be kept year-round.
  Now, I remember one night I got a call from Henry. It was after I had 
sold my cattle for the year. And he said, ``Don, my electric fencer 
broke. Could I borrow yours?'' I said, sure. So I disconnected mine and 
took it over to the Ebert farm. It was about 8 o'clock in the evening. 
This man had been up, I think, since 4, 4:30, 5 o'clock and he was 
standing on his feet and attempting to hook up, or beginning to hook up 
the wires that went into the electric fencer. I just looked at him and 
it just amazed me that this man had been on his feet 18, 20 hours a 
day, and he and Elaine get away maybe 1 week out of the year, and the 
only reason they can do that is that their son is farming with them. 
And here he is, so tired he is swaying on his feet. So I said, ``Henry, 
let me hook up that fencer for you.'' I was really afraid he was going 
to touch some wires and hurt himself.
  In fact, I do not know if I hooked it up or just suggested to him he 
wait until when his son came in, it has been so many years ago. But I 
was really concerned because he was so tired on his feet, and that is 
when accidents happen on the farms. And it really brings into focus the 
fact that we are dealing with some real people here. We are dealing 
with people that are being severely impacted. The Eberts' real estate 
taxes go up every year.
  Mr. GUTKNECHT. Does the gentleman mean to say that the real estate 
taxes are not based on how far away a farmer is from Eau Claire, 
Wisconsin?
  Mr. MANZULLO. No, of course not.
  Mr. GUTKNECHT. How about the feed prices?
  Mr. MANZULLO. Everything goes up.
  Mr. GUTKNECHT. So feed prices are not based on how far a farmer is 
from Eau Claire, Wisconsin?
  Mr. MANZULLO. Nothing.
  Mr. GUTKNECHT. Their other input costs, their electric bill is not 
based on how far they are from Eau Claire, Wisconsin; only the price 
they get from their local cooperative or whomever they sell their milk 
to; right?
  Mr. MANZULLO. And it is the price that his buyer is forced to charge.
  Henry's son, Hank, now is in the business with them; and they are 
working on the farm. And I talked to him again a couple nights ago 
because I needed some help with a power impact wrench to change some 
blades on a Woodson mower. And we talked again; and he said, ``Don, I 
don't know how long this can go on. I just don't know how long we can 
go on.'' Because I think the price of milk is, what, $10.50 to $12, I 
am not quite sure what it is, but it is substantially lower than the 
$17 mark that it hit several months ago.
  And I said, ``Henry, the only thing I can tell you is this. You are 
one of only 34 or 35 dairy farmers left in Ogle County. In neighboring 
Stevenson County we have about 250 dairy farmers. That is the number 
one dairy producing county in the State of Illinois.
  In the entire 16th Congressional District, which I represent, which 
goes from the Mississippi River all the way over to McHenry County, 
which has Harvard Milk Days and the same type of festival that the 
gentleman from Wisconsin has, there are 730 Henry Ebert families 
similarly situated, similarly with the first generation trying to hand 
their farm over to the second generation. And some night we will talk 
about estate taxes that makes that almost impossible to do without a 
huge bill to pay taxes on the farm that they own.
  And Henry sells to Dean Foods, and I had a conversation today with 
Gary Corbett, who is VP of industrial relations, and he sent me this 
letter and attached a key to it, and I want to read part of it for the 
record.
  It said, ``Dear Congressman Manzullo: I am writing on behalf of Dean 
Foods Company, which operates five plants,'' and has a technical 
research center in the district that I represent. He said, ``Please, 
enough is enough already. Is the House ever going to tire of 
introducing dairy legislation and allow us to run our own business? 
First, we had the 1996 Fair Act, which mandated Federal Order Reform, 
provided for the discontinuance of the Price Support Program, and 
promised more reliance on the market, to let the market itself 
determine the price of milk.

