Statements on Introduced Bills and Joint Resolutions - Milk Marketing Order Act

Floor Speech

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Mrs. FEINSTEIN. Mr. President, I rise today, on behalf of myself and Senator Boxer, to introduce the California Federal Milk Marketing Order Act. This legislation will allow California's dairy industry to operate on a system that is consistent with the industry in other states.

The bill is as simple and straight forward as it gets--it's only two paragraphs long.

The first paragraph allows the California dairy producers to create their own ``regional order'' within the existing Federal Milk Marketing Order Program, if they elect to do so.

If California dairy farmers do elect to join the Federal order, the second paragraph allows California to maintain its existing ``quota system,'' which I will explain in a moment.

It is important for me to say up front how non-controversial this legislation should be.

The legislation has broad bi-partisan support among the diverse California congressional delegation.

The bill would likely add no new burden to the Federal taxpayer.

Congress enacted an identical provision in 1996.

But the provision expired along with the 1996 Farm Bill. So essentially, the legislation I am introducing today is simply the reauthorization of that no-cost provision.

More importantly though, this legislation can help the struggling dairy industry. Prices have dipped back to near historic lows, and farmers are often milking their cows at or below the cost of production.

In California, this has resulted in a drastic consolidation of the industry. Forty-eight dairies went out of business in 2011. Eleven left the business in 2010. And 100 more left the business in 2009.

With only 1,668 dairies left in the state in 2011, those losses represent more than a 10 percent contraction in just three years.

But this legislation has the potential to begin the turnaround for California by bringing the milk pricing formulas in line with the rest of the nation.

To explain how the turnaround could occur, I'd like to start with the basics.

USDA operates 10 regional Federal Milk Marketing Orders for dairy farmers in 42 States. The order sets up a

system to pay farmers a set price for their milk, even though food manufacturers pay different prices based on how the milk is used. For instance, farmers in the Federal order receive the same price for milk that is put in a carton for drinking as milk that is converted into dry milk powder. This is true even though these products sell for significantly different prices at the grocery store.

However, California, the Nation's largest milk producing State, operates under a different system. The State elected to run its own milk marketing order, so California farmers are paid different values for their products, and they are playing by different rules.

One unique characteristic of the California Marketing Order, and the reason for this legislation, is the system known as ``quota,'' which I mentioned earlier.

Producers who own a portion of the ``quota'' receive a premium for their milk, roughly five percent more than other producers. Rights to quota can be bought or sold on the open market, and economists estimate that the combined value associated with quota is roughly $900 million.

It is this $900 million value that the California Federal Milk Marketing Order Act authorizes to be converted into a Federal order.

Inclusion of the quota will not come at taxpayer expense. Producers who own quota receive a higher price for their milk, but the additional payment is offset by a marginal increase in prices paid by dairy processors.

I know that dairy support programs can be convoluted and controversial. But I want to make sure that my colleagues know that this legislation is not.

The bill simply gives California dairy farmers the option of entering into the Federal order, at the time of their choosing. It does not mandate a thing.

I hope my colleagues will see the sense in this legislation and join me in supporting our dairy farmers by enacting this bill.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

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