[Congressional Record Volume 145, Number 124 (Wednesday, September 22, 1999)]
[House]
[Pages H8475-H8494]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 CONSOLIDATION OF MILK MARKETING ORDERS

  The SPEAKER pro tempore (Mr. Ewing). Pursuant to House Resolution 294 
and rule XVIII, the Chair declares the House in the Committee of the 
Whole House on the State of the Union for the consideration of the 
bill, H.R. 1402.

                              {time}  1036


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the State of the Union for the consideration of the bill 
(H.R. 1402) to require the Secretary of Agriculture to implement the 
Class I milk price structure known as Option 1A as part of the 
implementation of the final rule to consolidate Federal milk marketing 
orders, with Mr. Hastings of Washington in the Chair.
  The Clerk read the title of the bill.
  The CHAIRMAN. Pursuant to the rule, the bill is considered as having 
been read the first time.
  Under the rule, the gentleman from Texas (Mr. Combest) and the 
gentleman from Texas (Mr. Stenholm) each will control 30 minutes.
  The Chair recognizes the gentleman from Texas (Mr. Combest).
  Mr. COMBEST. Mr. Chairman, I yield myself such time as I may consume.
  (Mr. COMBEST asked and was given permission to revise and extend his 
remarks.)
  Mr. COMBEST. Mr. Chairman, as all Members know, dairy policy debates 
are contentious and are characterized more often than not by regional 
as opposed to ideological differences.
  The House Committee on Agriculture has endeavored to provide Members 
on all sides of this issue ample notice and a fair process in which to 
debate their views and represent the interests of their constituents.
  H.R. 1402, as reported, addresses several perceived weaknesses of the 
final decision of the U.S. Department of Agriculture as well as current 
law. During committee consideration, several amendments were included 
to deal with concerns over price volatility, manufactured product 
formula pricing, and price support.
  Mr. Chairman, I know Members are split on dairy policy. I am also 
aware that there is no great sense of camaraderie within the industry 
on this issue. This is a modest bill which makes some modest changes in 
the federal dairy program. I urge all Members to support this 
legislation.

[[Page H8476]]

  Mr. Chairman, I reserve the balance of my time.
  Mr. STENHOLM. Mr. Chairman, I yield myself such time as I may 
consume.
  Mr. Chairman, I rise in strong support of H.R. 1402.
  Mr. Chairman, we have a considerable variety of federal programs 
meant to guarantee a healthy agricultural sector for our Nation. Year 
after year, Congress has reaffirmed its commitment to build, redesign 
and improve policies that promote it. The more I think about these 
different programs and their purposes, the more I come to the 
conclusion that the key to a strong system for farming and ranching is 
the maintenance of policies that support cooperative effort.
  I am very excited that we have the opportunity to debate this issue 
today. Because whether we are talking dairy or cotton or sheep or hogs 
or corn, the problem is price. We have to find ways for our producers 
to get more of the agricultural dollars, and the long-term solution 
from the producer standpoint is cooperation, cooperation in the 
traditional sense of cooperatives and cooperation now soon to be in a 
nontraditional sense in which corporate America recognizes it is in 
their best interest to do whatever is necessary to see that more of the 
consumer dollars go to the producer's pocket.
  Mr. Chairman, dairy farmers are extremely vulnerable as stand-alone 
price-takers. Being a highly perishable commodity, raw milk can be kept 
on the farm for only so long before it becomes worthless. This fact is 
what has given rise to the need for a federal pricing system. The 
federal milk marketing order system promotes the opportunity for dairy 
producers to get a fair deal from the processor and does so without 
setting strict, unaltered minimums. Instead, regulated prices fluctuate 
each month according to changes in the market. The key benefit of the 
program then is not in price enhancement but in the promise of 
uniformity that takes away the processor's opportunity to play one 
producer off against another.
  Mr. Chairman, this program promotes producer cooperation. Without 
that cooperation, the producer has little chance of bargaining for a 
fair deal with a processor who can wait while the milk deteriorates in 
the tank. With cooperation, we have a shot at a healthy dairy sector 
and we will continue to have a safe, abundant and reliable supply of 
milk.
  While most processors would not choose to conduct business in that 
way, and do not, the program then and the enhanced cooperation that 
results from situations in which some do is the problem we attempt to 
address today. The program then, and the enhanced cooperation that 
results, works to the benefit of the processor and of the consumer, as 
well as of the men and women who go out to the barn two and three times 
a day to get the cows milked.
  Mr. Chairman, in marking up this bill, the committee adopted an 
amendment to require forward pricing under the order program. While I 
opposed that amendment, it has become even more clear to me, since the 
committee acted, that the provision is a very fundamental challenge to 
the milk marketing system, and one that will undermine cooperative 
effort at the very time that we should be promoting it. At the 
appropriate time, I will offer an amendment to limit the program in a 
way that will allow forward contracting to go forward without crippling 
the system.
  Mr. Chairman, discussions of federal milk marketing orders nearly 
always divide along regional lines, and the rulemaking we debate today 
is no exception. The gentleman from Texas (Mr. Combest), and the 
gentleman from California (Mr. Pombo), chairman for the Subcommittee on 
Livestock and Horticulture, have done an excellent job of facilitating 
a fair debate on this matter; and I am grateful for their leadership in 
bringing the bill to the floor.
  Mr. Chairman, USDA did a great deal of work in developing the rule on 
milk marketing order reform. The farm bill required little more than a 
consolidation of orders, a reform which by itself was considered to be 
an important step at the time. In addition to providing for order 
consolidation, the Department has used this rulemaking as an 
opportunity to base manufacturing class prices on milk components 
rather than on Grade B prices, and it establishes several surplus 
production regions as basing points for determining minimum prices.
  H.R. 1402 is designed to preserve all of these reforms and to make 
reasonable adjustments to Class I price differentials. It represents 
responsible progress towards an improved system and should be viewed as 
such against the backdrop of our current program.
  I want to thank the chairman for allowing me the time to address the 
committee regarding this important legislation, and I am grateful for 
his assistance in helping move this bill forward.
  In spite of these accomplishments, there are two areas where USDA 
badly missed the mark. We need to pass H.R. 1402 to complete the reform 
process in a manner that does not adversely affect our nation's 
existing milk marketing system.
  Mr. Chairman, this bill is supported by dairy farmers from much of 
the United States because it is so important to ensuring a successful 
completion of the milk marketing order reform process directed by the 
1996 Farm Bill. By requiring USDA to use Option 1A price differentials 
in implementing order reform, H.R. 1402 will fulfill the Farm Bill's 
mandate. It is clear that important portions of the Final Rule issued 
by the Administration lack the Congressional and public support needed 
to be sustainable.
  Mr. Chairman, this point was made abundantly clear by communications 
from Congress and public views filed during the comment period. Last 
year, nearly 240 Members of the House wrote to USDA expressing their 
support for Option 1A. According to USDA documents of the 4,217 public 
comments that were received regarding the Class I pricing structure, 
3,579 of them were in favor of Option 1A.
  In spite of these overwhelming expressions of public sentiment, USDA 
did not listen. Its decision gives rise to the need for Congress to act 
further.
  Mr. Chairman, in understandable efforts to simplify a complex issue, 
many have characterized Option 1B--the option chosen by the 
Department--as reform, and Option 1A as the status quo. This 
characterization is simply incorrect.
  Mr. Chairman, Option 1A is not the status quo. For many years, it was 
a goal of Upper Midwest dairy organizations to encourage a 
consolidation of milk marketing orders--so much so that the Farm bill's 
requirement for consolidation was that region's main accomplishment in 
the Dairy section of that bill. Option 1A would accomplish that goal to 
the same degree as Option 1B. Under the old rhetoric then, even with 
Option 1A, the Final Decision would be a significant accomplishment. 
But apparently the debate has shifted and we are faced with a new 
measure of success.
  It was also a goal of the Upper Midwest to bring an end to the 
accepted notion that each Order's Class I differential is related to 
its distance from Eau Claire, Wisconsin. Option 1A recognizes three 
surplus zones as the basis for determining Class I prices. In Texas, 
this result itself means a significant lowering of the differential and 
therefore of prices received by producers. Option 1A will reduce income 
for Texas Producers as well as producers in many other parts of the 
nation. So, again, under the old rhetoric and the old standards of 
success for the Upper Midwest, Option 1A represents a significant 
victory and a change from the status quo.
  Mr. Chairman, producers who are supporting Option 1A were prepared to 
accept these changes in Federal Orders that would have made the system 
more equitable for the Upper Midwest. The Final Decision, however, will 
result in a substantial negative impact on dairy producer income in 
Texas and in many other areas. In short, the Final Decision goes too 
far and unduly threatens the value of dairy farm investment in the 
United States.
  Mr. Chairman, in addition to focussing on Class I differentials, I 
have devoted considerable attention to another controversy relating to 
the Final Rule: the manufacturing milk pricing formulas. Several 
witnesses at the Subcommittee on Livestock and Horticulture's hearings 
this year raised concern that these formulas will have a significant 
negative impact on all producer prices. For this reason, I offered an 
amendment that was adopted by the Agriculture Committee to provide an 
interim solution to this problem. Section 2 of the Committee substitute 
requires that USDA initiate a new rulemaking for developing Class III 
(cheese) and Class IV (butter & nonfat) pricing formulas. While that 
rulemaking is pending, the Final Decision's formula is modified in a 
manner that will partially ease the negative impact of the Final Rule's 
formula on dairy farmer income.
  Mr. Chairman, for many years, a problem with the Federal order system 
has been its incompatibility and risk management tools

[[Page H8477]]

known as forward contracts. Such contracts are often used by producers 
of other agricultural commodities. In an effort to maintain a 
sensitivity to market forces, Federally regulated milk prices are reset 
each month in response to market movements. Finding a way to allow 
producers and handlers the option to enter into log-term price 
relationships without undermining that system has been a great 
challenge.
  During the Committee's consideration of H.R. 1402, Mr. Dooley offered 
an amendment that was adopted by the Committee to require USDA to allow 
forward pricing. I opposed the amendment at the time because I did not 
feel it contain sufficient safeguards, however I have been working 
closely with Chairman Pombo to develop improvements. To that end, we 
have developed an amendment that will allow forward pricing to go 
forward on a limited basis. Under the amendment, the forward pricing 
program would expire as of December 31, 2004, and would apply only to 
non-Class I milk. The amendment also requires USDA to submit an interim 
report to Congress on the operations of the program.
  Mr. Chairman, USDA did a great deal of work in developing the rule on 
milk marketing order reform. The farm bill required little more than a 
consolidation of orders--a reform which, by itself, was considered to 
be an important step at the time. In addition to providing for order 
consolidation, the Department has used this rulemaking as an 
opportunity to base manufacturing class prices on milk components 
rather than on Grade B prices, and to establish several surplus 
production regions as basing points for determining minimum prices. 
H.R. 1402 is designed to preserve all of these reforms and to make 
reasonable adjustments to Class I price differentials. It represents 
responsible progress towards an improved system and should be viewed as 
such against the backdrop of our current program.
  Again, Mr. Chairman, thank you for allowing me the time to address 
the Committee regarding this important legislation. I am grateful for 
your assistance in helping move this bill forward.
  Mr. Chairman, I reserve the balance of my time.
  Mr. COMBEST. Mr. Chairman, I yield 2\1/2\ minutes to the gentleman 
from California (Mr. Pombo), chairman of the subcommittee which has 
jurisdiction over dairy policy.
  Mr. POMBO. Mr. Chairman, I thank the gentleman from Texas (Mr. 
Combest) for yielding me this time.
  Mr. Chairman, I would like to just take a couple of minutes to 
hopefully try to explain to my colleagues how we arrived at the 
position that we are in in terms of this legislation. A couple of years 
ago when we passed the Freedom to Farm Act, as part of that 
legislation, as part of the farm bill, we directed USDA to go in and 
look at the dairy program, to redo the milk marketing orders and the 
rules that we play by, and they spent a considerable amount of time in 
public hearings, in internal work, to try to come up with a plan that 
they felt would work.
  I think all of my colleagues realize that the current dairy program 
is extremely complicated. A lot of times it does not make a lot of 
sense to a lot of Members, and to those of us that have spent a huge 
amount of time working on dairy policy it does not make a lot of sense 
to us either. It has been extremely difficult to work our way through 
60 years of dairy policy and try and come up with something that is 
going to operate, something that is going to work and something that 
will be a transition period for America's dairy farmers to go away from 
a command-and-control, government-knows-best dairy policy into a more 
free-market policy, which I believe is the majority of our goal that we 
would like to achieve.

                              {time}  1045

  That transition that we are in the middle of right now, USDA came out 
with their recommendation, and some people cheered it and others were 
extremely opposed to it because of the changes that they made. What the 
Committee attempted to do was to come up with a compromise piece of 
legislation, legislation that would give us the ability to transition 
away from the government-run dairy policy into a more free market dairy 
policy.
  The bill that we will have before us today is part of that 
transition. I do not like everything that is in the legislation. In 
fact, there are many things in there that I dislike. But I do believe 
it is a reasonable transition.
  One of the important things in our part of this legislation that the 
gentleman from Texas (Mr. Stenholm) talked about before was the ability 
to do forward contracting. I do believe that this is part of the future 
of dairy in this country, and it is an important tool that our dairy 
farmers ought to be able to use. Mr. Chairman, with the gentleman from 
Texas (Mr. Stenholm), I am introducing an amendment that I believe puts 
safeguards into that particular part of the legislation. I urge my 
colleagues to support that amendment.
  Mr. PETERSON of Minnesota. Mr. Chairman, I ask unanimous consent to 
control the time previously controlled by the gentleman from Texas (Mr. 
Stenholm).
  The CHAIRMAN. Is there objection to the request of the gentleman from 
Minnesota?
  There was no objection.
  Mr. PETERSON of Minnesota. Mr. Chairman, I yield myself such time as 
I may consume.
  Mr. Chairman, following the gentleman from California (Mr. Pombo), I 
am one of those that has been down on the Subcommittee on Livestock and 
Horticulture working on this issue over the last number of years, and 
it has been frustrating, to say the least. I would just like to say to 
my colleagues, I understand they are getting a lot of pressure from 
farmers and co-ops and so forth, but for those that believe in the free 
market and believe in free trade and pushed the GATT and NAFTA, I would 
just say to them, how can they continue to defend a system whose time 
has passed.
  There was a good reason back in 1937 why we set up the system we have 
now, because we wanted to keep fluid milk close to the population 
centers, but times have changed. We have interstate highways, we have 
refrigeration, we have a lot of things that we did not have back in 
1937, and because of that, it is time to change this policy.
  The Department has done a good job, they have gone out across the 
country, listened to everybody, put together a program that I do not 
like completely because it does not go far enough, but it is a step in 
the right direction, and that is what we asked them to do back in 1996. 
So we ought to follow through on that commitment, and we ought to not 
pass this bill and let the work that the Department put together become 
the law of the land.
  The other thing that people ask me all the time is why is it that it 
looks like Minnesota and Wisconsin against the rest of the country on 
this. Well, people need to understand that this bill focuses on the 
class 1 differentials, which are just part of the picture in dairy 
farming. In the Midwest, 85 percent of the milk that we produce goes 
into manufacturing. The reason that we are concerned about this current 
policy is that it is not based on economics.
  The current Class I differentials were put in place when Tony Coelho, 
who was the head of the Dairy Subcommittee, legislated them and 
basically locked all of the dairy industry in a room in 1985 and forced 
them to come up with these legislative Class I differentials that are 
in the statute. What we are trying to do here is to change those 
differentials so that they require more what the economics of the dairy 
industry are.
  What our concern in the Midwest is that we are a manufacturing market 
and when the government pushes people to produce more because of 
government policies, that excess milk gets dumped into our 
manufacturing market and it affects our price, and that is why we are 
concerned about this.
  The other thing that is an issue in all of this is that California 
has had their own system, which is similar to a compact that was set up 
in the northeast area, and they have entered into this because this new 
system is going to make the manufacturing price of milk closer to what 
their price is, and they have been using this as an advantage to lure 
some of the manufacturing industry to their State because of the way 
the Federal policies have been set up in the past, and they are outside 
of that Federal system.
  So what we are trying to do with this is get the whole industry more 
on a level playing field, get it to more mirror economics, and it is 
the right direction to go. I understand where some of the co-ops and 
farmers are coming from because the economics of the current situation 
favors their business structure, but it is not the right thing for the 
country. Again, I say to people,