                              {time}  2145

  ``That process has resulted in USDA releasing its final rule on 
Federal order reform which is to take effect on October 1, 1999.'' That 
is the 1-B, the one that goes a long way, it is not perfect, but it is 
a good compromise of moving in the right direction and hats off to 
Secretary Glickman for really spearheading the gigantic effort on that.
  He said, ``No sooner was the final rule released than more 
legislation has been proposed in the House. One, to mandate Class 1 
differentials, one which would extend the dairy price support program, 
another one which provides for creation of dairy compacts.''
  He says, ``Does the House have nothing else to do but micromanage the 
dairy industry from Washington?'' That is the other thing. The pricing 
is in Eau Claire but the managing comes from Washington. ``There is no 
industry in which Congress interjects itself daily except the dairy 
industry.''
  Corbett says, ``Reject dairy compacts; they represent socialism at 
its finest. We cannot live with a system that picks a price out of the 
air with no basis in supply and demand fundamentals. The Soviet Union 
tried it for four decades. It was a miserable failure and it will fail 
in the U.S.
  ``While we view compacts as the total antithesis of the American 
system of free enterprise, we are just as concerned that Congress feels 
the need to continue promulgating dairy legislation without waiting to 
observe the impact of legislation previously passed.
  ``We are totally exasperated at the House's continual effort to 
micromanage our industry from Washington.''
  I remind you, this is Dean Foods Company which is the processor that 
buys the milk from Henry Ebert who lives on Conger Road in Egan, 
Illinois, and is my next-door neighbor.
  ``Below is a key to our offices.'' He taped a key. In fact here is a 
photocopy. It is amazing that the key that he taped was a key from an 
old Cadillac car. I said, ``That is as close as I will ever get to a 
Cadillac.'' He said, ``We grabbed any key that we could around here 
that was excess, we just taped it to these letters that we sent out.'' 
Of course it is symbolic.

[[Page H5077]]

