About
the Compact
An
amendment to SB65 authorizes the Secretary of Agriculture
to enter an interstate dairy compact if the United States
Congress grants permission for states to form compacts. The
Kansas Dairy Association requested this legislation on behalf
of the 650 dairy men and women of Kansas because our state
is bordered on two sides by states that have approved compact
enabling legislation. We believe our producers could very
well be at a competitive disadvantage if Congress authorizes
the dairy compacts that are currently proposed.
The
dairy compact concept has growing national interest. The first
dairy compact (Northeast Interstate Dairy Compact) was part
of the 1996 Farm Bill. Now, proponents of a Southern Dairy
Compact are seeking authorization when the Northeast Compact
comes up for reauthorization by Congress later this fall.
The dairy men and women of Kansas believe that we cannot afford
to let surrounding states change the rules by which milk is
marketed and not have (at the very least) permission to join
if it becomes economically necessary. We believe the debate
over whether or not to have dairy compacts must take place
in Washington, D.C. The amendment to SB 65 gives us an opportunity
to look at joining a compact. We support SB 65 as amended.
- Kansas
is a dairy growth state. We rank 25th nationally in milk
production. We have approximately 650 dairies, 83,000 dairy
cows and produce about 1.3 billion pounds of milk each year.
-
Economic modeling done by the University of Missouri shows
that the farm gate price of milk in non-compact states that
neighbor compact states could DROP 17¢ to 21¢ cwt. or 1.4¢
to 1.8¢ per gallon, with no corresponding change in consumer
price.
- The
same study shows that a compact would raise the price to
consumers about 15¢ per gallon (based on a $2 cwt over-order
premium), while the farm gate price paid to farmers would
only increase about 8¢ per gallon (97¢ cwt).
- It
is necessary for us to have this legislation on the statute
books if we ever need (or want) to enter a
dairy compact.
- Enabling
legislation does not mean we are in a dairy compact. It
only prepares Kansas for a time when we may need to be in
a dairy compact.
- Enabling
legislation does not affect the price of milk in any way.
- Enabling
legislation in Kansas only goes into effect IF
the United States Congress authorizes dairy compacts and
IF our Secretary of Agriculture approves of
our entry into a compact.
- Compact
enabling legislation helps Kansas to be able to move to
enter a dairy compact ONLY IF IT IS NECESSARY
to keep Kansas producers from being at a competitive disadvantage
with surrounding states. Oklahoma and Missouri are enabled
to join the proposed Southern Dairy Compact. Much of Kansas-produced
milk is processed in Missouri. The majority of milk that
is exported from Kansas moves to the south and east which
is in the proposed Southern Compact region.
- Compacts
establish a price for Class I milk (fluid). The price is
determined by a compact commission, whose members are milk
processors, consumers and dairy producers. This means
that milk processors and consumers could have a 2 to 1 majority
vote over producers in setting that Class I price.
Benefits
To
Supplement Kansas's dairy farmer income
-Had Kansas been a member of the Southern Dairy Compact
during 2000, the state's 650 dairy farms would have received
$23.4 million in compact payments, an average of $36,000 per
farm. Such compact payments would have increased income
for the average Kansas Dairy farm by approximately 13%.
This financial benefit at a time when dairy farmers are faced
with depressed prices comparable to 1978.
To
return to Kansas significant power over fluid milk pricing
-A compact when ratified by Congress, authorizes creation
of an interstate compact commission which would guide the
pricing of fluid milk sold in the region. Consumers,
processors, producers, state officials and the public all
participate in determining Class I fluid milk prices.
Kansas's
compact overwhelmingly approved
-With Governor Graves' support, Kansas's Senate and
House have passed compact legislation by overwhelming 39-1
and 122-1 margins to allow for participation in a Southern
Compact.
Compact
milk prices for Kansas's consumers expected to be stable and
in line with non-compact prices.
-Experience under the Northeast Dairy Compact, successfully
in operation in MA, VT, NH, ME, CT and RI since July 1, 1997,
demonstrates the compact's impact on retail prices has at
most been benign and manageable despite total payments to
farmers of $130 million. Prices in the Compact region
are ore stable than, and in line with, equivalent prices in
areas without a compact.
No
cost to federal, state or local governments
-Compacts are self-financed and require no appropriation
of tax revenues, state, local or federal.
Compacts
legally valid
-Major legal challenges to the constitutionality of
compacts have been decided unequivocally in favor of compacts.
This legal precedent supports the legal validity of compacts.
Kansas's
social responsibility respected under a dairy compact
-The Northeast Dairy Compact protects Women, Infants
and Children (WIC) and school milk programs from adverse consequences
resulting from the compact. Kansas could similarly assure
against possible negative compact impact on the socially deserving.
Other
major benefits for Kansas
-Help Kansas's consumers by ensuring a local supply
of fresh milk.
-Helps Kansas's environment by preservation of
open space.
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