[[Page H8478]]

 if they are supporting this, if they believe in the free market and 
free trade, how can we set up a system where we are going to put up 
barriers within this country and favor one farmer over another, or 
price milk based on how it is going to be used at one price or another. 
This is what the Soviet Union tried, it did not work, and it is not the 
best thing for this country.
  So I urge that we defeat this bill.
  Mr. Chairman, I reserve the balance of my time.
  Mr. COMBEST. Mr. Chairman, I yield 2 minutes to the gentleman from 
Ohio (Mr. Boehner).
  Mr. BOEHNER. Mr. Chairman, I thank my colleague from Texas for 
yielding me this time.
  I would say to my colleagues that the gentleman from Minnesota (Mr. 
Peterson) and I have spent 9 years almost on the Committee on 
Agriculture, on the Subcommittee on Livestock and Horticulture, trying 
to make some sense and bring this order to the Federal milk market 
order system; trying, we believe, to allow farmers to have the chance 
to succeed by getting the Federal Government out of their way. But, for 
62 years, we have had this program that sets up milk cartels, 34 of 
them currently, around the country, and part of the reform that is 
going into place in the next couple of weeks will reduce the number of 
marketing orders to 11. As we get into this process, there are 
certainly changes that will occur in the differential.
  Mr. Chairman, H.R. 1402, which we are debating today, seeks to derail 
these long overdue reforms to the milk market order system. But let me 
be honest, these are the most modest of reforms that are being blocked 
today. For decades, the U.S. dairy policy has discriminated against 
some dairy producers based on their distance from Eau Claire, 
Wisconsin. I think it is time to say enough is enough.
  We looked at data, the Committee on Agriculture did, to show that 
some 60 percent of dairy producers in this country would benefit from 
the reforms the USDA is about to put in place, and there are all types 
of numbers around, but this is a consensus of the numbers. So why do we 
want to stand in the way of some 60 percent of U.S. producers who are 
likely to gain from this change in this order?
  As we, most of us, believe in free trade, asking countries around the 
world to tear down trade barriers, we in this country have one of the 
largest trade barriers within our own country, and that is this Federal 
milk market order system. I just cannot understand how my colleagues 
can continue to defend this depression-era system that says that milk 
is going to be priced based on its distance from Eau Claire, Wisconsin, 
and that we are going to pay producers a different amount of money, 
depending upon how the milk that they sell is used.
  So today we will have a chance to debate this, and I am looking 
forward to a healthy debate.
  Mr. PETERSON of Minnesota. Mr. Chairman, could I inquire as to how 
much time we have remaining on our side?
  The CHAIRMAN. The gentleman from Minnesota (Mr. Peterson) has 21 
minutes remaining.
  Mr. PETERSON of Minnesota. Mr. Chairman, I yield 3\1/2\ minutes to 
the gentleman from Wisconsin (Mr. Kind), who has been a leader on this 
issue.
  Mr. KIND. Mr. Chairman, I thank the gentleman for yielding me this 
time.
  I rise to urge my colleagues to oppose H.R. 1402 on final passage. 
This is a debate, quite frankly, that I am sure no one has looked 
forward to. It seems to be a perennial thing that goes through this 
United States Congress, and it is unfortunate in many respects. I think 
this is bad legislation based on policy reasons, but also based on 
procedural reasons.
  First, the procedure, Mr. Chairman. Back in 1996, my predecessor, 
Steve Gunderson, who was then chairing the Dairy Subcommittee, was 
going to write some legislation in the Freedom to Farm bill to reform 
this depression-era milk-pricing system that exists in this country. 
But there was an agreement reached, an understanding reached back then 
that instead of having legislation go forward under Freedom to Farm, 
they were going to let the regulatory and rule making process at the 
Department of Agriculture take its course. Over the next few years, the 
Department of Agriculture held countless hearings across the country, 
took testimony from experts in the field, from dairy producers, and 
proposed a reform that is due to take effect on October 1.
  This is a very small, gradual reform, but a reform that heads in the 
right direction in leveling the playing field and creating a fair and 
more equitable dairy policy for all of the producers in this country. 
But now, here we are in the eleventh hour, just a few short days before 
that reform is to take effect, with this legislation that would 
effectively stop that reform. This is unfortunate, because I believe 
people's words in this House should stand for something, and agreements 
should count for something. I am afraid that if we cannot rely on each 
other's promises and agreements that are reached, I shudder to think 
what the environment is going to be like in this chamber on a whole 
host of other issues.
  But there are policy reasons to oppose this as well. Milk is the only 
product that faces price discrimination in this country based on where 
it is produced and what it is used for. There is no other product that 
faces this same type of discrimination, and under the current policy, 
that subsidized rate is based on distance from a beautiful city in the 
heart of my congressional district, Eau Claire, Wisconsin. It does not 
make any sense.
  For those Members, especially rural Members, who constantly complain 
about the disparity in reimbursement rates under the Medicare formula, 
how can they continue to defend a dairy program that effectively does 
the same thing, based on geography in this country. For those Members 
who are strong advocates of fair trade with other countries around the 
world, how can they continue to defend a dairy policy that effectively 
creates trade barriers within our own country. It is comparable to 
setting up a new Federal program that would subsidize aqua farmers for 
raising lobsters based on distance from Boston and Maine or farmers 
that are growing oranges and get a higher subsidized rate based on how 
far they are from Florida or even high-tech companies, giving them a 
competitive advantage because they are further away from the Silicon 
Valley.
  The point is that under our current economic system, there are going 
to be comparative advantages for producers, especially in agriculture, 
that the government should not interfere with.
  Mr. Chairman, if my colleagues cannot vote ``no'' on H.R. 1402, I am 
going to be offering an amendment today which will stop pitting region 
against region, farmer against farmer, family against family. It is a 
pooling program where the Class I differentials, what the farmers get 
for the milk they produce for drinking purposes, would be pooled and 
then distributed equally and fairly to all of the producers around the 
country, regardless of where they happen to be producing that milk. I 
think that is a fair, equitable and a common sense approach which would 
finally end this constant regional fighting and civil war over dairy 
policy that we have in this chamber all too often.
  Mr. COMBEST. Mr. Chairman, I yield 2 minutes to the gentleman from 
Minnesota (Mr. Gutknecht), who is very involved in agriculture policy.
  Mr. GUTKNECHT. Mr. Chairman, I thank the Speaker for allowing us to 
have time to debate this on an equal footing.
  Mr. Chairman, today we are engaged in a great debate on a Federal 
policy that defies rational economic policy and just plain common sense 
just as Anton Scalia a couple of years ago described the Federal milk 
marketing order system as ``byzantine.''
  I doubt if there are more than a handful of Members on the floor of 
this House, in fact, I think if we had a quiz, I suspect all would fail 
if we were asked to describe in detail exactly how the milk marketing 
order system works. But we do know that it defies any logical or 
economic sense.
  Currently, the gentleman from Wisconsin (Mr. Kind) and myself, as 
well as some other Members, have Russians who are visiting in our 
districts, and we are going to be hearing today about the milk 
marketing order system being almost a Soviet-style price scheme.
  But it is interesting that even in Russia today they are allowing 
markets to set the price of milk, and yet

[[Page H8479]]

we are engaged in this debate today as to whether or not we will allow 
some modest reforms that Secretary Glickman came up with to go into 
effect.

                              {time}  1100

  Mr. Chairman, we are going to hear some interesting things today. 
Among them, some people are claiming this is going to cost the milk 
industry $200 million. That is not what the USDA said. That is not what 
the consensus of economists who have looked at that have said. They say 
at maximum it is going to cost dairy farmers $3 million. That is the 
worst it is going to be.
  Let me read a quote from the USDA. If the modest reforms the 
Secretary wants to put in place October 1 were in effect this year, let 
me read this quote, ``Over all Federal orders, the average blend price 
would have averaged 15 to 20 cents per hundred weight higher if Federal 
Order reform had been in place over the last 12 months and nearly all 
farmers would have been better off.''
  Mr. Chairman, we are not talking about making bold changes that are 
going to drive dairy farmers in some parts of the country out of 
business, we are talking about modest reforms we are going to allow to 
go into place. The current policy is indefensible. We should defeat 
H.R. 1402. We should allow the reforms to go into effect.
  Mr. PETERSON of Minnesota. Mr. Chairman, I yield 2 minutes to the 
gentlewoman from Wisconsin (Ms. Baldwin), a new Member who has been a 
real leader on this issue.
  Ms. BALDWIN. Mr. Chairman, for nearly 6 decades Wisconsin dairy 
farmers have been victims of a discriminatory pricing system that 
devalues their product, destroys their economic well-being, and 
threatens their very way of life. There are literally thousands of 
dairy farmers that I could tell Members about, but I would like to tell 
Members a little bit about one family farm, Dwayne and Janet.
  Dwayne and Janet operate a family farm in northern Green County in my 
congressional district. Dwayne's family has operated a dairy farm for 
four generations, over 100 years. Dwayne, Janet, and their sons work 
hard to manage their herd of 45 cows. They work between 90 and 100 
hours per week. They do not take vacations.
  They are very worried about their future. Dwayne and Janet have 
watched farming decline in their township for the last 20 years. The 
number of dairy farmers in their township has declined from 55 to now 
29. All Dwayne and Janet want is a level playing field. Dwayne and 
Janet know that other dairy farmers in other parts of the Nation are 
getting more for their milk simply by virtue of how far they live from 
Eau Claire, Wisconsin.
  Dwayne and Janet still count themselves as lucky so far, but because 
they have seen their neighbors go out of business, they wonder if they 
are next.
  H.R. 1402 is bad for Dwayne and Janet and all other Wisconsin dairy 
farmers. The Department of Agriculture has offered a fair reform plan. 
It is not everything we want, but it is a step in the right direction 
toward a more fair system, a system which can offer some hope for 
family farms and to people like Dwayne and Janet.
  Mr. COMBEST. Mr. Chairman, I yield 2 minutes to the gentleman from 
Missouri (Mr. Blunt), the original author of H.R. 1402.
  Mr. BLUNT. Mr. Chairman, I thank the gentleman for yielding time to 
me.
  Mr. Chairman, I am glad we are dealing with this issue today. It 
clearly is an issue that the House has been divided on for some time, 
but it has been overwhelmingly divided in favor of H.R. 1402. Last 
year, 238 Members of the House and 62 Senators wrote the Secretary and 
asked the Secretary to stay with the Option 1A pricing structure. The 
Secretary ignored that and came back with a different structure.
  This year 228 Members have joined me as cosponsors of this 
legislation. This House is overwhelmingly supportive of commonsense 
dairy policy for American farming families.
  My good friend, the gentleman from Minnesota, just said, I believe, 
that the USDA estimates that there would be maybe a $3 million loss to 
American farming families. The estimates that I see are $200 million, 
and in fact, in my district alone, the Seventh District of Missouri, in 
southwest Missouri, most of our milk is marketed on the fluid market. 
The Secretary's rule would reflect a 49 cent per hundred weight 
decrease in fluid milk. This means that in the Seventh District, there 
would be a $4 million loss. If we have a $4 million in the Seventh 
District of Missouri, which is not any longer in the top 10 dairy-
producing districts of the country, even though for years and for 
generations it was, there is no way we are going to have a $3 million 
loss nationwide.
  Mr. Chairman, this is the difference in farming families continuing 
to farm in the majority of our States. Forty-five States are negatively 
affected. An average dairy farm in those 45 States, a small dairy farm 
of around 100 cows, would lose between $6,000 and $15,000 a year, 
depending on the other market factors.
  On dairy farm after dairy farm, the difference in $6,000 a year to 
$15,000 a year is the difference in whether they continue to maintain 
that farm, whether their family continues to be in this business, 
whether there is a fresh supply of milk produced reasonably close to 
consumers.
  There is a reason that every bottle of milk has a date on it. The 
reason is that this is a highly perishable product. It does not have 
tremendous shelf life. It needs to be produced close to the people that 
consume it. Option 1A continues that policy that continues that kind of 
production. I urge my colleagues to support this bill.
  Mr. PETERSON of Pennsylvania. Mr. Chairman, I yield 2 minutes to the 
gentleman from Pennsylvania (Mr. Holden), a member of the Committee on 
Agriculture and the Subcommittee on Livestock and Horticulture, and a 
leader on this issue.
  Mr. HOLDEN. Mr. Chairman, I rise today in support of H.R. 1402, 
legislation to mandate the implementation of Option 1A of the Federal 
Milk Marketing Order System.
  In Pennsylvania, dairy is the largest agricultural enterprise, 
representing a $1.5 billion industry. Pennsylvania is the fourth 
largest dairy State in the country. Dairy is important to Pennsylvania 
and the entire Northeast because of the particular contribution it 
makes in both dollars and jobs.
  Over the past 2 years, I have worked with a majority of my colleagues 
in support of replacing the Federal Milk Marketing Order System with 
what is known as Option 1A. That is why I strongly opposed the rule 
proposed by the Secretary, a modified Option 1B. If implemented, it 
penalizes dairy producers to the tune of at least $200 million per 
year. In Pennsylvania alone, that loss will be about $20 million a 
year, based on a reduction in Class 1 differentials.
  It discriminates in providing a fair and equitable price to dairy 
farmers in most regions of the country. In both the short and long run, 
it will hurt consumers by reducing supplies of locally-produced fluid 
milk and drive up prices at supermarkets.
  The bill before us today will implement a widely-supported Option 1A 
which will provide equitable pricing for fluid milk, ensure affordable 
dairy products to consumers, and prevent the further erosion of the 
economic well-being of many small communities. It will ensure that our 
Nation's dairy farmers receive a fair pricing system and consumers have 
an adequate supply of fresh dairy product.
  I encourage my colleagues to join the 229 cosponsors and vote in 
support of H.R. 1402.
  Mr. COMBEST. Mr. Chairman, I yield 1 minute to the gentleman from 
California (Mr. Calvert), a member of the committee.
  Mr. CALVERT. When I was in the restaurant business, Mr. Chairman, I 
had to work hard to get the lowest prices, the best workers, and the 
most bang for my buck. If I was not competitive I risked going out of 
business, plain and simple. This is the American way. H.R. 1402 would 
revert us back to a dairy market system that is quite simply anti-
American, anti-business, and anti-consumer.
  I have some of the most efficient and successful dairy farmers in 
this country, probably the largest dairy district in the United States. 
They watch their expenses, they make a great product, and if given the 
chance, they would be highly successful in an unregulated market.
  We are just talking about a modest change here today, Mr. Chairman. 
We are just trying to change a system that

[[Page H8480]]

prices milk based upon the distance from Eau Claire, Wisconsin. What 
business in America would do that? I would encourage all Members to 
take a close look at this.
  With current technology and transportation, it has changed this 
country and we no longer need to run a system that way. Oppose H.R. 
1402 and let us get back to the American way.
  Mr. PETERSON of Minnesota. Mr. Chairman, I yield 3 minutes to the 
gentleman from Vermont (Mr. Sanders), who has also been a leader in 
dairy policy.
  Mr. SANDERS. Mr. Chairman, I thank my friend, the gentleman from 
Minnesota, for yielding time to me.
  Mr. Chairman, I rise in strong support of our Nation's dairy farmers, 
in strong support of H.R. 1402, and in strong opposition to the poison 
pill amendments that have been offered.
  This legislation is critical for the survival of dairy farms in the 
State of Vermont and all over this country. It would implement the 
Class 1 milk price structure known as Option 1A as part of the final 
rule to consolidate Federal Milk Marketing orders. It would protect 
family farmers all over America who in recent years have seen a 
significant drop in the price that they get for their milk.
  In fact, today in terms of inflation-accounted for prices, farmers 
today are receiving 35 percent less in real dollars than they received 
15 years ago, which explains why all over America we are seeing family 
farms going out of business, we are not seeing young people getting 
into farming, and we are seeing the industry becoming dominated by 
larger and larger agribusiness corporations, rather than small family-
owned farms.
  Option 1A is supported by 229 Members of the House. The reason for 
that is that the economics is very clear that Option 1A will help 45 
out of the 50 States.
  Let me suggest to Members the options that we have. If present trends 
continue, in my view, what dairy agriculture will look like 10 years 
from today is that a handful of agribusiness corporations will control 
the production and distribution of dairy products. The alternative is 
to maintain, as best we can, family-owned farms all over this country 
who protect our environment, who protect our rural economies, who 
provide fresh product to the people in the various communities.
  Does America really want a handful of corporations to determine the 
price of dairy product? Does America really want to lose family farms 
all over the country and see our green land converted into parking 
lots, or are we going to fight as hard as we can to protect family 
farmers, who provide us with fresh, high quality product?
  I would urge Members of the House, the 229 who are supporting this 
excellent legislation, to stand firm against the amendments that are 
being offered which would ultimately undermine the goals of this 
legislation. Let us stand with the family farmers who work 7 days a 
week, 12 hours a day, producing the quality of food that we desperately 
want and need to maintain.
  Mr. COMBEST. Mr. Chairman, I yield 1\1/2\ minutes to the gentleman 
from Michigan (Mr. Smith), a member of the committee.
  (Mr. SMITH of Michigan asked and was given permission to revise and 
extend his remarks.)
  Mr. SMITH of Michigan. Mr. Chairman, I am a dairy farmer from 
Michigan. I am supportive of H.R. 1402. It implements one of USDA's 
proposals known as Option 1A.
  Briefly, let me try to explain to our nondairy Members roughly what 
we are talking about. We started pricing milk back in 1937 because 
there was unfair bargaining between dairy farmers and the processors of 
milk. The processors of milk had the bargaining advantage and could rip 
off those dairy farmers simply because milk is perishable and is lost 
if not purchased. They could do anything they wanted to with you 
because your milk will spoil if not picked up, so the dairy processor 
had monopoly power over the individual dairy farmer. So government 
became involved in pricing milk.
  It is interesting that today there are still about 200 dairy farmers 
producers for every one processor as there was in 1937, so some pricing 
structure needs to stay in place if we are to continue producing an 
adequate supply of milk in this country. These two changes USDA came up 
were their two top proposals on how to involve the government; namely, 
Option 1A and Option 1B. Option 1A has less change from the current 
system; Option 1B has a more dramatic change.
  But I would suggest to Members, there are already very dramatic 
changes that include going from 31 milk marketing orders to 11 orders 
in this country, Also both proposals dramatically change the way we 
price milk and change the way we classify milk. It is very important, I 
think, in making this transition that we go with the less drastic 
change that is Option 1A.
  Members ask why roughly 87 percent of our milk is sold through 
cooperatives. It is because dairy farmers are over the barrel and do 
not have the ability to bargain effectively as individuals. They do 
have cooperative bargaining rights that will be helped with the passage 
of this bill. I think it is very important that we pass this bill and 
go with Option 1A.
  Mr. PETERSON of Minnesota. Mr. Chairman, I yield 2 minutes to the 
gentleman from Mississippi (Mr. Shows).

