Date: 1983-11-07
Speaker: DE LA GARZA (democrat)
Chamber: H

Mr. Chairman. I yield myself such time as I may consume. Pending the arrival of the gentleman from Illinois I Will make a preliminary statement. and I will yield time to any Member who might want to participate In this debate. H.R. 4196 is emergency legislation for the purpose of reducing surplus production of milk in the United States and the cost of the dairy price support program. The text of H.R. 4196 under consideration today Is the same as the text of H.R. 1875. as reported by the House Committee on Agriculture. except for a few minor modifications principally to change dates which are no longer current. The legislative history and explanatory material in tht committee report on H.R. 1875 apply as well to the clean bill. except for these minor differences. H.R. 4196 is a compromise measure developed earlier this year by a bipartisan coalition of Members of the House and Senate representing a crosssection of the dairy producing areas of the United States in consultation with the Department of Agriculture. The bill reduces the support price for milk. creates a temporary stopgap producerfunded incentive program to encourage dairy producers to reduce milk production. and provides for a producerfunded promotion and research program to expand the consumption of milk and other dairy products. The dairy price support program puts a nationwide floor under the price of manufacturing grade milk through the purchase of dairy productsbutter. cheese. and nonfat dry milkby the Commodity Credit Corporation (CCC) at announced prices. During periods of surplus production. stocks are accumulated and stored by the CCC. During periods of declining milk production. these stocks are available for resale into commercial channels. thus preventing disruption in supply and fluctuation in price. For many years. this legislation has served to benefit both producers and consumers. Prior to 1980. the dairy price support program functioned effectively. bringing stability to a sector of agriculture which had been subject to annual fluctuations in bath production and consumer demand. Purchases by the CCC during the 30year period prior to 1980 averaged 4.8 billion pounds of milk equivalent and cost about $300 million annually. Beginning in 1981. the situation changed. Dairy surpluses began to mount and the cost of the program burgeoned. Congress acted on three occasions to cancel scheduled increases In the support level which had been set at $13.10 per hundredweight on October 1. 1980. First. It rescinded the midyear adjustment scheduled for April 1. 1981. and on two other occasions it delayed increases In the support level until enactment of the Agriculture and Food Act of 1981. which continued the level of $13.10 per hundredweight for fiscal year 1982. This act set the minimum support level at predetermined dollar vaiues-$13.25 in fiscal year 1983. $14 in fiscal year 1984. and $14.60 in fiscal year 1985 with a return to a minimum of 75 percent of parity If CCC -purchases dropped below specified levels. In 1982. milk production continued to expand and with it program costs escalated. In response. the committee reported and the House passed the Food and Agriculture Reconciliation Act for fiscal year 1983 which would have created a twotier price program to shift to the producer the responsibility for all costs of the price support program In excess of 5 billion pounds milk equivalent annually. This would have immediately capped the cost of the program at approximately $800 million annually. However. this proposal was not agreed to by the Senate and drew strong administration opposition. A compromise was reached and Included in title I of the Omnibus Reconciliation Act of 1982 (Public Law 97253). This act continued to freeze the support rate for fiscal year 1983. the fourth consecutive year. at $13.10 per hundredweight. The support rate for fiscal year 1984 was set at the parity equivalent represented by $13.10 per hundredweight as of October 1. 1983. The Secretary was also given authority to Impose two 50cent per hundredweight deductions on all commercial marketings of milk until projected CCC purchases declined to specified levels. The second deduction was conditioned on the Secretary establishing a program whereby the funds resultIng therefrom would be refunded to producers who reduced their commercial marketings from those during a base period. Additional changes are urgently needed in the dairy price support programn. The dollar per hundredweight deduction has proved to be extremely unpopular with dairy farmers throughout the country. and has been the subject of extended litigation. The assessment was just recently upheld by the Federal court of appeals for the fourth circuit. There still remains a critical need to reduce milk production. Although the deduction scheme significantly reduces a producers gross receipts. it fails to effect an immediate downward response in production. In fact. many producers actually have expanded production to make up for lost Income resulting from the dollar deduction. A variety of economie occurrences have all combined to aggravate the surplus problem. Foremost amongst these has been the decline in feed prices. Since approximately onehalf the cost of producing milk is the cost -of feed. the severe decline in grain prices in recent years has made milk production very attractive. Three bumper crops In a row forced a major reduction in prices at a time of unprecedented Inflation In the prices of other commodities. It became more profitable to get paid for corn by feeding it to cows. Likewise. the declining value of cull cows made farmers reluctant to market marginal cows. Utility cow prices per hundredweight at Omaha averaged $50.10 In 1979. $45.73 In 1980. $42.01 In 1981. and $39.77 in 1982. These two factors. combined with the absence of any profitable alternatives in other sectors of agriculture or in offfarm employment have served to Increase milk production. In the last 2 months. however. a combination of the paymentinkind program and the drought has caused a turn around in corn prices and there are signs of a reversal of the trend of more and more milk production. Apart from the foregoing. the surplus problem has resulted from a stagnation In the demand for dairy products due to. .the general economic uncertainty and high unemployment. Considerable attention must be paid to stimulating demand over the next several years so that a stronger commercial market will exist for dairy products. H.R. 4196 makes the necessary changes In dairy legislation to adjust production to manageable levels. stimulate demand and bring stability to the Industry at the lowest cost to the Government of any proposal now before the House. The bill would repeal the current dollar assessment and replace it with the following program: