CLASS I DAIRY BASE PLAN MONDAY, MAY 5, 1969 HOUSE OF REPRESENTATIVES, DAIRY AND POULTRY SUBCOMMITTEE Washington, D.C. The subcommittee met, pursuant to notice, at 10 a.m., in room 1301, Longworth House Office Building, Hon. Frank A. Stubblefield (chairman of the subcommittee) presiding. Present: Representatives Stubblefield, Poage, Montgomery, Wampler and Zwach. Also present: William C. Black, general counsel; Hyde H. Murray, assistant counsel; John A. Knebel, assistant counsel; and Christine S. Gallagher, clerk. Mr. STUBBLEFIELD. The meeting will please come to order. This morning the committee has under consideration H.R. 7996 by Congressman Meeds, companion bill H.R. 9182 by Mrs. May of Washington, and H.R. 7922 by Mrs. Hansen. (The bills referred to are similar and the text follows:) [H.R. 7996, 91st Cong., first sess.] A BILL To amend the Agriculture Adjustment Act, as reenacted and amended by the Agricultural Marketing Agreement Act of 1937, as amended, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. (a) The Agricultural Adjustment Act, as reenacted and amended by the Agricultural Marketing Agreement Act of 1937, as amended, is further amended by striking in subparagraph (B) of subsection 8c (5) all that part of said subparagraph (B) which follows the comma at the end of clause (c) and inserting in lieu thereof the following: "(d) a further adjustment, equitably to apportion the total value of the milk purchased by any handler, or by all handlers, among producers and associations of producers, on the basis of their marketing of milk during a representative period of time, which need not be limited to one year, and further adjustments to provide for the accumulation and disbursement of a fund to encourage seasonal adjustments in the production of milk, and (e) a further adjustment, equitably to apportion the total value of the milk purchased by any handler, or by all handlers, among producers and associations of producers, on the basis of their marketings of milk during a representative period of time, which need not be limited to one year and which may be either a fixed period of one or more years, or a moving average of one or more years, as provided in the order, and which may be adjusted, and readjusted from time to time, to reflect the utilization of producer milk by any handler or by all handlers in any use classification or classifications. In the event a producer holding a base allocated under this clause (e) shall reduce his marketings, such reduction shall not adversely affect his history of production and marketing for the determination of future bases, or future adjustments of bases, except that an order may provide that, if a producer reduces his marketings below his base allocation in any one or more use classifications designated in the order, the amount of any such reduction shall be taken into account in determining future bases or future adjustments of bases. Bases allocated to producers under this clause (e) may be transferable under an order on such terms and conditions as may be prescribed in the order if the Secretary of Agriculture determines, in connection with such order, that transferability will be in the best interest of the public, existing producers, and prospective new producers. Provision shall be made in the order for the allocation of bases under this clause (e) to new producers and for the alleviation of hardship and inequity among producers, and prescribing terms and conditions under which new producers may obtain bases on an equitable basis with old producers. Producers holding bases so allocated or obtained shall thereafter participate pro rata in the market in the same manner as other producers. In the case of any producer who during any accounting period delivers a portion of his milk to persons not fully regulated by the order, provision may be made for reducing the allocation of, or payments to be received by, any such producer under this clause (e) to compensate for any marketings of milk to such other persons for such period or periods as necessary to insure equitable participation in marketings among all producers. Notwithstanding the provisions of sections 8c (12) and the last sentence of section 8c (19) of this Act, order provisions under this clause (e) shall not be effective in any marketing order unless separately approved by producers in a referendum in which each individual producer shall have one vote and may be terminated separately whenever the Secretary makes a determination with respect to such provisions as is provided for the termination of an order in subparagraph Sc(16) (B). Disapproval or termination of such order provisions shall not be considered disapproval of the order or other terms of the order." (b) Such Act is further amended (1) by adding to subsection 8c (5) the following new paragraph: "(H) Marketing orders applicable to milk and its products may be limited in application to milk used for manufacturing."; and (2) by amending subsection Sc (18) by adding after the words "marketing area" wherever they occur the words "or, in the case of orders applying only to manufacturing milk, the production area." (c) The legal status of producer handlers of milk under the provisions of the Agricultural Adjustment Act, as reenacted and amended by the Agricultural Marketing Agreement Act of 1937, as amended, shall be the same subsequent to the adoption of the amendments made by this Act