A political dynasty and a philanderer, ambitious and defeatist. Its award of a journalist and former reporter at the wall street journal. Words from a Book Review written about Joseph Kennedy senior, father of jack, Bobby And Teddy kennedy. Its a new book by Susan Rommel titled the ambassador. Her book is about Joseph P. Kennedy time as ambassador to great britain, 19381940. Historian Susan Rado on this episode of booknotes . Listen at cspan. Org podcast or where whatever you get your podcasts. Cspanshop. Org cspans online store. Theres a glitch in a cspan products. Browse to see whats new. Your purchase will support our nonprofit operations and your time to order the the Congrl Directory with Contact Information for members of congress and the biden administration. Go to cspanshop. Org. Next hearing on federal regulation of Milk Prices held by the Senate Agriculture Subcommittee on dairy. Chaired by new senator tristan gillibrand. New York Senator Kirsten gillibrand. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] livestock, dairy, poultry, local food systems, and Food Safety and security to order. Thank you for joining us this morning if this up to me next to receive testimony on the growing need to modernize the federal Milk Marketing Order system to bring the nations did repricing into the 21st century market. Since this is the first Subcommittee Hearing of the urologist of the welcoming Ranking Member Hydesmith for her leadership and her work. I look forward to working together to provide our nations farmers the Tools Support and resources they need. Our witness is welcome. We mac panels before introduce the panels im going to introduce the dean of the democrats to allow for his opening remarks because we have a conflict and he has to leave early. Senator leahy if you like to provide your opening remarks. Thank you very much, Madam Chair. I appreciate the courtesy of my neighbor from New York. This is important and timely hearing and only because of the conflict i have with appropriations, i mean with judiciary, i wont be here. I think every vermonter knows gary never takes a day off, and so i particularly thank our witnesses for being here. I just talked with mr. Ron, and ive often heard here today, shes speaking for agrimark which is an indispensable member of vermont dairy community, and i would say to her as i said before i could always count on your predecessor, the late Bob Wellington to provide sounD Counsel. I know youre going to do the same. Gary is a Bedrock Industry in vermont and theed north east, anchors our world economies for generations. The years of Price Volatility, consolidation, rising costs has squeeze many small sized farms. Vermont has been losing farms at a a devastating rate even before the pandemic. Since 2012 weve lost more than 40 of our gary. Thats 400 families no longer milking cows. That impact is across her committee, working landscape, our farmers continued to struggle with economic climate be under control. Last month i welcomed Secretary Vilsack to vermont. Together we announced 350 million in assistance to Dairy Farmers to receive lower prices due to market abnormalities caused by the pandemic. We look for to solutions and approve the resilience and transparency, address longstanding market inequities, so i look forward to their perspectives. Senator gillibrand, ill put my whole statement in the record but thank you for doing this. I know i dont have to tell you what Dairy Farms in the northeast face. You have been a champion with your own state of New York, traveled to this farms, youve talked to the farmers and i think theres a lot we can work together on, so thank you very much. Thank you, mr. Chairman. I would also like to recognize the Ranking Member, senator boozman. Thank you so much, Madam Chair, and thanks too Senator Leahy and you for your championship. What has worked in harder for the industry than you all and its such an important industry, i, too, would like to thank our witnesses for being here today in person and virtually come the time youre spending away from your duties on the farm and from your work is not lost on us. We greatly appreciate your expertise and your willingness to guide us as we do our very best to serve you and the american agriculture in general. Over the August Resource i have the pleasure of visiting Helms Dairy in arkadelphia arkansas. This Fifthgeneration Farm which has about two world wars come major depressions in the Farm Economy and steadily declining consumption, the products is one of the remaining 40 dairies in arkansas. Which is truly amazing were at that point. Er as Senator Hydesmith has shared, the number of Dairy Farms has steadily declined in many southern states. Im deeply concerned about this decline and look for to examining this trend and ways to reverse it. While Dairy Policy may be a part of that t conversation, the ites i hear about most from Dairy Farmers and all farmers are concerns about higher taxes, higher input costs and increase inhe regulation. And rising to each of those concerns is the Tax And Spending legislation that were getting ready to be forced through congress. And the last 40 years the Senate Agriculture Nutrition for street to meet has received Budget Reconciliation 15 times between 1980this Year Fiveyearea Committee chairs from both parties divided leadership to ensure that with some level of bipartisan input into the reconciliation process. Whether that was a committee hearing, and open market of the legislation, theis bipartisan service of the agricultural committee members on the Conference Committee or legislation that was passed with the bipartisan votes, senators fromen both parties. Consideration of the provisions of the american Rescue Plan of 2021 was the first time in more than 40 years that this bipartisan Committee Tradition was not upheld. No hearings were held to listen to the needs of farmers and ranchers, no Businessus Meeting was held to afforD Committee republicans and democrats come input into drafting the bill. Democrats did not convene a Conference Committee to consider any changes i in the final bill passeD Congress by partyline vote. Im deeply concerned democrats are choosing to gooc down this roadad once again. Without input from the Agriculture Community and without the input from senators on this committee, democratic leaders in the House And Senate are preparing a 3. 