and Wisconsin for manufacturing grade milk, plus a differential which will vary from $1.20 in Chicago to approximately $2.85 in Florida. Mr. YOUNG. And what do you how do you calculate this difference? Mr. HANSON. Well, it fits pretty well with the price in the heavy production areas of Minnesota and Wisconsin, plus the cost of transportation to these other markets. However, that is not the only criterion. The act requires us to take into account all factors affecting the supply and demand for milk for a given marketing area and to insure an adequate supply of pure and wholesome milk for the market. Mr. YOUNG. Is part of the input into that formula the protein price, or the cost of feed? Mr. HANSON. No, we do not use that precisely. But there are adjustments, of course, for butterfat in milk. Mr. YOUNG. But you could have a variance on the farms such as the cost of feed, yet this would have no input whatsoever into the price fixing of the milk marketing orders? Mr. HANSON. Well, it does. Yes, it does. In the first place, the trend of feed costs will be reflected in the Minnesota-Wisconsin average price. If there are unusual conditions peculiar to a given area at a given time, such as unusual drought, flood, or some other emergency situation, the costs can vary from the normal pattern and these can be considered in public hearings and some adjustment in price made if it has merit. Mr. YOUNG. Thank you. Mr. JONES of Tennessee. Any other questions? Mr. MURRAY. Mr. Chairman, the new members may be interested, Mr. Hanson, in the difference in the voting procedures that occur on the ratification of Federal milk marketing orders compared to other farm commodity programs and then in the further differences between the class 1 base plan voting procedure and the marketing area voting that applies to other Federal milk marketing orders. Mr. HANSON. Yes. There are two percentages of approval required from farmers to initiate or to amend a milk order. If the milk order contains what we call an individual handlers' pool, the vote on the order must be 75 percent of all farmers who would be affected by the order. If the order has a marketwide type of pooling, which is the type I have been talking about today, the percentage of approval by farmers would be twothirds. There are only five individual handler pool markets and they are all very small, so we do not have a 75-percent vote very often. It is usually on the basis of two-thirds. On the class 1 base plan, there is a special provision on voting. That is that the vote must be by the individual producer, even though he may be a member of a cooperative, whereas on all other provisions of an order, a cooperative may vote in a block on behalf of its membership. Mr. YOUNG. May I ask him one other question? Mr. JONES of Tennessee. Yes, sir; Mr. Young. Mr. YOUNG. What would happen if we did not have these Federal orders in this country? Mr. HANSON. I think that the seeds of disorderly marketing would still be present in fluid milk markets, and these conditions that I am speaking of are the fact that the sale of milk does not correspond that is, the pattern of sales does not correspond with the pattern of production which causes both weekly and seasonal variations in the amount of surplus milk that has to be disposed of in the market. And this means that somebody has to carry the burden of that surplus. The essential idea behind an order is to provide uniformity in pricing. This has been always considered the fair treatment in a fluid milk market, where all producers are sharing in the supply for that market, and by having the minimum price provisions and the distribution of moneys to producers on a uniform basis, everybody shares both in the high valued class 1 sales and in the surplus that is associated with them. Mr. YOUNG. Now that we have these big milk marketing organizations such as Mid-America and National Milk, would it be possible for these large cooperatives to take over this same function? Mr. HANSON. They probably could do a better job at it than the cooperatives could do when they confined their activities to individual markets, simply because they do operate over larger areas and they have the ability to move milk, both where it is needed, and when it is not needed, to move it to manufacturing for disposal as manufacturing. Of course, the long-term experience of Federal milk orders is that it only takes about 5 or 10 percent of the milk in a region to upset a program carried on privately by cooperatives. Mr. YOUNG. And you do not think that these cooperatives could function in handling this 5 percent extra? Mr. HANSON. Well, they certainly are supporting the continuance of milk orders. Mr. YOUNG. That answered my question. Mr. ZWACH. Could we have a little overall picture of the trend in the milk production industry? Is the vast amount of it still by the family operation, the man that generally owns the farm, owns the herd, puts up his own feed, raises much of his feed and hay and buys only protein supplement? Is that the main, broad base of American milk? What has taken place in this area? Mr. HANSON. I would say that in dairy, it does continue to be the broad base for the industry. Mr. ZWACH. It is? Mr. HANSON. Yes. There are operations on a corporate basis. There are experiments going on in cow pools and there are some very large operations, particularly in the West, in California, where you might say that the production of milk is on a factory line basis. But you spoke of the broad base for the dairy industry and it is still the individual dairy farmer. Mr. ZWACH. So the broad base of our dairy, when corn goes up a little bit, soybeans