Dairy Farmers Continue to Milk US Consumers
November 15, 1999
America’s Milk Drinkers Can Expect To Pay An Extra $7 Billion Next Year On Dairy Products. Blame A Sour Deal In Congress
LEESBURG, Va — Earl Butz, secretary of agriculture under President Richard Nixon, once explained why federal dairy support is so profligate: “Every state has two senators and at least one dairy cow.”
Butz’s observation is as true today as when he made it roughly a quarter of a century ago.
A rotten back-room deal has been cut by Senate Majority Leader Trent Lott to renege on a 1996 congressional promise for reform of the federal milk marketing order system, which determines the farm price of milk in various regions of the country.
The reform plan, crafted by the Agriculture Department, was sought by Congress three years ago, and for good reason.
The milk marketing order system is a Depression-era dinosaur, a throwback to a time before telecommunications, interstate highways and refrigeration.
Last year, Congress granted dairy farmers $200 million in direct payments. This year the figure was $125 million. That comes to about $10,000 per dairy farm, on top of $100 million a year in federal payments under the dairy price support program.
The dairy industry receives this federal largess even in boom times. Dairy farmers’ incomes hit a record high last year. The net worth of the typical mid-size dairy farmer has grown 50 percent over the last three years.
Marketing orders guarantee a price difference for raw milk sold for processing into beverage milk. Under the law, the government calculates a base price for milk, to which a beverage milk “differential” premium is added. This differential is based on the distance of the dairy farm from Eau Claire, Wis.
Sen. Lott, a Republican from Mississippi, also seeks to preserve the Northeast Interstate Dairy Compact, a scheme under which New England dairy farmers receive yet another premium above the already existing milk marketing order system.
Under the compact, a commission of diary farmers and bureaucrats sets the minimum farm price that processors must pay for milk.
Despite being defeated in the Senate and never brought up in the House in 1996, the compact was added at the last minute to the final conference committee farm bill report and voted into law that year. It was intended to be a temporary measure to tide over New England dairy farmers while the Agriculture Department worked on the reform plan mandated by Congress.
Now Lott, in the eleventh hour of the current congressional session, is searching for a piece of legislation to which he can attach a permanent extension of the compact, even though it has never been explicitly approved by Congress.
The price of this sort of back-room wheeling and dealing is dear. New England consumers have already paid about $70 million more for milk over the past three years.
Higher prices for milk have cost school districts and the U.S. Women, Infants and Children program, despite promises in the original statue that those groups would be reimbursed.
Indeed, last month the compact voted not to provide the reimbursements but instead to distribute the money among dairy farmersùa shrinking pool of dairy farmers. Dairy farms, mostly smaller ones, have gone out of business 25 percent faster than before the dairy compact was put in place.
The compact has resulted in higher prices to consumers, especially the working poor. It has imposed new costs on schools and welfare programs. This underscores the political selfishness of Lott’s deal, and explains why it’s being made in the back rooms on Capitol Hill.
Lott also seeks to include a provision to block the marketing order reforms Congress called for in 1996.
If those reforms are stymied, it would mean an extra $2.8 billion in farm income for dairy farmers, according to Jerry Kozak, chief executive of the National Milk Producers’ Federation. The Agriculture Department estimates that as a result, consumers would pay $7 billion more next year for milk and dairy products.
That’s quite a grocery bill, Sen. Lott.
DAVE JUDAY, an adjunct fellow with the Hudson Institute’s Center for Global Food Issues, was former Vice President Dan Quayle’s chief agricultural adviser. His views are not necessarily those of Bridge News, whose ventures include the Internet site www.bridge.com.
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