                              {time}  1115

  Mr. SHOWS. Mr. Chairman, our dairy farmers are not numbers and 
statistics to be shuffled around like a spreadsheet without care and 
concern. Our dairy farmers are part of the American farm family. They 
are men and women who work hard every day. Farming is not as much a 
career as it is a way of life. It is a way of life that touches every 
life in America.
  In my district, in the 4th District of Mississippi, we have over 300 
dairy farmers, more than 24,000 dairy cows, and a total value of 
agricultural crops and livestock products of over half a billion 
dollars. Dairy farming matters to the communities and towns and lives 
of Mississippians.
  All Americans, whether in the big cities, main streets of our towns, 
or roads of the countryside are touched by the hard work and care given 
to supplying fresh and wholesome milk to our tables.
  Milk does not just appear on the refrigerator shelves of our markets. 
It gets there through hard work.
  The American Government is wrong in attempting to enact policy that 
is not fair and equitable to all our dairy farmers. It is wrong to 
suggest some places matter more than others. All our farmers work hard, 
pay their dues, and give back to their communities and supply us with 
the highest quality, safest, best, and most economical food supply on 
the planet.
  Fairness across the board must prevail. Let us pass H.R. 1402 today 
and move forward as one American farm family serving one America.
  I would like to remember the 1-A and 1-B. 1-B stands for bad. Let us 
remember 1-A.
  Mr. COMBEST. Mr. Chairman, I yield 2 minutes to the gentleman from 
Minnesota (Mr. Ramstad).
  Mr. RAMSTAD. Mr. Chairman, I thank the gentleman from Texas for 
yielding me this time.
  Mr. Chairman, I rise in common sense tripartisan opposition to the 
bill before us today.
  Mr. Chairman, we need to cut to the chase and listen to Minnesota's 
governor, Jesse Ventura, who body slammed this bill during recent 
testimony before the House Committee on Agriculture.
  Governor Ventura, in his common sense, no-nonsense direct way put it 
best when he said, ``What we need, without question, is to end the 
nonsense that has the price of milk tied to how far the cow is from Eau 
Claire, Wisconsin. Now that there are refrigerated trucks'' in America, 
``it makes sense to abandon 50-year-old thinking and find a new way to 
look at the `millennium' dairy industry, one that reflects today's 
economic realities and is at least fair.''
  Governor Ventura is absolutely right, and we all know it. If H.R. 
1402 passes, it would derail long-overdue reforms to our Nation's 
Depression-era milk pricing regulations. As Governor Ventura further 
explained, and as we all know, Secretary Glickman has come up with a 
plan to correct some of the 50-year-old problems, but H.R. 1402 would 
torpedo that plan.
  The current system, as has been said today, is based on outdated 
realities of

[[Page H8481]]

milk production, consumption, and transportation; and it has caused 
drastic distortions in milk production in this country.
  I urge my colleagues to be fair, use Norwegian horse sense on this 
dairy policy, use Jesse Ventura common sense. Vote for a level playing 
field across America. Vote no on H.R. 1402.
  Mr. PETERSON of Minnesota. Mr. Chairman, I yield 3 minutes to the 
gentleman from California (Mr. Dooley), a member of the Subcommittee on 
Livestock and Horticulture, and a real leader on this issue.
  Mr. DOOLEY of California. Mr. Chairman, I rise in strong opposition 
to H.R. 1402, and I do so because it is time for us to move in a 
direction that takes us away from a program that was developed during 
the depths of the Great Depression.
  As I have often said, it was Secretary of Agriculture Henry Wallace 
that introduced this program, many our farm programs, as a temporary 
solution to deal with an emergency. We no longer have an emergency in 
the dairy industry.
  We have some of the highest milk prices that we have seen in history, 
yet, we are still trying to promulgate and continue a policy that is 
not going to allow this industry to become increasingly competitive so 
we can provide consumers with a lower cost product and allow U.S. dairy 
farmers to become more competitive internationally.
  When we get right down to it, the issues are very simple. When we 
look at the cost of production of milk in the United States, there is a 
great disparity. If we look in the southeast of this country, it costs 
about $17.50 a hundred-weight to produce milk. We go to the northeast, 
it is in the $14, $14.50 a hundred-weight. We go to Wisconsin and 
Minnesota, they can produce milk at $12.25 a hundred-weight. We go to 
the Pacific Coast, they can produce it out there for a little over $11 
a hundred-weight.
  We have in the United States, family farmers, dairy farmers that are 
able to produce milk at a third of the cost as other parts of the 
country. Yet, we are continuing a policy that is not going to allow 
those dairy farmers in those areas where they have a relative advantage 
to realize that advantage and opportunity.
  There is no other sector of our economy, no other agriculture 
commodity that we are growing that we have a farm policy that dictates 
that we are going to require consumers and processors to pay more for 
milk that does not have any direct correlation to market prices. That 
is what we are doing here.
  If we do not oppose H.R. 1402, we are going to ensure a policy where 
the Government is dictating what consumers and processors are going to 
have to pay for milk. When we are moving into a world which we 
understand and we have to become increasingly market oriented, we ought 
to allow the marketplace to dictate where milk is going to be produced.
  We should not have a federal policy that is going to ensure that we 
are going to have cows in the southeast where it is a very high cost of 
production when we know that there are family farmers in other regions 
of the country that can provide the same product at a lower price that 
can deliver that product to consumers through transportation of other 
means.
  Government should not be prejudicing whether or not a producer, a 
dairy farmer, is going to be supplying milk to a particular market 
because of the fact of how far they live from Eau Claire, Wisconsin.
  This policy is out of date; it is time to move on. It is time to 
allow the dairy farmers of this country which had the greatest 
opportunity and ability to produce milk at the lowest prices to realize 
that advantage, to realize that opportunity, and allow the marketplace 
to work.
  Mr. COMBEST. Mr. Chairman, I yield 1\1/2\ minutes to the gentleman 
from Pennsylvania (Mr. Sherwood).
  Mr. SHERWOOD. Mr. Chairman, I rise in strong support of H.R. 1402 
which would direct the Secretary of Agriculture to implement the Class 
I milk marketing structure known as Option 1-A that will put some sense 
back in the system that they are trying to change that has worked for 
so long.
  If my colleagues look at my diagram, they will see what bleeds red, 
almost the whole part of the country, except some parts of California 
and the upper Midwest. Although I have great respect for my colleagues 
on the other side of the debate, in this case, they are dead wrong.
  This map was made by the Department of Agriculture. The red part of 
the map, which is the vast majority of the country, shows the farmers 
that get hurt. If we do not pass H.R. 1402, we will have all the milk 
in this country produced in a couple areas.
  The next thing they will be asking us to do is reconstitute it so 
they can ship it. Mr. Chairman, do my colleagues know the difference 
between fresh orange juice and concentrate? That is where we are going 
in the milk business if we do not pass H.R. 1402.
  We have had in my area one hauler that went from 140 stops to 40 
stops. That is what is happening to the family farm. Option 1-A of H.R. 
1402 will help us delay that.
  I had a lady come into a meeting that I was at a while ago and she 
said, I came and I had to go home. Her son sent me a little letter. His 
mom had told him I could vote on this. He said, ``Mr. Voterman, my mom 
says you can help us. Please help my Grandpa Jack's cows.''
  The CHAIRMAN. The Chair would advise Members that the gentleman from 
Texas (Mr. Combest) has 14 minutes remaining. The gentleman from 
Minnesota (Mr. Peterson) has 6\1/2\ minutes remaining.
  Mr. PETERSON of Minnesota. Mr. Chairman, I yield 3 minutes to the 
gentleman from Maine (Mr. Baldacci), a member of the Committee on 
Agriculture.
  Mr. BALDACCI. Mr. Chairman, there are a lot of formulas, there is a 
lot of gobbledegook, and a lot of things that maybe a lot of people 
have a hard time understanding. But the basic fact is that this 
legislation would preserve the present system. Under the alternative 
that the Department has promulgated and that the detractors of this 
legislation are presenting, it would take $200 million out of the 
pockets of dairy farmers. It would take $200 million out of those dairy 
farmers pockets.
  It would be there to help people who are further up the chain other 
than the dairy farmer in the family farms that are spread throughout 
this country.
  So one thing is very clear. If my colleagues support the current 
level of funding that is going on and the arrangements that are in 
place right now, then they will support this legislation. If they want 
to support taking $200 million away from those dairy farmers and 
further jeopardizing their livelihoods, because we all know whatever we 
want to call it, people are working off the farm to stay on the farm. 
They are trying to raise their kids in a quality of life situation that 
not too many people have an opportunity for.
  In our State of Maine, $95 million a year is coming from dairy 
revenues. We are down to 600 small farms now. We used to have twice 
that number. Most people are telling me, John, the only thing that is 
constant in the business is how much we get for our milk. Everything 
else is going up by telegraph. Everything that we get is staying flat-
line, and we are having a hard time struggling to stay there.
  That is where most of the dairy farmers are in our State of Maine and 
throughout the northeast. Nobody is getting rich at the present formula 
that is put in place.
  But one thing is very clear. If my colleagues want to take $200 
million, which is what the Department has estimated would come from the 
implementation of their policies, would reduce farm income by $200 
million, then vote against this legislation.
  If my colleagues support the small dairy farmers throughout this 
country and they support family farms, then they are going to vote for 
this legislation which has over 228 Members that are supporting this in 
a bipartisan fashion to support the implementation of the 1-A program 
that has been supported by over three quarters to almost 80 percent of 
the dairy farmers throughout this country. That has been the support 
that has really registered here in Washington and something that we 
need to reinforce.
  So I am proud to be one of the cosponsors of this legislation, and I 
encourage my colleagues to support this.

[[Page H8482]]

  Mr. COMBEST. Mr. Chairman, I yield 3 minutes to the gentleman from 
Wisconsin (Mr. Green).
  Mr. GREEN of Wisconsin. Mr. Chairman, I thank the gentleman from 
Texas (Chairman Combest) for so graciously providing this opportunity 
for balanced debate.
  I would ask those watching today and listening to remember three 
points as this debate takes place: number one, we are going to hear a 
lot today about how family farms in general and dairy farmers in 
particular are hurting. No one knows that better than I. In the 
district that I represent, we have seen a massive decline in dairy 
farming. By this time tomorrow, Wisconsin will have lost five dairy 
farms. We have lost more dairy farms in the last 10 years than nearly 
every other State ever had.
  I understand that our farmers are hurting. But as we hear about how 
dairy farmers are hurting, do not forget that they are hurting under 
the current system, the system which the supporters of H.R. 1402 seek 
to reimpose. It will not help them one iota.
  Point number two to remember, we are going to hear a lot about 
numbers and about losses. The supporters of H.R. 1402 are going to have 
their charts. Remember this: the USDA has debunked every one of those 
numbers. The USDA just recently came out with a report which shows what 
would have happened if the Secretary's proposed reforms had been in 
effect over the last year. The doomsday scenarios that we are hearing 
about are false. They are badly misleading.
  Point number three, we are going to hear a lot about the coalition of 
Members who support this bill, and it is broad, and it is bipartisan. 
It is 229 Members. Would this be the first time that people inside the 
Beltway have been wrong? I ask my colleagues, just because they have 
229 Members does not make them right.
  I do not put my faith inside the Beltway. I put my faith in a 
different coalition, a broad coalition, a coalition that spans every 
part of the spectrum. Those standing against H.R. 1402 range from 
Americans for Tax Reform to the AFL-CIO, Citizens Against Government 
Waste to the Consumer Federation of America, the Teamsters, the Caucus 
of Black State Legislators, the Grocers Association, the Food Marketing 
Institute.
  We have had newspapers from every part of the country opining against 
raising the price of milk which is what H.R. 1402 would do.

                              {time}  1130

  We have heard from the Washington Post, The New York Times, the 
Chicago Tribune, paper after paper, group after group outside the 
beltway is saying do not do this. Do not raise the price of milk that 
consumers have to pay. Do not push farmers out the door.
  I urge my colleagues to stand today not within the beltway but with 
groups outside the beltway opposed to 1402.
  Mr. PETERSON of Minnesota. Mr. Chairman, I yield 3 minutes to the 
gentleman from North Carolina (Mr. Etheridge), a member of the 
committee.
  (Mr. ETHERIDGE asked and was given permission to revise and extend 
his remarks.)
  Mr. ETHERIDGE. Mr. Chairman, I thank the ranking member for yielding 
me this time.
  This morning I am proud to join my colleagues in this final push to 
pass legislation that will allow dairy farmers to survive and to ensure 
that consumers have access to a fresh milk supply, a fresh supply of 
milk at the local level.
  Enough is enough. It is time that Congress do what a majority of the 
Members have demonstrated they want done, and that is pass Option 1-A. 
Every step of the way we have proven that we have the support to do the 
right thing for the dairy farmers of this country and the consumers of 
America by passing Option 1-A.
  Folks, we are at a crossroads in America today for agriculture. 
Consolidation is killing the American farmer, and enough is enough. 
Consumers are going to feel the pain when a few corporations control 
agricultural production in this country. Too many people today think 
that food comes from the grocery store. They fail to realize that 
whatever the product may be, it is produced by a farmer somewhere in 
this country.
  I know that I speak for many Members of this House when I say we are 
committed to ensuring that these hardworking Americans and their 
children have an opportunity to succeed in agriculture in the 21st 
century. But, first, we must bring stability to the national dairy 
policy.
  Option 1-A provides a modest reform for the national system of 
pricing fluid milk that is fair both to the producer and to the 
consumers throughout this country. The Department's proposal, on the 
other hand, would, in my opinion, substantially lower prices for 
farmers that they get for their fluid milk in about 41 States in this 
country, forcing many of the dairy farmers out of business. No matter 
what we hear, that is true. And when farmers go out of business, 
competition declines and consumers pay. That is a fact, no matter how 
we want to change it.
  Option 1-A is fair both to consumers and to the farmers. And I am 
tired of folks who keep telling me to let the free market system work. 
It is not working for the farmer. They are going broke. We have just 
heard my colleague from Wisconsin saying they are going out of 
business, and that is a State that has a lot of dairies. In my State we 
have so few left we can hardly find them. We have to do something to 
stop it, and this morning we have an opportunity to do something.
  We are probably going to pass a $10 billion relief package in some 
form for our farmers before this year is out, I trust.
  But folks, dairy compacts and option 1-A is the disaster relief 
package my dairy farmers need to survive, and that's a relief package 
that won't cost the taxpayers one dime.
  I want to commend the gentleman from Missouri and the Chairman and 
the Ranking Member of the Agriculture Committee for their hard work in 
bringing this bill to the floor, and I urge my colleagues to support 
this important bill for our nation's dairy farmers.
  Mr. COMBEST. Mr. Chairman, I yield 1 minute to the gentleman from 
Alabama (Mr. Riley).
  Mr. RILEY. Mr. Chairman, we have heard more rhetoric today about 
everything that is going on here. I have heard one of my colleagues get 
up this morning and say that if we all took a quiz on this that we 
would all fail. This is probably one of the more simple things that I 
have had to deal with since I have been up here.
  We have a program in place today that allows most of the producers of 
milk in this country to receive essentially the same price, but there 
is a wide variance in the cost of production. So what we are trying to 
do today is overturn a program that says if it costs, as my friend from 
California said a moment ago, $17 to produce milk in the Southeast and 
$12 to produce it in the upper Midwest, what we are trying to do is 
overturn a program that says that the place that has the cheapest cost 
of production, we are going to give a dollar per hundred-weight raise; 
and where it costs more to produce it, we are going to ask for a 
decline in the price. It makes absolutely no sense to do what we are 
doing.
  Mr. COMBEST. Mr. Chairman, I yield 3 minutes to the gentleman from 
Wisconsin (Mr. Ryan).
  Mr. RYAN of Wisconsin. Mr. Chairman, a lot of folks have been calling 
our office, other Members that do not represent dairy States, asking 
what is going on here. Well, I would like to give Members who do not 
represent dairy States a little insight as to what this whole pricing 
formula is all about. If Members think our Tax Code is complicated, 
wait until they look at dairy.
  Out of the Code of Federal Regulations the method for determining the 
basic formula price for milk and the blend price is as follows:
  The basic formula price for milk equals last month's average price 
paid for manufacturing grade milk in Minnesota and Wisconsin plus 
current grade AA butter price times 4.27 plus current nondry milk price 
times 8.07 minus current dry-buttermilk price times 0.42 plus current 
cheddar cheese price times 9.87 plus current grade A butter price times 
0.238 minus last month's grade A butter price times 4.27 plus last 
month's nondry milk price times 8.07 plus last month's dry-buttermilk 
price times 0.42 minus last month's cheddar cheese price times 9.87 
plus last month's grade A butter price times 0.238 plus present butter 
fat minus 3.5 times current month's butter price times 1.38 minus last 
month's price of manufacturing grade A milk in Minnesota-Wisconsin 
times 0.028.

[[Page H8483]]

  That is the basic formula price. Now let us go to the blend price, 
which gets us closer to what the farmer actually gets.
  The blend price is the basic formula price plus .12 times percent of 
milk used for cheese and powder and butter plus basic formula price 
plus .30 times percent of milk used for ice cream and yogurt plus the 
basic formula price plus 1.04 plus .15 times the distance from Eau 
Claire, Wisconsin, divided by 100 times the percent of milk used for 
fluid milk.
  My colleagues, this is the pricing formula set in law 62 years ago; 
and this is what we are living under now. The USDA is proposing very 
modest reforms toward a market-based system so that farmers can farm 
based on their own merit, not based on where the heck they live in 
proximity to Eau Claire, Wisconsin.
  This is the formula. This is how they determine how a farmer 
basically gets the price for milk. This is more complicated than our 
U.S. Tax Code, yet the proponents of H.R. 1402 want to keep this price 
system in place. That is what this debate is about. When we listen to 
these numbers about $200 million being lost, those are bogus numbers. 
The USDA, the Food and Agricultural Policy Research Institute concluded 
on consensus numbers that, at worst, farmers are going to lose $2.8 
million a year but, on average, 60 percent of America's dairy farmers 
are going to do better under the USDA's plan.
  So this $200 million figure, Members should not believe the hype. At 
worst they are going to lose $2.8 million. The decimal point needs to 
be moved a couple slots to the left.
  Mr. COMBEST. Mr. Chairman, I yield 1 minute to the gentleman from 
Virginia (Mr. Goodlatte).
  (Mr. GOODLATTE asked and was given permission to revise and extend 
his remarks.)
  Mr. GOODLATTE. Mr. Chairman, I thank the chairman for yielding me 
this time, and I rise in strong support of H.R. 1402. It is a Federal 
response to a national problem, and it reflects what Congress had 
intended when it required milk market order reform.
  In 1996 through the Freedom to Farm Bill, Congress voted to reform 
the milk marketing order program. Congress directed the Secretary to 
reduce the number of marketing orders and phase out the Federal product 
purchase without compromising the basic pricing structure on which 
dairy farmers depend.
  Again in 1998, a majority of Members from the House and Senate signed 
letters to Secretary Glickman appealing to him to implement a Federal 
milk pricing policy that did not significantly lower milk producer 
prices. Unfortunately, the administration ignored the will of Congress 
and the desire of the majority of dairy producers and announced the 
final dairy plan that drastically phases down the Federal pricing 
program, costing producers nationwide millions in lost farm revenue.
  Dairy producers are expected to lose $200 million or more annually 
when the administration's plan, the modified Option 1-B Class I price 
differential is enacted. I urge my colleagues to support the 1-A option 
and to support this bill.
  Today, Congress has the opportunity to show support for agriculture 
and an interest in improving farm income during a time of financial 
turmoil for farmers by voting for H.R. 1402.
  Simply put, Option 1-A reforms the milk marketing order system, 
reduces volatility, and continues to assure there will be enough fresh 
milk in all markets of our nation. It does so by keeping in place 
transportation differentials, a system that has worked for many years, 
guaranteeing us an adequate supply of fresh, wholesome milk. As the 
government withdraws from the purchase of dairy products to balance the 
market, we need to leave in place those mechanisms that assure us a 
continued supply.
  Some may argue that the producers themselves voted for the 
Administration's plan through the producer referendum in August and we 
should honor their wishes. In no way should the producers affirmative 
vote be considered as support for the lower Federal Order Class prices 
proposed by Secretary Glickman. It was a vote under duress. The 
Secretary gave the producers no choice. It was either his way or no way 
at all. Producers voted for his plan in efforts to keep the Federal 
Order system intact as producers await the enactment of H.R. 1402.
  Farmers from across the country are counting on our support. More 
than 225 members of the House have promised their dairy farmers their 
support in Congress. Don't be fooled by misleading tactics. This is 
simply a bill to keep our farmers in business. I urge every member to 
support H.R. 1402.
  Mr. COMBEST. Mr. Chairman, I yield 1 minute to the gentleman from New 
York (Mr. Sweeney).
  (Mr. SWEENEY asked and was given permission to revise and extend his 
remarks.)
  Mr. SWEENEY. Mr. Chairman, I thank the gentleman for yielding me this 
time, and in this short time I have, Mr. Chairman, we have heard a lot 
of comment on what support there is and what expert evidence there is 
and support for Option 1-A.
  I just want to point out four simple facts, and they are this: That 
since the passage of the 1996 farm bill, the Secretary of Agriculture 
has ignored all of the experts, and has been on a biased march to 
debunk the dairy marketing process in the United States.
  Consider that USDA took public comments on many proposals it put 
forth; and, in the final analysis, comments filed by the dairy industry 
and dairy experts ran better than 8 to 1 in favor of Option 1-A. The 
Department empowered a price structure committee composed of many 
industry experts to make recommendations to the Secretary. This 
committee recommended Option 1-A. They were ignored.
  The Department's own internal dairy division experts recommended 
Option 1-A. They were overruled. Option 1-B was then advanced. Three 
hundred Members of the House and Senate sent a letter, concerned about 
the path USDA was pursuing, wrote to the Secretary and told him that 
they supported Option 1-A. They were ignored as well.
  Experts in the industry and out of the industry know that Option 1-A 
is the fair and equitable way.
  Mr. COMBEST. Mr. Chairman, I yield 1 minute to the gentleman from New 
York (Mr. Boehlert).
  (Mr. BOEHLERT asked and was given permission to revise and extend his 
remarks.)
  Mr. BOEHLERT. Mr. Chairman, I have been here 17 years. If I am here 
1700 years, I will not be able to explain the complexities of dairy 
pricing. But I can tell my colleagues this, the supporters of 1402 are 
not willing to stand idly by while others would relegate the family 
farm to the status of forgotten Americans.
  Let me tell my colleagues about the consumers, because we are all 
vitally interested in the consumers. If we do nothing, if we allow this 
present trend to continue, pretty soon we will have the production of 
milk concentrated in the hands of just a very few. And when that 
happens, just watch what happens to the price.
  We have an obligation in this House, in this Congress, to provide 
some assistance to the family dairy farms, and Option 1-B would rob 
them of $200 million of income. That is totally unacceptable.
  Let me give my colleagues another twist on this. Why is the 
environmental community so sensitive to the plight of the family dairy 
farms? It is not just because they are an endangered species, which 
they are, but it is because if we witness the demise of the family 
dairy farms, we will have more of that scourge of America urban sprawl, 
and that is not healthy for anybody.
  This bill is about protecting our struggling family farmers and 
ensuring that they get a fair price for the milk they produce for the 
benefit of us all.
  USDA's modified Option 1-B would reduce what return dairy farmers see 
for their investment at a time when many dairy farmers are already 
struggling. The dairy farmers' share of consumer dollars spent for milk 
has been decreasing since 1980. In fact, the percent of the consumer 
milk dollar going to farmers dropped approximately 20% from 1980 to 
1997.
  Dairy farmers nationwide stand to lose $200 million a year if the 
Agriculture Department's Modified Option 1-B pricing plan is for fluid 
milk is adopted. While farmers would see a reduction in income under 
the modified Option 1-B plan, this change would have little effect on 
the price consumers pay for milk because processors and grocery stores 
are unlikely to reduce prices.
  The number of dairy farms and farmers has been declining over the 
last several years. New York has lost approximately 6,000 dairy

[[Page H8484]]

farms in the last ten years. Any reduction in farmers' incomes will 
mean that more producers leave the farm.
  Farmers are vulnerable to volatile market conditions because milk is 
perishable; farmers can't just tell the cows to stop producing milk in 
order to wait out low prices. Option 1-A gives dairy producers more 
stability and helps to ensure that they receive a fair price for milk.
  Milk prices under the modified Option 1-B will be insufficient to 
cover the cost of producing milk on many family-sized farms, forcing 
many of these farmers out of business and leaving few producers with 
control of the dairy market. This will result in greater concentration 
of the dairy industry in the hands of a few and higher prices for the 
consumer.
  I urge my colleagues to vote for Option 1-A and H.R. 1402.
  Mr. PETERSON of Minnesota. Mr. Chairman, I yield 30 seconds to the 
gentleman from Minnesota (Mr. Oberstar), the dean of the Minnesota 
delegation and a leader on dairy issues.
  (Mr. OBERSTAR asked and was given permission to revise and extend his 
remarks.)
  Mr. OBERSTAR. Mr. Chairman, I thank the gentleman for yielding me 
this time.
  The existing policy is doing exactly what the preceding speaker said, 
driving the family farm out of existence. We have lost half of the 
dairy farms of East Central Minnesota in the last 10 years because of 
policies that are in place, and that would be changed by the 
Secretary's order.
  It is time to end the milk cartels, the regional dairy compacts. It 
is time to free up the most productive dairy farmers in America, those 
in the Minnesota-Wisconsin milksheds. It is time to reduce the milk 
marketing orders from 31 to 11, as USDA proposes. It is time to vote 
for fair trade at home in the dairy sector and preserve the family 
dairy farm.
  Mr. COMBEST. Mr. Chairman, I yield 2 minutes to the gentleman from 
New York (Mr. McHugh).
  Mr. McHUGH. Mr. Chairman, I thank the gentleman for yielding me this 
time.
  Perhaps some very troubling but, I think undeniable, important facts. 
As my colleague, the gentleman from New York (Mr. Sweeney) suggested, 
the Department had hearings but the Department did not listen. Of the 
4,217 comments placed into the hearing record, 3,579, nearly 85 percent 
of them, supported 1-A. Again, as my colleague so correctly noted, the 
industry, the Ag Department's own internal price structure committee 
accepted and recommended 1-A.

                              {time}  1145

  As well, the Congress has voted on this time and time again. During 
the 1996 farm bill, we considered proposals that would have 
dramatically altered the price structure and the market order system, 
but we rejected each and every one of those.
  To my friends that say that Congress is now reneging on the deal, let 
me read the report language from the 1996 farm bill: ``The minimum 
price for class I fluid milk shall be the same or substantially similar 
to those set forth in the 1985 farm bill.'' This 1402 is totally 
consistent with congressional intent.
  Let me just make a couple of other points. I am pleased to let 
Governor Ventura know that, under 1402, or 1-B, neither uses Eau 
Claire, Wisconsin, as the sole basing point for Class I differentials. 
So he can go to bed happy tonight.
  Also, when we talk about market orientation, both 1-B, the 
Department's plan, and our bill, 1402, use the market price of cheese 
as the driving force for class I. So that my opponents here and other 
opponents can continue not to worry about that, as well.
  Also, the Ag Department's analysis, the Secretary's analysis, was 
totally debunked by every reputable economist and organization that 
analyzes the dairy industry. They used a totally false premise with 
respect to class III prices when they came up with the calculation of 
$2.2 million. I wish it were true, quite honestly. Otherwise, we would 
not have to be here.
  1402 is consistent with congressional intent. It is good for dairy 
farmers across this country. The House needs to adopt the bill today.
  Mr. PETERSON of Minnesota. Mr. Chairman, I yield myself the balance 
of my time.
  Mr. Chairman, I just would say to my colleagues one more time, we 
have got a pretty good debate here today, but for those of my 
colleagues that have supported free trade, that believe in the free 
market, I just say to them, how can they defend a system where we are 
benefiting one farmer in America over another farmer? We are setting up 
barriers in this country where we are saying we should take them down 
in the world. So I would say, how can they defend a program that does 
that?
  The second thing I would say, we have had a lot of talk today about 
how we are losing family farmers. And that is true. We are leaving them 
in every area of this country. But we need to understand that we have 
been losing those farmers under the existing program which House File 
1402 continues. So how in the world are we going to save family farmers 
if we are going to keep the same program that has caused us to lose 
them up to this point?
  Mr. COMBEST. Mr. Chairman, I yield the balance of our time to the 
gentleman from Minnesota (Mr. Gutknecht).
  Mr. GUTKNECHT. Mr. Chairman, I thank the chair of the Committee on 
Agriculture for yielding me the time.
  Mr. Chairman, earlier the gentleman from Pennsylvania (Mr. Sherwood) 
had a chart and he said, if this thing is defeated, these areas are 
going to be bleeding red. But if we think about it, what it really says 
is that for 62 years they have had an advantage and our farmers in the 
upper Midwest have been bleeding red.
  The gentleman from Alabama (Mr. Riley) said that in some areas it 
costs more to produce milk and so we have to have big differentials. 
But in some areas of the country it costs more to grow wheat. In some 
areas it costs more to grow corn. And if it costs too much, they do not 
produce corn in those areas. But in no other area does the Federal 
Government step in and artificially try to set the prices.
  Mr. Chairman, I want to thank the gentleman from Wisconsin (Mr. Ryan) 
because I think what he read just made my point. In fact, I rest my 
case. Can anyone in this room, can anyone in this body, can anyone in 
this country say that they honestly understand the way milk marketing 
orders are set? Can anyone honestly say that it makes any sense, either 
economic or policy or politically, can anyone honestly defend this 
price-fixing cartel?
  Shortly after the Soviet flag came down for the last time over the 
Kremlin, an editorial was written here in the United States and the 
headline was ``Markets are more powerful than armies.'' What a 
beautiful line.
  Let us take a small step away from this Soviet-style pricing scheme. 
Let us listen to common sense. Let us listen to our farmers, not to 
special interests. Let us defeat H.R. 1402.
  Mr. GILMAN. Mr. Chairman, I commend Mr. Blunt for bringing this 
legislation to the floor today, and giving me the opportunity to speak 
on behalf of our Nation's dairy farmers, in support of H.R. 1402.
  In my home State of New York, agriculture is the largest industry 
with an annual farm value of products over $3 billion. The State's 
dairy industry, over 8,000 farmers, accounts for approximately 60 
percent of the farm receipts.
  With abundant rainfall, productive soil, and proximity to the 
Nation's largest markets, the outlook for the future of New York's 
dairy farmers is one of great potential.
  However, in a recent meeting with Brian Ford, a dairy farmer from 
Orange County, NY, it was once again made clear to me, that our 
Nation's farmers continue to struggle; a struggle made even harder by 
the inability of the Department of Agriculture to respond to their 
needs, by moving forward with a plan that reduces farm income in 45 
States.
  Although our Nation's dairy farmers overwhelmingly support reform, 
the present class 1 pricing formula will force them to lose at least 
$200 million annually.
  Accordingly, H.R. 1402 will require the Secretary of Agriculture to 
implement the class 1 milk price structure known as option 1-A, as part 
of the implementation of the final rule to consolidate Federal milk 
marketing orders.
  A strong agricultural industry is not only beneficial to the farm and 
food industry, but to the economy of every State, hundreds of local 
communities, and our consumers. America's small family farms rely on us 
to provide them with a strong foundation. Since 1993, the United States 
has lost 25 percent of its domestic dairy operations; a trend that must 
be stopped.
  Accordingly, I urge my colleagues to support H.R. 1402.
  Mr. HAYES. Mr. Chairman, over the past few months, I have traveled 
around my district

[[Page H8485]]

