A34-Lanctsttr Farming, Saturday, Decamber 22, 1990
The Farm
JAMES FRAHER
Economist, Atlantic
Dairy Coop.
President Bush recently signed
into law the Food, Agriculture,
Conservation and Trade Act of
1990. This Act, also known as the
1990 Farm Bill, sets basic U.S.
dairy policy for the 1991-1995
period. The most important provi
sion of the bill is the establishment
of a $lO.lO per hundredweight
U.S. support price “floor” for milk
testing 3.67 percent butterfat. For
milk testing 3.5 percent butterfat,
the support price is $9.90 per hun
dredweight. This is the current
U.S. support price.
The establishment of a support
price floor of $lO.lO represents a
major change from the 1985 Farm
Bill. The Food Security Act of
1985 contained a “trigger” which
reduced the support price based on
Commodity Credit Corporation
(CCC) purchases of surplus dairy
products. In addition, the 1990
Farm Bill also changed the way
dairy surpluses are calculated. To
date, all such accounting has been
based on butterfat equivalents. As
a result, with heavy butter purch
ases in recent years and little or no
cheese or non-fat dry milk pur
chased, surpluses have looked
much larger than they were in
reality.
The new Farm Bill will substi
tute total solids for butterfat
accounting. The Act further pro
vides authority for the Secretary
of Agriculture to increase or
decrease the support price based
on surplus purchases, provided
that the price is not reduced below
$lO.lO per hundredweight.
For calendar years 1991-1995,
if purchases are greater than S bil
lion pounds total solids equiva
lent, the Bill calls for a support
price reduction of between 25
BINS & AUGERS
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Bill And Dairy Farmers
cents and 50 cents per hundred
weight. If removals are between
3.5 billion pounds and 5 billion
pounds, there is no change in the
support price. If removals are esti
mated at less than 3.5 billion
pounds, the support price will be
increased by at least 25 cents per
hundredweight In no case can the
support price be reduced below
$lO.lO per hundredweight
As has been the case in recent
years, the Farm Bill had to pass
strict “budget muster.” For the
first time, the 1990 Farm Bill lim
ited total annual expenditures for
surplus dairy products at the cost
of purchasing 7 billion pounds of
total solids equivalent. If annual
surplus purchases exceed the 7
billion pound “cap” during any of
the years 1991-1995, a uniform
assessment per hundredweight
will be charged to all U.S. produc
ers. The assessments will be equal
to the cost of purchases in excess
of 7 billion pounds.
The Farm Bill also provides a
vehicle for the development of an
“inventory management” prog
ram, to limit milk surpluses. By
Aug. 1. 1991, the Secretary of
Agriculture is to “prepare and sub
mit a report and recommenda
tions” to the House and Senate
Agriculture Committees on “milk
inventory management prog
rams.” USDA will be soliciting
supply management proposals
from the industry as part of this
study. This study will include a
review of two-tier pricing. Adop
tion of another “buy-out” program
is prohibited.
The Bill calls for “reform” of
the Minnesota-Wisconsin (M-W)
price series. USDA is currently
preparing a study of alternative
price formulas. By Oct 1, J 991, a
national Federal Order hearing
will be held to consider proposals
to replace the M-W with a new
price mover. U.S. support prog
ram. Currently, the state of Cali
fornia provides manufacturing
plants with processing margins
that are considerably greater than
those used by CCC. Given the
vague wording of this section of
important friendships that aRe the hue basis of
business Relationships. One of the gßeat pleasußes
of the holiday Season is the oppoßtunity to exchange
gßeetings with those whose friendship and goodwill aRe
valued so highly-
c 9n this spirit it is a pleasure to say '
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pleasant association enjoyed with you.
3\lay a blight and piospelous bling
happiness to you and to you\s.
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the Act. there are questions
regarding USDA’s ability to
enforce this provision.
The Bill also provides for the
possible establishment of a
“processor-funded promotion
program.” Any monies collected
under the program would be
generated by an increase in Class I
prices. The maximum rate of
funding is set at 20 cents per hun-
Sn the Rush of events, we tend to oveßlook the
and extend sincere appreciation for the very
dredwcight. Processor approval is
needed to implement the program.
In sum, the establishment of a
$lO.lO per hundredweight support
price floor represents a major
achievement for producers. As
significant, the establishment of a
ceiling on total Federal dairy
program costs signals producers
that needed income can only be
generated in the marketplace.
Dennis M. Herr