Progressive Agriculture Organization

  S 1645 IS

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.

August 6, 2009

Mr. SPECTER introduced the following bill; which was read twice and referred to the Committee on Agriculture, Nutrition, and Forestry

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.

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--

(2) in clause (b) of the matter following the first clause (ii), by inserting `and the component value' after `quality'.(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

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 and export 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 all dairy products (including cheeses, curds, butter, butterfat, butter oil, buttermilk, anhydrous milk fat, dairy spreads, milk, cream, concentrated milk, condensed milk, nonfat dry milk powder, whole milk powder, skim milk powder, all other forms of powdered milk, yogurt, ice cream, whey, whey powder, dried whey, whey protein concentrate, all other forms of whey products, 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 imports or exports 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 of milk and milk products as required by law to administer programs including child nutrition programs (as defined in section 25(b) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1769f (b)), feeding programs administered by the Secretary of Defense, institutional programs, and any other mandated Federal food or feeding programs, the Secretary shall 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 imports and 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 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;

`(bb) in the case of any milk produced in excess of 3,000,000 pounds during that 1-year period, be subject to each price reduction described in subclauses (IV), (V), and (VI); and

`(cc) after that 1-year period, be subject to each price reduction that applies to existing producers.

`(IX) APPEALS-

`(aa) IN GENERAL- 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.

`(bb) SUBMISSION OF APPEAL- A producer that ships to an unregulated milk handler may submit any appeal of the producer to the Secretary or to the designated representative of the Secretary.

`(X) EXTRAORDINARY CIRCUMSTANCES- In deciding an appeal submitted by a producer under subclause (IX), a Federal or State milk marketing administrator (or, in the case of an appeal under subclause (IX)(bb), the Secretary or the designated representative of the Secretary) shall take into consideration production losses due to, at a minimum, fire, 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.

`(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:

`(i) the order; or

`(ii) other terms of the order.'.

`(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-

END

    July 13, 2009

Guest Editorial by Arden Tewksbury, Manager, Pro Ag

 COMPARING SPECTER-CASEY DAIRY BILL WITH DAIRY PRICE STABILIZATION PROGRAM

It’s time for all dairy farmers to take a hard look at various dairy proposals being offered on their behalf.

S-1645, “THE FEDERAL MILK MARKETING IMPROVEMENT ACT OF 2009”

The Specter-Casey Dairy Bill, S-1645, (“The Federal Milk Marketing Improvement Act of 2009”), is still generating much discussion around the country judging by calls we and others are receiving. Many individual dairy farmers are strongly supporting S-1645. In addition, the National Family Farm Coalition, the National Farmers Organization, and the National Farmers Union have all endorsed the Specter-Casey Dairy Bill. The endorsements by these national organizations have given significant credence to the Bill.

The Specter-Casey Dairy Bill includes some of the following provisions:

1.)    The value of milk on our dairy farms will be determined by the national average cost of production as determined by the Economic Research Service (ERS) of USDA.

2.)    The Bill eliminates any reference to the Chicago Mercantile Exchange (CME) as a method of determining milk prices paid to dairy farmers.

3.)    The Bill contains an inventory management program which will be paid for by dairy farmers and will not be using taxpayers’ money.

4.)    The Bill mandates that the US Secretary of Agriculture must be sure that the imports of dairy products do not exceed the amount of dairy exports before he can use the inventory management program. In other words, dairy farmers will not be required to balance the national supply of milk if there is interference from an accelerated amount of dairy imports. This includes imported milk protein concentrate (MPC) and casein.

5.)    If an amendment to a given federal order receives a negative vote during the referendum process, the Specter-Casey Bill protects the continuation of the federal milk marketing order and will not allow the negative vote to terminate the federal order.

6.)    The Specter-Casey Bill would be administered by the US Secretary of Agriculture as is currently the case. However, this Bill mandates that the Secretary carry out all provisions of the Bill, instead of the present system which leaves many of his responsibilities loose-ended.

7.)    The Specter-Casey Bill continues all federal and state milk marketing orders.

8.)    The Specter-Casey Bill encourages new dairy farmers to enter the dairy business. Any new producer, for the first year of production, would be exempt from any possible costs of the inventory management up to the first 3 million pounds of production. Starting the second year, that farmer would be treated the same as the other producers.

9.)    The Specter-Casey Bill allows appeals from dairy farmers (regarding the inventory management program) who endure extreme hardships.

THE DAIRY PRICE STABILIZATION PROPOSAL

A former name for the “Dairy Price Stabilization Program” was the “Growth Management Program.” It was apparently developed by the California-based Milk Producers Council along with someone from Cornell University. The proposal was probably drawn up to control the so-called burdensome supplies of milk in California. Some people, but definitely not all of us, have forgotten that, many years ago, certain processors built particular manufacturing plants with the main purpose of selling the dairy products to the Commodity Credit Corporation (CCC).

Our concerns about this proposal are the following:

1.)    There is no new milk pricing formula for dairy farmers in this proposal. Evidently, the proponents of this program are still supporting using the Chicago Mercantile Exchange to start the milk price.

2.)    The proposal completely ignores the dairy farmers’ cost of production.

3.)    The proposal ignores the difference of the price of milk in unregulated areas.

4.)    The proposal does not allow dairy farmers to recover their milk hauling cost (or really any cost for that matter).

5.)    This proposal does not address the real problem of imported dairy products, especially milk protein concentrate and casein.

6.)    The proposal mandates that a new start-up producer must pay anywhere from $2.00 per cwt to $3.00 per cwt on all milk he produces. This will certainly not encourage new farmers in most parts of the US.

7.)    The proposal allows all producers to increase their production by 2% to 3% each year. Any production produced by any dairy farmers over the allowable amount will trigger a penalty that will obligate the farmers to pay up to $3.00 per cwt on all their production. This could mean that large, corporate-backed farms might be the only ones who could afford the increased production.

8.)    The proposal makes no determination of who will be responsible for purchasing extra milk.

9.)    The program seems to indicate that the “MILC” program will still be used.

10.) The proposal is definitely a “base” program.

So do you dairy farmers want a program that covers your cost of production like the Specter-Casey Dairy Bill, S-889, or do you want a proposal like the “Dairy Price Stabilization Program” that might be dependent on the “MILC” payments  while it assesses new producers stiff fees to buy their way into the market?

The choice is yours.

In summary, since 1981, dairy farmers have been driven out of business, not by their choice and not by poor management on their farms, as certain self-proclaimed experts like to assert, but by low raw milk prices. The milk prices  farmers need to stay in business have been artificially reduced by acts of Congress signed by Presidents to accommodate ill-advised global trade agreements drafted to replace fresh local milk and dairy products with imports. This is still the policy being advanced in Washington today. It is this policy that is responsible for the elimination of the strong rural economic infrastructure that used to make up dairy communities across our entire country.

Again, dairy farmers, the choice is yours.