MISCONCEPTIONS CONCERNING S-889
1. The Secretary of Agriculture does not set the milk price for dairy farmers. The price will be established by using the pricing formula contained in S-889. The Secretary will make adjustments four (4) times a year based on economic conditions.
2. S-889 is not a dairy bill just for Pennsylvania or the Northeast. S-889 includes dairy farmers all across the United States (all are suffering).
3. The Bill does not discriminate against or favor any particular size dairy operation. The supply management provision covers all dairy farmers. If production exceeds the real market needs, then those who overproduce may pay an extra cost.
4. There appears to be a misunderstanding about the 3 million pound provision in S-889. The Bill states that a new producer may produce up to 3 million pounds of milk during his first year (and only during his first year) before he would be subjected to the milk supply management provision.
5. There are absolutely no quotas in S-889.
6. National cost of production is used in S-889 and not regional cost of production because several attempts already have been made to persuade Congress to implement regional dairy programs. They were all shot down by the US Congress with the last one being the Northeast Dairy Compact.
7. Presently, all manufactured milk in the federal orders is priced the same way, and, basically, the price is the same. No one is complaining about the fact that the current miserable price is the same in all markets. In May 2004, the Class III price was $20.58 per cwt. In July 2007, the Class III price was $21.38 per cwt. Again, at neither time did I hear any complaints raised that some regions were benefiting more than others. Now, with the introduction of S-889, with its new pricing formula that is geared to treat all US dairy farmers equally and fairly, we are hearing allegations that some regions will benefit more than others under this Bill. Let’s get real! This is a phony argument trumped up to kill S-889 by discrediting the Bill’s purpose.
Humanly and realistically, there is no possibility of establishing a dairy bill that satisfies everyone!
An examination of the projected pay prices that dairy farmers would be expected to receive in the federal orders as well as in California under S-889 reveals that “The Federal Milk Marketing Improvement Act of 2009” (S-889) is as fair as it can get.
Remember that dairy products are a national market. Processors in the Southwest and California need to pay as much for their milk as the processors do in the Midwest and in the Northeast—not more, but just as much.
To clarify important details relating to S-899, the following summary of the bill should prove helpful:
1.) ALL milk produced in the United States will be priced on the national average cost of producing milk on the dairy farms.
2.) ALL milk used for fluid purposes will be classified as Class I.
3.) ALL milk used for manufacturing purposes will be classified as Class II.
4.) The Class II price will be the national average cost of production. This price will be uniform in all federal and state orders as well as unregulated areas. The Class I price will be determined by using the Class II price plus the existing Class I differentials that are currently in place in each federal order. The state of California and other unregulated areas will be assigned a Class I differential by the US Secretary of Agriculture.
5.) ALL Federal and State Milk Marketing Orders will remain intact. Each Milk Marketing Order will be responsible for determining the component value of milk.
6.) S-889 prohibits any cost of operating milk manufacturing plants (commonly called “Make Allowance”) to be levied on dairy farmers.
7.) The U. S. Secretary of Agriculture will adjust the value of milk four times a year.
8.) S-889 calls for an inventory supply management program. The program is aimed at preventing a build up of domestic milk products and prevents foreign milk products from destroying dairy farmer prices.
9.) The inventory management program can not be implemented unless the imports and exports of dairy products are in balance.
10.) ALL dairy farmers will fund the inventory management program. If and only if the program is necessary, then all dairy farmers will receive a lower price on up to 5% of their production. This price will be half of the value of manufactured milk. However, the dairy farmers will receive the correct price on 95% of their milk. Please remember if the inventory management program is not implemented, then the dairy farmers will receive the full price. Also, the U. S. Secretary of Agriculture may decide that only a reduction of one or two percent of total production may be sufficient.
11.) If this reduction is insufficient to reduce excess production, the Secretary may reduce the price for producers who have increased production over the previous year. This reduction only applies to the volume of increased production.
12.) A new producer may produce milk up to 3 million pounds in the Milk Marketing Order he is regulated under before he is subject to the provisions of the inventory management program described in point “11.” This relates only to his first year.
13.) The intent of S-889 is not to tell dairy farmers how much milk they can produce. However, over-production will be addressed in the inventory management program.
14.) An inventory management program is necessary to prevent a small amount of milk from forcing $20.00 per hundredweight milk down to $12.00 per cwt.
15.) The beauty of S-889 is that this bill will be farmer-funded and will NOT cost the USDA any direct cost. The dairy farmer’s reward for funding the bill (if necessary) is for the first time the dairy farmers will receive fair/stable prices for his/her efforts.
