[Congressional Record Volume 146, Number 76 (Friday, June 16, 2000)]
[Senate]
[Pages S5290-S5291]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE DAIRY INDUSTRY
Mr. GRAMS. Mr. President, I will take a few minutes this morning to
talk about an industry that is very important to the State of
Minnesota, and that is our dairy industry.
June is National Dairy Month, and I come to the floor today to pay
tribute to the family farmers who rise early every morning to supply
fresh milk to our Nation. We as consumers assume there will always be
dairy products in our grocery stores, without considering the hard work
that is a daily requirement to get them there.
I grew up on a dairy farm myself, and I can remember those early
morning milkings before going to school and again, of course, when I
got home. I don't take for granted the hard work required of dairy
farmers to make a living. Unfortunately, for Minnesota dairy producers,
it is becoming harder
[[Page S5291]]
and harder just to make a living. The dairy compact in New England,
which sets a price floor for that region, is spurring overproduction
that is spilling over into the Midwest and is depressing the price
received by Minnesota farmers.
Previously, I have come to the floor to address the false claims that
dairy compacts somehow are necessary to ensure a consistent supply of
milk to certain areas of the country, and also the assertion that dairy
compacts save small family farms. Today, I want to turn to the claim
that the overproduction that results from dairy compacts does not
impact producers in noncompact regions of the country.
It is basic economics that if you want more of a particular commodity
produced, then you should subsidize its production. And it follows that
if you want more milk produced, you set a floor price for it, and the
volume of production will predictably expand. This may initially sound
somewhat harmless, but the overproduction from dairy compact States has
to go somewhere. It is currently going into noncompact markets for
milk, cheese, butter, and powder, and that is mainly the Midwest. Dairy
producers within the Northeast Compact currently receive a floor price
of $16.94 per hundredweight for beverage milk, and you could never run
enough ``Got Milk?'' commercials to increase beverage consumption in
the Northeast Compact region sufficient to offset the excess production
that results from this minimum price. So the consequence is that the
excess flows into the markets traditionally served by noncompact
producers--or, basically, dairy farmers in the Midwest--driving down
the prices that our dairy farmers receive because of the oversupply of
milk.
To provide some context, upper Midwest dairy farmers largely produce
for cheese markets. Approximately 86 percent of the milk produced in
the Midwest goes into the production of cheese. I come from a State
that has a comparatively small population and, thus, only a small
portion of the milk produced by dairy farmers in Minnesota is consumed
as a beverage. Our dairy farmers' livelihood depends on the income they
receive in the cheese markets. The current price they receive is being,
again, driven down, depressed by the influx of milk coming in from New
England, again, because of the compact and the floor price for milk
there that results from an artificially high compact price.
Following implementation of the compact back in 1997, New England
milk production and milk powder production has increased rapidly in
response to these higher prices--just, again, basic economics. New
England milk production actually rose more than three times the rate of
growth in production in the United States as a whole. So dairy farmers
in New England were producing milk at a rate three times faster in
growth than the rest of the country. This increased production in New
England, combined with falling milk consumption in the region due to
the higher consumer prices--again, basic economics; you drive the price
up, you get less purchases--set in place by the compact, again,
resulted in regional surpluses that have been converted to milk powder.
In fact, in the first year of the compact, New England powder
production soared by 43 percent, which accounted for most of the
increase in U.S. powder production during that year. The combination of
increased production and lower milk consumption in the compact States
due to higher prices, again, has created milk surpluses. That drives
down milk prices for farmers outside of the New England compact. So it
is directly hurting farmers in the Midwest. It also floods national
markets with nonbeverage dairy products that compete with dairy
products produced outside of the compact region.
A January 1999 University of Missouri study found that higher milk
production and less milk consumption in an expanded Northeast Dairy
Compact and a new Southern Compact would cost farmers outside of those
compact States a minimum of $310 million a year. So the dairy farmers
who are having a hard time making a living right now would find their
milk checks down $310 million a year.
A May 1999 University of Wisconsin study found that the cost to
farmers outside of the Northeast and proposed Southern Compact States
would be at least $340 million a year. Again, these are tough times for
Minnesota dairy farmers, and they cannot afford to lose that kind of
income over and above what the compact States are already taking away
from them. As I have said before, compacts are a zero-sum game, and all
the income benefits that the large producers in New England derive come
out of the pockets of consumers--low-income consumers, of course, are
hit the hardest--and also producers in the noncompact regions. The
mailbox price--actual income farmers get for their milk--was $1.87 per
hundredweight higher in December of 1999 in the compact region than in
Minnesota.
The expansion of the compacts to the southern region of the country
would put the cartels in half of the States, exponentially magnifying
what happened in New England, making the problem worse than what it is
today. New England has only 3 percent of the U.S. milk production, and
the proposed Northeast and Southern Compacts would cover nearly 40
percent of U.S. milk production. The thought of how this unprecedented
expansion of the cartel would affect producers in my State and how it
would affect the prices consumers pay only increases my resolve to
fight compact expansion and work for revocation of the current compact.
It would be a tremendous cost to taxpayers in the form of higher costs
for school lunch programs and other food nutrition programs. It could
also lead to higher Government storage costs and maybe even another
round of a dairy buyout program--a cost that could run into the
millions, if not billions, of dollars.
If you are concerned about returning some sanity to our dairy
markets, then I ask you to join me as a cosponsor of the Dairy Fairness
Act, S. 916, which repeals the Northeast Dairy Compact. Compact
supporters can't win in an honest debate on the floor, so we are
continually subjected to the end-of-the-session arm-twisting going on
in conferences to keep this cartel alive. That is how the compact got
started in the first place, when the 1996 farm bill was held hostage in
committee until the compact was added.
We need to work for a national dairy policy that is fair to all
producers, not one that artificially expands production in one portion
of the country, which directly impacts the price received in other
areas of the country. Again, the notion that compacts don't adversely
impact producers outside the region is another dairy myth that must be
put to rest if our country is to move toward a national dairy policy,
again, that is fair to all producers.
As we celebrate National Dairy Month, I hope Congress will gain new
resolve to create a dairy policy that is not based on ``robbing Peter
to pay Paul,'' which is what is done when you cut through the rhetoric.
It is the fundamental principle undergirding the concept of dairy
compacts.
I yield the floor.
The PRESIDING OFFICER. The Senator from Alaska is recognized.
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