Most of the Wisconsin Congressional delegation have sent a letter to House and Senate Ag Committee leaders expressing concern with a provision in the Senate version of the Farm Bill. Specifically Section 1462 would require the Agriculture Secretary to convene an informal pre-hearing to discuss possible changes to the Federal Milk Marketing Order Class III pricing system.
While the Section does not require the Secretary to initiate a change to the pricing system, the Wisconsin legislators are concerned that if that does occur, the Class IV pricing system should be included in the process. The letter states that because the Class III and Class IV price discovery mechanisms are intertwined, they “believe that it would be disruptive to the milk market for USDA to consider Class III without also looking at Class IV, at a minimum.”
The letter is signed by Senator Tammy Baldwin and Representatives Reid Ribble, Marc Pocan, Sean Duffy, Ron Kind, Tom Petri, Gwen Moore and James Sensenbrenner.
Section 1462 follows:
SEC. 1462. FEDERAL MILK MARKETING ORDER PROGRAM PRE-HEARING PROCEDURE FOR CLASS III PRICING.
- (a) In General- The Secretary shall use the pre-hearing procedure described in this section to consider alternative formulas for Class III milk product pricing under section 8c of the Agricultural Adjustment Act (7 U.S.C. 608c), reenacted with amendments by the Agricultural Marketing Agreement Act of 1937.
- (b) Requests for Proposals-
- (1) IN GENERAL- Not later than 120 days after the date of enactment of this Act, the Secretary shall issue a request for the submission by interested persons of preliminary proposals for replacement of the Class III milk product pricing formula.
- (2) PRELIMINARY PROPOSALS- Preliminary proposals submitted under paragraph (1)–
- (A) may include competitive pay price formulas; and
- (B) shall provide sufficient detail in concept to serve as the basis for the convening by the Secretary of a public information session for review and discussion in accordance with section 900.24 of title 7, Code of Federal Regulations (as in effect on the date of enactment of this Act), but need not conform with the other procedural requirements of part 900 of title 7, Code of Federal Regulations (as in effect on the date of enactment of this Act).
- (c) Pre-hearing Information Session Review-
- (1) IN GENERAL- Not later than 180 days after the date on which the Secretary issues a request under subsection (b)(1), the Secretary shall convene a public information session in accordance with section 900.24 of title 7, Code of Federal Regulations (as in effect on the date of enactment of this Act).
- (2) REQUIREMENTS- The Secretary shall review all preliminary proposals submitted under this section that are of sufficient conceptual detail to allow for the review described in paragraph (b)(2)(B).
- (d) Hearing Determination-
- (1) IN GENERAL- Not later than 90 days after the conduct of the public information session under subsection (c), the Secretary shall determine whether to conduct a formal hearing in accordance with part 900 of title 7, Code of Federal Regulations (as in effect on the date of enactment of this Act).
- (2) HEARING TO BE CONDUCTED- If the Secretary determines under paragraph (1) to conduct a formal hearing, the Secretary shall issue notice and conduct the hearing in accordance with part 900 of title 7, Code of Federal Regulations (as in effect on the date of enactment of this Act).
- (3) HEARING NOT TO BE CONDUCTED- If the Secretary determines under paragraph (1) not to conduct a formal hearing, not later than 90 days after that determination, the Secretary shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition and Forestry of the Senate a written report that explains the basis for the decision.
- (e) Proceeding With a Hearing at Any Time- Consistent with the purposes of this section, the Secretary may dispense with the pre-hearing requirements of this section and initiate at any time a formal hearing under part 900 of title 7, Code of Federal Regulations (as in effect on the date of enactment of this Act).
The Wisconsin letter states:
Dear Chairman Lucas, Chairwoman Stabenow, and Ranking Members Peterson and Cochran,
We appreciate your leadership and your bipartisan efforts to move the 2013 Farm Bill forward. As you work to complete the process this fall, we write to share our views on the Federal Milk Marketing Order (FMMO) system as it relates to our home state of Wisconsin.
As you well know, Wisconsin’s dairy industry generates $26 billion in economic activity annually; Wisconsin ranks second in the nation in milk production, first in cheese production, and first in the number of family dairy farms. Therefore, our constituents, including dairy farmers, cooperatives, and manufacturers, have a significant stake in the outcome of any dairy policy changes included in the 2013 Farm Bill.
The FMMO system has long put Wisconsin dairy farmers at a competitive disadvantage because it artificially increases the value of fluid (Class I) milk while reducing the value of milk used for manufactured products like cheese (Class III). With this in mind, we have worked during this Farm Bill process to ensure that the Dairy Title does not mandate legislative changes to the FMMO system that would further enhance Class I prices.
We have conferred with our constituents in the dairy sector regarding Section 1462 of the Senate Farm Bill. This provision requires the U.S. Department of Agriculture to begin a process to consider alternative pricing mechanisms for Class III milk. In particular, this section requires USDA to convene an informal pre-hearing to discuss changes to the current pricing system. It is our understanding after talking with USDA officials that this provision does not mandate a particular outcome of the pre-hearing process, nor does it modify USDA’s existing FMMO hearing procedures or analysis requirements.
However, because the price discovery mechanisms for Class III and Class IV milk are related, we recommend that the language be clarified to ask USDA to consider alternatives for the Class IV formula as well as Class III. If the Class III product price formula is in need of reform, then other formulas should be reconsidered as well. We believe that it would be disruptive to the milk market for USDA to consider Class III without also looking at Class IV, at a minimum.
We understand and appreciate that many in the dairy sector are interested in exploring changes to the current milk pricing structure, but we must emphasize that the industry has not yet coalesced around any proposal or reached any kind of consensus. Therefore, beyond the above clarification, we strongly urge that Section 1462 of the Senate Farm Bill not be broadened or expanded during conference negotiations to include any language that would make direct changes to the FMMO system. Proposals to modify one pricing formula would undoubtedly impact other formulas as well, so we believe that the industry must engage in full and open conversation about any potential changes.
In closing, we appreciate for your consideration of our comments and we stand ready to answer any questions you may have. Thank you for your attention to this issue of critical importance to America’s Dairyland.
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