Milk Regulatory Equity Act of 2005

Mr. Speaker, I rise today in support of the Milk Regulatory Equity Act, S. 2120. This important legislation was first introduced in 2003 and has been subjected to extensive review both inside and outside of Congress. I am satisfied that every effort has been made to craft a measure that is fair and have personally participated in efforts over the past three years to make certain that this legislation does exactly what we say it will do. We have worked collaboratively with every corner of the U.S. dairy industry and have formed a coalition that is unprecedented in this sector of the economy. Indeed, processors and dairy farmers from throughout the country, each with significantly varying local and regional interests, have come together to share with us the urgent need to address this issue. I am pleased that we are responding and would like to thank Chairman Goodlatte and Ranking Member Peterson and their staff for their hard work.

S. 2120 is about fairness, Mr. Speaker. The bill responds to fundamental questions of regulatory equity that only Congress can address. The questions are simple. Should producer-handlers in Arizona be exempted from our Nation's regulatory system with no regard for their impact on our system of pooling and pricing, as established by Congress? Should producer-handlers be permitted to continue to operate free of regulation, while collecting Federal subsidies and benefiting from Farm Bill programs? Should a State regulatory system, such as California, be subjected to unregulated shipments of dairy from States participating in the Federal milk marking orders? Clearly, and with a strong bipartisan statement, Congress must say no. We must support passage of S. 2120.

Mr. Speaker, I understand that anyone in business who has found a lucrative regulatory loophole would be inclined to fight for it. However, we in Congress need to look at the bigger picture. Those special interests that have resisted this legislation are doing so because they are gaming the system. They owe their success to the very program they claim to loath. Their ability to operate under preferential treatment in a highly regulated industry, while taking government subsidies, is not free market capitalism.

It may be asked, ``How are we achieving fairness in this bill?'' Mr. Speaker, we have worked diligently to find a solution that recognizes the realities of our dairy programs today. In Arizona, we establish a three million pound per month cap on producer-handlers. This will allow small mom and pop businesses to operate as they have since the 1930s. However, it will regulate large dairy operations that have been found to have an impact on our system of pooling and pricing. We also address those handlers that are escaping regulation by means of locating their facilities in federally regulated regions, while doing business exclusively in State regulated regions. This activity seriously undermines both the Federal and State regulatory systems, by diverting revenue away from the pool and disadvantaging regulated businesses.

Mr. Speaker, State and Federal milk marketing orders have existed side-by-side since Congress first enacted the Federal milk marketing orders in the 1930s. They promote a stable and affordable fluid milk supply and were intended to regulate the industry equitably. However, the discovery of an intra-order loophole has encouraged the growth of unregulated handlers in the marketplace. We need our Federal and State regulatory systems to interact in a seamless way, so that farmers and processors are not disadvantaged or discriminated against by our laws. Under S. 2120, Congress will allow the regulation of processors exploiting the intra-order loophole. They will be regulated based on the rules of the Federal milk marketing order where their plant is physically located. This won't place them at a disadvantage, it will restore equity to our dairy program.

Mr. Speaker, we have 70 years of history reflecting Congressional intent for unregulated handlers to become regulated when they begin to have an impact on the regulated market.

It has been suggested by opponents that S. 2120 ``targets'' an individual or individuals. Nothing could be further from the truth. We are merely closing regulatory loopholes that can be exploited by anyone. We are thus dealing with a general situation as stated by the Gentleman from Virginia and Chairman of the Agriculture Committee.

Congress has been advised by the Department of Agriculture that there may be and indeed likely is, at least one other business entity that going forward could, based upon present business practices, find itself subject to these provisions. And that is the point. The loopholes that presently exist can be exploited by anyone. By closing the loopholes, we address the situations at hand and prevent their use by those who could (and likely would) exploit these loopholes in the future.

It must also be emphasized that the provisions of S. 2120 are entirely consistent with the legislative history dealing with producer- handlers and the need to monitor their potential negative impact on fair competition in the markets in which they operate.

When the predecessor to the Agricultural Marketing Agreement Act (the Agricultural Adjustment Act) was passed in 1935, a Manager of the bill on the House floor stated that the United States Department of Agriculture had the power and the duty to regulate producers who were also handlers when they were large enough to disrupt the competitiveness of the market in which they operated.