5 trillion tax trillion Dollars Tax a and spend bill that better reflects white house priorities right that the news of the agricultural community. Democrats t are being sent for much this legislation will spend billions of dollars on conservation programs, yet earlier this week the house Agriculture Community approved an incomplete bill that included no Conservation Program Spending as of yet. Apparently 28 billion worth of conservation and other spending will be added later. Perhaps on the house floor. The bill did h identify somethig called the civilian climate corps which i think is better described as the climate police. We have no information on what the climate police may become what its purpose is or how it will work, why it is needed or any other answersny to the most fundamental questions american taxpayers expect this body to know and deliberate on before spending trillions of dollars. We do know that president bidens socalled american Jobs Plan proposes mobilizing the next Generationex Resilience workers to advance environmental justice. We also know in this bill democrats are directing the climate police to operate on federal forest and private land. Thats less the part that concerns me the most is the impact this partisan process will have on consideration of the next Farm Bill. Despite its final Vote Tally passing in 2018 Farm Bill, was no simple task. It took moderation on both sides and months of thoughtful deliberation to craft legislation demonstrated wins foron all. By choosing this approach democrats are shadowing the Farm Bill process and putting our farmers futures in jeopardy. Throughout this process i and my republican colleagues on this committee will do everything in our E Power to defend american agriculture from the democrats reckless Tax And Spending agenda, and i yield back with that, Madam Chair. Thank you. Thank you mr. Ranking member. I would now like to welcome our witnesses. Welcome. We have two panels today. The the first panel includes mr. Jim davenport junior owner of Tollgate Farm and the of Hudson Valley fresh of ancramdale, New York. Welcome, jim. Mrs. Christina zuiderveen, managing partner of black Soil Dairy of granville, iowa. And mr. Mike Ferguson Owner of the Ferguson Dairy Farm of senatobia, mississippi. Our second panel we would hear from ms. Catherine geraghty, Vice President of economics and legislative affairs at agrimark in andover, massachusetts. Mr. Roberts wills president of Cedar Grove Cheese and Clock Shadow Creamery of plain, wisconsin, anD Christopherer wo, e. V. Baker professor of agricultural economics at the charles dyson school of applied economics and management at Cornell University ithaca, New York. I look for to hearing from you all and thank you for sharing your time and expertise with us today. O Milk Pricing is y rightly considered onee of the most complicated economic systems in our nation. When the system is a working for farmers, the ramifications reach from coast to coast including in my Home State of New York. New york is the fourthlargest dairy producing state and the nations largest producer of Yogurt And Home to more than 3000 Dairy Farms. When the Milk Pricing system leaves those farmers without adequate pay, the impacts i felt all across our economy. Dairy farmersos are facing Risig Cost of production anD Current prices are not covington. Farmers cause for needs like Labor And Fuel have been increasing for years as Corn And Soy used for feed parsing and historic price rally. The Consolidation And Corporatization of the Dairy Industry is only exacerbated these issues. Large dairy operations have driven prices well below the cost of Production And Family Farms Cant compete with the economys of scale to that Maker Producerse have. Country have Beo Bankruptcy and in tragic cases in my own state of New York, suicide. Thousands of Family Farms have been left with no choice but to leave the industry entirely. Between 2003 and 2020, there has been a 55 decrease in the number of dairy firms operating nationwide. We are in the midst of a modernday gary crisis. Struggles have only been occupied by the fundamental change made to class one pricing in the 2018 farmville which switched from using higher class to the average of the two and applicable differential. Seventyfour Cents Addition based on his Torque Price Difference between two classes but historically isolated formula failed to meet the needs of the presentday market. Anytime Price Differential between class three and four is larger than a dollar and 48 cents farmers lose money. During the pandemic, Government Intervention left Price Magnitude larger than that. Mastery prices skyrocketed Health Class for increased only slightly. An average of the two with pricing never fully capture the change in the market. It left class one prices as much as 4. 