TESTIMONY BEFORE SENATE JUDICIARY COMMITTEE
AS GIVEN BY JAMES F. BEATTY
Thank you Chairman Leahy, Ranking Member Hatch and members of the Committee for inviting me here today to discuss Dairy Compacts.
These are 5 points that should be considered when evaluating the effects of dairy compacts.
1. The proposed legislation includes consumers on dairy compact commissions. Therefore, any dispute over the level of price between producers and processors will be settled by consumers.
2. Milk production contributes a substantial economic impact and tax base in many rural areas in the states petitioning for formation/extension of dairy compacts. These states would like to use compacts as a tool for maintaining these contributions.
3. Dairy compacts regulate fluid milk prices at the farm only. Therefore, the ability to generate dairy farmer income is determined by the volume of fluid sales in the compact area and the level of compact price determined with input from consumers. A compact should help encourage milk produced in other parts of the country to come into the Southeast region when it is needed to supply the market.
4. The proposed legislation does not prevent the flow of milk, raw or packaged, into the compact region nor does it restrict the flow of money out of that region. The farmer who produced any milk sold as fluid milk in the compact region receives the revenue generated, regardless of his location.
5. The key question in the debate over fluid milk compacts is: should a substantial portion of the milk consumed as fluid be produced relatively close to the site of consumption? Twenty-five states have decided, through their state legislatures, the answer to that question is yes. That is the reason those states are petitioning this congress for permission to use a dairy compact as a tool in achieving that goal. Ten additional states are concerned enough that they are considering their need for compacts.
The U.S. dairy industry is constantly transporting ever increasing amounts of milk over increasing numbers of miles to supply fluid markets. At present, dairy farmers in the Southeast share in the cost of procuring and transporting supplemental milk. The dairy farmers contribution will cease if local production ceases.
Production capacity in the Southeast United States, Table 1, has deteriorated to the point that further decreases will push production below the point of no return. The loss of the critical mass necessary to maintain efficient support industries (milk hauling, feed, milking equipment, custom forage production) would lead to unbearably increased costs of production and marketing.
Production in the states of Louisiana, Mississippi, Alabama, Georgia, Florida, North Carolina and South Carolina was 5.7 billion lbs. less than required to supply the fluid markets in 1996. Regional production continues to decrease while consumption increases and supplemental supplies are farther and farther away. Texas, Missouri, Kentucky and
Tennessee, who have traditionally provided supplemental supplies, have lost 16-26% of their production since 1995 (Table 1). The loss of production in Texas has been primarily in east Texas, and more recently in central Texas, leaving remaining supplies farther west. For Louisiana, Mississippi and Alabama this means the reserve supply is farther away and is more likely to be needed to supply consumers where it is produced.
Production trends in the Southeast U.S. prove prices have not been high enough to maintain supply(Table I). This down trend in production has continued even as farm milk prices reached record levels in 1996, set new records in 1998, and approached 1998 levels in 1999. These events occurred in spite of grain prices, the major factor affecting the cost of milk production, which have been extremely low since 1997. This is the case in most of the states east of the Rockies. (Table I, II and III).
Prudent consideration of recent and current milk production trends strongly suggests that the downward trend in production east of the Rocky Mountains should be slowed before it becomes irreversible. Are we are willing to commit to producing all or a very substantial portion of the milk needed for fluid consumption in a few states in the very northern and western regions of the country.
Is a decision to produce all milk in those areas where on-farm costs are lowest and routinely transport very large volumes of fluid milk very long distances a sound economic decision?
Will that decision remain
economically sound in the future?
Are we giving proper consideration to current and future transportation costs?
Four lbs. of concentrate feed will produce 10 lbs. of fluid milk. Should the feed be transported rather than the milk? Transporting the feed is a lot cheaper.
Again, the key question in the debate over Fluid Milk Compacts is; will a reasonable amount of the milk consumed as fluid be produced relatively close to the site of consumption in the future? Doing so has served U.S. consumers very well for over 60 years.
If the milk production capacity in large areas of the country is destroyed, the cost of regenerating it in the future will be astronomical.