  He said, ``Below is a key to our offices. You might as well come run 
our business directly rather than try from D.C. Then maybe you can feel 
the same frustration we experience in having our business turned upside 
down regularly through congressional intervention. Let the 1996 Fair 
Act have a chance to work.'' That is the law that the gentleman from 
Wisconsin described that mandated the Department of Agriculture come up 
with a workable solution moving toward a free enterprise system.
  He says, ``Stand by the promise of the 1996 farm bill to deliver a 
dairy policy that is more market oriented and consumer friendly. We do 
not need this narrow economic self-interest piece of legislation 
burdening our industry.''
  So here is Dean Food, which has I think operations in 37 States 
saying, ``Look it. We are standing alongside the farmers, the dairy 
farmers in your district. Let us be able to move forward, to be able to 
allow the market to operate on a free enterprise basis.'' We also had 
the original J.L. Kraft cheese factory in our district over in Jo 
Daviess County which buys a tremendous amount of milk.
  But I would ask the gentleman from Minnesota, the base price for 
Grade A milk is fixed by the sale of Grade B milk for cheese purposes 
in Eau Claire, Wisconsin. Tell me how that makes sense, especially 
since only 5 percent of the milk produced nationwide is Grade B.
  Mr. GUTKNECHT. I think the gentleman has asked a question which I 
cannot answer. I think it is a great rhetorical question. It is 
particularly troubling for those of us in the upper Midwest where about 
85 percent of our milk goes into cheese. One other thing. We have 
already made this far more complicated, I think, than the average 
Member can really understand. But the problem, of course, is if you 
artificially set the price of milk too high in some regions, which in 
our opinion they do, what it does is that fluid milk begins to back up 
in the system and then goes into cheese, which drives the cheese price 
down, which drives our price down, which drives everybody's price down.
  Mr. RYAN of Wisconsin. So what the gentleman is saying is, they get 
hit once, farmers in Wisconsin, in Illinois, in Minnesota, they get hit 
once because the price that they get for their milk that they produce 
is lower for the rest of the country.
  Mr. GUTKNECHT. For two reasons. Because, first of all, more of their 
milk goes into cheese and because they are closer to Eau Claire, 
Wisconsin.
  Mr. RYAN of Wisconsin. Because they are producing cheese and they are 
closer to Eau Claire, Wisconsin. So farmers, say, in New York or 
Florida or Arkansas and Alabama are getting higher prices. They are 
producing Class 1 milk, fluid milk, the kind of you drink out of the 
bottle, that gives you the mustache. They are overproducing that, which 
is then getting turned into cheese which is suppressing the price of 
Class 3 or cheese prices which we produce in the upper Midwest, so that 
further depresses the prices. So you get hit twice. Is that what the 
gentleman is suggesting?
  Mr. GUTKNECHT. I think that is a pretty accurate characterization. 
Then the gentleman from Illinois pointed out something else, that a few 
years ago as part of a compromise, and unfortunately that is a word 
that we hear, some of us think we hear too often, here in Washington 
but as part of a compromise, they allowed six of the northeastern 
States where they have a lot of population, they have big markets for 
fluid milk, they allowed them to create what can only be called a 
cartel, a compact between those six States that would in effect keep 
other milk out and in effect help to artificially drive their price of 
milk up even higher.
  Now, what is truly ironic about this, and I know both of you and 
particularly the gentleman from Illinois has been one of the real 
fighters for free trade in this Congress and he has got a lot of high 
tech companies that really do depend, and I know I have a lot and I 
suspect the gentleman from Wisconsin does as well, companies who 
recognize the importance of world trade. In fact, I am wearing a Spam 
watch tonight. They produce Spam in my district. Every day in Austin, 
Minnesota, we turn 16,000 pigs into Spam. Spam is a great export 
product. But we need export markets. Whether we are producing Spam or 
whether we are producing cheese or whether we produce automobiles, you 
name it, the United States desperately needs to export more of what we 
produce. At the very time we are trying to open up markets for our 
farmers, whether it be in China, whether it be in Japan, whether it be 
in the European Union, Africa, Central, South America, anywhere else in 
the world, at the very time we are saying we have got to open up 
markets for our products around the world, we cannot open up markets in 
the East. There are six States that try to keep our dairy farmers from 
coming in and competing. It really is like salt in a very sore wound.
  Mr. RYAN of Wisconsin. Was part of the purpose of the Constitutional 
Convention when our country was created not to avoid those type of 
trade wars, to try and avoid these interstate commerce trade wars, so 
we would not have barriers from State to State, that we would be able 
to have free trade among the States within the United States of 
America? Is this proposal, this Northeast Dairy Compact essentially not 
a trade barrier between one State and another State within the United 
States of America?