57 lower under the new formula than the old. That, in turn, led to 436 million in revenue last Record Amount in record low Price Differentials all told by the summer of this year, the new formula already caused Dairy Farmers 7,150,000,000 in lost income. I want to be clear, the pandemic and economic downturn are not the only causes of this problem but they did exacerbated. The system cannot adapt to market conditions and its not barely compensating Dairy Farmers. The Formula Change is a symptom of a larger problem with Federal Orders. The current system is confusing, convoluted and too difficult to fully understand. Different orders have different rules and some parts of the country are not even under orders. The system is an adequate and out of date. We are using almost 100yearold system which had his last major reform more than 20 years ago. For Pricing And Industry were narrow Dairy Farmer is running the firm the way they would have 100 years ago. They should not be beholden to apply system to operate as if they are. We must put thE Power back in the farmers hands, help them recoup losses and build a system that ensures better prices moving forward so they are put in this position again. To do that, its going to take combined efforts of farmers, processors anD Cooperatives. Today we will hear from all three and write the current system is in need of reform and i look forward to their testimony and working with you, senator, to address these issues in punch more. I want to me and its been a challenge for a very long time. Thank you to our witnesses and Dairy Farmers and industry experts for taking time away from your very busy schedules to join us today because i know its a hardship in itself to stop and take time to testify but we appreciate you doing this because its vital to hear from actual producers. Im especially pleased to welcome Mike Bergson in mississippi, i know him well, hes been in the Dairy Business over 40 years and runs an operation of approximately 150 in north mississippi. Hes held a number of leadership positions in the Dairy Industry and has been helpful and hopeful and wellbeing valuable insight to the subcommittee and thank you for being available today. Youve always been so genuine anD Concerned and active. You want to be part of the solution and thats exactly the kind of people we need. Before the pandemic, dairy producers post based multi year of low prices and proctoring to 2020 years of color, my colleagues and i sent bipartisan legislation to Dairy Farm families through the pandemic. Many Dairy Farm families are still in Business Today because of Food Assistance Program despite Price Volatility and Demand Uncertainty costs by this unprecedented pandemic. A key component of Todays Discussion will be the 2018 Farmville Change Reference to already and the request of the dairy industries stakeholders. According to estimates by the american farm bureau federation, Formula Change resulted in millions of dollars of short falling discussed over 750 million farmers supplying milk to beverage, milk processors. The authors of that provision certainly do not foresee the severe market challenges occurring in 2020 nor could they have anticipated unintended economic consequences of the 2018th Formula Change. There are options to address the situation facing dairy producers with another statutory change to the formula or changes achieved through the administrative processes. On another front, the number of Dairy Farmers in the southeast is particularly important to me and Ranking Member postman. Mississippi and arkansas are Milk Deficit states, we consume more than we produce im interested in examining whether aspects of the federal Order System make it more difficult to stay in business. The number of Dairy Farms and firms across the southeast have fallen dramatically over the last 40 years. Id like to help reverse that trend and be part of seeing this come back so i am glad we are here today to discuss colleges facing the industry and potential opportunities to improve the federal policy. While todays Subcommittee Hearing is about dairy, id like to also express my concerns about a more comprehensive topic which will certainly affect the Dairy Industry. Disastrous taxes that vending packages considered right now our colleagues and the democratic party as we speak the u. S. House of representatives is crafting legislation that aims to spend 135 billion or more just within Ustas Jurisdiction of the agricultural committee oversees. The Price Taker of the overall bill is 3. 5 trillion. This is Deficit Spending that will be paid for hiking taxes on Family Farms. I expect legislation will soon make its way to the senate for consideration. I raise these concerns because the Senate Agriculture Committee has not held a single hearing to consider any part of this bill and i do not anticipate that we will. In this legislation, this will be able to pass with a simple majority strictly party lines harming the american farmer. 135 billion in new spending on agricultural climate programs financed from the backs of hardworking Family Farmers, rangers enforcers are crossed rural america. Unfortunately the public has not had any input into this process. The same could be said about members of this committee and republicans as a whole. If this is a product developed democratic leadership behinD Closed doors, a reckless taxandspend agenda. Farmers anD Consumers and everyone in between have long been debated from the professional bipartisan manner in which the committee operates. This is not just talking points, is the way we are expected to serve in the way the committee has operated for many years. I hope my colleagues keep in minD Contemplating concerning road for our country, agricultural communities and for this committee. All that said, im pleased were here today to discuss ways to help the Dairy Industry. Perhaps we can even come up with commonsense amendment ideas to improve partisan package i mentioned which at this time, unfortunately does not include any dairy related provisions. Thank you for your time and i look forward to your discussion and thank you Senator Gillibrand for convening this very important hearing. Thank you so much. Id like to recognize Senator Grassley because he has a conference at 10 00 for opening remarks and introduction of your witness. I have the privilege of introducing a witness. I want to put something in the record first that associates my remarks with what the Ranking