16.) Rejection of proposed FMMO amendments will not result in the elimination of the FMMO.
17.) S-889 allows milk hauling charges to be levied on dairy farmers. The cost of production figures by the USDA pick up the hauling charges. Again, the dairy farmers’ hauling costs are in the cost of production figures.
Let’s stop the squabbling and get something done and done soon for all our dairy farmers.
.
Federal Milk Marketing Improvement Act of 2009 (Introduced in Senate)
S 889 IS
111th CONGRESS
1st Session
S. 889
To amend the Agricultural Adjustment Act to require the Secretary of Agriculture to determine the price of all milk used for manufactured purposes, which shall be classified as Class II milk, by using the national average cost of production, and for other purposes.
IN THE SENATE OF THE UNITED STATES
April 23, 2009
Mr. SPECTER (for himself and Mr. CASEY) introduced the following bill; which was read twice and referred to the Committee on Agriculture, Nutrition, and Forestry
A BILL
To amend the Agricultural Adjustment Act to require the Secretary of Agriculture to determine the price of all milk used for manufactured purposes, which shall be classified as Class II milk, by using the national average cost of production, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Federal Milk Marketing Improvement Act of 2009'.
SEC. 2. PRICES RECEIVED FOR MILK UNDER MILK MARKETING ORDERS.
Section 8c(5)(B) of the Agricultural Adjustment Act (7 U.S.C. 608c(5)(B)), reenacted with amendments by the Agricultural Marketing Agreement Act of 1937, is amended--
(1) in the first clauses (i) and (ii), by inserting `(based on the blended price of all milk covered by the order)' after `uniform prices' each place it appears; and
(2) in clause (b) of the matter following the first clause (ii), by inserting `and the component value' after `quality'.
SEC. 3. CLASS II MILK PRICING.
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 by adding at the end the following:
`(P) CLASS II MILK PRICING-
`(i) MINIMUM PRICE- The Secretary shall base the minimum price for Class II milk on the average cost of producing all milk in the 48 contiguous States, as determined by the Economic Research Service of the Department of Agriculture in accordance with clause (ii) (referred to in this subparagraph as the `national average cost of production').
`(ii) NATIONAL AVERAGE COST OF PRODUCTION- For purposes of this subparagraph, the national average cost of production shall equal the national average of the operating cost and the allocated overhead cost of producing all milk.
`(iii) SURVEY- For purposes of clause (ii), the Secretary shall survey producers and associations of producers subject to Federal and State milk marketing orders and in all unregulated areas applicable to all milk.
`(iv) PRICE ANNOUNCEMENT-
`(I) IN GENERAL- Not later than November 1 of each calendar year, the Secretary shall announce the minimum price for Class II milk for the next calendar year, as determined in accordance with clause (i).
`(II) ADJUSTMENTS- Using the most currently available national average cost of production, the Secretary shall adjust the price announced under subclause (I) for a calendar year on April 1, July 1, and October 1 of the calendar year.
`(v) BASIC FORMULA PRICE-
`(I) IN GENERAL- The Secretary shall use the Class II milk price announced under clause (iv) as the basic formula price for all Federal and State milk marketing orders and all unregulated milk production areas.
`(II) CLASS I MILK-
`(aa) IN GENERAL- The price of Class I milk in all Federal and State milk marketing orders and all unregulated milk production areas shall be equal to--
`(AA) the basic formula price under subclause (I); plus
`(BB) the applicable Class I milk differential under Federal and State milk marketing orders.
`(bb) UNREGULATED AREAS- For purposes of item (aa)(BB), the Secretary shall assign comparable Class I milk differentials to each unregulated area.
`(vi) ESTIMATION OF ANNUAL MILK PRODUCTION AND DOMESTIC CONSUMPTION- Not later than November 1 of each calendar year and taking into consideration the import projections for all milk products, the Secretary shall estimate the quantity of all milk to be produced in the 48 contiguous States and marketed by producers for commercial use during the next 12 months.
`(vii) INVENTORY MANAGEMENT PROGRAM-
`(I) IDENTIFICATION AND DETERMINATION OF DAIRY PRODUCTS-
`(aa) IN GENERAL- Not less frequently than once each quarter, the Secretary shall--
`(AA) identify each dairy product (including cheeses, curds, butter, butterfat, butter oil, buttermilk, anhydrous milk fat, dairy spreads, milk, cream, concentrated milk, condensed milk, milk powder, yogurt, ice cream, whey, whey protein concentrate, milk protein concentrate, milk protein isolate, casein, caseinates, lactose, food preps containing milk, and milk chocolate) imported into, or exported from, the United States; and
`(BB) determine the quantity of raw milk contained in each such product.
