N.E. Dairy Compact Commission Sets Management
VERNON ACHENBACH JR.
Lancaster Farming Staff
MONTPELIER, Vt. - In
about two weeks, details of a prop
osal for a supply management
program for dairy producers in the
Northeast Interstate Dairy Com
pact region are to be published in
the Federal Register.
Also to be published ate details
for Northeast Dairy Compact
Commission meetings, and hear
ings about the proposed program,
set for July 7 at the Eastern State
Exposition in West Springfield,
Massachusetts, and August 4 at the
Northern Stage Opera House, in
White River Junction, Vermont.
The Compact Commission is a
group of delegates from the six
New England states enjoined in the
Constitutionally authorized North
east Dairy Compact
The Commission meetings are
to be held at 1 p.m. at the sites, and
they are to be the Commission’s
tegular monthly meetings.
The hearings follow the meet
ings on the same day, and they
should be of interest to Compact
producers and others, because they
have been especially scheduled for
7 pjn., in an attempt to attract testi
mony from actual daily producers.
A Commission official said this
was done because the Commission
considers it has had a lack of direct
input from actual farmers, and for
months has had plenty of testi
mony from representatives of
dairy cooperatives, dealers, politi
cal organizations and related
groups, especially with respect to
the supply management proposal.
Accenting to Kenneth Becker,
executive director of the Compact
Commission, when the Commis
sion met the first week in June to
consider a condensed-proposal for
a supply management system, it
put off acting on the proposal until
later in the year.
Becker said that the “commis
sioners want to tweak the
proposal.”
As it was, the proposal would
institute an assessment on each
100 pounds of milk sold by a Com
pact producer. At the end of the
marketing year, those farmers who
s,om Augers
Galvanized • Carbon • Stainless
AUGER INSTALLATIONS
✓ In feedlots
✓ In drying systems
✓ Commercial applications
✓ At feedmills or elevators
✓ Around poultry & dairy barns
✓ At your gram bins or bulk tanks
✓ Replacement Augers for feed
mixers and farm equipment
Manufactured by
auf tfr
kept their production stable (no
more than 1 percent increase) geta
refund of their assessment. Those
who increased production lose
their assessment. Those who
decrease production get a tegular
refund, plus a bonus refund on
each 100 pounds of decreased
production. , ,
hi essence, the proposal creates
goals of no-growth and reduced
production for the Compact
producers.
While just short of an explicit
quota system, the proposal is con
sidered a form of a quota system by
many.
This has provided much concern
for those in Pennsylvania who
have been considering the adop
tion of legislation to allow Pen
nsylvania to join in the N£. Com
pact should the U.S. Congress
expand its borders and extend its
life.
Started in 1997, the Compact
had an original termination of date
of April 1, that was extended to
Oct. 1, 1999.
hi its brief time of operation, it
has provided additional income
support for New England dairy far
mers (as well as some New York
and Pennsylvania farmers), but has
also been attracting more milk than
it needs.
Milk received by processing
plants within the Compact region
qualifies for Compact payments.
Even if the milk is then “diverted”
for use outside of the Compact reg
ion, it gets priced at the Compact
level.
Last fall, the Commission
adopted a rule limiting the amount
of milk that a processing plant
could divert and still receive the
Compact price.
As far as can be determined, in
brief, this was done because the
Commission didn’t want a situa
tion that could foster the deliberate
shipment of unwanted milk to a
Compact processing plant merely
to draw a higher price for the milk.
Depending on the ownership of
tire processing plant, the motiva
tion to do so is considered a
possibility.
When that is done, it dilutes the
I n |
ars automatic farm systems I
!• 717-274-5333 ' '
iar 9e Stock of o
U-TROUGHS
Standard Auger Specifications
Tube Gauge
Flight Thickness
3/16"
3/16”
250
BuVHr
850
RPM
Caf[lls Jor Custom Specifications
f t
i r* t r 4 » 1 f♦ r r
HAMMER MILLS
for Grinding High Moisture & Dry Grains
Features
• Low Initial cost
• Low maintenance
> Low operating coat
• Easy serviceability
• 360' screen
• Reversible hammers 6 screens
• Compact design
• Heavy duty plate magnet
• Dust tight enclosure
• Removable wear plate
• Self locking door latches
1/4”
3/16”
Manufactured by.
3000
2000
Rovendale Ag
Watsoniown PA
717-538-9564
Keystone Mills
Romulus NY
315-549-8226
A.N. Martin
Grain Systems
Clyde NY
315-923-9118
'/.V ViV'-Vc I jil
value of the milk, and thus the far
mer price, for all within the
Compact.
That problem of increased
diversions of milk was exacer
bated with increased milk produc
tion' within the Compact
Testimony was presented to the
Commission that the increased
milk production was in response to
favorable milk-making conditions,
not a widespread expansion of, or
increase in, dairy herds within the
Compact.