Members had about the responsible spending in the Reconciliation Bill and tax policies that are going to be detrimental to farming. In South Dakota, on a Daytoday Basis anD Christina, she works in bookkeeping and in Hr And Christina is also on the board of the Iowa State Dairy association. She is also a member of the Dairy Farmers cooperative, located in the upper midwest and serves unoriginal milk rising task force. She is previously served on the Dairy Expo Board of directors. Christina cornerstone and a university, received her degree in Business Marketing in california she grew up very far before the family took her operation to michigan state she now resides in iowa with resonate in the three children i last saw christina, and it discussion it about all of these issues we are talking about here today when we had a small Dairy Farmers meeting while the Iowa State Fair was going on in the morning. Thank you that interment. Thank you Senator Grassley leslie, want to introduce mr. Jim davenport in the Dairy Farmer from New York and member of the since he and his wife karen starteD Chipping milk in 1986 and is also one of nine Farmer Owned Owners of the Hudson Valley fresh, this group of farmers loan a plant in kingston, New York and process over 1 million pounds of raw milk each month in a high Quality Yogurt Ice cream mix. Hudson valley fresh, used by the military academy. Thank you very much for being here today jim. We just introduce Christina And Senator highsmith introduce myself you can proceed with your testimony mr. Davenport. Okay thank you been good morning and i would like to thank Senator Gillibrand pressed me down to testify today in our small farm of 64 milking cows, over 50 percent of the Labor And Omar 90 percent of management and therefore, im fully aware that hundred 16 hours in a week in any week that i work less than half of those hours is good. And taking time off to be here weeks is a good week. I would like to thank Senator Children for her work on making this current Dmc Program so responsive to the needs of the small Dairy Farms. During this time of skyhigh prices. I will be starteD Chipping milk in 1986, there were about to have 50000 licensed dairies in the u. S. And at the end of 2020, the work hundred and 32000. 1986, average Dairy Farmer and 43 cows and a Deist Close to 300. Our federal order for a few years, we shipped about daily average production for the order and lately shut out to over twice we produce each day in our production has crept up because were doing things more efficiently. Keeping small funds viable is critical for our survival. And as i in my written testimony, since its inception, the federal Order System has served us well. In recent covid19 reduce market turmoil, especially in the Fluid Milk Business shows the Pricing System needs to be adjusted to reflect the current Milk Product next the market swings. I know of no large independent Dairy Processors to be vertically integrated and unlike the Parker Poultry Industry the Dairy Process on nothing to do with milking cows. In all of the vertical integration Milk Business comes from the bottom up and Dairy Farmers are trying to capture larger share of the consumer dollar. People in the Dairy Industry more knowledgeable and i preventing around ideas for this and the process of the usda to do this will work, just take time we just have to be vigilant in keeping a watch on what transpires for these benefits the ones who are with the hardest jobs, the Dairy Farmers. Four years ago, on egner economic lesson learned the demand for Food And Milk meaning that consumers do not buy more than the prices low or less and the prices high. I hope that someone comes up with a plan for the Price Fluid Milk off of something less volatile than the Cheese And Butter powder market. In the Consumer Demand or Fluid Milk tend to be steady, so should the food in portion of the Dairy Farmers crises printed and that is my written part of my oral they say have two minutes and 16 seconds left and so i will just expand on that a little bit. Basically, what we are hearing here today from the folks and senators from the southern part of the state in any place there is a high food usage, is tough to stay in business as a Dairy Farmer. The advantage they have been heavily cheese producing states is fluid is a very small portion of the Milk Shut so its very easy to some of the food processors but covid19 certainly proved southeast United States whole lot of milk got dumped in the northeast as well but i think the southeast when surprise is just a matter of eating it so that Fluid Milk price really reflects how hard it is to provide milk to the fluid processors. Their own bread re reflect to be two Hours North of homeless people 8 million or 9 million metro New York area, to appreciate local who appreciate knowing where the products come from and we been able to capitalize on that and due to consolidation of the Dairy Industry we do School Milk and the effectually put a price that coming up farmers a little bit better money and they would get from a regular processor still have a little bit that is because the consolidation of the Dairy Industry. A lot of small plans have closed in New York state and some of the areas for most of the milk is made, a lot of school systems can only get one in New York city currently is putting 17 and a half since the units on Fluid Milk as for the students an 8ounce Carton and in a southern tier of New York around bingo, some of the schools are paying 37 cents because they only get one bed and whoever is bidding decides theres only one bed i might as well make money. So i think the business has to be addressed seriously in all pricing. I would really like to see them decouple the price for Food Milk from the international volatile Cheese And Butter Powder Price so thank you your time and thank you for staying here and being here i