I
105TH CONGRESS
1ST SESSION
H. R. 646
To improve price discovery in milk and dairy markets by reducing the effects
of the National Cheese Exchange on the basic formula price established
under milk marketing orders, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 6, 1997
Mr. OBEY (for himself, Mr. KIND of Wisconsin, Mr. JOHNSON of Wisconsin,
and Mr. BARRETT of Wisconsin) introduced the following bill; which was
referred to the Committee on Agriculture
A BILL
To improve price discovery in milk and dairy markets by
reducing the effects of the National Cheese Exchange
on the basic formula price established under milk mar-
keting orders, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Milk Price Discovery
Improvement Act of 1997’’.
SEC. 2. FINDINGS.
Congress finds that—
(1) the National Cheese Exchange, located in
Green Bay, Wisconsin, is the only cash market for
bulk cheese in the United States, trades less than 1
percent of all bulk cheese sold nationally, and cur-
rently functions as the only price discovery mecha-
nism for bulk cheese throughout the industry;
(2) the National Cheese Exchange opinion price
directly influences milk prices paid to farmers be-
cause of its use in the Department of Agriculture’s
basic formula price under Federal milk marketing
orders;
(3) opinion prices at the National Cheese Ex-
change influence the price for much of the bulk
cheese bought and sold in the United States and di-
rectly or indirectly influences the price of milk paid
to producers throughout the United States;
(4) the National Cheese Exchange is a thinly
traded, illiquid, and highly concentrated market that
is increasingly volatile;
(5) a report issued by the University of Wiscon-
sin and funded by the United States Department of
Agriculture concluded that the National Cheese Ex-
change is vulnerable to price manipulation;
(6) the thin nature of the National Cheese Ex-
change and the characteristics of that market that
may facilitate price manipulation have led to wide-
spread producer concern about the validity of prices
at the National Cheese Exchange; and
(7) it is in the national interest to ensure that
prices on cash markets that directly and indirectly
affect milk prices are determined in the most com-
petitive manner practicable and to improve price dis-
covery for milk and other dairy products.
SEC. 3. BASIC FORMULA PRICE.
Section 143(a) of the Agricultural Market Transition
Act (7 U.S.C. 7253(a)) is amended by adding at the end
the following:
‘‘(5) NATIONAL CHEESE EXCHANGE.—
‘‘(A) IN GENERAL.—In carrying out this
subsection and section 8c(5) of the Agricultural
Adjustment Act (7 U.S.C. 608c(5)), reenacted
with amendments by the Agricultural Market-
ing Agreement Act of 1937, the Secretary shall
not, directly or indirectly, use a price estab-
lished on the National Cheese Exchange to de-
termine the basic formula price for milk or any
other milk price regulated by the Secretary.
‘‘(B) REGULATIONS.—Not later than 60
days after the date of enactment of this para-
graph, the Secretary shall review and amend
‘‘(A) collect and disseminate, on a weekly
basis, statistically reliable information, obtained
from all cheese manufacturing areas in the
United States on prices and terms of trade for
spot and forward contracts, reported separately,
transactions involving bulk cheese, including in-
formation on the national average price and re-
gional average prices for bulk cheese sold
through spot and contract transactions;
‘‘(B) provide technical assistance to any
person, group of persons, or organization seek-
ing to organize a cash market alternative to the
National Cheese Exchange that the Secretary
believes will improve price discovery; and
‘‘(C) not later than 180 days after the date
of enactment of this subsection—
‘‘(i) in cooperation with the Commod-
ity Futures Trading Commission, conduct
a study and report to Congress on means
of encouraging improved volume in futures
trading for milk, bulk cheese, and other
dairy products; and
‘‘(ii) conduct a study and report to
Congress on the feasibility and desirability
of the creation of an electronic exchange
for cheese and other dairy products.
‘‘(3) CONFIDENTIALITY.—All information pro-
vided to, or acquired by, the Secretary under para-
graph (2)(A) shall be kept confidential by each offi-
cer and employee of the Department of Agriculture,
except that general weekly statements may be issued
that are based on the information and that do not
identify the information provided by any person.’’.
SEC. 5. OVERSIGHT OF CASH MARKETS AFFECTING FED-
ERAL MILK MARKETING ORDERS.
Section 8c of the Agricultural Adjustment Act (7
U.S.C. 608c), reenacted with amendments by the Agricul-
tural Marketing Agreement Act of 1937, is amended by
adding at the end the following:
‘‘(20) OVERSIGHT OF CASH MARKETS AFFECT-
ING FEDERAL MILK MARKETING ORDERS.—
‘‘(A) DEFINITION
OF
NONCOMPETITIVE
PRACTICE.—In this paragraph, the term ‘non-
competitive practice’ means an action or meas-
ure that involves engaging in a course of busi-
ness or act for the purpose or with the effect
of—
‘‘(i) manipulating or controlling a
price on a cash market that affects the
price of milk regulated under an order is-
sued under this section;
‘‘(ii) creating a monopoly in the ac-
quiring, buying, selling, or dealing in a
product; or
‘‘(iii) restraining commerce.
‘‘(B) GENERAL RULE.—In order to ensure
fair trade practices and orderly marketing con-
ditions for milk and milk products under this
section, the Secretary shall prohibit non-
competitive practices on a cash exchange for
milk, cheese, and other milk products that the
Secretary finds affects or influences the price of
milk regulated under an order issued under this
section.
‘‘(C) OTHER
AGENCIES
AND
STATES.—
This paragraph shall not affect the authority of
the Federal Trade Commission, Commodity Fu-
tures Trading Commission, Department of Jus-
tice, any other Federal agency, or any State
agency to regulate a noncompetitive practice de-
scribed in subparagraph (B).
‘‘(D) ENFORCEMENT.—The enforcement
provisions of sections 203, 204, and 205 of the
Packers and Stockyards Act, 1921 (7 U.S.C.
193, 194, 195) shall apply, to the extent prac-
ticable (as determined by the Secretary), to this
paragraph.’’.
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