Then, in 1965, after losing three lawsuits in which they made the same arguments they make against S. 2120, producer-handlers sought an amendment on the House floor to the 1965 Farm Bill which would have granted them a limited regulatory exemption from the Agricultural Marketing Agreement Act. That amendment was defeated. The Managers' Report explicitly states that producer-handlers who are large enough to disrupt the markets in which they operate can be regulated.

Mr. Speaker, as I have said before, the Milk Regulatory Equity act is about fairness. It's about equitable application of our laws. The hard working dairy farmers in Arizona have witnessed a steady decline in their pool since unregulated handlers began to flourish. They deserve to be treated fairly by their government and should never be placed in a situation where government regulations unintentionally disadvantage them in the marketplace. Regulated processors in Arizona are no less efficient or innovative than their unregulated competitors. They are simply unable to compete with businesses that don't have to play by the rules. This situation is wrong and must be resolved by Congress.

Without changes to the law to close existing loopholes, California dairy farmers are equally disadvantaged and so are our State's processors. When unregulated milk is shipped into the California marketplace from the Federal milk marketing orders, the impact is not just felt on dairy farms and in processing plants but in the homes of the families whose livelihoods depend on this industry.

Mr. Speaker, it is highly offensive to me that California's losses, including dairy industry jobs, are not based on our competition's superior product quality or innovative practices. These losses are because loopholes in Federal law are allowing unregulated handlers to game the system. Let me be clear: unregulated handlers are not promoting market competition. They are driving out competition. They owe their success to the dairy programs and to the advantage they have found in loopholes. Some of them collect large subsidies from the Federal Government, take full advantage of Farm Bill programs and then demand to be treated differently than the rest of the dairy industry.

No Mr. Speaker, we cannot allow this to continue. This issue is all about fairness. It's about resolving the current practice of unequal application of the law. I hear about the challenges my dairy farmers face every time I go home and I know first hand how frustrated and disappointed farmers and processors are with the current situation. They are looking to us to close these loopholes and restore free market principles and fair regulation to the dairy industry.

Congress must pass this legislation today and I ask for your support.

Mr. Speaker, I move to suspend the rules and pass the Senate bill (S. 2120) to ensure regulatory equity between and among all dairy farmers and handlers for sales of packaged fluid milk in federally regulated milk marketing areas and into certain non-federally regulated milk marketing areas from federally regulated areas, and for other purposes.

Mr. Speaker, I ask unanimous consent that the ranking member of the Committee on Agriculture, who I understand is on his way, and in his absence the gentleman from California (Mr. Cardoza), to have control of time for 10 minutes, and that they be permitted to yield blocks of that time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of S. 2120. My original interest in this legislation was to address a loophole created in the interface of the Federal Milk Market Order System with individual State milk marketing arrangements.

Under the authority of the Agricultural Marketing Agreement Act of 1993, the Secretary of Agriculture protects dairy producers from predatory pricing by setting a minimum price that must be paid by processors who distribute fluid milk within a Federal Milk Market Order Area.

While a majority of the country is covered by one of 10 Federal orders, some States, California in particular, have enacted legislation which authorizes State agencies to regulate minimum milk price for intrastate sales.

Herein lies the dilemma. Milk processed and distributed in the neighboring State of Arizona, which operates under a Federal order, is subject to the Federal minimum pricing regulations. However, milk processed in Arizona and then sold in California is exempt from the Federal existing regulations.

And since the commercial product originates from outside the State, it is exempt from California State regulations. Because of this loophole, milk produced in Arizona and sold in California is not subject to any minimum pricing regulations. This creates an unfair advantage for out-of-state fluid milk processors.

This situation was first brought to my attention by the gentleman from California (Mr. Nunes) and I agreed to help resolve this issue.

The solution simply directs the Secretary to apply the minimum pricing regulations of the Federal order system to any covered milk handler if they sell a significant portion of their fluid milk production in States that have established minimum milk pricing regulations.

Mr. Speaker, as all of our colleagues can attest, Federal dairy policy is among the most complicated and politicized of all of our programs. Indeed, the main reason that it has taken as long as it has to bring this bill to the full House for consideration is because often the simplest dairy bills tend to act as magnets and attract all kinds of unrelated pieces that are in many ways controversial.

This legislation is no exception. While the original intent was to remedy a situation that has caused great concern to the California dairy industry, two additional provisions have been added to this legislation to address concerns elsewhere.

Admittedly, I was reluctant to include these provisions; but after meeting with members of the dairy industry and hearing their near universal support, I decided to move forward with the legislation as drafted.

The two provisions that were added simply exempt Clark County, Nevada from the existing Arizona-Las Vegas

Milk Market Order and create a 3 million pound-per-month cap on the exemption for producers who process and distribute their own milk within the Arizona-Las Vegas Order.

Mr. Speaker, I am aware that some Members may have concerns about one or more of these provisions. As I indicated, I too had some reservations. But as I stated, there is near unanimous support within the dairy community, both the producers and the processors, for these changes. I therefore urge my colleagues to support this legislation.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself 30 seconds. Just to respond to the gentleman, I certainly respect the gentleman's concerns. I too learned about the measure last Thursday or Friday, but this is very common with the scheduling of suspensions.

As the gentleman is well aware, we have been discussing this issue, and it has been on the cusp of coming to the floor for a long, long time. We need to attempt to resolve these differences, and I think the consensus, on the part of many, is that we need to proceed with this debate today. I think that is the best way to get to the heart of what is going on here.

Mr. Speaker, I reserve the balance of my time.

Announcement by the Speaker Pro Tempore

Mr. Speaker, I yield myself 1 minute.

Mr. Speaker, I want to take a moment to respond to the gentleman from Wisconsin regarding the concern that this legislation is targeting one or two individual producer handlers to the benefit of the rest of the dairy industry.

We are here today to discuss how to keep the current Federal milk market order, something very important to the people of Wisconsin and other States, operating in a fair and equitable manner. I do not fault companies for their success. In fact, I applaud them for it.

When one or two companies' success, however, is based on a gap in the regulatory system, I believe we have an obligation to respond. In this particular case, millions of pounds of unregulated milk flows in your State commerce in direct competition with regulated milk. This certainly has the potential to impact markets.

I support this legislation because I believe that this milk should be treated the same way by the Federal Government that we treat milk that is in direct competition with it.

This is not about punishing individuals. It is about ensuring a level playing field for competition.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 1 minute to the gentlewoman from Ohio (Mrs. Schmidt).

(Mrs. SCHMIDT asked and was given permission to revise and extend her remarks.)

Mr. Speaker, I am pleased to yield 2\1/2\ minutes to the gentleman from Minnesota (Mr. Gutknecht), the chairman of the Dairy Subcommittee of the Agriculture Committee.

(Mr. GUTKNECHT asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I have just one speaker remaining, and I believe we have the right to close.

Mr. Speaker, I yield the remaining balance of my time to the gentleman from California (Mr. Nunes).

Mr. Speaker, I claim the time in opposition to the bill.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, far be it from me to rise and challenge the chairman of the authorizing committee regarding a dairy issue.

He and I have talked about this on many occasions; and frankly, much of that which he suggests as a potential solution to the California- Nevada-Arizona problem I am in total agreement with.

My difficulty is that I have reviewed with great care all of those suspensions that are on the floor today. This is the controversial suspension. And indeed, rather than talking policy, I will talk policy all that my colleagues would like today, I would prefer to discuss the violation of procedure that is involved here.

Under our rules, suspensions are to be addressing issues that are not controversial, that Members on both sides of the aisle are able to largely agree upon. There are minor exceptions to this. But in this case, we are talking about a violent exception.

It is clearly understood by people operating with this bill on both sides of the aisle that I have had very strong opposition and others have had opposition to this policy. And yet to have it come to the floor as a suspension with no notice whatsoever, I mean, I learned last Friday by accident that this bill was going to be on the floor.

Frankly, I might be on a plane today, otherwise; and it is hardly the way to treat Members on either side of the aisle dealing with a fundamental question of procedure. So for that reason initially I have expressed my very strong opposition.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield as much time as he may consume to the gentleman from Wisconsin (Mr. Obey).

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself as much time as I may consume.

Mr. Speaker, I will speak just for a moment, for the gentleman from California (Mr. Cardoza) talked about a loophole. The loophole that he is talking about really is a part of an existing law. But if there is a loophole, it is handled by a regulation that has been handled by the Department recently.

That very regulation is currently being challenged in the courts, and people are attempting to codify that regulation in order to bypass my constituents' opportunity in the courts. They were due to appear in court tomorrow to defend their interest, and this bill is on the floor today, making it not just a very controversial issue, but violating our very fundamental process.

Mr. Speaker, I would urge the House to be very reserved about using the suspension process in this fashion.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself 1 minute.

Mr. Speaker, responding directly to my colleague from California's point, indeed it has been suggested that we are dealing with dairy policy in a major way here on the floor. If that is the case, clearly we should not be handling that very policy by way of a suspension matter. It is a fundamental violation of that process.

This bill has had a number of years for possible consideration in the authorizing committee; and, yet, the authorizing committee has never held a hearing on this subject, the subject of the Senate bill that is before us today.

I would suggest to us that our authorizers need to, in a fundamental way, look at national dairy policy and not let California continue to take such advantage of the country, as my colleague, the gentleman from Wisconsin (Mr. Obey), suggested. In this case, we have California divided against itself, the central valley against my district.

I must tell you, a long time ago, I tried not to have to deal with dairy policy because of problems in the past, but I can tell you also you can never quite satisfy dairy people in California because any kind of competition is a problem.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I might consume.

Mr. Speaker, it is pretty apparent for those who have been listening that this is not a simple matter. I mean, dealing with national dairy policy by way of a suspension bill, with the presumption this is a very simple, noncontroversial item, at best, distorts the process.

Let me share with my colleagues that there is a regulation in place that covers the problems that have been raised here on the floor. The department has recently done that. That regulation is being challenged in court, and it is supposed to be heard tomorrow. So the opponents are choosing to bring the bill up today to undermine that opportunity for a family business to have an opportunity to expand their business.

I would suggest to my colleagues perhaps we should be supporting small producer-handlers across the country who would wish to expand their business, and those who have not chosen to follow that line, if it is so profitable, why do they not follow that line themselves? They, too, could become producer-handlers.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I have no additional speakers, and I yield back the balance of my time.

Mr. Speaker, will the gentleman yield?

Mr. Speaker, the gentleman involved is a constituent of mine. I can take you to his farm anytime you like, in California.

One of his major farms is in my district, and all the farmers around him in California are supporting his position.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, today I rise in support of the bill before us, and I would like to thank Chairman Goodlatte and the other members of the committee for their hard work and cooperation. I would also like to acknowledge the gentlemen from California, Mr. Nunes, Mr. Baca, Mr. Cardoza and Mr. Costa, who have worked diligently to bring this important issue to the attention of the House.

Though this bill is not perfect, Mr. Speaker, it will begin to solve an imbalance in our regulatory structure. However, it ignores the fact that the real solution is for California to join the Federal Dairy System. Right now, one handler in Yuma, Arizona, is using a loophole in the current system to sell from a Federal milk market area into California and is not paying the minimum milk price that either institution has in place. This practice is disrupting the marketplace and undermining the goal of fairness that the regulatory system should encourage.

Unfortunately, Mr. Speaker, this bill offers a piecemeal approach when dairy policy really needs a more comprehensive adjustment. The bill will begin to address the problem more immediately, but will leave more work to be done for a later time.

Mr. Speaker, even as one part of this bill is written to ensure that the Yuma handler is on the same regulatory playing field as his competitors, the bill's second provision completely exempts Nevada processors from regulation. So one provision requires that similar rules apply to all handlers, while the other gives special status to handlers in Nevada.

It may be that the exemption for Nevada will allow the Yuma handler to regain unregulated status that the bill is meant to take away. Keep in mind, Mr. Speaker, that the goal of this bill is to level the playing field between producers and handlers, which is what I hope it will do despite the fact that it is not a particularly comprehensive solution.