Prepared by: James F. Beatty
LSU AgCenter
Southeast Research Station
P.O. Drawer 567
Franklinton, LA 70438
Ph: (985)839-2322
Email: jbeatty@agctr.lsu.edu
TABLE I
MILK PRODUCTION 1ST QUARTER 1995 VS 2001
Southeast U.S.
|
STATE |
1ST QTR[1] 2001 Production Million LBS |
LBS. [2] CHANGE Million LBS |
% CHANGE 95VS01
|
% CHANGE /YEAR |
|
ALABAMA |
86 |
-52 |
-38 |
-6 |
|
ARKANSAS |
125 |
-64 |
-34 |
-6 |
|
FLORIDA |
666 |
-17 |
-2 |
0 |
|
GEORGIA |
387 |
-46 |
-11 |
-2 |
|
KENTUCKY |
426 |
-86 |
-17 |
-3 |
|
LOUISIANA |
184 |
-74 |
-29 |
-5 |
|
MARYLAND |
347 |
-2 |
-1 |
0 |
|
MISSISSIPPI |
148 |
-53 |
-26 |
-4 |
|
MISSOURI |
517 |
-185 |
-26 |
-4 |
|
N. CAROLINA |
299 |
-81 |
-21 |
-4 |
|
OKLAHOMA |
326 |
-7 |
-2 |
0 |
|
S. CAROLINA |
99 |
-9 |
-8 |
-1 |
|
TENNESSEE |
350 |
-112 |
-24 |
-4 |
|
TEXAS |
1389 |
-257 |
-16 |
-3 |
|
VIRGINIA |
481 |
-25 |
-5 |
-1 |
|
W.VIRGINIA |
61 |
-9 |
-13 |
-2 |
|
TOTAL |
5892 |
-1,079 |
-15 |
-3 |
-1,079 MILLION LBS/QTR
-12 MILLION LBS/DAY 95 VS 01 -250 TANKER LOADS/DAY
N.Mexico +414
Texas -257
+157
TABLE II
MILK PRODUCTION 1ST QUARTER 1995 VS 2001
NORTHEAST U.S.
|
STATE |
1ST QTR.[3] 2001 Production Million LBS |
LBS.[4] CHANGE Million LBS |
% CHANGE 95VS01 |
% CHANGE /YEAR |
|
CONNECTICUT |
121 |
-16 |
-12 |
-2 |
|
DELAWARE |
37 |
-2 |
-5 |
-1 |
|
MAINE |
158 |
+1 |
+1 |
0 |
|
MASSACHUSET |
91 |
-21 |
-19 |
-3 |
|
NEW HAMPSHIRE |
80 |
+1 |
+1 |
0 |
|
NEW JERSEY |
68 |
-16 |
-19 |
-3 |
|
NEW YORK |
2848 |
-3 |
0 |
0 |
|
PENNSYLVANIA |
2726 |
+95 |
+4 |
+1 |
|
RHODE ISLAND |
6 |
-2 |
-25 |
-4 |
|
VERMONT |
658 |
+37 |
+6 |
+1 |
|
TOTAL |
6794 |
+74 |
+1 |
0 |
TABLE III
MILK PRODUCTION 1ST QUARTER 1995 VS 2001
NORTH CENTRAL U.S.
|
STATE |
1ST QTR. 2001[5] Production Million LBS |
LBS. CHANGE[6] Million LBS |
% CHANGE 95 VS 01 |
% CHANGE /YEAR |
|
ILLINOIS |
519 |
-118 |
-19 |
-3 |
|
INDIANA |
630 |
+76 |
+14 |
+5 |
|
IOWA |
965 |
-36 |
-4 |
-1 |
|
KANSAS |
395 |
+90 |
+30 |
+5 |
|
MICHIGAN |
1409 |
+26 |
+2 |
0 |
|
MINNESOTA |
2327 |
-64 |
-3 |
0 |
|
NEBRASKA |
295 |
+23 |
+8 |
+1 |
|
NORTH DAKOTA |
165 |
-42 |
-20 |
-3 |
|
OHIO |
1097 |
-62 |
-5 |
-1 |
|
SOUTH DAKOTA |
405 |
+11 |
+3 |
0 |
|
WISCONSIN |
5637 |
+24 |
0 |
0 |
|
TOTAL |
13845 |
-72 |
-1 |
0 |
TABLE IV
MILK PRODUCTION 1ST QUARTER 1995 VS 2001
WESTERN U.S.
|
STATE |
1ST QTR. [6] 2001 Production Million LBS |
LBS. CHANGE[7] Million LBS |
% CHANGE 95VS01 |
% CHANGE /YEAR |
|
ARIZONA |
746 |
+156 |
+26 |
+4 |
|
CALIFORNIA |
8082 |
+1885 |
+30 |
+5 |
|
COLORADO |
480 |
+94 |
+24 |
+4 |
|
IDAHO |
1815 |
+847 |
+88 |
+15 |
|
MONTANA |