[Congressional Record (Bound Edition), Volume 146 (2000), Part 8]
[Senate]
[Pages 11165-11166]
[From the U.S. 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

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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 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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