June 25, 1999

The House Agriculture Subcommittee on Livestock heard dairy industry views on a bill to mandate an option for milk pricing under USDA's final rule on milk marketing order reform that ranged from "there is no crisis in the U.S. dairy industry" to "a dire economic situation for dairy producers" will result if no changes are made to USDA's final rule.

At issue is whether the so-called Option 1A should be mandated for marketing order reform. Many analysts say that option would mean more income for dairy producers than Option 1B that USDA included in its final rule.

E. Linwood Tipton, president and CEO, International Dairy Foods Association, told the panel "the future is bright for the U.S. dairy industry...1999 will be the year of the third highest milk prices on record," implying that no crisis exists for dairy farmers. If the final rule is modified, the result will be "unintended consequences for the dairy industry" and lead the industry "right back to Congress asking for more to be done."

Elwood Kirtpatrick, National Milk Producers Federation first vice president, wasn't nearly as optimistic. "Dairy farmers struggle to eke out a living from an enterprise that requires constant attention seven days a week year 'round." For most of the 1990s, dairy producers "have had a negative return for management and risk," he said.

Failure to mandate Option 1A, he added, "will lead to a dire economic situation for dairy producers. Don't force producers to live with a federal order program that reduces their income." USDA didn't have an easy job composing the final rule, he added, but "they did not make things any easier with their final decision."

Arthur S. Jaeger, assistant director, Consumer Federation of America, called the bill to mandate 1A "a mistake." USDA's final rule imposing 1B "was and is a step in the right direction. It benefits consumers by reducing regional price differentials, and it somewhat reduces the complexity of the federal milk pricing system."

Ray Souza, president, Western United Dairymen, said the 1B formula would have a negative effect on California's Class I (fluid) milk price. "We plead with this subcommittee to send to the full committee...language that contains the 1A mandate."

The witness who generated the most media attention was Minnesota Gov. Jesse Ventura. "It goes without saying that Option 1B, which represents modest reform by the USDA is the only of the two choices that Minnesota will accept," he told the subcommittee. He suggested transportation differentials be tied to the distance from Beaumont, TX, instead of Eau Claire, WI.

"If this sounds borderline ridiculous," he added, "it is no more so than the original law that designated proximity to Eau Claire which is only 83 miles from St. Paul, MN." And "there aren't any dairy cows in Beaumont." Minnesota dairy farmers would receive "1,100 miles worth of benefit from this move."