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Alternatives to the National Cheese Exchange As Part of the Dairy Pricing System S. HRG. 105±131 ALTERNATIVES TO THE NATIONAL CHEESE EXCHANGE AS PART OF THE DAIRY PRICING SYSTEM HEARING BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE ONE HUNDRED FIFTH CONGRESS FIRST SESSION SPECIAL HEARING Printed for the use of the Committee on Appropriations ( U.S. GOVERNMENT PRINTING OFFICE 42±397 cc WASHINGTON : 1997 For sale by the U.S. Government Printing Office Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 COMMITTEE ON APPROPRIATIONS TED STEVENS, Alaska, Chairman THAD COCHRAN, Mississippi ROBERT C. BYRD, West Virginia ARLEN SPECTER, Pennsylvania DANIEL K. INOUYE, Hawaii PETE V. DOMENICI, New Mexico ERNEST F. HOLLINGS, South Carolina CHRISTOPHER S. BOND, Missouri PATRICK J. LEAHY, Vermont SLADE GORTON, Washington DALE BUMPERS, Arkansas MITCH MCCONNELL, Kentucky FRANK R. LAUTENBERG, New Jersey CONRAD BURNS, Montana TOM HARKIN, Iowa RICHARD C. SHELBY, Alabama BARBARA A. MIKULSKI, Maryland JUDD GREGG, New Hampshire HARRY REID, Nevada ROBERT F. BENNETT, Utah HERB KOHL, Wisconsin BEN NIGHTHORSE CAMPBELL, Colorado PATTY MURRAY, Washington LARRY CRAIG, Idaho BYRON DORGAN, North Dakota LAUCH FAIRCLOTH, North Carolina BARBARA BOXER, California KAY BAILEY HUTCHISON, Texas STEVEN J. CORTESE, Staff Director LISA SUTHERLAND, Deputy Staff Director JAMES H. ENGLISH, Minority Staff Director SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES THAD COCHRAN, Mississippi, Chairman ARLEN SPECTER, Pennsylvania DALE BUMPERS, Arkansas CHRISTOPHER S. BOND, Missouri TOM HARKIN, Iowa SLADE GORTON, Washington HERB KOHL, Wisconsin MITCH MCCONNELL, Kentucky ROBERT C. BYRD, West Virginia CONRAD BURNS, Montana PATRICK J. LEAHY, Vermont TED STEVENS, Alaska ex officio Professional Staff REBECCA DAVIES MARTHA SCOTT POINDEXTER GALEN FOUNTAIN (Minority) Administrative Support C. RACHELLE GRAVES-BELL (II) 2 CONTENTS Page Opening remarks of Senator Cochran .................................................................... 1 Statement of Senator Specter ................................................................................. 2 Statement of Senator Kohl ...................................................................................... 3 Statement of Senator Feingold ............................................................................... 3 Prepared statement .......................................................................................... 6 Alternative price for cheese free from manipulation ............................................ 9 Establishing a price floor ........................................................................................ 10 Statement of Hon. Dan Glickman, Secretary of Agriculture ............................... 11 Prepared statement .......................................................................................... 15 Seasonal-base plans ................................................................................................. 19 Cheddar cheese prices ............................................................................................. 35 Milk marketing orders ............................................................................................ 39 Statement of Alan T. Tracy, secretary, Wisconsin Department of Agriculture .. 41 Governor's Task Force on Cheese Pricing ............................................................. 42 Cheese Pricing: A Study of the National Cheese Exchange ................................. 51 Task force recommendations ................................................................................... 75 Prepared statement of Alan T. Tracy ..................................................................... 78 Status of the National Cheese Exchange ............................................................... 79 Statement of Harold J. Howrigan, president, St. Albans Cooperative Cream- ery, Inc .................................................................................................................. 83 Prepared statement .......................................................................................... 84 National survey of cheese prices ............................................................................ 89 Statement of Arden Tewksbury, manager, Progressive Agricultural Organiza- tion ........................................................................................................................ 90 Prepared statement .......................................................................................... 93 Statement of Kenneth E. Zurin, dairy farmer ....................................................... 97 Prepared statement .......................................................................................... 98 Statement of Buckey M. Jones, board of directors, Mid-America Dairymen, Inc .......................................................................................................................... 98 Prepared statement .......................................................................................... 101 Statement of Bill Brey, president, Wisconsin Farmers Union ............................. 103 Prepared statement .......................................................................................... 106 Price of cheese long-term solution .......................................................................... 108 Statement of E. Linwood Tipton, president and CEO, International Dairy Foods Association ................................................................................................. 110 Prepared statement .......................................................................................... 113 Statement of Edward T. Coughlin, acting CEO, National Milk Producers Federation ............................................................................................................. 119 Prepared statement .......................................................................................... 122 Request to establish price floor .............................................................................. 122 Submitted questions ................................................................................................ 126 (III) (III) ALTERNATIVES TO THE NATIONAL CHEESE EXCHANGE AS PART OF THE DAIRY PRIC- ING SYSTEM THURSDAY, MARCH 13, 1997 U.S. SENATE, SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES, COMMITTEE ON APPROPRIATIONS, Washington, DC. The subcommittee met at 2:38 p.m., in room SD±138, Dirksen Senate Office Building, Hon. Thad Cochran (chairman) presiding. Present: Senators Cochran, Specter, Bumpers, Kohl, and Leahy. Also present: Senator Santorum. CONGRESSIONAL WITNESSES OPENING REMARKS OF SENATOR COCHRAN Senator COCHRAN. The subcommittee will please come to order. We are pleased today to convene a meeting of the Agriculture Appropriations Subcommittee for the purpose of reviewing the De- partment's plans for dairy pricing. This hearing is being held at the request of the distinguished Senator from Pennsylvania, Senator Specter, who, during our hear- ing with the Secretary of Agriculture on the subject of the Presi- dent's budget request, asked if we would schedule this special hear- ing to discuss the alternatives to the National Cheese Exchange as a part of the dairy pricing system. I was happy to consent to that request, and today we are here keeping our commitment to hold a hearing on this subject. We ap- preciate very much Senators' attendance at the hearing, the Sec- retary of Agriculture's attendance, and that of others who we have asked to be here today to help us better understand the alter- natives and the options available to the Government on this very important issue. Let me point out, too, that we have problems in Mississippi and across the South with dairy pricing formula issues. While not spe- cifically the subject of the hearing the milk marketing orders and seasonal base plans are an integral mechanism to encourage milk producers to even out their seasonal milk production over the year. The authorization for these plans was not included in the Fed- eral Agriculture Improvement and Reform [FAIR] Act, and we are concerned about that. We understand there are some witnesses who will be here to discuss this, and we hope the administration (1) 2 will work hard to address this problem as it endeavors to make needed changes to the dairy program. At this point I am going to yield to my distinguished colleagues here on the committee for any opening statements they may have, and then we will proceed to hear from our first witness, Senator Feingold. Senator Specter. STATEMENT OF SENATOR SPECTER Senator SPECTER. I thank you very much, Mr. Chairman, and thank you for convening this hearing as you have stated we would when we heard earlier from the Secretary of Agriculture on our regular appropriation hearing. In my judgment, there is a real crisis in the milk industry today, with prices being so very low. The formula is determined with an input from cheese, and for every 10 cents the price of cheese goes up, the price of milk per hundredweight goes up by $1. There are some indications that the price of cheese which has been estab- lished is not the realistic fair market price. It is determined by the Wisconsin Cheese Exchange, and without getting into any of the details as to how that exchange functions, suffice it to say that it may not be the accurate market price in the country. Secretary of Agriculture Glickman traveled to
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