  Mr. GUTKNECHT. I would say it is more than just essentially. It is a 
trade barrier. In my opinion it violates both the letter and the spirit 
of the commerce clause of the Constitution. The gentleman is correct. 
One of the fundamental reasons that the 13 colonies came together and 
formed a Federal union was to keep the colonies from setting up 
artificial trade barriers and to allow free trade between the 13 
colonies. But we do have a constitutional expert among us. As I said, 
the gentleman from Illinois has been one of the really true fighters in 
terms of opening up markets and free trade here in the United States.
  Mr. MANZULLO. I appreciate the comment from the gentleman from 
Wisconsin. That precisely is the reason why we had the Constitutional 
Convention, because the States used to have tariffs among each other. 
They used to have their own money, their own coinage. They would treat 
people who lived in one State differently than people who lived in 
another State. Finally the Constitutional Convention got together and 
said, ``Wait a second. We're Americans. You can't have tariff barriers 
among each other.'' What amazes me about this entire milk marketing, 
there are now 34 or 35 marketing orders nationwide.
  Mr. GUTKNECHT. Thirty-one. The goal was to reduce it to no more than 
13.
  Mr. MANZULLO. That is correct. I think the proposal was to put it at 
about 11, that would be out there. I cannot think of any other 
foodstuff or manufactured item or service, price of service, that is 
mandated by congressional act and turned over to a bureaucracy to come 
up with 31 different price orders based upon the sale of 5 percent of 
the Nation's milk in Eau Claire, Wisconsin, on anything that similar. 
There is nothing anywhere. We are not talking about loans. We are not 
talking about deficiency payments. We are not talking about emergency 
bailouts because of floods. Those things come and go but a residential 
area can get hit just as well as an agricultural area. I do not know of 
any legal price fixing that exists like this. In fact, the antitrust 
laws that are set up in this country will attach severe penalties to 
executives of corporations who even whisper of getting together and 
having prices that are similar to each other.
  Mr. RYAN of Wisconsin. I would like to bring it back from the 
constitutional question, because there are clear implications that the 
compacts violate the commerce clause of the Constitution. But let us go 
back to the human toll that is taken with this pricing system. I live 
in Janesville, Wisconsin. Just east of me on County Trunk A are the 
Barlass Farms. I used to work for Grande Cheese Company. When I was a 
young kid in high school, I worked for Grande out with the milk trucks. 
I used to put up the signs and just do some odd jobs around Grande. The 
Grande Cheese Company would do a lot of work and buy milk from milk 
producers around Rock County, Wisconsin, where I live. The Barlasses I 
got to know at an early age. The patriarchs of the Barlass family are 
about to retire

[[Page H5078]]

and their two boys are taking over the family farm. They milk Jersey 
cows. Most of the cows we milk in southern Wisconsin are Holsteins but 
they milk Jerseys and they take quite a bit of pride in milking 
Jerseys. Because the Barlasses, their parents are going to try and pass 
the farm on to them, they have got problems, with capital gains taxes, 
with the estate tax, that if they pass away, their farm is going to be 
taxed so much so at a 55 percent rate that they may have to sell the 
farm and discontinue having their sons farm it for them because of the 
estate taxes. On top of that, the capital gains taxes they pay are so 
high because they are not indexed for inflation that they are paying 
tax rates as high as 70 percent when you take into account the fact 
that they are paying on the inflationary gains of their assets.
  Look at all of that. How difficult it is with this price system, the 
fact that in Wisconsin we have lost 2,000 dairy farmers just last year. 
The Barlasses have a tough time as it is, with the estate tax, with the 
things that the government is imposing on them right now. And look at 
what else is happening. Look at what is being piled on top of them. 
What is being piled on top of them is that irrespective of their 
efforts to keep their family farm alive and they say they know they 
have to grow it to survive, they have got to get more money from the 
bank to invest in better technology with the dairy farm, to get more 
cow, to grow, to get bigger, for surviving. But if that is not enough, 
what they have to face is this pricing system, that just by the very 
fact that they farm and raise Jersey cows in Rock County, Wisconsin, 
southern Wisconsin, which is located fairly close to Eau Claire, 
Wisconsin, in the whole scheme of the country, they get a lower price 
for the milk they produce than farmers around other parts of the 
country. That is the other part that is crushing their ability to keep 
their family farm alive. Not only are they getting hit with a lower 
price but we have a system that even lowers the price more because of 
the oversupply of Class 1 milk. So not only is it very difficult to 
keep a farm alive, just on its own, but we have a milk pricing system 
which is based upon this antiquated, socialistic, Depression era 
program that they and many other farmers like them are going out of 
business. And that there are Members of Congress here today who swear 
to uphold the Constitution, who swear to uphold the commerce clause of 
the Constitution, who out of this side of their mouth talk about 
upholding market principles, the free market, the individual, and then 
out of this side of their mouth they say, ``Well, not for the dairy 
industry, not for milk. For orange juice, yes, for Chevy Tahoes, yes, 
for free trade, yes, but not for milk.'' I would ask them, these 
Members of Congress who are saying this out of this side of their mouth 
and that out of that side of their mouth, go talk to the Barlasses 
because I do not know what to tell them. I do not know how to explain 
to them that in this country, the market should survive.