and listened to farmers and ranchers tell me about the state of the 
farm economy--low commodity prices, drought, hurricanes. I also heard 
from my dairy farmers telling me of their dwindling dairy industry in 
North Carolina. A business which once thrived with as many as 400,000 
milk cows, is now down to 75,000 cows--losing 5,000 in the last 3 years 
alone.
  I tell you these things about our dairy industry in North Carolina to 
give you some insight into our current situation. I want you to know, 
however, that while it is becoming increasingly difficult for our dairy 
farmers, there are still 478 farms employing hundreds of people and 
providing consumers in North Carolina with fresh milk every day.
  I come to the floor today to voice my strong support for H.R. 1402. 
Option 1-A is not only vital to the survival of the dairy industry in 
many regions, it is also good for consumers. Economic studies show that 
locally produced milk is cheaper for consumers because they don't have 
to pay the cost of shipping milk from surplus areas. Option 1-A is also 
good for consumers because it ensures that milk will get quickly from 
the cow to the consumer; therefore, it will have a longer shelf-life.
  The bottom line here is that North Carolinians want and deserve fresh 
milk. I, along with 230 of my colleagues, believe that the freshest 
milk is the milk that doesn't have to travel a thousand miles to get to 
our constituents. By voting against option 1-A, Members would be voting 
to put hundreds of more dairy farmers out of business--ensuring that 
milk will indeed have to be transported in year-round from farms all 
over the United States.
  I urge you to vote in favor of option 1-A and in favor of fresh milk 
and the family farm.
  Mr. VENTO. Mr. Chairman, I rise in vigorous opposition to H.R. 1402. 
This legislation threatens to keep this Nation's dairy system shrouded 
in an antiquated, Depression-era policy that discriminates against our 
Nation's dairy farmers because of the area in which they produce milk 
products.
  Mr. Chairman, this bill should not have reached the floor today. It 
flies in the face of a commitment that we made in the 1996 Freedom to 
Farm bill that granted the Secretary of Agriculture limited authority 
to develop a market based policy for our Nation's dairy farmers. Since 
the majority failed to let this House address this issue legislatively, 
we left it upon the Secretary of Agriculture to replace the current 70-
year-old pricing structure whose original goal was to facilitate milk 
production across the nation when the United States lacked the 
intricate transportation network and modern refrigeration technology 
that we possess today.
  Because this Nation lacked the ability to reach all areas of the 
country within a day, it was necessary to guarantee dairy farmers a 
minimum price within 31 regions for the fluid milk they produced in 
order to encourage milk production in regions that otherwise would not 
have a regular milk supply. The minimum milk prices paid to producers' 
were based on the producers distance from Eau Claire, WI. This curious 
pricing scheme accounted for the regional inequities experienced by 
producers. If it ever made any sense, events and developments have long 
rendered this law useless for achieving equity.
  This may have worked for farmers 70 years ago, but today this 
Byzantine dairy policy is punishing our small dairy farmers. Under 
current law and under this legislation, small dairy farmers who live in 
an area of traditionally high milk production are being put out of 
business because of a government requirement that other dairy farms 
must be paid a higher price for the same identical product based on 
their geographic location. I find it incomprehensible that the greatest 
nation on earth, the center of freedom and democracy, is maintaining 
such a market place disparity to farm producers, the very family 
farmers who are responsible for allowing us to put food on our tables.
  H.R. 1302 not only forces more dairy farmers out of business, it also 
places the United States at a disadvantage at the upcoming World Trade 
Organization Ministerial meeting in which the United States hopes to 
achieve its trade objectives during multilateral trade negotiations. At 
a time when the U.S. trade deficit is at an all time high, the United 
States cannot afford to extend this competitive disadvantage that our 
farmers already experience at home to markets abroad. How can we as a 
nation negotiate with our trading partners for free and open markets 
when we persistently refuse free trade between regions within our own 
country? Our farmers and our Nation cannot afford to maintain this 
protectionist method of structuring the milk market in this progressive 
era of global trade. A vote for this legislation means stunting the 
growth and development of this nation all in the name of regionalism 
and money for parochial interests.
  This should not be a regional issue. This should be an issue of 
equity. Equity for all our dairy farmers. Times are tough in the 
agricultural industry today, and we are only exacerbating these 
problems by following the creed of divide and conquer. It is my sincere 
hope that Members today can show a degree of fairness, look at this 
issue as it affects the Nation as a whole and vote against this 
legislation.
  Mr. NUSSLE. Mr. Chairman, I rise today in strong opposition to H.R. 
1402. This legislation would deny dairy farmers in my congressional 
district and throughout the Upper Midwest much-needed, free-market-
oriented reforms and would continue to threaten their ability to do 
business while giving an unfair advantage to other dairy farmers 
throughout the country.
  Rreforms of this Nation's Depression-era milk pricing regulations are 
long overdue. The current system, which H.R. 1402 would preserve, is 
based on outdated realities of milk production, consumption, and 
transportation, and has caused drastic distortions in milk production, 
as a result.
  Currently, U.S. dairy policy discriminates against Upper Midwestern 
Dairy producers based on the region where they produce their milk. 
Specifically, federal pricing regulations dictate the price of fluid 
milk based on distance from Eau Clair, WI. In the days before modern 
refrigeration, interstate highway systems, and other innovations, this 
policy made sense. Those days are gone, and today, this policy makes 
about as much sense as Microsoft pricing computers based on how far an 
individual resides from its corporate headquarters in Redmond, WA.
  The USDA's final rule makes modest steps toward pricing equity and 
toward a system that would allow producers to compete more fairly in 
the domestic marketplace. The nation's leading dairy economists, at the 
request of the House Agriculture Committee, conducted an analysis of 
USDA's pricing reforms and showed that about 60 percent of the nation's 
dairy producers would fare better under USDA's final rule than they 
would under the status quo, which would be mandated by H.R. 1402.
  Additionally, H.R. 1402, if enacted, would cost consumers as much as 
$1 billion annually in higher milk and dairy product prices. That cost 
is regressive, falling most heavily on low-income consumers, who use 
more of their income for food and more of their food budget for dairy 
products. USDA estimates that the federal nutrition programs, such as 
WIC, Food Stamps, and the School Lunch Program will take at least a 
$190 million hit over 5 years under H.R. 1402, and likely more.
  Further, while the United States continually encourages the World 
Trade Organization to open agricultural markets to increased 
competition, our domestic dairy policies are being attacked as anti-
competitive and trade-distorting.
  In summary, I believe there are numerous reasons to oppose this bill. 
H.R. 1402 continues a system that props up dairy farmers in some 
regions of the country at the financial expense of efficient dairy 
farmers in Iowa and the Upper Midwest in a pricing manner that does not 
exist for any other product in the United States. This legislation is 
an added burden to taxpayers and a regressive tax increase on low-
income families. Finally, this legislation represents a twisted one-
size-fits-all federal mandate and a pro-isolationist trade policy which 
could lock U.S. dairy farmers out of the world market. For all of these 
reasons, I oppose H.R. 1402 and I hope my colleagues will vote to allow 
dairy farmers to produce for the market, and not for government 
programs.
  Mr. LARSON. Mr. Chairman, I rise today in strong support of H.R. 
1402, which would require the Secretary of Agriculture to implement the 
new Federal Milk Marketing Order proposal known as Option 1-A.
  As you know, the 1996 Farm bill mandated the Department of 
Agriculture to reform the Federal Milk Marketing Orders, which 
determine the price of most dairy products. In response, USDA issued 
two proposed reforms, known as option 1-A and option 1-B. During 
consideration of this rule, USDA heard directly from more than 200 
members of this body supporting the implementation of option 1-A. Their 
Final Rule published on March 28, 1999, noted that the 4,217 comments 
received since the change was proposed, more than 3,500 of them were in 
support of option 1-A.
  We are here today because despite clear and overwhelming support for 
option 1-A, USDA has chosen to move forward and implement a plan that 
would devastate small dairy farmers throughout the country. The 
proposal put forward by USDA would specifically cost dairy farmers in 
my district more than $360,000 per year, representing a loss of 66 cent 
per hundredweight on class I fluid milk and a loss of 24 cents per 
hundredweight on class III milk. In Connecticut, and in most of New 
England, our dairy farms are small family run businesses, and vital to 
our region's economy.
  In New England, we have even banded together to form the Northeast 
Interstate Dairy Compact, twice approved by this body, to foster this 
shrinking industry and to address the unique problems of dairy 
production in the region. Protecting these small family businesses

[[Page H8486]]

has also been an integral part of protecting open space and local 
communities' conservation and environmental reclamation programs. Many 
other states in the Mid-Atlantic, Southeast, and Southwest have 
followed New England's lead and begun ratifying their own compacts. If 
USDA moves forward and implements option 1-B, few if any of these dairy 
producers would survive.
  I have heard repeatedly from other members and the USDA that there 
was overwhelming support among dairy producers for their reform 
proposal in their recently conducted referendum. But I have also heard 
from the dairy community that they felt cornered into that vote, forced 
to support the Federal Order system at the risk of termination rather 
than the proposed change.
  So I rise in support of this bill, to protect small American farmers, 
and in support of the Stenholm/Pombo amendment, which would clarify 
language about forward contracting for dairy producers. I urge my 
colleagues to support this bill, and oppose any poison pill amendments 
that may be offered as attempts to prevent fair and meaningful dairy 
reform.
  Mr. SENSENBRENNER. Mr. Chairman, I rise in opposition to H.R. 1402. 
Frankly, I find it ridiculous that we are even discussing this bill 
here today. We all know that free markets are far preferable to out-
dated government price control schemes, yet we are discussing a bill to 
block even modest market-oriented dairy policy reforms.
  The free market has served American producers and consumers 
exceptionally well. Car prices are not determined according to the 
distance that they are manufactured from Detroit, software prices are 
not set by the distance that they are produced from Silicon Valley, and 
orange prices are not established according to the distance from 
Florida to where they are grown. Instead, the free market is allowed to 
determine the prices for these products. Not coincidentally, these 
industries are thriving. Conversely, milk prices are determined by the 
distance of the producer from Eau Claire, Wisconsin, and small dairy 
farmers across the country are struggling to survive. It should be 
clear that the free market provides the best system for determining 
prices in America, no matter the product.
  The Department of Agriculture's milk marketing order reforms, though 
certainly less market-based than I had hoped, represent a common-sense 
step toward simplifying the pricing of milk. Dairy farmers across the 
country voted in support of this reform by 97 percent. Ignoring this 
vote, H.R. 1402 would essentially maintain the status quo in milk 
pricing and force dairy farmers to continue to struggle under the 
current antiquated government restraints. For the sake of farmers and 
consumers, I urge you to oppose H.R. 1402 and support market-oriented 
dairy reforms.
  Mr. BALLENGER. Mr. Chairman, today we will have the unique 
opportunity to cast a vote which will save the family dairy farmer, 
while ensuring that Americans continue to enjoy the highest possible 
quality of milk. H.R. 1402, which would require the Secretary of 
Agriculture to implement the Class I milk price structure known as 
Option 1-A, will ensure that tens of thousands of American family dairy 
farms are not put out of business. Option 1-A does this by extending 
for one year the dairy price support program, as well as maintaining 
current minimum prices for fluid-use farm milk. H.R. 1402 will enable 
the American family dairy farmer to survive and hopefully prosper in 
the years ahead.
  While most industry in the United States continues to ride the wave 
of the largest economic boom in history, in my district, many family 
dairy farmers have been forced to give up their 4th and 5th generation 
farms. This is deplorable. Without the enactment of this legislation, 
more will go out of business--and for what reason--so all the milk 
produced in this nation will be produced by large Midwestern dairies. 
Fewer producers will mean less competition and higher prices. Don't 
believe the numbers that are being circulated by our upper Midwestern 
colleagues--Option 1-B will cost consumers in quality and price down 
the road.
  Let me give you some numbers which point to the huge significance of 
this legislation for my state. Last year in North Carolina, the dairy 
industry generated an estimated $572 million in economic activity. 
North Carolina has 10 Grade A milk processing plants. The total milk 
produced in the state last year amounted to 146 million gallons. As of 
July 1, 1998, there were 478 commercial dairy farms in the state. Cash 
receipts for the sale of milk by dairy farmers amounted to $187 
million. Last year, there were 75,000 milk cows in the state, each 
producing an average of 1,947 gallons of milk. And Iredell county, 
which is part of my congressional district, has 71 farms which produced 
almost 5 million gallons of milk in the month of December last year, 
making it far and away the largest milk producing county in the state.
  Without H.R. 1402, the economy of North Carolina faces a loss of over 
half a billion dollars in economic activity, a loss of almost 500 dairy 
farms, and the devastation of commercial and family farming. Don't vote 
to devastate the livelihoods of these farmers by opposing H.R. 1402. 
Please support H.R. 1402 to ensure more low cost, high quality milk 
production in North Carolina and in the United States.
  Mr. McGOVERN. Mr. Chairman, I rise today in support of H.R. 1402--a 
bill which requires the Secretary of Agriculture to implement the Class 
I milk price structure. This price structure, known as Option 1-A, is 
important to dairy farmers in Massachusetts, and I am proud to 
cosponsor this legislation. While the volume of dairy production in 
Massachusetts does not come close to equaling the production of some of 
the Midwestern states, dairy is an important industry in my state and 
district, and I fully support this effort to provide a stable pricing 
structure for this volatile industry.
  The U.S. Department of Agriculture will soon issue a final Class I 
milk price structure. The USDA proposed price structure, Option 1-B, 
will cost dairy farmers at least $200 million annually, placing an even 
greater burden on an industry that is already reeling from drought. 
H.R. 1402 would keep the Class 1 differentials at levels similar to 
those today. These levels were established to assure an adequate supply 
of milk for fluid use and guarantee a minimum price for producers based 
on supply and demand conditions. Despite overwhelming support from 
dairy producers and the Members of Congress who represent these 
farmers, USDA has continued with its planned implementation of Option 
1-B. This bill will ensure that our dairy producers are not forced into 
bankruptcy because of a flawed price structure dictated by the large 
farms in Midwestern America.
  At this point, I would like to insert into the record a letter from 
Massachusetts State Representative Michael J. Rodrigues, who represents 
the Fall River/Westport region. This letter documents the importance of 
the Option 1-A pricing structure to the dairy producers in 
Massachusetts.
  Mr. Chairman, this bill is important not only to dairy farmers in 
Massachusetts, but also to those throughout the Northeast and 
Southeast. Without the stability of this pricing structure, dairy 
production in these areas will decline until the business is 
unprofitable and ceases to exist except on large dairy farms in the 
Midwest. H.R. 1402 will help prevent these closures by setting a 
minimum price for milk for these regions. This bill gives dairy farmers 
a chance to succeed and prosper. I urge my colleagues to support H.R. 
1402 and vote for this important bill.

                                    Commonwealth of Massachusetts,


                                     House of Representatives,

                                   Boston, MA, September 20, 1999.
     Congressman James McGovern,
     Cannon Building,
     Washington, DC.
       Dear Congressman McGovern: The dairy industry is moving 
     through a period of great change. The 1996 FAIR Act has been 
     the key impetus to this change and is the result of 
     fundamental changes in the agricultural sector of the 
     economy. A significant part of these changes is the greater 
     volatility in milk prices farmers receive.
       Volatility in prices creates difficulties not only for 
     dairy farmers but also for those who purchase milk for 
     manufacturing product. From a business perspective, price 
     volatility presents difficulties in financial planning. If a 
     farmer or a company cannot depend on a stable price, 
     financial planning becomes much more difficult.
       Often not considered in the debate is the impact on 
     manufacturers of dairy products such as ice cream, cheese, 
     and butter. Massachusetts has a considerable amount of dairy 
     product manufactures. For example, Massachusetts consistently 
     ranks second or third in the country in the manufacture of 
     ice cream. Part of the reason for this high ranking is a 
     stable milk supply, which is the result of stable milk prices 
     to dairy farmers. Of course, the other reason is that 
     Baystaters enjoy a good bowl of high quality ice cream.
       With one of the highest costs of production in the country, 
     Massachusetts dairy farmers, and indeed, Northeastern dairy 
     farmers, face an uncertain future. The Northeast Dairy 
     Compact has offered that safety net which, for many farmers, 
     is the make-or-break factor in whether or not to sell out to 
     developers. If the Northeast Dairy Compact is not 
     reauthorized, many Massachusetts dairy farmers will likely 
     sell out. As the local supply of milk declines, dairy product 
     manufactures will likely move to areas of more available milk 
     supplies and with this move, jobs will move as well.
       Your support of the Northeastern Dairy Compact is critical 
     to the viability of the dairy product manufacturing industry 
     not to

[[Page H8487]]

     mention the vitality of the dairy farmers in Massachusetts, 
     who work so hard not only to produce milk, but also to 
     maintain the open space and aesthetic qualities that are so 
     important to the character of Massachusetts as a New England 
     state.
           Sincerely,
                                             Michael J. Rodrigues,
                                             State Representative.

  Mr. CRANE. Mr. Chairman, having spent quite some time on a farm in my 
earlier years, I can certainly understand the concerns of those who are 
advocating enactment of H.R. 1402. With all the risks and uncertainties 
agricultural producers face on a regular and not-so-regular basis, it 
is hardly surprising that dairy farmers would rather not add another 
unknown quantity to the list of things with which they must concern 
themselves. Also, there is a natural tendency to fear the unknown 
simply because it is unfamiliar.
  But while it may be tempting to think that the devil you know is 
preferable to one that you don't, there is a problem with that line of 
reasoning in this instance. Should it prevail today, members of this 
body may have a devilishly difficult time explaining, much less 
justifying, it in the future. That being the case, I would urge my 
colleagues to consider some facts and figures before they cast their 
vote on H.R. 1402.
  Most obvious, not to mention significant, is the fact that our 
current system of milk marketing orders and price differentials is over 
60 years old, a relic born long before the interstate highway system 
came into being or refrigeration trucks made their presence felt. Back 
then, the argument went as follows: for America's children to be able 
to drink wholesome fresh milk every day, dairy farmers had to be in 
business nearby. But now the circumstances are entirely different. Not 
only can milk be shipped safely over long distances but, in many cases, 
it can be obtained from out-of-state more cheaply than from neighboring 
sources. As a consequence, what once may have benefited youngsters now 
adds to the price their parents pay for their milk.
  Estimates of the cost of the present milk pricing system to consumers 
start at $674 million per year, with several approaching or even 
exceeding $1 billion annually. Not only that, but if milk price 
supports are extended for another year, as H.R. 1402 now provides, and 
the existing milk pricing system is essentially retained, America's 
taxpayers will be adversely affected as well. Because those provisions 
of H.R. 1402 will keep the price of milk consumed by participants in 
this nation's food stamp, child nutrition and supplemental feeding 
programs, they will not realize approximately $53 million a year in 
savings that should result from implementation of the USDA's Final Rule 
on milk marketing orders and price differentials. Also, there is 
evidence that dairy farmers themselves would not benefit as much as 
they might expect if H.R. 1402 becomes law. According to a recent 
estimate extrapolated from data developed by the University of Iowa's 
Farm and Agricultural Policy Research Institute (FAPRI), 59% of 
America's dairy farmers would fare better if the USDA's Final Rule 
takes effect.
  That last figure, in particular, is a telling statistic. But it is by 
no means the only reason it would be best to reject H.R. 1402 for the 
sake of America's dairy farmers.  Even more compelling, to my way of 
thinking, is the potentially negative impact enactment of H.R. 1402 
could have on the prospects for enhancing the export of American 
agricultural products in the years ahead.

