(4) Structure and Health of the New England Dairy Industry
    The comment received also makes clear the devastating impact that
chronic price insufficiency, price instability, and the failure of milk
prices to keep up with inflation over the last decade has had, and will
continue to have, on the structure and health of the New England dairy
industry absent intervention through regulation by the Compact
Commission.\36\
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    \36\ One commenter felt that the Commission should not take
action because he believed that other regions of the country were
losing dairy farmers at a faster rate than New England. See Tipton,
WC 1/2/97 at 462. A finding that New England is losing farmers
faster than any other part of the country is unnecessary to
establishing an over-order price regulation.
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    According to the extensive testimony by University of New Hampshire
Extension Specialist Michael Sciabarrasi, the character of the New
England dairy industry is still predominantly family owned and
operated, made up of mostly small to medium sized producers, and is
heavily dependent on family labor.\37\ Maintenance of this market
structure premised on family farms is precisely the express purpose of
the Compact. See Compact Article I, Sec. 1.\38\
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    \37\ Sciabarrasi, 1/2/97 WC at 309.
    \38\ Three commenters expressed the opinion that the market
should be left to work without regulation, even if this meant
continued farm loss. (Baker, 12/17/96 HT at 185, Schnittker, 1/2/97
WC at 313 and Vetne, 12/19/96 HT at 269.) As one Commenter
recognized, this is essentially a question of public policy. In
response, the Commission refers to the Compact's Statement of
Purpose, that ``dairy farmers are essential to the region's rural
communities and character'' and are ``an integral component of the
region's economy.'' Compact Article I, Sec. 1.
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    Mr. Sciabarrasi's conclusions were corroborated by much of the
evidence adduced at the hearings. There is abundant evidence that many
of the region's farms are small to medium-sized. Likewise, there is
substantial anecdotal evidence of heavy dependency on family labor,
much of which often goes unpaid.\39\
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    \39\ See 12/17/96 HT: Mason at 87; Olson at 146; d'Boer at 192.
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    The testimony of Robert Smith, with the Yankee Farm Credit Bank and
Farm Credit of Maine, described the effect of the industry's chronic
distress upon this basic market structure. 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
24%, total production has declined 4% and land used in farms fell by
nearly 600,000 acres.'' \40\ 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.\41\
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    \40\ Smith, 12/17/96 at 34.
    \41\ Ed Barron, 12/17/96 HT at 60.
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    Statistics cited by another commenter indicate these problems are
particularly 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
See New England Agricultural Statistics, 1995-96, USDA, Page 68.\42\
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    \42\ William Zweigbaum, U-NH Extension 3/31/97 AC.
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    The economic literature submitted into the record addressing this
issue likewise concludes that inadequate milk prices threaten the long-
run survival of small and medium-sized farms. Quiroga & Bravo-Ureta,
``Short- and Long-Run Adjustments in Dairy Production: A Profit
Function Analysis,'' 24 Journal of Applied Economics 607-16 (1992).\43\
In this study, the authors extracted data from Vermont farms between
1966 and 1988 and applied that data to econometric models to test the
effects of milk price reductions on several factors, including farm
size. The results of their analysis were consistent with the view that
low milk prices threaten the economic viability of small- and medium-
sized dairy farms in the short run, and continue the trend towards
fewer, and larger, dairy farms over the long run. Yet, it is precisely
this fear of continuing attrition among the region's small rural dairy
farmers that led to the enactment of the Compact, and prompted the
Commission to undertake this proceeding. See, e.g., Compact, Art. I,
Sec. 1.
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    \43\ Bravo-Ureta, 1/2/97 WC.
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