A36-Lancaster Farming, Saturday, April 24, 1299
Senate Approves Dairy Compact Legislation
(continued from Page A 1)
Officially, the Senate bill still
needs to be sent to the House Ag
Committee by House leadership,
before the committee can review
it
The Northeast Interstate Dairy
Compact is a multi-state trading
agreement originally intended
only for the six New England
states, that was authorized by the
1996 Farm Bill.
The 1996 Farm Bill set up for
the removal of the federal govern
ment from its 50-year role in mani
pulating the market availability
and thus the market values of agri
cultural commodities, and setting
up producer-support prices and
programs.
The purpose for federal support
programs was to ensure the availa
bility of reasonably affordable
foods to Americans, as well as to
maintain an adequate commodity
production sector.
While the dairy industry never
demonstrated consensus on what
federal policy should be for itself
(during a series of meetings held
across the nation that resulted in no
consensus, and regional and indus
try sector differences), for the most
part the mainstream sector sup
ported removal of federal pricing.
(Some who now support the
expansion of the Dairy Compact
and the creation of other similar
Compacts around the nation have
said that the reason the dairy indus
try wanted to be free of the federal
government in the early 1990 s was
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because, at the time, dairy farmers
were being assessed monies by the
federal government that were used
to help pay down the national defi
cit, as well as provide a disincen
tive to expansion. That program
ended with the 1996 Farm Bill.)
Federal government support
programs were also targeted for
removal because they posed barri
cades to international trade negoti
ations in achieving free markets
for United States' agricultural
commodities.
World market prices of various
agricultural commodities have
been kept artificially low for years
as a number of nations sought to
maintain certain domestic agricul
tural sectors, if not all in-country
agrarian production and cultures.
(A commonality in many
nations’ protectionistic programs
for agricultural overproduction is
essentially that the surplus is pur
chased by the government,
removed from domestic supplies,
and offered at a discount to the
world.)
The strategy has been shown to
temporarily maintain domestic
production and standards of living,
as long as the burden to the rest of
the economy isn’t overwhelming,
but the strategy of protectionism
has not been shown to be a satis
factory plan for long-term
stability.
The Northeast Interstate Dairy
Compact was achieved in the 1996
Farm Bill because of a trade-off of
interests, and because Vermont’s
U.S. Sen. Patrick Leahy argued
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that the Northeast states a defi
cit dairy production region was
not a major producer of milk or
dairy products, had natural disad
vantages to dairy farming and was
losing dairy farmers at a rapid rate,
which not only hurt the North
east’s rural agricultural business
sectors, but the region's tourism
industries as well.
In the meantime, the methods
employed by the federal govern
ment to arrive at a value for milk
has resulted in extreme volatility in
producer prices.
Furthermore, despite two of the
past three years providing all-time
record dairy producer prices, and
1999 projected to provide the third
all-time highest average producer
price (even with the dramatic drop
in price early this year), those
prices are averages, and dairy far
mers don’t generally operate on
annual averages, but monthly cash
flows.
Farmer income can be measured
in many different ways, depending
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upon the length of time discussed,
and whether it be in terms of cash
flow to meet debit payment
demand or in annual total revenues
compared to outlays.
Dairy farmers, unlike other agri
cultural sectors, have not been
familiar with risk management and
techniques for dealing with
extreme fluctuations in cash flow.
Earlier this year, the federal
government followed through
with the introduction of its pilot
program to offer dairy farmers a
virtually risk-free opportunity to
learn bow to use dairy futures put
options as a form of “crop insur
ance" to prevent extreme drops in
prices received, such as is current
ly happening.
However, farmer participation
was less than desired.
In the meantime, Pennsylvania
has become a center for political
pressure for support of the North
east Compact
In order for Pennsylvania, New
York, New Jersey, Maryland, and
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certain other states to join the
Northeast or a new Southern Com
pact and/or Pacific Compact, the
federal Legislature would have to
pass legislation authorizing such.
For, the Northeast Interstate
Dairy Compact, if Pennsylvania
would not join, it could isolate
Maryland from being contiguous
and being eligible, should the fed
eral political body favor expansion
and reauthorization of the
Compact
New York’s Legislature
approved Compact enabling legis
lation last year, when it was tied
into a pay raise for the Legislature
and offered in late hour dealings.
While some Compact reauthori
zation and expansion legislation
has been introduced at the federal
level for consideration, it is per
ceived to not be a political
imperative.
What has been grabbing nation
al attention has been the military
(Turn to Pag* A 37)
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