                              {time}  2200

  Mr. MANZULLO. Mr. Speaker, if the gentleman would yield, as my 
colleagues know, there is another class, and these are the consumers 
who pay more for the cost of dairy products as a result of this 
incredible system of pricing. I mean you have a price system that does 
not make sense. As my colleagues know, who is going to pay more on this 
thing? The consumer ends up paying more. But what we are saying this 
evening is to let the free market float, let the dairy farmers have the 
opportunity to be part of the dairy system because at least in the area 
of the country that we come from, as my colleagues know, we are talking 
about the survival of dairy families. This is critical.
  I was at an ag breakfast in Stephenson County in Freeport which is, 
as I said before, is the largest dairy production county in the State 
of Illinois, and a lot of farmers were coming through. I was there 
quite early and to the later morning, and there was this sense of, and 
I know farmers have been depressed in the past because of what has 
happened in the cycles and everything, but I have never seen such a 
sense of, and I cannot even find the word, the adjective, is the look 
on the faces of the dairy families because they know that the only 
chance they really had to have a piece of the free market system was in 
the reforms that the U.S. Department of Agriculture came up with under 
1 B and now that could be strangled because people want to keep the 
present pricing and our good colleague from Missouri (Mr. Blunt), love 
him dearly, he is a great Member of Congress, I am very close to him, 
but we think he is incorrect on that particular issue.
  And so I just wanted to commend the gentleman from Minnesota (Mr. 
Gutknecht) for taking the tremendous leadership and explaining this 
very difficult concept to other Members and the American people.
  Mr. GUTKNECHT. I yield to the gentleman from Wisconsin. We need to 
wrap it up here for any last comments you would have.
  Mr. RYAN of Wisconsin. I would just like to ask the gentleman from 
Minnesota a couple of questions so people understand the timing of the 
issue.
  Is it the case that the bill that we are talking about, freezing the 
status quo in place; that is, being drafted up, marked up, in the 
Agriculture Committee tomorrow?
  Mr. GUTKNECHT. Absolutely, tomorrow afternoon.
  Mr. RYAN of Wisconsin. And if this legislation does not pass, if 
nothing happens, then by October the USDA, the U.S. Department of 
Agriculture, will implement these forms which are a step in the right 
direction towards the free market; is that correct ?
  Mr. GUTKNECHT. It is a small baby step in the right direction, and if 
Congress takes no action, the President does not sign a bill, the 
USDA's rule will go into effect October 1, and the anticommerce clause 
compacts will disappear, and we will move gradually, and I mean very 
gradually, to a more level playing field for dairy farmers around the 
United States; that is correct.
  Mr. RYAN of Wisconsin. So what the gentleman from Minnesota is 
saying, that the train is already leaving the station, and it is 
heading in the direction of the market, and the USDA is driving this 
train, but that if nothing else happens, but that there are Members of 
Congress here among us, friends of ours from other States, who are 
trying to stop that train.
  Mr. GUTKNECHT. They are trying to derail that train.
  Mr. RYAN of Wisconsin. Trying to derail that train, trying to stop 
this modest reform from taking place so, if they can intervene in 
Congress, to stop this from happening. Is that precisely what?
  Mr. GUTKNECHT. That is exactly correct, and at least I am delighted 
that the dairy farmers in the upper Midwest have Members like 
yourselves who are joining me and others to try and at least get the 
facts out on the table because John Adams, who served in this body, 
former President, a great patriot; one of my favorite quotations from 
John Adams is that facts are stubborn things. And I think in this case 
the facts are so overwhelming that so many things have changed since 
1937 that a system that may have made some sense in 1937; just look at 
this map, and you can see how incredibly bizarre. In fact, a Supreme 
Court justice was asked to review this, and he referred to this system 
as, and I quote, Byzantine, and if ever there was a time to say it is 
time to scrap this system, come up with a new system that levels the 
playing field that is based on real market principles, if ever there 
was a time, that time is now and that place is here because here is an 
interesting fact about milk.
  They are now allowing markets to set the price of milk in Moscow. 
Would it not be wonderful if we tried at least a modified version of 
that here in the United States? And who knows? We might actually begin 
to increase per capita consumption of milk.
  And if I can just finally say this: If there is one really great 
tragedy about this system where we have regional conflicts, where the 
southeast dairy farmers compete and argue against the dairy farmers in 
Iowa, and the dairy farmers in Carolina are against the dairy farmers 
in the upper Midwest; any time you have farmers spending so much energy 
arguing with each other, then it means that they are not spending that 
energy trying to figure out how in the world can we sell more milk, how 
can we sell more cheese, how can we sell more ice cream not only