  As I need hardly remind my colleagues, this nation's agricultural 
producers have been disproportionately disadvantaged by foreign trade 
barriers for many years now. That being the case, a key objective in 
the next round of trade negotiations is to achieve greater market 
access for all United States exports of agricultural commodities and 
value-added foods. But how successful can we be in achieving that 
objective if we are perceived to be asking other nations to do things 
we are unwilling to do ourselves?
  Let me be a bit more specific. From my vantage point as chairman of 
the Trade Subcommittee of the House Ways and Means Committee, it 
appears that the provisions of H.R. 1402 run directly counter to the 
negotiating objectives of the United States in those upcoming trade 
talks which get underway in Seattle on November 30th of this year. 
Instead of telling our would-be trading partners that we practice what 
we preach, those provisions would give them ammunition they could use 
to resist opening their markets to our exports. In the past, countries 
with the most troublesome trade barriers have tried to shield their 
unfair trade practices by continuing to define them as being within the 
``blue box'' category of export subsidies that are beyond the reach of 
multilateral disciplines. If we insist on maintaining market distorting 
pricing mechanisms and commodity subsidies of our own, as H.R. 1402 
would do, those countries will see little reason--and have no 
incentive--to change their position. The result: markets for American 
agricultural products will not open up as we would like, the promise of 
the 1996 Freedom to Farm Act will not materialize as we have hoped, and 
American farmers will not be as well off as they have expected.
  Mr. Chairman and colleagues, I trust we will not make that mistake. 
For the sake of the consumer, the taxpayer and, yes, the dairy farmer 
himself or herself, I hope we will not go down the antiquated, out-of-
date, inconsistent with the free market path that H.R. 1402 would take 
us. Rather than cling to a past that was not all that kind to dairy 
farmers anyway, let us look to the future and to the prospect of 
larger, more efficient markets, not just for dairy products, but for 
all the exportable agricultural goods produced in this country.
  We have the land, the skill, the experience and the technology to 
feed not just ourselves, but people all over the world at prices, few, 
if any others, can match. Indeed, we are truly blessed and it would be 
a shame if we did not count our blessings and put them to the best 
possible use, not exclusively to serve the interests of agricultural 
producers, but also to benefit those who process, distribute, sell, 
prepare and/or consume all kinds of agricultural commodities.
  Mr. Chairman, I urge my colleagues to vote ``no'' on H.R. 1402 so 
that the USDA's Final Rule on milk marketing orders can take effect on 
October 1st of this year. That Rule may not be perfect, but compared to 
status quo alternative contemplated by H.R. 1402, it is a significant 
step in the right direction.
  The CHAIRMAN. All time for general debate has expired.
  Pursuant to the rule, the committee amendment in the nature of a 
substitute printed in the bill, modified by the amendments printed in 
Part A of House Report 106-324, is considered as an original bill for 
the purpose of amendment and is considered read.
  The text of the committee amendment in the nature of a substitute, as 
modified, is as follows:

                               H.R. 1402

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

     SECTION 1. REQUIRED USE OF OPTION 1A AS PRICE STRUCTURE FOR 
                   CLASS I MILK UNDER CONSOLIDATED FEDERAL MILK 
                   MARKETING ORDERS.

       (a) Use of Option 1A.--In implementing the final decision 
     for the consolidation and reform of Federal milk marketing 
     orders, as required by section 143 of the Federal Agriculture 
     Improvement and Reform Act of 1996 (7 U.S.C. 7253), the 
     Secretary of Agriculture shall price fluid or Class I milk 
     under the orders using the Class I price differentials 
     identified as Option 1A ``Location-Specific Differentials 
     Analysis'' in the proposed rule published in the Federal 
     Register on January 30, 1998 (63 Fed. Reg. 4802, 4809), 
     except that the Secretary shall include the corrections and 
     modifications to such Class I differentials made by the 
     Secretary through April 2, 1999.
       (b) Effect on Implementation Schedule.--The requirement to 
     use Option 1A in subsection (a) does not modify or delay the 
     time period for actual implementation of the final decision 
     as part of Federal milk marketing orders specified in section 
     738 of the Agriculture, Rural Development, Food and Drug 
     Administration, and Related Agencies Appropriations Act, 1999 
     (as contained in section 101(a) of division A of Public Law 
     105-277; 112 Stat. 2681-30).
       (c) Implementation of Requirement.--
       (1) Expedited implementation.--The Secretary of Agriculture 
     shall comply with subsection (a) as soon as practicable after 
     the date of the enactment of this Act. The requirement to use 
     the Option 1A described in such subsection shall not be 
     subject to--
       (A) the notice and hearing requirements of section 8c(3) of 
     the Agricultural Adjustment Act (7 U.S.C. 608c(3)), reenacted 
     with amendments by the Agricultural Marketing Agreement Act 
     of 1937, or the notice and comment provisions of section 553 
     of title 5, United States Code;
       (B) a referendum conducted by the Secretary of Agriculture 
     pursuant to subsections (17) or (19) of such section 8c;
       (C) the Statement of Policy of the Secretary of Agriculture 
     effective July 24, 1971 (36 Fed. Reg. 13804), relating to 
     notices of proposed rulemaking and public participation in 
     rulemaking; and
       (D) chapter 35 of title 44, United States Code (commonly 
     known as the ``Paperwork Reduction Act'').
       (2) Effect on minimum milk prices.--If the Secretary of 
     Agriculture announces minimum prices for milk under Federal 
     milk marketing orders pu4rsuant to section 1000.50 of title 
     7, Code of Federal Regulations, before the date on which the 
     Secretary first complies with subsection (a), the minimum 
     prices so announced before that date shall be the only 
     applicable minimum prices under Federal milk marketing orders 
     for the months for which the prices have been announced.

     SEC. 2. NECESSITY OF USING FORMAL RULEMAKING TO DEVELOP 
                   PRICING METHODS FOR CLASS III AND CLASS IV 
                   MILK; MODIFIED MANUFACTURING ALLOWANCE FOR 
                   CHEESE.

       (a) Congressional Finding.--The Class III and Class IV 
     pricing formulas included in the final decision for the 
     consolidation and reform of Federal milk marketing orders, as 
     published in the Federal Register on April 2, 1999 (64 Fed. 
     Reg. 16025), do not adequately reflect public comment on the 
     original proposed rule published

[[Page H8488]]

     in the Federal Register on January 30, 1998 (63 Fed. Reg. 
     4802), and are sufficiently different from the proposed rule 
     and any comments submitted with regard to the proposed rule 
     that further emergency rulemaking is merited.
       (b) Formal Rulemaking.--
       (1) Required.--The Secretary of Agriculture shall conduct 
     rulemaking, on the record after an opportunity for an agency 
     hearing, to reconsider the Class III and Class IV pricing 
     formulas included in the final decision referred to in 
     subsection (a).
       (2) Implementation.--A final decision on the formula shall 
     be implemented not later than 10 months after the date of the 
     enactment of this Act.
       (3) Effect of court order.--The actions authorized by this 
     subsection are intended to ensure the timely publication and 
     implementation of new pricing formulas for Class III and 
     Class IV milk. In the event that the Secretary is enjoined or 
     otherwise restrained by a court order from implementing the 
     final decision under paragraph (2), the length of time for 
     which that injunction or other restraining order is effective 
     shall be added to the time limitations specified in paragraph 
     (2) thereby extending those time limitations by a period of 
     time equal to the period of time for which the injunction or 
     other restraining order is effective.
       (c) Failure To Timely Complete Rulemaking.--If the 
     Secretary of Agriculture fails to implement new Class III and 
     Class IV pricing formulas within the time period required 
     under subsection (b)(2) (plus any additional period provided 
     under subsection (b)(3)), the Secretary may not assess or 
     collect assessments from milk producers or handlers under 
     section 8c of the Agricultural Adjustment Act (7 U.S.C. 
     608c), reenacted with amendments by the Agricultural 
     Marketing Agreement Act of 1937, for marketing order 
     administration and services provided under such section after 
     the end of that period until the pricing formulas are 
     implemented. The Secretary may not reduce the level of 
     services provided under that section on account of the 
     prohibition against assessments, but shall rather cover the 
     cost of marketing order administration and services through 
     funds available for the Agricultural Marketing Service of the 
     Department.
       (d) Effect on Implementation Schedule.--Subject to 
     subsection (e), the requirement for additional rulemaking in 
     subsection (b) does not modify or delay the time period for 
     actual implementation of the final decision referred to in 
     subsection (a) as part of Federal milk marketing orders, as 
     such time period is specified in section 738 of the 
     Agriculture, Rural Development, Food and Drug Administration, 
     and Related Agencies Appropriations Act, 1999 (as contained 
     in section 101(a) of division A of Public Law 105-277; 112 
     Stat. 2681-30).
       (e) Modified Manufacturing Allowance for Cheese.--
       (1) Modification of allowance.--Pending the implementation 
     of new pricing formulas for Class III and Class IV milk as 
     required by subsection (b), the Secretary of Agriculture 
     shall modify the formula used for determining Class III 
     prices, as contained in the final decision referred to in 
     subsection (a), to replace the manufacturing allowance of 
     17.02 cents per pound of cheese each place it appears in that 
     formula with an amount equal to 14.7 cents per pound of 
     cheese.
       (2) Expedited implementation.--The Secretary of Agriculture 
     shall implement the modified formula as soon as practicable 
     after the date of the enactment of this Act. Implementation 
     and use of the modified formula shall not be subject to--
       (A) the notice and hearing requirements of section 8c(3) of 
     the Agricultural Adjustment Act (7 U.S.C. 608c(3)), reenacted 
     with amendments by the Agricultural Marketing Agreement Act 
     of 1937, or the notice and comment provisions of section 553 
     of title 5, United States Code;
       (B) a referendum conducted by the Secretary of Agriculture 
     pursuant to subsections (17) or (19) of such section 8c;
       (C) the Statement of Policy of the Secretary of Agriculture 
     effective July 24, 1971 (36 Fed. Reg. 13804), relating to 
     notices of proposed rulemaking and public participation in 
     rulemaking; and
       (D) chapter 35 of title 44, United States Code (commonly 
     known as the ``Paperwork Reduction Act'').
       (3) Effect on minimum milk prices.--If the Secretary of 
     Agriculture announces minimum prices for milk under Federal 
     milk marketing orders pursuant to section 1000.50 of title 7, 
     Code of Federal Regulations, before the date on which the 
     Secretary first implements the modified formula, the minimum 
     prices so announced before that date shall be the only 
     applicable minimum prices under Federal milk marketing orders 
     for the months for which the prices have been announced.

     SEC. 3. ONE-YEAR EXTENSION OF CURRENT MILK PRICE SUPPORT 
                   PROGRAM.

       (a) Extension of Program.--Subsection (h) of section 141 of 
     the Agricultural Market Transition Act (7 U.S.C. 7251) is 
     amended by striking ``1999'' both places it appears and 
     inserting ``2000''.
       (b) Continuation of Current Price Support Rate.--Subsection 
     (b)(4) of such section is amended by striking ``year 1999'' 
     and inserting ``years 1999 and 2000''.
       (c) Elimination of Recourse Loan Program for Processors..--
     Section 142 of the Agricultural Market Transition Act (7 
     U.S.C. 7252) is repealed.

     SEC. 4. DAIRY FORWARD PRICING PROGRAM.

       The Agricultural Adjustment Act (7 U.S.C. 601 et seq.), 
     reenacted with amendments by the Agricultural Marketing 
     Agreement Act of 1937, is amended by adding at the end the 
     following new section:

     ``SEC. 23. DAIRY FORWARD PRICING PROGRAM.

       ``(a) In General.--Not later than 90 days after the date of 
     enactment of this section, the Secretary of Agriculture shall 
     establish a program under which milk producers and 
     cooperatives are authorized to voluntarily enter into forward 
     price contracts with milk handlers.
       ``(b) Minimum Milk Price Requirements.--Payments made by 
     milk handlers to milk producers and cooperatives, and prices 
     received by milk producers and cooperatives, under the 
     forward contracts shall be deemed to satisfy all regulated 
     minimum milk price requirements of paragraphs (A), (B), (C), 
     (D), (F), and (J) of subsection (5), and subsections (7)(B) 
     and (18), of section 8c.
       ``(c) Application.--This section shall apply only with 
     respect to the marketing of federally regulated milk 
     (regardless of its use) that is in the current of interstate 
     or foreign commerce or that directly burdens, obstructs, or 
     affects interstate or foreign commerce in federally regulated 
     milk.''.

  The CHAIRMAN. No amendment to that amendment shall be in order except 
those printed in Part B of that report. Each amendment may be offered 
only in the order printed in the report, may be offered only by a 
Member designated in the report, shall be considered read, debatable 
for the time specified in the report, equally divided and controlled by 
a proponent and an opponent, shall not be subject to amendment, and 
shall not be subject to a demand for division of the question.
  The Chairman of the Committee of the Whole may postpone a request for 
a recorded vote on any amendment and may reduce to a minimum of 5 
minutes the time for voting on any postponed question that immediately 
follows another vote, provided that the time for voting on the first 
question shall be a minimum of 15 minutes.
  It is now in order to consider Amendment No. 1 printed in Part B of 
House Report 106-324.


           Amendment No. 1 Offered by Mr. Green of Wisconsin

  Mr. GREEN of Wisconsin. Mr. Chairman, I offer an amendment.
  The CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Part B Amendment No. 1 offered by Mr. Green of Wisconsin:
       Page 3, beginning line 3, strike section 1 and insert the 
     following new section:

     SECTION 1. REQUIREMENTS APPLICABLE TO REFERENDA REGARDING 
                   FEDERAL MILK MARKETING ORDERS.

       (a) National Basis of Referendum.--Section 8c(19) of the 
     Agricultural Adjustment Act (7 U.S.C. 608c(19)), reenacted 
     with amendments by the Agricultural Marketing Agreement Act 
     of 1937, is amended by adding at the end the following new 
     sentence: ``In the case of the issuance or amendment of an 
     order relating to milk or its products, the referendum 
     required by this subsection shall be conducted on a 
     nationwide basis among all milk producers operating in areas 
     covered by Federal milk marketing orders and the results of 
     the referendum shall be tallied on a nationwide basis.''.
       (b) Termination of Bloc Voting.--Section 8c(12) of the 
     Agricultural Adjustment Act (7 U.S.C. 608c(12)), reenacted 
     with amendments by the Agricultural Marketing Agreement Act 
     of 1937, is amended by adding at the end the following new 
     sentence: ``In the case of a referendum relating to milk or 
     its products, a cooperative association of producers may not 
     vote in the referendum on behalf of milk producers who are 
     members of, stockholders in, or under contract with, such 
     cooperative association of producers.''.
       (c) Application of Amendments.--The amendments made by 
     subsections (a) and (b) shall apply with respect to the 
     referendum required by subsection (d) and any other 
     referendum relating to milk or its products commenced under 
     section 8c(19) of the Agricultural Adjustment Act (7 U.S.C. 
     608c(19)), reenacted with amendments by the Agricultural 
     Marketing Agreement Act of 1937, on or after the date of the 
     enactment of this Act.
       (d) Referendum on Use of Option 1A or Option 1B.--
       (1) Referendum required.--As soon as practicable after the 
     date of the enactment of this Act, the Secretary of 
     Agriculture shall conduct a referendum among dairy producers 
     whose operations are located within areas covered by Federal 
     milk marketing orders to determine whether producers would 
     prefer that the Secretary price fluid or Class I milk under 
     the orders using the Class I price differentials identified 
     as Option 1A or Option 1B in the proposed rule published in 
     the Federal Register on January 30, 1998 (63 Fed. Reg. 4802, 
     4809), including such corrections and modifications to such 
     options made by the Secretary through April 2, 1999.
       (2) Implementation of results.--The Secretary shall 
     implement the favored option in the referendum as part of 
     each Federal milk marketing order (other than any order 
     covering the State of California).

  The CHAIRMAN. Pursuant to House Resolution 294, the gentleman from 
Wisconsin (Mr. Green) and the gentleman from Texas (Mr. Stenholm) each 
will control 10 minutes.