appreciated. Your hard work and thank you. Our next speaker is recognized for five minutes. Good morning, it is an honor to be here representing them many dairy families in iowa and across the United States, chairwoman jill rendon highsmith, thank you for giving me the privilege of taking part in the governing process. I was born into a California Dairy Family face better market conditions in the 90s and after my husband and i work on his family of 500 dairies before taking an opportunity in emerging Dairy Market the central plains. The flight has been it and three children in northwest iowa but we also work closely with my brother in southeast South Dakota and together across relocations, 15000 cows. And most milk in the United States is related to federal Milk Marketing Orders at the system was put in place decades ago to prevent Dairy Processors and making one farmer been against the other. In other words, fm does promise. And if there milk is as good as the neighbors they will be paid the pit same price. And after decades of decline in sales and Fluid Milk over the promise now seems to be broken. Although these conditions have benefited me personally in the last year, im advocating this change because i want a fair system where everyone can compete on a level Playing Field. In 2020, prices were high with cheese and we shipped to shes processors or milk for high we were able to pay our debt and grow our operation. Meanwhile, some of her neighbors were forced to intimate cross cutting measures to stay close and, i mean, the Dairy Farmers all across iowa who are struggling because they are paid far less promote because theyre not paid solely on that Shes Price predict enterprises are most definitely not uniform. This disparity is not unique to my region, i have family in california to indiana in michigan with the same problem. On the surface it seems that the rules of the problem but the deeper issue is that for most do not provide market safe incentives to move milk from processing plants is most valuable. For decades, fmos encouraged overproduction of cheese and nonfat Milk Powders when fluid sales were high, they subsidize Milk Powder returns. Fluid sales declining, federal order rules, cheesemakers are less subsidize powders to revenue fully the decline to do so in 2020. Good intentions. A system of uniform prices has resulted in a distorted system that is now coming unglued. To the detriment of their families whose Income Dependence on the value of Fluid Milk and Milk Powder and butter. The Drp And Dmc have reduce the cost of producers to hedge against the volatility and margins. When a Pricing System must be improved to allow all producers manage their Commodity Market Risk and if dairy producers like my neighbors in iowa my relatives in michigan, cannot what classic milk will participate in the book of the oneok whether the checks will be based on the Cheese Price, the Mother And Father side making not effectively in this epidemic where i was raised in michigan and just like my dairy, they were based on the Cheese Price and also i however the milk to dive along with the other markets the loss was compounded. Fmo rules make it hard to predict other Farms Milk Revenue will correlate with the main Milk Price on the commodity exchange. The culmination of unpredictable anD Cooling and ad hoc Government Bill is saved which further discourages Risk Management. I appreciate the drv in traditional Risk Management tools are based on free market. We should be sure to offer the same marketbased freedoms to processors to invest in our industry and also face Commodity Risk and we can modernize federal or regulation provide a consistent and predictable benefits and incentivize processors to react more quickly to Ship Market Demand by redirecting milk to plants that produce the most valuable during products. A Federal Orders is necessary and provides a safeguard against Market Power of marginal buyers but the system should be modernize to stimulate financial transparencies and promote Competition And Innovation as opposed to consolidation among both process doors and producers rated for Money Competition between processors will get very ended dairy families butterMilk Price and incentivize the development of new products market. Im patient is good for everyone. Every day, dairy producers must compete with one another for land, labor, livestock and feed. In the wide periods and mailbox prices caused by current pricing formulas, creates a sense of helplessness among producers. While competition is good, it is unfortunate that federal policies crating uneven Playing Field. With some producers receive as much as 9 less for milk than their peers, the operator would not be able to compete in the long run. As a child, my dreams for the future did not include hunting operating a dairy. And now that ive had the opportunity, i cannot imagine raising the kids in any other environment and they get to work percent of the value of hard work, where fooD Comes from, and how to care for the land and animals has asked us to steward. Im currently raising if one equine enthusiast one future but, in one Future Dairyman is important to me that we design a system that gives them the best chance to accomplish your dreams and thank you again. And all of the committee for your time and it is an honor to be here. Thank you we appreciate you. And the next person is recognized for five minutes. I think he is here via webex. Members of the subcommittee and all, thank you for the opportunity to testify before you today my name is mike ferguson. I have a hundred 50 had an eastern county mississippi for 45 years. The Dairy Industry mississippi currently consists of about 60 Family Farms pretty we are considered estate where we dont produce as much milk as our states consume so joke comes in from other states. Mississippi instantly rapidly reducing their Dairy Farms over the