[[Page H5079]]

here in the United States, but around the world.
  And the real tragedy is we are pitted against each other, we are 
arguing against each other, when at the end of the day the simple fact 
about agriculture in America today is this: We cannot eat all that we 
can grow. The only way that we can increase real farm income is become 
aggressive in world markets. But while we are spending all of our 
energy arguing with each other, we are losing tremendous market 
opportunities whether it be in Asia, China, Japan, Central America, 
South America, Europe, other parts of the world who really, if we can 
just show them what we can produce, I think we can get a bigger and 
bigger market share and increase the size of the pie rather than 
arguing about who gets the largest slice.
  Mr. RYAN of Wisconsin. If the gentleman would yield, is not another 
loser in this the American consumer as well?
  Mr. GUTKNECHT. Yes.
  Mr. RYAN of Wisconsin. Are not people who buy milk paying higher 
prices because of this system?
  Mr. GUTKNECHT. Well, that is an argument that the consumer groups and 
now even some of the people against government waste and some of the 
other taxpayer groups have weighed in and begun to say particularly in 
the larger cities, that they are paying artificially higher prices for 
dairy products, that if we had a more market based reform along the 
lines of what Secretary Glickman has proposed that they would see lower 
prices, and this would benefit poorer people, and frankly, we believe, 
in the long run, would increase consumption.
  Mr. RYAN of Wisconsin. So not only are we talking about hurting upper 
Midwest dairy farmers, it is just not a regional clash, we are talking 
about poor inner city parents who are trying to provide for their 
children with a lot of single, we have the illegitimacy rate in the 
inner city is as high as 70 percent in this country in inner city 
America. We are talking about these mothers, these young mothers in 
many cases, trying to raise their babies and their children, to try and 
nurture them with dairy products, and they are paying a higher price 
for these products because of this?
  Mr. GUTKNECHT. Artificially higher prices, yes.
  Mr. RYAN of Wisconsin. Because of this government mandate?
  Mr. GUTKNECHT. I would yield to the gentleman from Illinois and then 
we are going to yield back our time.
  Mr. MANZULLO. I would ask for leave to attach this letter from Dean 
Food Company and be part of the Record:


                                           Dean Foods Company,

                                  Franklin Park, IL, May 19, 1999.
     Hon. Don Manzullo,
     U.S. House of Representatives, Washington, DC.
       Dear Congressman Manzullo: I am writing on behalf of Dean 
     Foods Company with whom, we hope, you are quite familiar. 
     Dean operates five plants and our technical research center, 
     all in your district.
       Please, enough is enough already! Is the House ever going 
     to tire of introducing dairy legislation and allow us to run 
     our business? First, we had the 1996 Fair Act, which mandated 
     Federal Order Reform, provided for the discontinuance of the 
     Price Support Program, and promised more reliance on the 
     market. That process has resulted in USDA releasing its Final 
     Rule on Federal Order Reform which is to take effect on 
     October 1, 1999 and required two years of industry work to 
     complete.
       No sooner was the Final Rule released than more legislation 
     has been proposed in the House; HR 1402 to mandate Class I 
     Differentials, HR 1535 which would extend the Dairy Price 
     Support Program and now the most onerous of all HR 1604 which 
     provides for the creation of dairy compacts. Does the House 
     have nothing else to do but micro-manage the dairy industry 
     from Washington? There is no industry in which Congress 
     interjects itself daily except the dairy industry.
       Reject dairy compacts; they represent socialism at its 
     finest. We cannot live with a system that picks a price ``out 
     of the air'' with no basis in supply/demand fundamentals. The 
     Soviet Union tried it for four decades; it was a miserable 
     failure, and it will fail in the U.S.
       While we view compacts as the total antithesis of the 
     American system of free enterprise, we are just as concerned 
     that Congress feels the need to continue promulgating dairy 
     legislation without waiting to observe the impact of 
     legislation previously passed. We cannot make sound business 
     decisions if you continually change the rules.
       We are totally exasperated at the House's continual effort 
     to micro-manage our industry from Washington. Below is a key 
     to our offices; you might as well come run our business 
     directly rather than try from D.C. Then maybe you can feel 
     the same frustration we experience in having our business 
     turned upside down regularly through congressional 
     intervention.
       Let the 1996 Fair Act have a chance to work. Stand by the 
     promise of the 1996 Farm Bill to deliver a dairy policy that 
     is more market oriented and consumer friendly. Please vote 
     ``NO'' on HR 1604; we do not need this narrow economic self-
     interest piece of legislation burdening our industry.
           Sincerely,

                                                 Gary Corbett,

                                  Vice President, Governmental and
                                         Dairy Industry Relations.

  Mr. RYAN of Wisconsin. I would also just like to ask, mention to the 
gentleman from Minnesota (Mr. Gutknecht), and thank him for his 
leadership. The gentleman from Minnesota (Mr. Gutknecht) has provided 
excellent leadership here in Congress on this issue. I want to thank 
him on behalf of the dairy farmers of Wisconsin for his leadership on 
this issue, and I also thank the gentleman from Illinois (Mr. 
Manzullo). Our districts butt up against each other. He has the 
Wisconsin border, I have the Illinois order, and hopefully we can fight 
together on behalf of the dairy farmers in our areas along and with the 
leadership of the gentleman from Minnesota (Mr. Gutknecht) to try to 
get resolve to this, to make sure that we can stop what is going on 
here in Congress. So the USDA, the train can leave the station toward 
the market so we can go down the road of getting a market-based system, 
and I want to just thank the gentleman from Minnesota for his 
leadership.
  Mr. GUTKNECHT. Well, I thank the gentleman, and I just, in summing 
up, one of the expressions that I think every farm State legislator, 
whoever represents a farm area, this expression they all understand, we 
all understand, and that is that a deal is a deal and a bargain is a 
bargain, and you know, out in farm country they sell a $100,000 combine 
on a handshake, they trade their grain on a phone call.
  We have very few written contracts because everybody understands the 
principle that a deal is a deal and a bargain is a bargain, and 2 years 
ago and then again last year we made a deal, we made a bargain, to 
allow the Secretary to go forward with market-oriented ag reforms, 
dairy reforms, that would move us to a fairer, simpler system. That was 
the deal, that was the bargain, that is what we shook hands on, that is 
what we expect, and as far as I am concerned, I do not care how many 
cosponsors they may have in the House, I am going to continue fighting, 
arguing, making the case, sharing the facts with the Members, with the 
American public because at the end of the day a deal is a deal, a 
bargain is a bargain. We ought to have market-based reform as far as 
dairy products, and as far as I am concerned, we will not stop until we 
get them. I thank my colleagues for joining me.

                          ____________________