WASHINGTON — Agriculture Secretary Dan Glickman on Friday unveiled a proposal intended to make the nation's Depression-era system of pricing milk more market-oriented, but the reform effort drew harsh criticism from producers.
For consumers, the effect would be minimal: Officials estimated that retail milk prices nationally would fall about 3 cents a gallon over a six-year period. But for farmers and dairy processors in some regions, the changes could be profound.
The complex rules would consolidate the existing 31 federal milk marketing orders--which determine the prices paid by processors to farmers--into just 11. The differential paid for fluid milk would no longer be based on distance from Eau Claire, Wis., traditionally the top dairy region.
Instead, the new orders would attempt to set prices based more on regional market and transportation conditions. The main effect would be to reduce milk prices that have been artificially inflated in some parts of the country, such as the Southeast, where farmers could see prices fall as much as 40 cents per hundred pounds.
California does not operate under the federal marketing order. In this state, the price of milk paid to producers is set by the California Department of Food and Agriculture and is based on several factors, including cost of production and the amount of milk produced, according to Jay Goold, economist for the Western United Dairymen, a Modesto trade group.
That system allows California to have more "responsiveness and flexibility," Goold said.
California could ask to be put under the federal rules, Goold said, "but at the present time, the majority of producers in California do not want to."
Midwesterners said Glickman did not go far enough to put their region's milk prices on a par with other areas. New Englanders, meanwhile, said lower milk prices would put farmers there out of business. At present, the six New England states have their own pact that allows prices higher than federally set levels.
Many consumer advocates contend that federal intrusion adds billions of dollars in costs each year by artificially inflating prices in some regions. Consumers in Texas and New York, for example, pay about 30 cents more a gallon than those in Minnesota.
"Just changing the formulas is not any kind of reform," said John Frydenlund, food and agricultural analyst for Citizens Against Government Waste.
But Glickman said the sheer complexity of the system and the "politically explosive" regional fights over who benefits mean some government control is essential to ensure "a regular, reliable supply of milk across the country."
As part of the 1996 farm law, Congress directed the Agriculture Department to make the dairy program more market-oriented by April 1999. Ultimately, the nation's 127,000 dairy farmers must vote on the new plan. A final rule is expected to be proposed in the fall after a period of public comment and hearings.