is the Northeast Dairy Compact?
States are Included in the Compact?
is the Purpose of the Compact?
is the Compact Needed?
Does the Compact Work?
Does the Compact Pricing Work?
Was the Compact Created?
Makes Up the Compact Commission?
There Any Cost to the Government as a Result of the Compact?
is the Northeast Dairy Compact?
A formal agreement
between the six New England States, enacted through state and federal legislation,
which allowed for the establishment of a regional pricing mechanism for
fluid milk sold in the New England states.
states are included in the Compact?
The New England
states -- Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island
and Vermont -- are all currently included in the Northeast Dairy Compact.
Jersey, New York, Pennsylvania, Maryland and Virginia are the only additional
states that may join the Northeast Dairy Compact, if upon entry the State
is contiguous to a participating State and if Congress consents to the
entry of the State into the Compact.
is the purpose of the Compact?
Dairy Compact was established to restore the regulatory authority of the
six New England states over the New England dairy marketplace. Its purpose
is to recognize the interstate character of the northeast dairy industry
and to form an interstate commission for the region.
The mission of
the Compact Commission is to take such steps as necessary to assure the
continued viability of dairy farming in the northeast and to assure consumers
of an adequate, local supply of pure and wholesome milk.
The Compact recognizes
the cultural and economic benefits of a viable dairy industry to the region
-- that dairy farms are an integral component of the region's economy and
preserve open spaces used for a diversity of recreational pursuits.
is the Compact needed?
The current federal
milk pricing system does not fully account for regional differences in
the costs of producing milk and the unduly low federally-established minimum
prices have imposed a great financial stress on New England farmers.
By design, the
federal program relies on state regulation for an adjustment in regulated
milk prices, as needed. Individual states in New England have repeatedly
attempted to complement the federal minimum level. However, since milk
almost always now crosses state lines to get to market, the courts have
ruled that this activity is an intrusion on Congressional authority under
the Interstate Commerce Clause of the U.S. Constitution. Congress may,
however, delegate its regulatory authority over interstate commerce to
regional groupings of states, through the mechanism of an interstate compact.
Dairy Compact, therefore, offers a regionally-tailored solution to the
milk pricing problem in the northeast by allowing New England states to
collectively regulate the farm price of fluid milk. By entering into the
Compact, the New England states have recognized that they must work together,
rather than individually, if they are to maintain family dairy farms.
does the Compact work?
The Compact creates
a Commission comprised of 26 delegates from each of the six New England
states, appointed by the governors. Each delegation has between 3 and 5
members, including at least one farmer and consumer representative.
has the authority to regulate the farm price of Class 1 (fluid) milk. It
establishes price regulation by way of a formal rulemaking process. The
Commission takes formal testimony to determine both the price necessary
to yield a reasonable return to the producer and the distributor, as well
as the purchasing power of the public. Any price regulation proposed by
the Commission is subject to a two-thirds vote by the state delegations
as well as a producer referendum.
All milk consumed
in the Compact-affected area is uniformly regulated. This provision ensures
an equal benefit to New York farmers who supply the New England market.
does the Compact pricing work?
The Compact Commission's
price regulation works in conjunction with the federal government's pricing
program, which establishes minimum prices paid by processors and received
by dairy farmers for raw milk produced on farms. The Compact regulation
raises these minimum prices as they relate to the market for fluid, or
bottled milk processed for sale in the six Compact states. Processors purchasing
milk to produce other dairy products such as cheese or ice cream are not
subject to the Compact's pricing regulations, although all farmers producing
milk in the region, for any purpose, share equally in the regulation's
Here's how it
works.The Commission established $16.94 per hundredweight as the Compact
over-order price for Class 1 milk. All milk processors having sales of
fluid milk in New England are required to pay a monthly over-order obligation.
This obligation is the difference between $16.94 and the price established
monthly by federal regulation for the same milk. For instance, if the federal
price for Class 1 milk was $13.94 for a particular month, the processors'
over-order obligation for that month would be $16.94 minus $13.94 -- or
$3.00. Processors multiply their total fluid milk sales by this amount
and that is what they pay into the Compact Commission.
of the pooled price regulation proceeds are then set aside to hold harmless
the impact on New England WIC programs. At least 4 cents but no more than
5 cents is deducted from the pooled proceeds each month and placed in a
reserve fund established in the event of late payments by handlers. Approximately
half of the unobligated balance of this fund is added back into the pool
for redistribution in the following month in order to prevent the reserve
fund from growing too large. Farmers receive the balance of the proceeds
in accordance with the Class 1 utilization rate -- the percentage of milk
produced that actually goes towards drinking milk, not cheese or other
manufactured products. Therefore, the producer price is derived by dividing
the balance of the pool proceeds by the total number of pounds of all producer
milk in the region.
The Compact Commission
makes disbursements to farmer cooperatives and milk handlers, who then
make the individual payments to farmers based on their production.
Here's an example:
When the Compact regulation first took effect in July of 1997, the Compact
over-order obligation was $3.00. During that month, 245,001,960 pounds
of milk, or 46.14% of the total milk in the region was sold as Class 1
milk. This resulted in a pool paid into the Commission of $7,350,058.80.
After the WIC and reserve fund adjustments were made, the balance of the
pool proceeds was $6,903,009.44. When this number was divided by the total
number of pounds of all producer milk, in this case 531,000,726 pounds,
the resulting producer price was $1.30.
was the Compact created?
in each of the six New England states demonstrated with their votes in
support of the Compact that they recognized the important role that farms
and farmers play in New England. Between 1989 and 1993 each of the member
states passed uniform legislation joining the Compact and the governors
of each state signed the legislation into law.
Under the Compact
Clause (Article 1, section 10, clause 3) of the United States Constitution,
Congress must approve interstate compacts. The Compact language was included
in the 1996 Farm Bill (Federal Agricultural Improvement and Reform Act)
and was passed by Congress on March 28, 1996. This required support from
Congressional members outside of New England.
signed the legislation into law on April 4, 1996.
the Farm Bill Conference Report were a number of conditions of consent.
Among these was a requirement that, before the Compact could be implemented,
the U.S. Secretary of Agriculture must review the legislation to determine
if there was a "compelling public interest" for the Compact's implementation
in the Compact region. After a public comment period, on August 9, 1996,
Secretary Glickman found that the Compact was in the compelling public
interest and authorized its implementation.
makes up the Compact Commission?
includes producers, processors, retailers and consumer representatives.
This broad participation allows the Commission to address the broad public
interest in milk price regulation. The Commission consists of three members
from Maine and New Hampshire and five members from Connecticut, Massachusetts,
Rhode Island and Vermont -- for a total of 26 members. Commissioners are
appointed by the governors of their respective states and are not paid
for their work on the Commission. The Commission sits as a formal hearing
panel and has formal rule-making authority.
there be any cost to the government as a result of the Compact?
No. The Compact
legislation requires the Commission to reimburse the federal government
for the cost of Commodity Credit Corporation purchases of any surplus production
that might occur should the rate of regional increased milk production
exceed the national rate.