[Congressional Record Volume 147, Number 7 (Monday, January 22, 2001)]
[Senate]
[Pages S377-S378]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FEINGOLD:
  S. 105. A bill to amend the Agricultural Adjustment Act to prohibit 
the Secretary of Agriculture from basing minimum prices for Class I 
milk on the distance or transportation costs from any location that is 
not within a marketing area, except under certain circumstances, and 
for other purposes; to the Committee on Agriculture, Nutrition, and 
Forestry.


                           dairy legislation

  Mr. FEINGOLD. Mr. President, I rise today to offer a measure which 
will serve as a first step towards eliminating the inequities borne by 
the dairy farmers of Wisconsin and the upper Midwest under the Federal 
Milk Marketing Order system.
  The Federal Milk Marketing Order system, created nearly 60 years ago, 
establishes minimum prices for milk paid to producers throughout 
various marketing areas in the U.S. For sixty years, this system has 
discriminated against producers in the Upper Midwest by awarding a high 
price to dairy farmers in proportion to the distance of their farms 
from Eau Claire, Wisconsin.
  This legislation is very simple. It identifies the single most 
harmful and unjust feature of the current system, and corrects it.
  Under the current archaic law, the price for fluid milk increases 
depending on the distance from Eau Claire, Wisconsin, even though most 
milk marketing orders do not receive any milk from Wisconsin.
  The bill I introduce today will prohibit the Secretary of Agriculture 
from using distance or transportation costs from any location as the 
basis for pricing milk, unless significant quantities of milk are 
actually transported from that location into the recipient market. The 
Secretary will have to comply with the statutory requirement that 
supply and demand factors be considered as specified in the 
Agricultural Marketing Agreement Act when setting milk prices in 
marketing orders. The fact remains that single-basing-point pricing 
simply cannot be justified based on supply and demand for milk both in 
local and national markets.
  This bill also requires the Secretary to report to Congress on 
specifically which criteria are used to set milk prices. Finally, the 
Secretary will have to certify to Congress that the criteria used by 
the Department do not in any way attempt to circumvent the prohibition 
on using distance or transportation cost as basis for pricing milk.
  This one change is so crucial to Upper Midwest producers, because the 
current system has penalized them for many years. By providing 
disparate profits for producers in other parts of the country and 
creating artificial economic incentives for milk production, Wisconsin 
producers have seen national surpluses rise, and milk prices fall. 
Rather than providing adequate supplies of fluid milk in some parts of 
the country, the prices have led to excess production.
  The prices have provided production incentives beyond those needed to 
ensure a local supply of fluid milk in some regions, leading to an 
increase in manufactured products in those marketing orders. Those 
manufactured products directly compete with Wisconsin's processed 
products, eroding our markets and driving national prices down.
  The perverse nature of this system is further illustrated by the fact 
that since 1995 some regions of the U.S., notably the Central states 
and the Southwest, are producing so much milk that they are actually 
shipping fluid milk north to the Upper Midwest. The high fluid milk 
prices have generated so much excess production, that these markets 
distant from Eau Claire are now encroaching upon not only our 
manufactured markets, but also our markets for fluid milk, further 
eroding prices in Wisconsin.
  The market distorting effects of the fluid price differentials in 
federal orders are manifest in the Congressional Budget Office estimate 
that eliminating the orders would save $669 million over five years. 
Government outlays would fall, CBO concludes, because production would 
fall in response to lower milk prices and there would be fewer 
government purchases of surplus milk. The regions which would gain and 
lose in this scenario illustrate the discrimination inherent to the 
current system. Economic analyses show that farm revenues in a market 
undisturbed by Federal Orders would actually increase in the Upper 
Midwest and fall in most other milk-producing regions.
  While this system has been around since 1937, the practice of basing 
fluid milk price differentials on the distance from Eau Claire was 
formalized in the 1960's, when the Upper Midwest arguably was the 
primary reserve for additional supplies of milk. The idea was to 
encourage local supplies of fluid milk in areas of the country that did 
not traditionally produce enough fluid milk to meet their own needs.
  Mr. President, that is no longer the case. The Upper Midwest is 
neither the

[[Page S378]]

lowest cost production area nor a primary source of reserve supplies of 
milk. In many of the markets with higher fluid milk differentials, milk 
is produced efficiently, and in some cases, at lower cost than the 
upper Midwest. Unfortunately, the prices didn't adjust with changing 
economic conditions, most notably the shift of the dairy industry away 
from the Upper Midwest and towards the Southwest, specifically 
California, which now leads the nation in milk production.
  Fluid milk prices should have been lowered to reflect that trend. 
Instead, in 1985, the prices were increased for markets distant from 
Eau Claire. USDA has refused to use the administrative authority 
provided by Congress to make the appropriate adjustments to reflect 
economic realities. They continue to stand behind single-basing-point 
pricing.
  The result has been a decline in the Upper Midwest dairy industry, 
not because they can't produce a product that can compete in the market 
place, but because the system discriminates against them. Today, 
Wisconsin loses dairy farmers at a rate of more than 5 per day. The 
Upper Midwest, with the lowest fluid milk prices, is shrinking as a 
dairy region despite the dairy-friendly climate of the region. Other 
regions with higher fluid milk prices are growing rapidly.
  In an unregulated market with a level playing field, these shifts in 
production might be fair. But in a market where the government is 
setting the prices and providing that artificial advantage to regions 
outside the Upper Midwest, the current system is unconscionable.
  I urge my colleagues to do the right thing and bring reform to this 
out-dated system and work to eliminate the inequities in the current 
milk marketing order pricing system. I ask unanimous consent that the 
text of the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 105

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

     SECTION 1. LOCATION ADJUSTMENTS FOR MINIMUM PRICES FOR CLASS 
                   I MILK.

       Section 8c(5) of the Agricultural Adjustment Act (7 U.S.C. 
     608c(5)), reenacted with amendments by the Agricultural 
     Marketing Agreement Act of 1937, is amended--
       (1) in paragraph (A)--
       (A) in clause (3) of the second sentence, by inserting 
     after ``the locations'' the following: ``within a marketing 
     area subject to the order''; and
       (B) by striking the last 2 sentences and inserting the 
     following: ``Notwithstanding subsection (18) or any other 
     provision of law, when fixing minimum prices for milk of the 
     highest use classification in a marketing area subject to an 
     order under this subsection, the Secretary may not, directly 
     or indirectly, base the prices on the distance from, or all 
     or part of the costs incurred to transport milk to or from, 
     any location that is not within the marketing area subject to 
     the order, unless milk from the location constitutes at least 
     50 percent of the total supply of milk of the highest use 
     classification in the marketing area. The Secretary shall 
     report to the Committee on Agriculture of the House of 
     Representatives and the Committee on Agriculture, Nutrition, 
     and Forestry of the Senate on the criteria that are used as 
     the basis for the minimum prices referred to in the preceding 
     sentence, including a certification that the minimum prices 
     are made in accordance with the preceding sentence.''; and
       (2) in paragraph (B)(c), by inserting after ``the 
     locations'' the following: ``within a marketing area subject 
     to the order''.
                                 ______