past five years, extremely low prices producers are struggling to put food in the family stables while providing it milk for the rest of us we have lost approximately six tears over this time from 86 in 2016, 260 the present time in a 30 percent decrease. In about 60 Family Farms of the state, my be here in a few years of things do not change. I would like to focus on today in areas of improvement in congress could to review to make an impact for this trend to reverse it to allow the Dairy Farms in the southeast. Congress subsequently modified our Milk Prices when they were calculating the last fall. The request and of these new provisions, one milk calculated based on the average of a Dance Class three anD Class four prices plus an Adjusting Factor. She finds a class one. Previously class one prices based upon the higher up plans three and four considered a high rep entering this process the Covid19 Pandemic and additional Pricing Mechanisms unless one was huge and due to the purchases of cheese on federal government. And the class three prices significantly were higher in class one anD Created a vast disparity in the last one milk rated all Dairy Farmers were no doubt grateful for the immediate relief, first cheese products during the pandemic, the way it was done a significant unintendeD Consequences that no one could have seen coming. While Dairy Farmers are eager to do everything possible to have people consumerproducts, should be done in a balanced way to minimize price disruptions. I like to mention a few recommendations to alleviate this issue for the future. , shoulD Consider immediately going back to the higher up the Dairy Industry can proceed to a national Rulemaking Processor Usda Dairy Programs to consider alternative milk. And no pricing rules. More frequent and thorough review of the national and Adjusting Factor in the Class Blood Movement could be considered by the end of the transparent Movement Process or professional action printed another potential solution alleviate the Dairy Industrys consideration of Component Pricing. In recent economic realities of the Dairy Industry has been an interest in southeast u. S. To consider an existing and skim fat in the flavor of adopting local Component Pricing. The southeastern region struggled in the may order five and six and seven of milk is not price based alone on all of the components rather milk is on the schema that alone ignoring what you had in the protein in milk. And in the southeast rising value of milk coatings combined the regions alternative milk crises is believed to have contributed to the challenges related to the Peer Chairman of the milk and its likely the Milk Proteins will continue to be a major nutritional and economic value out of Dairy Product in both domestic and international markets and permitting a mark if our Pricing Scheme across large portions of u. S. Will have to improve performance. Embedded up to its highest value and best use. And this pricing is a very equitable idea based on the concept the regulated price of milk received at the Farm Level should reflect it and economic value of the milk. And partly for farms like mine in the southeast, the pricing can improve anD Could facilitate innovations and investments in southeast Dairy Industry. This could be addressed through a mood Rulemaking Process by our subcommittee to consider this issue in our conversations. And in closing, thank you for the opportunity to testify before you today to look forward to working with you to reform the pricing for the betterment of all producers and stand ready to answer any questions that you have read in thank you. Thank you to our witnesses for your introductions and statements. I like to ask the first panel russians about the smaller dairies as i noted in my opening remarks with lots of Dairy Farms for centuries have been staggering as many than being small theories. Please share some of the challenge of small farmers face the federal Order System in order dairies do not have to overcome. I guess basically, in our federal order one, the smaller dairies while at an advantage over their disadvantaged a lot of them have or dont have the ability to expand due to geographic concerns. I feel that the Order System, we get paid fairly through the Order System and i dont know that the Order System is responsible for us getting a lower price and our neighbors the make much more milk. But i will say as far as the fluid part of the business, i think that if we could have a better Fluid Portion of our Milk Price, it would be very helpful on a small farm. In the federal order one and i think it would be beneficial to get a better price. I just think its unfortunate but i think that that last agriculture said something that raised something with a small farmers, something to the effect that the Dairy Business get bigger it out, those of us who choose to stay small and nimble and do some valueadded stuff im going to try to keep in business by doing that. Just dont want to expand and just try to do a much better job with a few cows, once a day is possible that would be ideal to try to be very efficient. I dont really know other than Fluid Milk price discovery, Cant Think of anything the Order Couldnt do to benefit the small farmers and a lot of the programs weve had, the D C is awesome. And thats work really well in our apartment we see the high diets. Sertoli takes care our issues with high grain prices. But it off of the top of my head, hope i had better ideas anD Can really think of anything that the order could do to benefit the small farmers. In the price of milk and Dairy Farmers but i honestly cannot come up with anything that would be reasonable. To the other two witnesses, when addo contribute to the question . Okay. Class one modifications, as i noted in the hearing today, because of the unforeseen circumstances, due to the pandemic and subsequent economic downturn 