go up a little, hay goes up a little, the broad-based dairyman still benefits by this? I am getting kind of concerned about people just talking about the cost of feed as the big item in dairy. Do not most of these people raise their own feed and benefit, too, when corn prices improve and oats and hay, silage prices improve? Mr. HANSON. Yes. Many farmers, of course, have to buy some of their grains, their feeds, in that form, but most of them do have, of course, pasture and hay. Mr. ZWACH. Hay and silage? Mr. HANSON. Silage; yes, sir. Mr. YOUNG. Mr. Chairman, I am going to try not to make a speech, but I just want to make an illustration. In 1954, Coble Dairies went into the business of buying a company. We had 1,173 producers at that time. We had our annual meeting in January. We are producing twice as much milk today with 280 producers. In this period of time, we have completely changed and it has gone to the larger producers. He may be the same farmer that Mr. Zwach referred to here, but he is certainly producing a great deal more milk now than he was in 1954. Mr. HANSON. I did not mean to imply that producers were not getting larger. Mr. ZWACH. This was not my question. Mr. HANSON. No, they are getting larger around the country generally, but there are still a lot of individual dairy farms. Mr. MATSUNAGA. Is the basic law establishing marketing orders expiring this year? Mr. HANSON. No; not the basic law. That is a continuing legislation. It is the class 1 base provisions that expire-expire for all programs that are not issued by the end of this year. If a plan is in effect, the present legislation permits it to stay in effect until 1976, but if it is not in effect by the end of December this year-not issued by thenit can't go into effect. Mr. MATSUNAGA. And is it the recommendation of the administration that those expiring be continued? Mr. HANSON. We have not taken any position on this. Mr. MATSUNAGA. No position? Mr. HANSON. No. It has not been brought to us for our opinion. Mr. JONES of Tennessee. Hyde, how much more time do we have? Mr. MURRAY. I was going to say we can go on with our other dairy programs unless the members have more questions about the class 1 base plan. Mr. YOUNG I have no questions. I apologize for taking as much of the gentleman's time as I have. Mr. JONES of Tennessee. It is perfectly all right. I think it has been helpful that we have done this. Do you want to move on to the next subject? Mr. MURRAY. The next dairy program that is due to expire this year that we want to discuss at this point is the dairy indemnity program. Mr. Cook, general agricultural program specialist of the Incentive and Indemnity Branch, will discuss the dairy indemnity program, and then the honey indemnity program, which is patterned after it and is very similar. They both have similarities and they both expire in 1973. We have a handout for you to describe how both programs work. [The document referred to follows:] DAIRY INDEMNITY PROGRAM Section 331 of the Economic Opportunity Act of 1964 authorized the Secretary to make indemnity payments, at fair market value, to farmers who have been directed since January 1, 1964, to remove their milk from commercial markets because it contained residues of chemicals registered and approved for use by the Federal Government at the time of such use. Authority granted under this section terminated January 31, 1965, and the termination date has been extended six times. The latest extension was made to June 30, 1973, by Public Law 91-524 which also authorized indemnity payments to manufacturers of dairy products whose 92-647-73- 7 products have been removed from the market, since the date of its enactment (November 30, 1960), because they contained residues of chemicals registered and approved for use by the Federal Government. The authority for the program expires on June 30, 1973. ELIGIBILITY REQUIREMENTS FOR DAIRY FARMERS Briefly, the conditions a dairy farmer must meet in order to be eligible for an indemnity payment are: 1. The producer must not have been responsible for the milk contamination. 2. If the producer used the pesticide that caused the removal of the milk from the market, the pesticide must have been: (a) Registered and approved for use by the Federal Government at the time of such use. (b) The dairy farmer must have used the pesticides in accordance with the directions on the label. 3. If the contamination resulted from the use of purchased feed, the applicant must certify that at the time he purchased the feed he did not know or have reason to believe that the feed contained a harmful level of pesticide residue. 4. If the contamination resulted from pesticide drifting onto the feed grown on the farm, the producer must establish that the drift was not from pesticides he applied to other crops on the farm. 5. The producer must take steps to determine the source of the contamination and steps designed to eliminate the residue from the milk. ELIGIBILITY REQUIREMENT OF MANUFACTURERS A The manufacturer must not have been responsible for the product contamination B If the manufacturer used the pesticide that caused the removal of the product from the market, the pesticide must have been: (1) Registered and approved for use by the Federal Government at the time of such use. (2) Used in accordance with the directions on the label. C If the contamination resulted from the purchase of contaminated milk, the manufacturer must certify that he did not know or have reason to believe that the milk from which the product was made contained a harmful level of pesticide residue. DAIRY INDEMNITY PAYMENTS (JAN 1, 1964-JUNE 30, 1972) |