A32-Lancaster Fanning, Saturday, May IS, 1999
Many Issues Surround Northeast Dairy
(Continued from Page A3O)
authorizing the existing Daily
Compact provides for possible
expansion, should certain adjoin
ing states’ legislatures create spe
cific authorizing laws.
Pennsylvania remains the hold
out among those additional states
to create such Compact eligibility
laws. However, it appears likely
that the state Legislature will do
so, even if relunctantly, if the dairy
farming community and the farm
policy organizations continue to
request it.
New York State did so when
Compact authorizing law was
attatchcd at the last minute to legis
lation that provided salary
increases for the state’s legislators.
The original Compact legisla
tion was reported to have been
added to the 1996 Farm Bill
through political negotiation
as a trade-off for votes for other
legislation relating to a United
States’ senator’s bid in the pres
idential election and related feder
al campaign funding. That report
has never been refuted.
Numerous reports from lob
byists and federal lawmakers indi
this week were projected to con
tinue to be low.
However, fanner advocacy
organizations and national dairy
cooperatives have been urging for
the passage of Compact-eligibility
laws for Pennsylvania and the
other states, and also for the feder
al Legislature to reauthorize and
expand the Northeast Dairy Com
pact, as well as create the other reg
ional Compacts in the United
States.
The co-ops and organizations
claim that expanding the Compact
would bring “price stability" to
Northeast dairy producers.
It seems that despite the strength
of annualized average dairy prices,
the volatility of the monthly dairy
price under market conditions is
the reason dairy farmers arc going
out of business.
In other words, while the incom
c for the year may be greater than it
has been, the variability of month
ly cash flow at the farm from
high profit to high loss is hurt
ing dairy farmers because they
must pay most bills monthly, not
annually, and their businesses are
mostly not designed to save
extreme increases in cash flow to
use during periods of extreme
decreases in cash flow.
Furthermore, the modern
United States dairy industry eco
nomic system has developed in an
environment of a federal milk
marketing order pricing system
that continues to set values for
milk, milk components and dairy
products, rather than allowing the
industry to discover its own values
and demand for milk.
The transition away from gov
ernment producer price supports.
as well as competitive pressures to
increase productivity, have
resulted in a rapid pace of mergers
and consolidation in all sectors of
agriculture, including, and to some
extent especially, the dairy
industry.
Also adding to the confusion is
the fact that the USDA continues
to determine the value of milk, and
has recently announced a final
order changing the structure and
cate that reauthorization of the
Compact law is not popular in
Washington, even though legisla
tion has been introduced.
In recent months, however, Pen
nsylvania’s U.S. Sen. Arlen Spec
ter, R-Philadelphia, held a press
conference to announce his sup
port for expanding the Compact
Up until then, the consensus of
sentiment that seemed to be
expressed by the Pennsylvania del
egation to Washington was that the
federal government’s role in con
trolling the price of farm
commodities either through
national supply management or
through various production con
trol programs was over.
Since then, however, farm com
modity prices dropped across the
board, apparently in response to
devalued currencies of global trad
ing partners, surplus production,
and the failure of intended export
ffllkl
Compact For Pennsylvania
markets. According to published
reports and testimony presented at
hearings regarding low commodi
ty prices, product intended for
export instead has been marketed
domestically, adding to, or creat
ing, surplus and lower producer
prices.
The domestic dairy industry had
been the exception, with record
high prices received by producers
for much of 1998 and extending
briefly into 1999.
Li February, the market price for
dairy commodities dropped signif
icantly and resulted in a dramati
cally lower Basic Formula Price
(farmer prices respond with a two
month delay after the BFP level
moves up or down) that resulted in
an unexpected, signficant decrease
Where's your mustache? “
in milk value.
Especially since then, political
lobbying efforts have strengthened
considerably to promote passage
of Compact legislation.
The issue is controversial and
somewhat confusing.
Agricultural economists have
forcast that 1999 dairy prices
should represent the third highest
average price ever. At the same
time, feed prices have been lower
than they have been for years, and
mechanisms by which it assigns
milk values.
Dairy and other farmer political
organizations have already begun
lobbying the U.S. Legislature to
create a law changing the final
order.