[Congressional Record Volume 149, Number 145 (Thursday, October 16, 2003)]
[Extensions of Remarks]
[Page E2065]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




      ON THE INTRODUCTION OF DAIRY FORWARD CONTRACTING LEGISLATION

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                         HON. CALVIN M. DOOLEY

                             of california

                    in the house of representatives

                       Thursday, October 16, 2003

  Mr. DOOLEY of California. Mr. Speaker, today I introduced legislation 
to make permanent the authority for dairy producers and processors to 
have an important risk management tool known as forward pricing 
contracts. As the ranking minority member of the Agriculture 
Committee's subcommittee that has jurisdiction over dairy policy, I 
hope to move this legislation forward before the existing statutory 
authority expires next year. I am very pleased that my subcommittee 
chairman, Mr. Gutknecht of Minnesota, has joined me in introducing this 
legislation, along with 14 other of our colleagues.
  Forward pricing contracts allow farmers and their customers the 
opportunity to freely negotiate a long-term contract for the sale of 
their agricultural products at a fixed price. This risk management tool 
gives farmers greater predictability for income streams, which in turn 
allows for better management of farm and business operations.
  Buyers and sellers of many farm commodities rely heavily on forward 
contracts. According to a report by the GAO, forward cash contracting 
is the risk management tool most frequently used by producers outside 
the dairy sector. A majority of cotton (76 percent), corn (65 percent), 
and wheat (57 percent) producers use forward contracts to lock in their 
prices and revenue. Dairy producers have utilized this tool less, 
primarily because the legal requirements of the federal milk marketing 
order system have prevented dairy processors from offering this risk 
management tool to dairy farmers.
  In 1999, Congress decided to amend federal law to remove this 
impediment to dairy forward pricing contracts. A pilot program was 
established, allowing dairy producers and processors to enter into 
voluntary agreements for the sale of a set amount of milk for a fixed 
price over a specified period of time. These contracts are based on a 
negotiated price rather than the minimum price set monthly under 
federal milk marketing orders.
  The pilot program went into effect in July 2000, and is due to expire 
December 31, 2004. Although it has only been in place for a few years, 
it is an important tool for the dairy industry to have that deserves 
permanence. The bill that I introduced today would make this program a 
permanent authority and thereby ensure the availability of forward 
pricing contracts to any and all producers and processors who 
voluntarily want to use such a risk management tool.
  I hope my colleagues will join me in supporting this legislation and 
making it become law in the near future.

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