3. The Experience of the Southeast Region of the United States
    Received comment and statistics indicate that the adverse
experience of the southeast states could well serve as a model for the
future of New England's supply pattern and retail prices, if the
present stress on the milkshed is not abated. Many of those states have
lost a significant measure of their local milk supply. For the
southeast as a whole, between 1980 and 1995, the number of dairy farms
declined from 33,900 to 7,250.\100\ In Georgia, the percentage of milk
supplied by Georgia farmers declined from 84% in 1973 to 50% in
1988.\101\
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    \100\ National Agricultural Statistics Service, ``Milk
Production'', 1970-1995.
    \101\ Gilmeister, 3/31/97 at 10.
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    Two commenters, Ronald Harrell, Ph.D., of the Louisiana Farm Bureau
Federation, Inc., and G.A. Benson, Ph.D., and Associate Professor and
Extension Economist in the Department of Agriculture at North Carolina
State University, voiced graphic concerns over the dwindling local milk
supply patterns in the Southern states. According to Dr. Benson:

    Because milk production is decreasing, and because of seasonal
imbalances between production and sales, more milk must be imported
from out-of-region sources in the fall. The seasonal ``surplus'' in
the spring months has virtually disappeared. Supplementary or other
source milk is more expensive than locally produced milk because of
give-up charges, transportation costs, and differences in
classification in the originating and receiving orders. These
statistics are not collected on a regular basis or published, but a
reliable source in one of the regional cooperatives informed me that
last year they imported an average of 8.5% of the total milk they
needed to meet customer needs as supplementary milk at an average
cost of $1.92 per 100 lb. above the cost of producer milk in the
federal order. * * * On Average, this supplementary milk [reported
by another cooperative] cost $2.58 per 100 lb. more than

[[Page 23050]]

local milk. It came from a variety of sources and the added costs
ranged from a low of $1.52 per 100 lb. to a high of $4.15 per 100
lb.\102\

    \102\ Dr. G.A. Benson, 327/97 AC at 2.
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    The comment indicated that dairy cooperatives were currently
absorbing the cost as a loss rather than passing it on to customers,
but that this is an unsustainable market pattern.\103\
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    \103\ Gillmeister's analysis at 6-7 (sic) also indicates that
southern retail costs are not reflecting these market conditions.
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    The Commission is concerned that if the continued stress on the
milkshed for the New England region continues unabated, without
Commission intervention, then the New England states will begin to
approach the increased market uncertainty currently facing the Southern
states. Accordingly, the Commission bases its determination of the
present need for Compact Over-order Price Regulation on the current
experience on the southern states. The Commission concludes the Compact
was designed precisely to avoid such a market pattern as currently
experience by the southeast, and to permit the New England region to
test the efficacy of the over-order price mechanism as a device for
curtailing these very problems.