2018, farmville change to class one mover resulted in hundreds of millions of dollars in lost income for Dairy Farmers. Women proposals from industry stakeholders adjusting medication such as temporary returning back to the higher formula which will Proposal Garnish can be region changes due to class one mover, would you all suggest. Senator, i think the class one mover breakable things that can be done in my estimation, one is if we go back to thE Power of investigation but a study they can be done to find out the true effects of the improvement in the Adjuster Portion of that are more timely and review of it. I dont think theres any review of that we can look at it of something of that nature, that would be very beneficial for us. When the D C, that is a huge huge plus for us so whatever it is at that moment pretty. Thank you. I would just like to say that i am opposed to a temporary solution, think that we need have a Committee Or Something to study this fairly indepth so that we can follow this longterm and not have to address it multiple times in the next few years rated. Upgrade. Mr. Davenport. I currently right now i think the current and Pricing System we might be making doing better than the higher of before and at this current time but the only thing that i would say is that they dont feel they were out of the woods yet. On this Covid19 Thing in the Supply Chain disruptions and i personally as a stopgap measure, i would have no problem going back to the higher of for now. It may upset the processes a little bit but i hope it made a lot of money when the price is not so good and that they did have a little cushion to fall back on. But i do certainly believe that we do need to not get rid of the system of the order but get it straightened out so that every farmer can get a fair price for the milk. And you get to the highest and best use, the way that order was intended. Thank you. Thank you senator. Mr. Ferguson another recommendation to provide it was more frequent and thorough review of the national Adjusting Factor in the class want calculation. What role does the Adjusting Factor play in this process anD Could this change of more frequent and so the reviews of the Adjusting Factor again administratively through the Rulemaking Process and then without the more ideal rather than waiting on the next farmville. Senator, that would be a yes to that Movement Process to a core and it would be advantageous because through the Rulemaking Process, sometimes sometimes are slow as molasses but as far as next farmville, if we have another year like we headed 2020, there will be that many Dairy Farmers especially the southeast that are going to be a business. And i have the opportunity to take advantage of these changes that would be made to have us to be above water as opposed to underwater in our operations read in my particular case, it was catastrophic we had a 30 Percent Loss from monthtomonth on how the moves in an unprecedented way so yes, the Rulemaking Process would be ideal for this. In your testimony also provided some recommendations and what might help alleviate these problems such as going back to the pre 2018 farmville, higher up method. So are you looking more at going back to that as a temporary or what are your thoughts on your additional details that you can give us on the longterm solution instead of going back immediately to the higher up. I think we need he is and is a temperate solution because well we heard on the first when he out on the Farm Bill, there was not really enough time to have an extended study that woulD Come up with the correct amounts of the adjuster and things of that nature. Whether an adjuster actually help the class one price. To find his true value. And if we had things in place in a study that it shows exactly with an adjuster should be and how it should be before we review it it would be beneficial. Thank you. Senator, would you like to ask questions. Thank you and again thank you all for being here in this event a great hearing with a lot of thoughtful testimony and also some answers as to how we move forward. And according to my colleagues suggested for the suspending the legislation that we are about to addresses the climate infrastructure needs of the United States. Poultry reduction accounts for nearly half of all Agriculture Cash receipts in approximately one or 91 billion annually. Kenneth this point, this legislation provides no funding for the animal Agriculture Sector for restarts, climate mitigation or any other product yet youre going to be on the hook for paying the taxes for it. Theres milk millions in the bill and for equity whatever that is, and theres not a dime directed to the Dairy Industry in the bill does have including 2. 9 trillion in additional taxes and is groups have continuously shared the proposeD Changes if those databases are included which is a possibility still later in this process, it would be devastating to Family Farms rated texas a m came out with a study and according to their representative Arm Study by them, Dairy Farmers would be among the hardest hit. In addition the bill contains changes to state tax provisions would force many farmers to modify their estate plans just to ensure the future of their Family Farm. How the proposeD Changes in step two pieces impact your Family Business and in the other things included in this is a significant green new deal which would significantly increase your electricity, energy cost, your Oil And Gas and the things that you rely on an everyday basis. How would that affect your bottom line read pretty. Anytime you have an increase in interest, get a look at ways to cut in other areas rated small Dairy Farmers, we dont have those resources where we can cut, we cannot afford additional tax in these farms and abandon families for generations, they will be going by the wayside. In the net of faith and effective