[[Page H8489]]

  The Chair recognizes the gentleman from Wisconsin (Mr. Green).
  Mr. GREEN of Wisconsin. Mr. Chairman, I yield myself such time as I 
may consume.
  Mr. Chairman, one of the problems with the debate that we are going 
to have today is that, as my colleagues may have already heard, we are 
going to be dealing with a very complex, very difficult subject, milk 
marketing orders. A lot of terms and a lot of images are going to be 
tossed around, and a lot of Members and a lot of interest groups are 
going to be arguing that they know what is in the best interest of a 
family dairy farm.
  This amendment, the amendment that I offer today, will ensure that, 
whatever we do today, it is supported by the dairy farmers themselves, 
not co-ops, not manufacturers, not associations, not Members of 
Congress, not inside-the-beltway interests, but the dairy farmers 
themselves.
  As we will also hear reference to today, back in August, dairy 
producers all across America were asked to vote up or down on the 
modest, very modest reform plan offered by Secretary Glickman. 
Overwhelming results: over 95 percent of the dairy producers today and 
over 90 percent in each region of the Nation said that they favor the 
Glickman reform.
  So why are we here? I would argue that farmers have spoken loud and 
clear. They want reform. Well, my colleagues, we are here because the 
large co-ops and some regional money interests do not like the results, 
and they seek today to overturn those results and overturn what the 
farmers I believe really want.
  Now, to cover themselves they offer a weak excuse. They say that the 
vote that they cast in August was not a true vote and it was not a true 
vote because they did not have a choice between 1-A and 1-B. Instead, 
it was up or down on the Glickman reform, it was either the Glickman 
reform or termination of milk marketing orders.
  Well, where have they been for the last 6 decades? That has been the 
system in place since 1937. Those of us who oppose 1402 did not create 
it. These are not our rules. These are the rules that we have had to 
play by for 60 years. The votes have always been cast in such a 
fashion.
  But today we have an opportunity through this amendment to take the 
anti-reformers at their word. This amendment that I offer creates 
democracy. It asks dairy farmers their opinion. It turns to them for 
votes.
  This amendment says that before this all-seeing, all-wise Congress 
overturns the result of the August referendum and reimposes its Soviet-
style dairy system, we must have a real vote of dairy farmers.
  What a radical idea, no taxation without representation.
  Secondly, this amendment turns the vote over to dairy farmers 
themselves, all the dairy farmers covered by milk marketing orders. 
Instead of having an order-by-order vote, which is patchwork voting, 
this amendment recognizes that all dairy farmers, and we are going to 
hear this over and over again, all dairy farmers, all consumers have an 
interest, have a national stake in what we do today.
  Third, this terminates block voting. A dirty secret in this process 
is that farmers actually do not have the vote. Instead, co-ops do. Co-
ops have the right to vote their members. Just like feudal lords had 
the right for centuries to vote their tenants, husbands had the right 
to vote for their wives, co-ops have the right to vote for their member 
farmers. Lord forbid that our dairy farmers get to express their own 
opinion.
  Fourth, this amendment does precisely what the supporters of 1402 say 
they want, a true choice, a true vote. We allow dairy farmers, under 
this amendment, to choose either 1-A or 
1-B.
  We have heard a lot of rhetoric about dairy farmers not getting a 
real vote in August. Today, with this amendment, we have the 
opportunity to give them a real vote, a real choice.
  I do not rely on the Members out here, the 229 Members inside the 
Beltway, to make these choices. I put my faith in dairy farmers. I ask 
my colleagues to support this.
  Mr. Chairman, I reserve the balance of my time.
  Mr. STENHOLM. Mr. Chairman, I yield myself 1 minute.
  Mr. Chairman, we have heard some statements made that are not very 
factual. To suggest that dairy farmers have not already voted on this 
because their cooperatives have expressed themselves totally ignores 
two main facts. One, of all of the milk produced in the United States, 
82 percent of it is produced by farmers who belong to cooperatives.
  It is very true that there are a few cooperatives that differ with 
this legislation, and they happen to be mostly from one region of the 
country; and I understand that. I hate to hear people continue to 
suggest that we are maintaining Soviet-style legislation because that 
is not true either under 1-A or 1-B, which is the argument today. That 
is not a true statement.
  Is it a Government program? Absolutely. Has it worked perfectly? 
Absolutely not. But it is the overwhelming consensus of opinion by 
those who commented on this some 4,217 dairy farmers and their 
organizations, 3,579 supported 1402.
  Mr. GREEN of Wisconsin. Mr. Chairman, I yield 2 minutes to the 
gentleman from Wisconsin (Mr. Ryan) who has had a major effect in this 
debate, and been a major force.
  Mr. RYAN of Wisconsin. Mr. Chairman, it really comes down to this: 
proponents of H.R. 1402 are saying that the vote that happened in 
August was a cooked vote, that it was not an honest vote, that they did 
not get all the choices to vote on what they wanted.
  Well, that is what we are trying to give. Let us be very clear about 
what 1402 does with the latest self-executing amendment. It denies the 
farmer any choice as to their fate. It says that H.R. 1402, the status 
quo, will be crammed down their throat with no say-so, no plebiscite, 
no choice from the farmer.
  What this amendment simply does is it lets every individual farmer, 
not the co-ops, not the processors, not the big businesses, the farmers 
get to choose do they want it.
  Well, the vote that took place in August was one that passed with 
overwhelming majority. It was a choice between the USDA's rule and 
Option 1-B. I understand the proponents of 1402 disregard this vote, so 
we are coming to them with another vote.
  If 1402 is what my colleagues think all the farmers in this country 
want, then they should not be afraid of letting them decide themselves 
whether they want it. Let us move this debate beyond the Beltway, 
beyond the co-ops and go directly to the people.
  Mr. STENHOLM. Mr. Chairman, I yield myself such time as I may 
consume.
  Mr. Chairman, I believe the gentleman from Wisconsin (Mr. Ryan) 
unintentionally misspoke concerning the vote that occurred. The farmers 
had a choice of the Secretary's proposal of 1-B or nothing was the 
choice that was voted on.
  Mr. Chairman, I yield to the gentleman.
  Mr. RYAN of Wisconsin. Mr. Chairman, yes. I apologize. I thought that 
is what I had said.
  The point is it is understandable that the proponents of H.R. 1402 
disregard the vote that just took place by the farmers in August. So 
what we are simply saying is, okay, let us have a real vote; let us 
have a vote with the dairy farmers to choose whether or not they want 
1402 before it is implemented, before it is passed down on to the 
farmers with no say-so.

                              {time}  1200

  Mr. STENHOLM. Mr. Chairman, I yield 1 minute to the gentleman from 
New York (Mr. Sweeney).
  Mr. SWEENEY. Mr. Chairman, I thank the gentleman for yielding this 
time to me.
  Mr. Chairman, as my colleagues know, I find the arguments of the 
sponsors of this amendment to be a little suspect. These gentleman, I 
believe, have every good intention, but they will also speak today on 
behalf of the Boehner amendment, an amendment which the dairy farmers 
have voted on. The dairy farmers overwhelmingly, 90 percent of them, in 
August rejected that proposal which would gut the milk marketing order; 
so, I am very skeptical of their position on this.
  But let me say this: At a time when we should be empowering farmers 
to work together through cooperatives to

[[Page H8490]]

get better prices, this amendment directly undercuts cooperative 
bargaining. This amendment would implement Option 1-B while another 
referendum is conducted by the Department of Agriculture.
  Farmers join cooperatives to increase the size and effectiveness of 
their voice, and block voting on the part of cooperatives is 
representative democracy at its best. In a time of agricultural crisis, 
we should not be advocating ways to limit the ability of cooperatives 
to speak for its members, whether it be in the marketplace or in the 
regulatory impacts. This amendment would be a bad precedent, and I urge 
a ``no'' vote on Green-Ryan.
  Mr. GREEN of Wisconsin. Mr. Chairman, I yield myself as much time as 
I may consume.
  Mr. Chairman, this amendment seeks to pull the mask off the 
antireformers, and we are hearing a bit of that in the rhetoric of my 
colleague from New York. Either my colleagues respect the overwhelming 
vote of dairy farmers in August, those that we all say we are here to 
serve, or they should change that voting system to get the real voice 
of dairy farmers. This amendment seeks to do that. It seeks to give us 
what many of us here are calling for, a real choice.
  As my colleagues know, so many of us here pay lip service to the 
family farm. We say we want to save it, we want to save Americana, we 
want to protect the family farm as a part of our economy and our 
culture; and yet apparently, we do not trust those same family farmers 
we say we want to protect. We do not trust them to have a voice. 
Instead we take the voice away from them.
  One wonders if perhaps those who do not support this amendment are 
afraid of what they might hear. They are afraid of what the farmers may 
tell them.
  This is the moment of truth, this amendment: Who lines up for dairy 
farmers and who lines up for others, for special interests? Who really 
wants to hear from dairy farmers and give them the opportunity to 
decide what is best for them, and who believes that they know better?
  Mr. Chairman, I reserve the balance of my time.
  Mr. STENHOLM. Mr. Chairman, I yield myself 2 minutes.
  Mr. Chairman, let me attempt to make it as clear as we possibly can 
what that vote was in August, approved by from 90 percent to 100 
percent of those who were voting in various referenda. Dairy farmers 
voted to impose upon themselves the Federal market order system. That 
was the vote, because if they had voted no, they would have joined with 
those who will later today and in some of the rhetoric already today 
are suggesting that dairy farmers do not want a Federal milk marketing 
order system.
  What most of this discussion is about is whether we have 1-A or 1-B, 
and I readily admit that the intricacies and the complexity of dairy 
market order makes for great fun on the floor of the House, but it does 
work for the purpose of which it was intended and that is to provide a 
stabilizing force for dairy products all over the United States.
  Now the issue of whether to have another vote, I hope we will not 
forget for a moment somebody will have to pay for that and that the 
people that will pay for that will again be dairy farmers through the 
system of which we will be asking to vote. Under normal circumstances, 
I would be in favor of that; but we have already voted. This is an 
amendment by those who oppose 1402, attempting to muddy the waters 
somewhat in a very sincere way, and I would just say to my colleagues:
  I hope that they will oppose this amendment, it is well-intended, it 
is unnecessary, it is costly, and it is being slightly misrepresented 
by those who advocate it from the standpoint of that vote in August 
because dairy farmers were confronted there with a vote of approving 1-
B and the recommendation of USDA or having no Federal order in their 
region. Given that choice, they voted for the Federal order and support 
us in our endeavor to pass 1402 today.
  Mr. GREEN of Wisconsin. Mr. Chairman, I yield myself such time as I 
may consume.
  I find it interesting that my esteemed colleague is against this 
amendment because holding a referendum of dairy farmers would prove 
costly, and yet my colleague and the supporters of 1402 seek to 
overturn a referendum we have already paid for. Apparently that one was 
not so costly; it was worth throwing away to them. My colleagues cannot 
have it both ways. Either we are going to turn to our dairy farmers or 
we are not. Either we are going to respect the results of a referendum 
or we are going to change the referendum to get a true vote.
  Remember this: 1402 not only reverses the results of the August 
referendum, but it would take away the right to vote by dairy farmers 
before this change takes place.
  Dairy farmers have had the right to vote on the Federal order system 
since 1937. We are taking the step, those who support 1402 and vote 
against this amendment, they are taking the step for the first time in 
62 years imposing a system without giving dairy farmers the right to 
vote. I think that is outrageous.
  Wherever one stands on 1402, wherever one stands on 1-A, 1-B, 
Glickman reform, to take away the right to vote before we do so is 
wrong. It is antifarmer, it is anti-family farmer, it is a slap in the 
face of family farms all across this Nation, those who would benefit 
and those who would be hurt by 1402.
  Mr. Chairman, I reserve the balance of my time.
  Mr. STENHOLM. Mr. Chairman, I yield 1 minute to the gentleman from 
California (Mr. Pombo), the chairman of the Subcommittee on Livestock 
and Horticulture.
  Mr. POMBO. Mr. Chairman, I thank the gentleman for yielding this time 
to me. I rise in opposition to the amendment. Even though I agree with 
many of the arguments of my colleague from Wisconsin (Mr. Green) makes, 
his amendment is not all that simple. There are many major changes that 
are made in the system by this particular amendment that I do not agree 
should be done by an amendment on the House floor without the full 
knowledge and without the hearing process, without everything that it 
takes to rewrite dairy policy.
  This has been a very difficult bill to get through because it does 
make major changes and has been very hard because there are so many 
different ideas region to region across the country. One of the most 
difficult things in all this is to hear from people, to get the members 
educated on that so they understand what they are voting on. This 
particular amendment makes major changes in dairy policy in a so-called 
simple amendment that is being added onto this bill. Because of that, I 
rise in opposition to this amendment.
  Mr. STENHOLM. Mr. Chairman, I yield 1 minute to the gentleman from 
Texas (Mr. Combest), chairman of the full House Committee on 
Agriculture.
  Mr. COMBEST. Mr. Chairman, I understand very much the gentleman's 
concerns about the dairy policy, the proponents of this amendment, and 
I would say that the committee, now the full House, is considering 
basically whether to implement 1-A or not. I believe we know where our 
constituents stand on this issue, I believe we know how they have 
spoken with us. I do not believe it is necessary to implement what we 
believe is a strong majority of the House by holding another 
referendum. Either Members support 1-A or they do not. It is not 
necessary to go through some bureaucratic procedure in order to get to 
the end point.
  So, Mr. Chairman, I would oppose the amendment.
  Mr. STENHOLM. Mr. Chairman, I yield myself such time as I may 
consume.
  I would urge our colleagues to strongly oppose this amendment. Listen 
to the chairman of the full committee, the chairman of the 
subcommittee, me as the ranking member of the committee. The committee 
has acted on this. We recommend very strongly 1402, an overwhelming 
vote, not a unanimous vote. So I would urge the opposition to this 
amendment.
  Mr. Chairman, I yield back the balance of our time.
  The CHAIRMAN. All time has expired.
  The question is on the amendment offered by the gentleman from 
Wisconsin (Mr. Green).
  The question was taken; and the Chairman announced that the noes 
appeared to have it.

[[Page H8491]]

                             Recorded Vote

  Mr. GREEN of Wisconsin. Mr. Chairman, I demand a recorded vote.
  The CHAIRMAN. Pursuant to House Resolution 294, further proceedings 
on the amendment offered by the gentleman from Wisconsin (Mr. Green) 
will be postponed.
  It is now in order to consider amendment No. 2 printed in part B of 
House Report 106-324.


                Amendment No. 2 Offered by Mr. Stenholm

  Mr. STENHOLM. Mr. Chairman, I offer an amendment.
  The CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Part B Amendment No. 2 offered by Mr. Stenholm:
       Page 7, strike line 19 and all that follows through line 10 
     on page 8, and insert the following:

     ``SEC. 23. DAIRY FORWARD PRICING PILOT PROGRAM.

       ``(a) Pilot Program Required.--Not later than 90 days after 
     the date of enactment of this section, the Secretary of 
     Agriculture shall establish a temporary pilot program under 
     which milk producers and cooperatives are authorized to 
     voluntarily enter into forward price contracts with milk 
     handlers.
       ``(b) Minimum Milk Price Requirements.--Payments made by 
     milk handlers to milk producers and cooperatives, and prices 
     received by milk producers and cooperatives, under the 
     forward contracts shall be deemed to satisfy--
       ``(1) all regulated minimum milk price requirements of 
     paragraphs (B) and (F) of subsection (5) of section 8c; and
       ``(2) the requirement of paragraph (C) of such subsection 
     regarding total payments by each handler.
       ``(c) Milk Covered by Pilot Program.--The pilot program 
     shall apply only with respect to the marketing of federally 
     regulated milk that--
       ``(1) is not classified as Class I milk or otherwise 
     intended for fluid use; and
       ``(2) is in the current of interstate or foreign commerce 
     or directly burdens, obstructs, or affects interstate or 
     foreign commerce in federally regulated milk.
       ``(d) Duration.--The authority of the Secretary of 
     Agriculture to carry out the pilot program shall terminate on 
     December 31, 2004. No forward price contract entered into 
     under the program may extend beyond that date.
       ``(e) Study and Report on Effect of Pilot Program.--
       ``(1) Study.--The Secretary of Agriculture shall conduct a 
     study on forward contracting between milk producers and 
     cooperatives and milk handlers to determine the impact on 
     milk prices paid to producers in the United States. To obtain 
     information for the study, the Secretary may use the 
     authorities available to the Secretary under section 8d, 
     subject to the confidentiality requirements of subsection (2) 
     of such section.
       ``(2) Report.--Not later than April 30, 2002, the Secretary 
     shall submit to the Committee on Agriculture, Nutrition and 
     Forestry of the Senate and the Committee on Agriculture of 
     the House of Representatives a report containing the results 
     of the study.''.

  The CHAIRMAN. Pursuant to House Resolution 294, the gentleman from 
Texas (Mr. Stenholm) and a Member opposed each will control 20 minutes.
  The Chair recognizes the gentleman from Texas (Mr. Stenholm).
  Mr. STENHOLM. Mr. Chairman, I ask unanimous consent that the 
gentleman from California (Mr. Pombo) be permitted to control 10 
minutes of the time in support of the amendment.
  The CHAIRMAN. Is there objection to the request of the gentleman from 
Texas?
  There was no objection.
  Mr. STENHOLM. Mr. Chairman, I yield myself such time as I may 
consume.
  Mr. Chairman, the amendment Mr. Pombo and I offer today represents a 
step into forward contracting for dairy industry producers and 
handlers. At the outset, I want to point out to my colleagues that if 
the Pombo-Stenholm amendment is not adopted, then forward pricing will 
not likely come soon to the dairy industry. The committee's bill 
provision allows for a wide experiment where a more modest effort is 
justified. With the modifications we offer producer acceptance for the 
program can be secured. If the Pombo-Stenholm modifications are not 
adopted, producers will abandon forward pricing, and there will be no 
program.
  Mr. Chairman, by failing to make special account of the coordination 
challenges, the provisions reported by the Committee on Agriculture 
fails to fully take account of the milk marketing order system and the 
need of dairy producers to rely on cooperative effort to maximize their 
income.
  Mr. Chairman, dairy farmers are extremely vulnerable as stand alone 
price takers. Their product is uniquely perishable, and the system we 
have has grown out of the fact that the processing industry has the 
unique advantage where negotiations with producers are concerned. While 
one can say what they want about the appropriateness of the particulars 
of the milk market order system, one fact is clear, that milk marketing 
orders give dairy farmers an opportunity they would otherwise lack to 
engage in mutually beneficial cooperative action for price.
  Mr. Chairman, much of the debate of this bill focuses on the class 1 
differentials. While the differentials matter in terms of promoting 
geographically diverse milk production, the key to the success of the 
milk marketing order program is it is focused on uniform prices. The 
idea that the orders promote the establishment of market-based prices 
that are paid uniformly to each producer regardless of the use to which 
his or her milk is put.
  Mr. Chairman, put quite simply, the committee's bill's provisions 
regarding forward pricing represents a fundamental threat to the 
uniform pricing feature of the Federal milk marketing order system. 
This development is troubling to me because without uniform pricing, 
producers will have little choice but to abandon the cooperative effort 
that has sustained the dairy production industry.
  Consider the situation where dairy producers have a choice between 
selling to a producers' cooperative or selling to a proprietary fluid 
milk processor. With the marketing system we have today, the producer 
can make a rational choice given the best opportunities available 
considering the farm's location and the location of the facilities. 
Because of uniform pricing there is an inducement to join the 
cooperative, consolidating with other producers in a manner that gives 
them the strength of common marketing. As a co-op, they together bear 
the additional costs of being prepared to process milk into a storable 
farm by building plants, of finding new markets, and of creating 
opportunities in other ways.

