C. Issue: The Balance Between Production and Consumption
of Fluid Milk
Products
As noted, the finding analysis regarding the price
calculation
simultaneously accounts for the level required to ensure the region's
local supply of fluid milk products and the amount needed to cover cost
of production. Section 9(e) of the Compact specifically
requires the
Compact Commission to consider the balance between production
and
consumption of milk and fluid milk products in the regulated area.
Inquiry under this issue assisted the Commission in
determining
whether the region presently is being supplied locally or has become
dependent upon supply from distant sources, notwithstanding any present
price disparity between cost of production and the pay price. This
understanding allowed the Commission to determine the degree to which
price regulation is needed to sustain current, sufficient, local
supply, and the degree to which it is also needed to encourage and
ensure new and added local supply.
According to data, the six state, New England, region draws
approximately seventy percent of the raw product supply needed for the
consumption of all milk products, fluid and manufactured, from New
England farmers. The total volume of milk supplied for the region is
approximately five billion pounds. The predominant remainder is
supplied by New York farmers, who have traditionally made up a
substantial portion of the New England milkshed. Less than three
percent of the raw milk supply for the New England market is produced
outside of the six state/New York milkshed.
According to the Market Order statistics, approximately fifty
percent of this raw product milk supply is processed for consumption as
fluid, or drinking milk, in the New England region. The raw product
supply for this in-region fluid production and consumption draws from
both the New England and New York farmers comprising the New England
milkshed. At present, approximately 98 percent of the fluid milk
products consumed in the region are produced by fluid processing plants
located in New England. The remaining two percent of fluid milk
consumption is supplied by packaged milk products imported by plants
nearby to New England. A small percentage of the in-region fluid
production is similarly exported for consumption in the immediate areas
adjacent to New England.
The Market Order statistics also describe with particularity
that
the remainder of the raw product milk supply is processed within New
England into manufactured dairy products. In contrast to fluid
milk
products, these manufactured dairy products are consumed both
within
and outside the New England region.
It is universally understood that the same raw product supply
can
be used for both fluid, processing and manufacturing purposes. Given
this substitutability, and assuming reliance upon farmers in New York
State as part of the milkshed, the Commission concludes that New
England is, overall, presently in stable balance of regional production
and consumption of fluid milk products.
At the same time, the Market Order statistics describe a
marked
decline in production over time in every individual New England state
except Vermont.\57\
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\57\ See also New England Agriculture statistics, submitted
by
William Zweigbaum, A/C 3/31/97.
Receipts of Milk From Producers, By
States
[Thousand
Pounds]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year
CT
Me
MA
NH
NY
RI
VT All States
--------------------------------------------------------------------------------------------------------------------------------------------------------
1985............................................
594,785 345,956
540,143 338,028
1,284,015 39,722
2,256,595 5,399,244
1986............................................
574,279 333,124
506,773 343,806
1,280,331 36,912
2,266,222 5,341,447
1987............................................
541,118 293,373
450,524 301,738
1,313,635 36,198
2,236,238 5,172,824
1988............................................
515,512 262,059
418,055 281,403
1,391,994 34,490
2,214,116 5,117,629
1989............................................
502,716 217,437
400,105 268,453
1,388,680 29,651
2,167,758 4,974,803
1990............................................
494,619 216,586
407,704 280,201
1,455,463 29,805
2,229,961 5,114,341
1991............................................
504,516 253,383
412,990 294,185
1,545,890 30,056
2,268,174 5,309,194
1992............................................
525,702 260,759
427,407 307,159
1,560,245 28,853
2,367,566 5,477,691
1993............................................
504,282 288,776
424,836 310,463
1,443,447 28,266
2,345,423 5,345,493
1994............................................
491,495 296,500
398,271 299,911
1,283,684 27,161
2,301,044 5,098,521
1995............................................
487,493 346,443
400,501 314,610
1,417,034 28,536
2,375,518 5,370,135
1996............................................
457,230 388,684
388,227 312,293
1,459,469 26,850
2,350,348 5,383,101
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: New England Market Order Administrator's Statistical
Summaries.
Milk Marketed by Producers: Sold to Plants and Dealers: by
State
[Million
Pounds]
--------------------------------------------------------------------------------------------------------------------------------------------------------
YR
CT
ME
MA
NH
RI
VT Total NE
--------------------------------------------------------------------------------------------------------------------------------------------------------
1986.........................................................