`(bb) INCLUSIONS- In identifying dairy products under item (aa)(AA), the Secretary shall include any current or projected future import of a product used for dairy, a dairy substitute, or ingredient, including any product that does not have the status of `generally recognized as safe', as determined by the Commissioner of Food and Drugs.
`(II) MILK PRODUCTION TOTALS- Not later than February 1 of each calendar year, the Secretary shall determine the total quantity of all milk produced by each producer or farming operation during the preceding calendar year.
`(III) EXCESS PRODUCTION DETERMINATION- Not more than once every 2 months, if the Secretary, acting through the Commodity Credit Corporation, has purchased the maximum quantity practicable of excess milk and milk products, the Secretary may determine whether an excess quantity of milk and milk products is being produced for the national domestic market.
`(IV) REDUCTION IN PRICE RECEIVED-
`(aa) IN GENERAL- Subject to item (bb), if the Secretary determines under subclause (III) that there is excess production, the Secretary may provide for a reduction in the price received by producers for not more than 5 percent of all milk produced in the 48 contiguous States and marketed by producers for commercial use.
`(bb) LIMITATION- The Secretary shall not provide for a reduction in the price received by a producer under item (aa) unless the Secretary determines that there exists a positive trade balance in dairy products described in subclause (I)(aa)(AA) that are imported into, or exported from, the United States, based on--
`(AA) dollar value; and
`(BB) the quantity of milk represented by exports, as determined under subclause (I)(aa)(AA).
`(V) AMOUNT- The amount of the reduction under subclause (IV) in the price received by producers shall not exceed half the minimum price of Class II milk.
`(VI) ADDITIONAL REDUCTION- If the Secretary determines that the reduction described in subclause (IV) is insufficient to reduce excess production, subject to subclauses (VII) and (VIII), the Secretary may reduce the price received by any producer or farming operation that--
`(aa) produces more than 3,000,000 pounds of milk in a calendar year; and
`(bb) has increased the production of all milk in a calendar year, as compared to the immediately preceding calendar year.
`(VII) APPLICATION- A reduction in price under subclause (VI) shall apply only to the quantity of milk produced in excess of the quantity of milk produced during the previous calendar year.
`(VIII) NEW PRODUCER EXCEPTION- A new producer, as defined by the Secretary, shall--
`(aa) during the 1-year period beginning on the date on which the new producer commences operation, be exempt from any applicable price reduction relating to the first 3,000,000 pounds of milk produced by the new producer; and
`(bb) after that 1-year period, be subject to each price reduction that applies to existing producers.
`(IX) APPEALS- A producer subject to an additional reduction under subclause (VI) may appeal to the Federal or State milk marketing administrator to provide evidence that the producer did not increase production in the calendar year that the reduction was in effect when compared to the immediately preceding calendar year.
`(X) EXTRAORDINARY CIRCUMSTANCES- In deciding an appeal under subclause (IX), a Federal or State milk marketing administrator may take into consideration production losses due to severe weather conditions or severe disease outbreaks.
`(XI) COLLECTION- Except as provided in subclause (XII), reductions in price required under subclause (IV) or (VI) shall be collected by Federal and State milk marketing administrators and timely remitted to the Commodity Credit Corporation to offset the cost of purchasing excess milk products.
`(XII) COLLECTION IN UNREGULATED AREAS- Reductions in price required for unregulated areas under subclause (IV) or (VI) shall be collected by the Secretary and timely remitted to the Commodity Credit Corporation to offset the cost of purchasing excess milk products.
`(viii) PROHIBITION ON CERTAIN CHARGES- In carrying out this Act, the Secretary shall not impose charges on producers for the cost of the conversion of raw milk to manufactured products.
`(ix) RESPONSIBILITIES OF MILK PURCHASING HANDLERS- A milk handler that purchases milk from a producer shall assume title for the milk at the time at which the milk is pumped into a milk truck provided by or otherwise delivered to the milk handler.
`(x) APPLICABILITY- This subparagraph applies to all producers and handlers of milk in the 48 contiguous States.'.
SEC. 4. AMENDMENTS TO FEDERAL MILK MARKETING ORDERS.
Section 8c(17) of the Agricultural Adjustment Act (7 U.S.C. 608c(17)), reenacted with amendments by the Agricultural Marketing Agreement Act of 1937, is amended by adding at the end the following:
`(H) ORDERS COVERING MILK AND MILK PRODUCTS- In the case of an order covering milk or milk products, disapproval of an amendment to the order shall not be considered to be disapproval of--
`(i) the order; or
`(ii) other terms of the order.'.