The temporary overage resulted
in Compact farmers being required
to pay the USDA Commodity Cre
dit Corporation to remove low val
ue dairy product to boost the value
of fluid milk.
It has been feared by many that
the Compact, by offering a guaran
teed price, could result in a more
rapid demise of small herd family
farms.
It is reasoned that such a guaran
teed price could attract invest
ments to fund large-herd dairy
facilities that could outsupply and
outperform long-time small dairy
farms.
However, in markets with no
return on investment guarantees,
there is greater risk to investment.
Logic and histoiy indicate that gre
ater risks are more likely assumed
by individuals rather than large
financial groups.
Reduced return on investment
risk has changed poultry and swine
production investment sources,
and essentially the production
industry in those meat production
sectors.
Hie Compact concept is to sta
bilize the dairy industry, not stimu
late its growth or change the nature
of the production industry.
Hie N.E. Compact specifically
was instituted to stabilize small
herd family farming in the New
England states.
What has become tricky with
the Compact pricing system is
similar to problems experienced
fay the USDA during its admi
nistration of its defunct
program designed to provide a
minimum milk price to farmers in
order to keep them in business
Grinds Finer than
Roller Mills.
automatic farm systems
Contact your nearest Matter Mill dealer listed below.
Marvin
Zimmerman
Oakland Mills PA
717-463-9731
Nlesley Feed
Equipment
Willow Slraat, PA
717-786-/654
Star Silo
Myaralown pa
717-866-5708
until market prices, recovered to
profitable levels.
Here’s the concept, as under
stood by Lancaster Farming : The
Compact Commission sets a mini
mum retail price on milk used as
beverage milk, in an attempt to
provide a fair systetn for compen
sation for product to consumers
and fanners within the Compact
system.
If too much milk is made, or
shipped in, then, for some of the
farmers, their pay will drop below
the cost of production, no matter
what floor price is set by the
Commission.
That is to serve to curtail in
compact production.
However, it doesn’t appear as
though that is enough of a tool to
deal with the teal world.
On top of that, the complicating
aspects of the current United States
milk marketing and pricing system
ate many, and they affect the abili
ty of the Compact Commission to
keep the system simple and fair.
Hie federal government sets the
value of milk after considering the
current market value of manufac
tured dairy products.
For example, when the USDA
determines the current price to be
paid to a farmer for his milk, it con
siders the current open trading
market price of cheese on national
exchanges and then uses that
price as a major factor in determin
ing the current value of fluid milk
(and thus the farmer price).
For the farmer and anyone else
without cheese processing com
pany records, trying to match up
the value of cheese with the price
paid for the milk used to make that
cheese is impossible.
Forget trying to determine the
value of the milk used to make the
cheese whose current market value
determines the current value of
milk, etc.
Hie perceived assumption used
in establishing cheese as a fluid
milk price mover is that cheese use
Big Valley
Repair Service
Bftllevllfe, PA
717-935-5051
Wltmer
Implement
Shlppansburg, PA
717-532-6139
Zelset
Equipment
Manheim, PA
717-665-4056
Cedar Crest Equip.
Lebanon, PA
717-270-6600
Martin Equip. Co.
Chambeisourg. PA
717-263-3505
Harold’s Equip.
Dundee OH
330-893-2348
Beaver Creek
Farms
NewEmerpnse PA
814-766-3239
Hearings
represents a regular use of surplus
fluid milk, therefore, low-priced
cheese represents greatly exces
sive fluid milk.
Thus tied together in a pricing
formula, the government attempts
to stabilize the dairy industry by
creating a supply-and-demand
cyclical relationship based on two
relationship assumptions:
1. Low priced cheese creates
low priced milk to the farmer and
reduces the milk supply; that
results in less excessive milk pro
duced, less cheese being made, and
thus causes increases in the price
of cheese, which then increases the
price of milk, etc.
2. Increases in the price of milk
stimulates increases in milk pro
duction, while decreases in milk
price cause decreases in milk
production.
However, real world
influences primarily the deci
sions made by people within the
dairy industry tend to break
down the relationships.
For example, for years some
dairy farmers have testified atvari
ous hearings that they increase
dairy production in response to
receiving low milkprices (to main
tain cash flow to pay bills), and
others have testified that they have
increased production in response
to higher prices (to exploit profit
able opportunities).
Because the price the farmer
receives for his milk is calculated
after the fact, and because he has
no direct control over how it is
being marketed, he can’t know
how much he will receive, but he
can know how much he spends to
make it
In the competitive battle to con
trol market supply, the trend has
been to high-numbered animal
operations of thousands of cows.
California, and non-traditional
daily states have seen the most
nnTirVi summer discount on
W 0 111/ li AGLIME - JUNE, JULY, & AUGUST
ISajiflß Hb
■HHI
(Turn to Pago A 29)