                              {time}  1215

  If a fluid plant were permitted to use the forward-pricing 
provisions, however, then it could begin to offer prices that are below 
the Class I price required under the order system but above the price 
the cooperative pays, the cooperative which bears those costs which 
make it effective in strengthening the producer's market position.
  Mr. Chairman, it is easy to see what happens next. The rational 
producer has to do what is best for his or her operation, processors 
are restored to the position of being able to play each producer off 
against the other, and our system's effectiveness in promoting 
cooperative effort collapses.
  Mr. Chairman, I agree that forward pricing can be an important risk 
management tool. Our amendment is designed to allow its use by 
producers and handlers on milk other than Class I for 5 years. We 
believe this is a reasonable compromise. I urge my colleagues to oppose 
the Dooley amendment and support the Stenholm-Pombo amendment.
  Mr. Chairman, I reserve the balance of my time.
  Mr. RYAN of Wisconsin. Mr. Chairman, I rise to claim the time in 
opposition to the amendment.
  The CHAIRMAN. The gentleman from Wisconsin (Mr. Ryan) is recognized 
for 20 minutes.
  Mr. RYAN of Wisconsin. Mr. Chairman, I yield 2 minutes to the 
gentleman from California (Mr. Royce).
  Mr. ROYCE. Mr. Chairman, I thank the gentleman from Wisconsin (Mr. 
Ryan) for yielding me this time.
  Mr. Chairman, the issue is one of free markets, in my view. Will we 
allow producers on a volunteer basis to enter into a private contract 
with a private processor? The Stenholm amendment says that if one 
happens to be a producer selling to a fluid milk bottler, the answer to 
that question is no.
  The underlying bill, H.R. 1402, would increase the power basically of 
dairy cartels and, in the long run, the underlying bill not only would 
hurt producers because of over-supply, in my view, but it also hurts 
consumers, and it would do so through higher prices, and it would do so 
through higher price volatility.
  Subsidies create excess production. Creating surplus dairy products 
eventually will create products that will be

[[Page H8492]]

dumped into the markets and ultimately the Government will be asked to 
step in and buy surplus dairy products, and Congress did just that over 
a decade ago in the 1980s; and it cost Americans $17 billion, causing 
many to say that we should stop milking our taxpayers.
  The Dooley amendment, if adopted, would help alleviate basically this 
situation by allowing producers and processors to contract for price 
and supply. Under that type of an arrangement, in my view, everyone is 
a winner, including the consumer. So let us work to implement free 
market reforms.
  There is a reason why Citizens Against Government Waste, why groups 
like Americans for Tax Reform and Taxpayers for Common Sense oppose the 
underlying legislation, and I urge my colleagues to do the same and to 
oppose this amendment as it is currently drafted.
  Mr. POMBO. Mr. Chairman, I yield myself such time as I may consume.
  Mr. Chairman, this amendment has been put together as an effort to 
bring forward contracting as a tool, as an option, to America's dairy 
farmers. The original bill that was introduced to allow forward 
contracting for dairy farmers in this country was a bill that we 
introduced, and I have always been a big supporter of that because I 
believe that forward contracting is an extremely important tool that 
our Nation's dairy farmers should have.
  They should have the ability to contract with someone on the outside, 
some corporation, some business, some processor out there, to contract 
for the sale of their milk over a long period of time to manage their 
risk on their particular operation. I believe that very strongly. I 
think the future for America's dairy farmers will include the ability 
to do forward contracting.
  As we move forward with this particular bill, it became very apparent 
that a number of our producers, a number of our dairy farmers 
throughout the country, were dead set opposed to doing forward 
contracting. They did not want that tool, they did not want that 
ability, and our opportunity to bring forward contracting to America's 
dairy farmers, I believe, was very threatened.
  I salute the gentleman from Texas (Mr. Stenholm) for working with me 
over the past couple of months to come up with this amendment that is, 
in some ways, a compromise that allows us to bring forward contracting 
to two-thirds of the dairy producers that are out there, to give them 
the opportunity to manage their risk with doing forward contracting.
  It is not perfect. It is a pilot program. It gives us the ability to 
try this over the next couple of years and prove that it will work. I 
believe it will work, but without this amendment passing we will not 
have forward contracting as part of the ultimate bill; and I believe 
that that will be a bigger risk for America's dairy farmers.
  Mr. Chairman, I reserve the balance of my time.
  Mr. RYAN of Wisconsin. Mr. Chairman, I yield 3 minutes to the 
gentleman from California (Mr. Dooley).
  Mr. DOOLEY of California. Mr. Chairman, I rise in opposition to the 
Stenholm-Pombo measure and would also like to speak in support of my 
amendment to theirs.
  What we are trying to do here is to provide dairy farmers with a 
risk-management tool, a tool that will allow them to manage some of the 
wide fluctuations in milk prices that occur throughout a year. This is 
an important opportunity that would allow a dairy farmer to voluntarily 
enter into a contract with a private processor.
  Now that sounds like something that is very reasonable, because as a 
farmer myself that is something I do almost every day, is I enter into 
a contract with someone that is going to purchase my cotton, my 
alfalfa, or whatever else I might be producing. It is somewhat 
remarkable that in our dairy laws today we have a prohibition that 
actually makes it illegal for a dairy farmer to enter into a private 
contract voluntarily in order to set a price.
  This amendment that we are dealing with at the current time is one 
that is a step in the right direction because it allows us to have a 
pilot program that will allow dairy farmers to contract forward on the 
milk that they are going to sell for manufacturing purposes. If we are, 
in fact, going to have a legitimate and comprehensive pilot program, we 
ought to expand it to all classes of milk. Why should we limit it 
solely to that milk that is going to be used for cheese or other 
manufacturing purposes? We ought to also be allowing the dairy farmer 
the option to manage his risk, if he is going to sell his milk to be 
used for fluid purposes; and that is what is at stake here, and that is 
why we ought to oppose Stenholm-Pombo, because I think it is important 
that as policymakers that we really do define what the appropriate role 
of Government is.
  How can we, in good conscience, say that the appropriate role of 
Government is to preclude dairy farmers from voluntarily entering into 
a contract with a processor of their choice? It just does not make any 
sense.
  So for all my colleagues that do not know a lot about dairy policy, 
that are listening, this is a very simple amendment. I ask my 
colleagues to oppose Pombo-Stenholm and support my amendment.
  I would also say that this is a measure that makes so much sense that 
all the dairy cooperatives in the United States already are using 
forward contracting. In fact, I have some letters here that are put out 
by Dairy Farmers of America that talk about the benefits of forward 
contracting. They say that the benefits of forward contracting is to 
protect profit margins. It establishes a known price for future 
production. It allows management of income in volatile markets.
  Now, if we have the dairy cooperatives of the United States that are 
already promoting to their producers the use of forward contractors 
why, again, would we as Members of Congress decide that it is 
inappropriate and it in fact should be illegal to allow dairy farmers 
to enter into a forward contract for the sale of fluid milk to a 
private processor? That makes no sense.
  Vote against Stenholm-Pombo. Vote for the Dooley substitute.
  Mr. POMBO. Mr. Chairman, I yield 2 minutes to the gentleman from 
Michigan (Mr. Smith).
  Mr. SMITH of Michigan. Mr. Chairman, I thank the gentleman from 
California (Mr. Pombo) for yielding me this time.
  Mr. Chairman, let me start out by saying if one supports co-ops, and 
most all of the dairy farmers in this country sell their milk through 
co-ops, then you should support the Stenholm-Pombo amendment.
  Eighty-seven percent of our milk in this country is sold through the 
cooperative system. The reason buyers of milk from the farmers would 
like us to vote down the Stenholm-Pombo amendment is simply because 
they can undercut the effectiveness of the cooperative to help farmers. 
What this amendment helps correct is an amendment passed in committee 
on a vote of 20 to 23, with 6 Members absent. A very close vote in 
committee. Some were convinced by the philosophical debate that the 
gentleman from California (Mr. Dooley) puts forward.
  It sounds good on the surface but what it does, is undercut the 
effectiveness of the co-ops by letting the manufacturers and the 
purchasers of the milk go around the co-op, to buy milk directly from 
the farmers. Thus they have better negotiating power with the co-op, by 
getting several farmers to leave the co-op and sell directly to the 
dairy by promises of benefits. A dairy that does not have to deal 
directly with the co-op for a significant amount of milk increases 
their bargaining power and reduces the co-op's ability to serve the 
majority of the people that they represent in getting a fair price for 
their milk.
  Help keep farmer cooperatives strong and vote against the Dooley 
secondary amendment and for Pombo-Stenholm.
  Mr. RYAN of Wisconsin. Mr. Chairman, I yield 2 minutes to the 
gentleman from Wisconsin (Mr. Green).
  Mr. GREEN of Wisconsin. Mr. Chairman, I thank the gentleman from 
Wisconsin (Mr. Ryan) for yielding time.
  Mr. Chairman, I rise in opposition to the Pombo amendment and in 
favor of the Dooley amendment. I believe that my dairy farmers should 
have the right to forward contracting with the processors. I believe 
that they have to have this tool to manage the risks of fluctuating 
prices. Those who support this amendment seek to, as my colleague just 
alluded to, reverse the results of the Committee on Agriculture.
  Secondly, I find it interesting that those who are supporting the 
Pombo

[[Page H8493]]

amendment say that farmers are vulnerable with respect to processors. 
That is interesting because farmers in Classes II, III, and IV can 
already engage in forward contracting. Apparently they are not 
vulnerable but somehow those in Class I are.
  It is also interesting that farmers are suddenly vulnerable with 
respect to the processors, but they are not vulnerable with respect to 
the co-ops. We heard in the debate on the previous amendment that they 
were not vulnerable with the co-ops; they had strengths with the co-ops 
in their bargaining. Suddenly they are vulnerable.
  Quite frankly, in response to the previous speaker, I am not worried 
about the large co-ops. I think the votes today prove that the large 
co-ops can take care of themselves very well. They do not need our 
protection. Our dairy farmers do.
  I think the ones who are really vulnerable today are the dairy 
farmers, not vulnerable with respect to the co-ops, not vulnerable with 
respect to the processors, but vulnerable with respect to us here 
inside the beltway as we seem poised to overturn the results of the 
August referendum and reimpose a Soviet-style system.
  Mr. STENHOLM. Mr. Chairman, how much time do I have remaining?
  The CHAIRMAN. The gentleman from Texas (Mr. Stenholm) has 6 minutes 
remaining.
  Mr. STENHOLM. Mr. Chairman, I yield myself 3 minutes.
  Mr. Chairman, I want to repeat some of what the gentleman from 
Michigan (Mr. Smith) mentioned a moment ago because he was right on 
target. If we ask any farmer today, and we are going to talk a lot 
about this over the next several days and weeks, about the problem we 
are having with the price we are receiving, now I have done a lot of 
analyzing of what can farmers do to enhance price and it comes down to 
a pretty simple question.
  Either we farmers, whether it is dairy we talk about today or whether 
it is fruit, vegetables, beef producers, hog producers, the only thing 
that producers can do is to bind themselves together in order that they 
might become an economic unit that can have market power in this 
tremendously changing marketplace.
  My dairymen at home are telling me, the large dairies are saying, if 
the Dooley amendment should pass, we will have no choice but to do what 
the advocates of this amendment want done: allow a few producers to go 
cut their own deals to the expense of everybody else. That can already 
be done. That is the American system. But why should we make it the 
legal system more than it already is? That is the fundamental question.
  The proponents of this amendment really honestly believe that is what 
they want to do and I respect that. I respect that, but then I come 
back to the problem of which we are going to be called on to spend 
billions of dollars in a few days supplementing the income of corn 
producers, rice producers, cotton producers, wheat producers. Why? 
Because the price is too low.

                              {time}  1230

  That is the fundamental choice; and why I point out to my colleagues, 
to those that want to forward contract under current law, they can 
already do so and they will be able to do so. It is called the future's 
market. Any producer that believes they would like to forward price 
because it is better may do so every day today. If one chooses to do 
that as an individual because one believes one can get a better price, 
one may do so.
  The problem with allowing one to do as this amendment suggests 
ignores the fact that our cooperatives play a very vital role for their 
dairy community that often gets overlooked by those who choose to 
contract out. It is called market balancing. Whenever one gets short-
term surpluses of milk in any given regional order, somebody has to 
take that and move it some place at whatever cost it takes. That is 
what gets overlooked if this amendment should pass in the form in which 
they propose it to those who oppose the amendment. It will do 
irreparable harm to the dairy industry's quest at price enhancement, of 
taking what we now have and allowing dairy farmers to work with the 
processors, not against them, to get more of the consumers' price into 
the dairy farmers' pockets.
  Mr. RYAN of Wisconsin. Mr. Chairman, I yield 2\1/2\ minutes to the 
gentleman from Wisconsin (Mr. Kind).
  Mr. KIND. Mr. Chairman, I thank my friend from Wisconsin for yielding 
me this time.
  Mr. Chairman, I rise today in opposition to the Stenholm amendment 
and in support of the Dooley amendment. I truly believe that if we 
really want to do everything we can to enable our dairy farmers to 
survive in current market conditions, we need to do two things, one of 
which is to allow us to move forward this reform from USDA that moves 
us to a more market-oriented pricing system rather than a government 
price-controlled system. Even though it is very incremental, it is a 
step in the right direction.
  The other important thing, we can do is to do everything within our 
power to empower the individual producer with more risk-management 
tools so that they have more control over their own destiny. There is a 
very important risk-management tool that is available to farmers that 
have the luxury of dealing with co-ops and that is called forward 
contracting. In fact, we have a pilot options program taking place 
right now in a variety of counties throughout Wisconsin that allow 
producers to enter into options or future contracts. The concept is 
simple. If they can lock in on a predictable price and a revenue return 
that they can rely upon, then they will not be subject to the vagaries 
of the marketplace and the wild, cyclical ride that we have seen 
throughout the dairy industry and throughout most of the agriculture 
industry, with drastic price fluctuations. This risk-management tool 
gives those individual producers who are willing to crunch their own 
numbers and determine what their individual cost of production is, to 
enter into private contracts placed on future prices.
  Now, if they know that their cost of production is say 11 bucks per 
hundred-weight and they can lock in on a future contract of 12 bucks 
per hundred-weight, they are going to be making a buck profit per 
hundred-weight. And that is a tool that our farmers in the region are 
just now starting to utilize. That is why I am in favor of the Dooley 
amendment. It would expand future contracting beyond cooperatives.
  I think we should be empowering these farmers regardless of the 
access they have to co-ops. There are many producers around the country 
that do not have access to co-ops. In Wisconsin, we have roughly a 
little more than 80 percent of our dairy farmers that do have co-ops 
that they can forward contract with. But there are roughly 20 percent 
that want to be able to do this with private entities, and that is more 
true in other parts of the region that do not have a lot of co-ops to 
join and forward contract with.
  So if we are really going to help our family farmers today, I would 
encourage my colleagues to oppose the Stenholm amendment, support the 
Dooley amendment, and allow forward contracting for producers, 
regardless of where they happen to be producing and regardless of 
whether or not they can join a co-op or deal directly with a private 
entity.
  Mr. RYAN of Wisconsin. Mr. Chairman, may I inquire as to the time 
remaining.
  The CHAIRMAN pro tempore (Mr. Gillmor). The gentleman from Wisconsin 
(Mr. Ryan) has 10\1/2\ minutes remaining; the gentleman from California 
(Mr. Dooley) has 6\1/2\ minutes remaining; the gentleman from Texas 
(Mr. Stenholm) has 3 minutes remaining.
  Mr. RYAN of Wisconsin. Mr. Chairman, I yield 2 minutes to the 
gentleman from Virginia (Mr. Goodlatte).
  Mr. GOODLATTE. Mr. Chairman, I thank the gentleman for yielding me 
this time.
  I rise in strong opposition to the Stenholm amendment and in support 
of the Dooley amendment. The Stenholm amendment is a bad idea. It takes 
away something that we just put into this legislation to give every 
dairy farmer in the country something they badly need to do.
  Farmers across the country complain about their inability to manage 
risk, to deal with the fluctuation in prices. Forward contracting 
allows them to do that. It allows processors to offer producers or 
their cooperatives a predetermined price for their milk over a 
specified period of time. Producers can voluntarily accept a price 
based on the

[[Page H8494]]

processor's offer or continue to pay prices based on Federal milk order 
prices set each month in their order. This is simply another risk-
management tool that should be offered to all farmers. There is nothing 
that says a producer must take a processor's offer or that he cannot 
continue to be paid for his milk the way his grandfather's father was 
paid. The forward contracting provisions in this bill are completely 
voluntary.
  The amendment to exclude fluid milk from the forward contracting 
provisions of this bill will leave the majority of my dairy-producing 
constituents without the same risk-management tools that others have. I 
represent a heavy Class I utilization area. I hear my farmers' 
complaints about price volatility very frequently. If they are not 
offered the same ability to forward contract as other dairy producers, 
they will be severely disadvantaged in their ability to manage their 
risk and lock in a price for their product.
  Dairy cooperatives can offer their producers forward contractors, but 
the Agriculture Marketing Agreements Act of 1937 severely limits 
proprietary processors from offering producers forward pricing. This 
legislation is necessary to enable all dairy processors, cooperative 
and proprietary alike, to offer forward contracts.
  Class I milk must be included in this bill's forward contracting 
provisions if we are to put the entire industry on an equal footing in 
helping farmers manage their operations profitably.
  Oppose the Stenholm amendment and support the Dooley amendment.
  The CHAIRMAN pro tempore. The Committee will rise informally.
  The SPEAKER pro tempore (Mr. Gutknecht) assumed the Chair.

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