[Congressional Record Volume 146, Number 8 (Thursday, February 3, 2000)]
[Senate]
[Page S316]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                 DAIRY

  Mr. GRAMS. Mr. President, I take this opportunity to address concerns 
about the direction our country is taking in agriculture policy for our 
Nation. It has been very frustrating to me that our Federal dairy 
policy has been driven by what I can only describe as urban myths about 
the supposed benefits of dairy compacts in our country. These myths, 
just like stories on the street, have been repeated so many times in 
Congress that they are assumed to be true, despite their total lack of 
a factual basis.
  I would today like to discuss the myth that dairy compacts are 
necessary to provide an adequate supply of fresh, locally produced milk 
to consumers. As I have said before, I believe this assertion is a 
deliberate attempt to mislead consumers into believing that if we do 
not have compacts, there may not be milk in the dairy case the next 
time they go to the grocery store. Perhaps the statement is not a total 
deception because it says that the dairy compact is designed to 
guarantee fresh, locally produced milk. But as we enter the 21st 
century, we as consumers know that a product in the grocery store does 
not have to be produced locally to be ``fresh.'' If it is produced 
locally, all the better, but we regularly go to the grocery store and 
buy fresh, perishable food that comes from all over the United States, 
including fruits, vegetables, meats, poultry, and any of a number of 
other foods. Similarly, fresh milk and dairy products can now be safely 
and rapidly shipped all over the country in refrigerated trucks--there 
is no need to restrict interstate trade in our country to guarantee 
fresh milk to our consumers.
  One of the reasons that America thrives economically is because we 
allow individuals to produce what they are most skilled at producing. 
And this principle extends to geographic regions of the country. As an 
example, Americans buy most of their citrus products from Florida and 
California, cotton and rice from the South, and potatoes from the West. 
Economists call this ``comparative advantage''--regions produce and 
sell whatever they are most efficient at producing, and everyone 
benefits because trade and efficiency is maximized. Lower price; better 
products to the consumer. It all seems very simple, but it is not 
allowed to work that way in our dairy industry.
  The upper Midwest, due in part to its climate, low feed prices, and 
an abundant water supply happens to have a comparative advantage in 
milk and dairy products. However, unlike the rest of the country, it is 
not permitted to freely sell the product that it so efficiently 
produces. Instead, Congress has chosen to protect entire regions of the 
milk industry against competition from the upper Midwest through dairy 
compacts and/or outdated milk marketing orders.
  Basically, in dairy, the Government is picking winners and losers, 
not who can produce the best, not who can be competitive, what area of 
the country it is. But under a Government program, the Government is 
saying who is a winner and who is a loser when it comes to the dairy 
industry.
  Dairy compacts require that processors pay a minimum price for the 
milk they sell for fluid consumption. Compact proponents will claim 
that producers outside the compact region are not prevented from 
selling into the region, but for all practical purposes, this is 
exactly what it does. If you have a floor price, it eliminates the 
ability of lower cost producers to sell in that region. There is no 
incentive for processors to buy from producers outside the region 
because the price they pay is already set. So they are not able to buy 
at the lower price or more competitive supply, but because of the 
compact setting the price, that is where they buy it.

  It is interesting that the argument that compacts are necessary to 
guarantee a supply of fresh milk to a region was also made to justify 
the unreasonably high support prices in the 1980s that resulted as you 
will remember, in massive government purchases of surplus dairy 
products. The Federal Government spent $2.6 billion on surplus 
purchases in 1983 alone, more than 12 percent of U.S. milk production. 
Congress consequently had to begin a dairy termination program which 
paid dairy farmers not to produce milk for 5 years.
  Congress today is perpetuating the same myths as in past years, with 
the same predictable results of producer surpluses and higher milk 
prices to consumers. Upper Midwest producers could sell cheaper milk to 
consumers almost nationwide, but instead, not only can they not compete 
for markets outside the region, but their prices in cheese markets are 
depressed by the oversupply of production in the compact region that 
flood into the Midwest.
  Finally, it appears that not only are dairy compacts not necessary to 
guarantee a fresh supply of milk to consumers, but they seem to only 
offer Government protection to dairy farmers within the compact area 
and guarantee decreased consumption by families due to the high milk 
prices. If something costs more, you sell less of it, and milk is no 
different. For example, in 1998, each consumer drank an average of 23.8 
gallons of fluid milk products. That is compared to 56.1 gallons of 
soft drinks, 15 gallons of fruit juices, and 14 gallons of bottled 
water. Moreover, beverage milk consumption declined from 28.6 gallons 
in 1975 to 23.9 gallons in 1997. This is not a trend we can ignore. If 
we went to encourage milk consumption, we cannot do so by artificially 
raising the price and keeping less expensive, domestically produced 
milk out of the market.
  As we begin the second session of the 106th Congress, I ask my 
colleagues to be truthful in the dairy debate and not perpetuate the 
falsehood that compacts are necessary to ensure a fresh supply of milk 
to consumers. There are, unfortunately, other dairy myths to be 
exposed, so you can look forward to me returning to the Senate floor to 
make sure Congress and the American people learn the truth about our 
Federal dairy policy.
  We need some fairness in our dairy policy.
  I thank the Chair, and I yield the floor.
  The PRESIDING OFFICER. The Senator from North Dakota.

                          ____________________