as it was prior thereto. Mr. STUBBLEFIELD. Our first witness this morning is Congressman Meeds. Congressman Meeds, we are happy to have you with us this morning. STATEMENT OF HON. LLOYD MEEDS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON Mr. MEEDS. Thank you, Mr. Chairman. It is a pleasure to be before this subcommittee of the Agriculture Committee again. At the outset, Mr. Chairman, I would like to express my very sincere appreciation to the members of this committee and to the members of the full Committee on Agriculture for the very courteous consideration they have given me now for 4 years in my attempts and in the committee's attempts to help the American dairy farmer. Now, this is my third appearance in 4 years, having appeared initially on the Food and Agriculture Act of 1965, in which the first class I base legislation was adopted as title I of that bill. And I certainly appreciate the fair and expeditious manner in which this committee has dealt with those problems. The bills to which the chairman referred, and before this committee today, I think should be considered as perfecting legislation. The experiment we authorized in title I of the Food and Agriculture Act of 1965 has been tried in the Puget Sound milk marking area and has been found to be a success with certain reservations. In February, Mr. Chairman, the dairy producers were polled on whether or not they wanted to continue their class I base plan for another year, or to extend the plan under which they were presently operating, and their response was roughly 90 percent favorable. The dairymen in the Puget Sound milk marketing order became the first group in America to adopt an operating class I base plan. The intent of the plan was to move away from blend pricing and resulting overproduction by separating class I and class II prices and production. Although the Puget Sound market has achieved stability, the producers feel that changes must be adopted to make this plan more equitable. The legislation before us, Mr. Chairman and members of the committee, seeks to make those changes. The first change is that H.R. 7996 would grant permanent authority for class I base plans. Making the legislation permanent rather than being contingent upon the expiration of the Food and Agriculture Act will thus permit dairymen everywhere to plan and to set up a marketing order with the confidence that it will be long term. I should add that it takes a long time to write and then adopt a class I base plan, for the dairymen in my district submitted their proposal to the Department of Agriculture in May of 1966 and it was not approved until July of 1967. H.R. 7996 and the companion measures will permit dairymen to alter the way in which the base for each producer is computed. The Department of Agriculture has insisted that only a single representative period of market deliveries be used in allocating a permanent base to all producers. To maintain this rule is to hold that all cows and all dairymen function in the same manner. As members of this committee and certainly people in the audience and witnesses will testify that is certainly not true. To avoid this freezing of the base, the legislation would permit allocation of class I bases so that individual marketing histories would be recognized and so that adjustments could be made. The current law works a severe hardship on both new producers and existing dairymen. For the new producers, those who did not acquire a base by supplying milk during the basemaking period of time, economic security is a fragile commodity available only on a month-to-month basis. The 1965 law requires that they can participate in the market only through transfer of sales, or, as is more common, through sales in excess of the base for the market. But they can never obtain a base under the existing law. Thus, should market production decline, our new producers are left with no economic security. In the bill I introduced last year the language would have allowed new producers to "earn" a base. After consideration with dairy handlers and others who thought that this could conceivably be used to lock out new producers and to prevent intermarket milk shipments, we changed the language so that new producers could "obtain bases on an equitable basis with old producers." We further determined that the new producers "shall thereafter participate pro rata in the market in the same manner as other producers." Mr. Chairman, members of the committee, the legislation before us today is precisely as it passed the House last year, and as passed the House of Representatives. Mr. Chairman, this is an acceptable compromise to which all the parties agreed. Interpreting this provision, I feel that it will facilitate the entry of new dairymen into the market without permitting indiscriminate milk dumping. By definition a base can only be something which is acquired over a period of time in which milk is delivered. Thus, market stability is not compromised by unlimited access. Imposing a hardship on established dairymen is the provision in the law and its interpretation by the Department of Agriculture that new producers and hardship cases must receive the sales over the allocated base. Mr. Chairman, I depart from my prepared statement just momentarily to refresh the committee's recollection. It was my understanding, and certainly my understanding from my discussion with menbers of the dairy