575
670
535
362
36.0
2405 4583.0
1987.........................................................
540
654
480
314
36.0
2370 4385.0
1988.........................................................
515
620
437
296
35.0
2350 4253.0
1989.........................................................
500
585
422
286
30.0
2295 4118.0
1990.........................................................
495
590
436
297
30.2
2330 4178.2
1991.........................................................
505
600
440
313
33.4
2370 4261.4
1992.........................................................
526
623
454
328
32.3
2474 4437.3
1993.........................................................
527
645
452
320
31.9
2470 4445.9
1994.........................................................
514
621
431
308
31.2
2422 4327.2
1995.........................................................
508
625
426
322
32.1
2507 4420.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: MILK: Annual Quantities Used and Marketed by Producers, 1986-1995 New
England Agricultural Statistics,
1995-1996.
[[Page 23040]]
This statistical picture of decline is further corroborated
by the
previously cited testimony of Smith and Baron. According to Smith,
``The number of dairy farms in New England declined by 41%
over the
past 10 years. (1985-1995) During this period the number of cows has
declined by 24%, total production has declined 4% and land used in
farms fell by nearly 600,000 acres.'' \58\ According to another
commenter, New England has lost dairy farmers at a rate of
about 40%
faster than the national average, between 1987 and 1992.\59\
---------------------------------------------------------------------------
\58\ Smith, 12/17/96 HT at 34.
\59\ Barron, 12/17/96 HT at 60.
---------------------------------------------------------------------------
According to statistics cited by another commenter, problems
are
especially severe in the southern portion of the Compact
region.
Massachusetts, the most populous state, has seen the greatest effect,
showing a 35% decline in cow numbers and a 20% decline in milk
production during the period of 1986 through 1995. Each of the two
other southern New England states, Connecticut and Rhode Island, have
also shown substantial declines in farms, cow numbers and
production.\60\
---------------------------------------------------------------------------
\60\ See New England Agricultural Statistics, 1995-96, USDA,
Page 68.
---------------------------------------------------------------------------
Another commenter indicates that milk production in New York
state,
the supplemental portion of the New England milkshed has also declined.
Citing USDA statistics, this commenter states that ``New York milk
production was down 4 percent in February 1997 compared to one year
ago.'' \61\
---------------------------------------------------------------------------
\61\ Wellington et al, 3/31/97 AC at 6.
---------------------------------------------------------------------------
This commenter also indicates that the milkshed has expanded
in
area as production closer to the production centers has declined:
The milk supply area for the New England market has steadily
increased over time as dairy farmers in the region have gone
out of
business. When the New England Order was promulgated more than
twenty years ago, the supply area, or milkshed, covered all the six
New England states and a dozen or so eastern New York counties.
Recent information provided by the Market Administrator's Office
shows that the New England market now receives milk from thirty four
New York counties as far west as Ontario County. Ontario County is
about 360 miles distance from Boston. This distant milk is primarily
needed to satisfy the daily Class I needs of New England bottlers
during the peak demand period in late summer and fall when schools
go back into session and milk supplies are seasonably at their
lowest level. The New England milkshed has increased in size by
approximately 10 miles.\62\
\62\ Wellington et al, 3/31/97 AC at 6.
---------------------------------------------------------------------------
From the comment and statistics, therefore, the Compact
Commission
concludes that production and consumption in New England, though
presently in balance, are operating in a balance that is under
tremendous stress. The supply most local to the population centers, or
that provided by southern New England farms, has been greatly
diminished and is in fact disappearing. Production at the outer reaches
of the milkshed has been able to replace this loss of the most local
supply. Yet this more distance supply is itself under stress and is in
fact in decline, causing the outer boundaries of the milkshed to be
expanded.
The Compact Commission consequently
concludes that the present
stress on the balance between the region's production and consumption
must be relieved if the region is to continue to be provided an
adequate, local supply of fluid milk. The Commission concludes that the
present balance likely will not be maintained and could soon begin to
significantly erode, which would threaten the region's supply, if the
stress is not relieved. To ensure a continuing balance, the present,
local supply must at least be stabilized, if not increased.
Furthermore, the present, distant supply itself must be stabilized as
well, to ensure that the milkshed does not reach further west.