Mainstreet Radio's Brent Wolfe reports on a national referendum sponsored by the U.S. Department of Agriculture, which looks to change the current system that sets different minimum prices for milk in different parts of the country. The new pricing system would reduce the disparity in minimum prices around the nation.
Upper Midwest dairy experts believe the new system will help the region's dairy industry.
BRENT WOLFE: Milk isn't just milk to those in the dairy business. There are different classes of milk-- one for the milk used in ice cream and yogurt, another for the milk destined to become cheese, and a separate class for the milk we drink. The federal milk order system sets different minimum prices for the milk we drink-- class 1 milk in different regions of the country. The same gallon of milk can be worth more in Vermont than if it came from a Wisconsin or Minnesota dairy farm.
The system dates back to the 1930s, when federal agriculture officials set higher minimum prices in regions distant from the dairy heartland in the Upper Midwest because refrigerated transportation wasn't available to ship milk out of the Midwest. The 1996 Freedom to Farm law directed the agriculture department to create a more market-oriented system. And Paul Kyburz, federal milk market administrator in Minneapolis, says the result is the system dairymen voted on this week. He says it sets more even minimum prices around the country.
PAUL KYBURZ: So there have been a number of areas of the country where the minimum class 1 price has been reduced significantly. In this region of the country, the Upper Midwest, the minimum class 1 price has actually been increased. For example, the federal order minimum price in Minneapolis has been increased $0.40.
BRENT WOLFE: That's just for the milk we drink. On a warm day on Lyle Tjosaas's dairy farm in rural Dodge County, a cow uses her big pink tongue to catch a cool stream of water. 85% of the milk produced by Tjosaas's cows and others in the Upper Midwest is used to produce other products, like cheese and butter. Tjosaas gets a price that's a blend of the prices for different milk classes, drinking and manufacturing milk. He doesn't expect his milk check to change much if the new system of minimum prices is adopted.
LYLE TJOSAAS: When you look at the country and the pricing, we are one of the highest-paid milk prices in the country. And people don't realize that. But when you look and you-- and I have talked to these people around the country. And we get probably one of the best milk prices and mainly because of the competition. We have a lot of milk and a lot of competition for our milk, which we are pretty fortunate to have.
BRENT WOLFE: That competition means processors pay Midwest farmers and co-ops prices more than the minimum set by the government. And dairy farmers have largely avoided the price plunges that have beset other sectors of the agricultural economy. The complicated, interwoven layers of bureaucracy that affect milk prices set up sharp conflicts between different regions of the country. Eastern and Southern members of Congress are supporting a bill that would leave the current system in place because they believe it boosts milk prices for their dairy farmers. University of Wisconsin dairy marketing specialist Bob Cropp says that doesn't help Midwestern dairy farmers.
BOB CROPP: Some are trying to use federal orders to enhance prices to farmers as a price support program. That does not work because what they're doing is raising the price on milk that we drink. And so when you raise the price of milk we drink, and that stimulates more milk production than need it for drinking, which it does, that means it goes into manufactured products.
BRENT WOLFE: The result is cheese plants get more milk to make cheese. And they lower the price they pay for milk. Cropp says since Wisconsin and Minnesota dairy farmers sell most of their milk to cheese plants, they get hurt by the lower prices.
Eastern dairy farmers also benefit from a congressionally created compact that allows them to set higher prices for their milk. Their compact is due to expire when the new system takes effect. And Eastern lawmakers are trying to renew it. This week, Midwestern senators filibustered an attempt to attach the compact renewal to the farm aid bill.
Midwest farmers aren't the only ones complaining. Dutch officials say they're going to demand the US change its milk pricing system during the World Trade Organization talks in Seattle this fall. If dairy farmers adopt the new milk order system and Congress doesn't block it, it will go into effect October 1. I'm Brent Wolfe, Minnesota Public Radio.
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