Without feedback from hearings and from the USDA regarding implementation of this bill, we cannot be sure that it will resolve the problem that is occurring now with the plant in Yuma, Arizona. Who is to say that the same issue will not arise elsewhere? Are we going to legislate milk price regulation every time a new milk processing plant opens? I hope not.

Finally, I must reiterate that the entire problem addressed by this bill could be solved if California belonged to the Federal order system. We need our policy to recognize that no State, even California, is isolated from the dairy marketplace. Each day raw milk and processed dairy products cross the California border in both directions. Despite that fact, California has taken various actions to isolate itself; most notably, in 2003 the Supreme Court ruled unanimously against California's position that its system was protected from scrutiny under the commerce clause of the U.S. Constitution.

California has attempted to stop the flow of raw milk from Nevada to California processors by requiring that the processors pay an extra fee into the California pool, a contribution that was not shared with producers supplying that milk.

Mr. Speaker, that California even felt the need to tax incoming milk in that way is a sign that the system is becoming unsustainable.

Although this bill before us today is needed and is not perfect, I just have to say that it does little to address the broader problems that arise from the two systems operating side by side. So I am here today to support this bill because it will give us a short-term solution to the problem. And I look forward to working with my colleagues as we move ahead, my colleagues in the dairy industry, to develop a more sensible plan for the long term.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from California (Mr. Cardoza).

Mr. Speaker, I yield 2 minutes to the distinguished gentleman from California (Mr. Costa).

Mr. Speaker, I do not think we have any additional speakers, and so I yield back the balance of my time.

Mr. Speaker, this has been a very interesting debate; and if you want to get into hot water, just start debating dairy policy. It not only gets very complicated very fast, but it gets very heated.

This is not a new issue. This has been percolating around this Capitol now for at least 2\1/2\ years. I was first made aware of it by the gentleman from California (Mr. Nunes) and others on a trip to California. I have learned more about this issue than I think I really ever wanted to know; and, frankly, I think most Members of the House do not really want to know too much about this.

Our colleague from Ohio, I think, said it well. This is really an example of where the laws were originally designed to protect small producer-handlers, and here we have a large producer-handler who has found this, and I do not want to get into a fight here over the term ``loophole,'' but he has found this opportunity and he is exploiting this opportunity.

Now, we have said repeatedly to our colleagues in California, this essentially is a California issue, why do you not work it out. I think there was a good-faith effort on both sides of this argument to try and do that; but, unfortunately, they failed.

This is a very complicated issue, but I think all of the speakers who have preceded me have said it well, that we have a responsibility to have a Federal milk system that is fair to everybody. What we have right now is one particular producer who is trying to use the best of both worlds, who is situated right on the border; and, frankly, I think we have a responsibility to close that loophole.

Let me point out that this is not an issue, while generally milk issues divide geographically, they divide between the people who produce the milk, the dairy farmers and the processors, this is one where virtually everyone in the dairy industry, from all corners of the United States, whether they are dairy farmers large or small, whether they are processors large or small, or whether they are in the marketing side or the manufacturing side, almost universally they support this legislation.

So with all due respect to our distinguished colleague and chairman of the Appropriations Committee, I think this is an idea that has percolated for a very long time. It is time for the House to take action. I strongly support the bill, and I hope my colleagues will join me in supporting it as well and pass it here today on the House floor.

Mr. Speaker, as Chairman of the Subcommittee with jurisdiction over dairy programs and policies, I want to express my support for this legislation and reiterate the comments made by the Chairman of the Agriculture Committee.

As he said, the federal milk marketing order system has served the dairy industry well. But we have this situation where a processor from outside California can undermine the market there by under pricing the regulated competition.

Mr. Nunes and a number of others have worked to address this, and the legislation before us today would direct USDA to apply the minimum pricing regulations of the federal order system to milk processed in a federal order area and distributed into states that have a statewide system.

While we're aware that some Members have concerns with this legislation, it's important to point out that it has the strong support from nearly the entire dairy industry, both producers and processors.

Again, as Chairman of the Dairy Subcommittee, I encourage my colleagues to join me in supporting this legislation.