subcommittee and the full Committee on Agriculture, in 1965, we fully intended by the language we adopted at that time that new producers should be able to earn a base and that established producers should also be able to share in the new sales. Accordingly, the first order which was proposed by the Puget Sound milk marketing area people had a provision which would have allocated 75 percent of the new sales to hardship cases and new producers, and 25 percent to the established producers. We were informed after the hearing, and upon consideraion by the Department of Agriculture, that the language of the 1965 title I of the Food and Agriculture Act did not permit that. So in simplest terms, the major thrust of this bill is to allow and to permit specifically by law what we thought we were doing in the first instance. Quite obviously, this robs the established producer of incentive and income. As we all know, dairy farming is becoming more and more expensive in this age of high capital costs and rising property taxes. To deprive the farmer of needed income is unjust, and H.R. 7996 offers corrective action. We should also note that the excess sales now going to new producers and hardship cases are frequently priced much higher than base sales. In a market growing steadily, therefore, there exists a harmful attraction for established dairymen to drop out of the regulated market and become free-lance adventurers. H.R. 7996 would also allow seasonable prices to be paid, thus permitting a further leveling of production. I would anticipate a situation where higher prices were paid during the slack winter months and lower prices during the summertime. Mr. Chairman, I wish to conclude by reaffirming the intent of this legislation and the purpose of the Congress in writing title I of the Food and Agriculture Act of 1965. It is my understanding that certain voices of the Department of Agriculture are contending that class I base plans should be available to producers only in those areas where a damaging milk surplus is undermining the market. Reduction of surplus milk production was a key aim of the 1965 act, but to my own thinking the central purpose was to invest the individual dairyman with more control of his production, more determination of what his actions were going to be in response to the market. Dairymen in the Puget Sound region responded quickly to the authorizing legislation because they had suffered long enough under the blend pricing syndrome in which output and more output was essential for economic survival. With the new provisions of H.R. 7996 we can continue our support for orderly growth compatible with stability and with economic self-determination. That concludes my prepared testimony, Mr. Chairman. Mr. STUBBLEFIELD. Congressman, you have two bills in, is this not right? Mr. MEEDS. Yes. Mr. STUBBLEFIELD. One of them is H.R. 492? Mr. MEEDS. H.R. 492, I think it is, Mr. Chairman. Mr. STUBBLEFIELD. H.R. 492. Mr. MEEDS. My new bill supercedes that, and it is my intent, my desire, Mr. Chairman, that H.R. 7996 be considered and that H.R. 492 not be considered. Mr. STUBBLEFIELD. H.R. 492 contains the voting provision? Mr. STUBBLEFIELD. And your other bill does not, is that right? Mr. MEEDS. The difference in the bill is with regard to voting. The difference in the two bills is with regard to voting, and in one instance the block voting will be allowed, but it will not be allowed, individual voting is required on the adoption of the new class I base plan, which is proposed to be allowed by legislation in H.R. 7996. Mr. STUBBLEFIELD. You make reference on page 2, paragraph 3, to "the bill I introduced last year, the language would have allowed new producers to earn a base." What is the explanation? Mr. MEEDS. Mr. Chairman, we had some difficulty last year with several groups who felt that the word "earn" was unduly restrictive on new producers, and that to use these words would inhibit their obtaining of bases. In response to their request we changed the word to "obtain," rather than "earn," and also there was some thinking, if my recollection is correct, that when we said earn, we would prohibit them from obtaining them in other ways which would also be allowed under the language of the act. It was not our intent to in any way inhibit their obtaining bases in other authorized ways. And so, we changed the word earn to obtain. And as I understand, this is acceptable and this compromise was ironed out last year, and, therefore, this is the language we use in the new bill. Mr. STUBBLEFIELD. And you also use the words, "fair and equitable." Is that left up to the Secretary what is fair and equitable or not? It is a broad term. Mr. MEEDS. Yes. And I think, Mr. Chairman, it is nothing more than stating in writing what certainly every one would want to see in the obtaining of new bases. What, of course, is fair and equitable is a matter which will ultimately be resolved by the adoption of the base plan within a given marketing area, and the dairymen themselves, the producers in the given area, would be the first to make the determination of what was fair and equitable by their adoption by 662% percent vote, individual vote, of what was fair and equitable, and if further, the Secretary of Agriculture did not feel that that was fair and equitable, he would refuse to approve the plan. At least, that is my understanding. Mr. STUBBLEFIELD. Any questions? 29-515-69-2 |