safe and effective, Food Source would be out the window. I think in someone elses statement earlier, there was talk about movement basically. You would have these pockets where all foods being produced in some of things produced would have hard time getting to market. Huge problem as it is now read i see no way that we can add any more tax burdens to farm as a unit now the thing is, we worked all of our lives to establish these farms in a lot of cases you got family members waiting in line but i stepped up basis, their farms there of three informed percent in value and how can we possibly tax these farms at that rate and extroverted to the local farmers. I just cannot see this. Would anybody else like to share in that briefly. For the chairwoman will gavel me down pretty. I would like to share the my family i am 105 siblings we are currently going through some transitioning with the siblings and talking about when future looks like without a steppedup basis, detrimental to our operations and through the process my husband i are also doing our State Funding and its scary to look at what that will look like for my children how they will keep the dairy together if that stepped up basis was taken away. In my opinion on the whole matter is a family has been farming for generations and build something up, and a lot of times the value of the haves influence local real estate which may not be farming. And i strongly feel that if the farm stays in farming, they should not be worded any extra Estate Taxes. Now ive seen my neck of the woods way too often, a Family Farm goes out and one sibling wants to state going in the other cletter is the cash in and at that point i feel that they should any Estate Tax because is not producing food anymore. But as far as staying as a farm, i think theres no reason to have extroverted enough transition taxes for the next duration. Thank you very much we have senator smith. By webex. Good morning Madam Chair and good morning Ranking Members and to all of our panelists is great to be with you virtually. If i may i would like to issue just to clarify something following on the Ranking Members questions about stepped up basis. I just want to make it clear that Budget Resolution that the democrats captain the work that we are doing on the build back better budget, specifically excludes any changes to the stepped up basis. Theres been a lot of talk about this the many conversations with farmers in the Family Farmers in minnesota so i just want to be clear about that issue. So to the topic at hand, what is going on during farmers across the country, want to start out talking a minnesota vet. During Farmers Minnesota tell me that they are pleased place and they would hear the stories that you are doing today and sounds familiar to them in the credit Milk Prices are consistently below the cost of production for them and some to negative margins or too many Dairy Farmers to use up their equities and their savings to keep from going out of business over these last few years i think we all know their 40000 fewer license in his country in their work in 2000 and to read it and you will i think made the case for the lack of transparency and the mill Pricing System, significant role for Dairy Farmers. The reality is that the milk federal Marketing Order is 80 years old pretty so system so its not easy to understand it one statement that i read some susceptible so many variables are involved typical farmer knows that their Milk Checks will be worse but only an economist can explain it. And also the federal Milk Marketing Orders regionally based and know there are discussions around the evaluating of the system. During farmers in minnesota and in the midwest have said theyve need to take an approach to evaluate the entire system than any other way would be counterproductive. So i would like to hear from the witnesses about this question first. How can we modernize mill Pricing System in a way that keeps into account the differences among the dairy producing regions and ensures that our system matches the realities facing the Dairy Farmers and their cooperatives the processes in the markets the milk they produce across the region. And ill be happy to hear from any of your all and mr. Davenport, would you like to start . Sure, thank you for attending virtually. Yeah, i think basically we have seen the prices of the commodities, cheese, butter and powder, reflect the World Market and theres also a futures market, so i think theyve become less reliable and as ive said before, i think because fluid demand is sort of of steady, we ought to have a steadier price on the fluids and find a different way to price fluids milk, and it would be beneficial to those who dont have a lot of option to send their milk and farmers have no other option to send to another processor and getting a fair Price And Trucking a factor in that. But i do feel that the Order System can be corrected and we have to get some ideas and make sure that theyre good with the farmers and everybody involved in the business. Would the other panelists would like to comment on how we could look at regional differences and performed. Senator, thank you, this is my first and we in the southeast, were in a different area than any other part of the country, a tremendous Milk Deficit area and the south southeastern area, we only provide like 45 of the fluid thats consumed in the southeast and its only going to exasperate because our farmers are leaving yet, our consumers are growing leaps and bounds if you look at the numbers where the population is growing. So and one of the biggest problems we have, most of the milk in the southeast is coop based and the farmers are members of a coop and the cost of transporting that milk in is on the backs of the Dairy Farmers, theres no mechanism where we can recoup that cost of bringing that milk in. To provide for the consumers. So, if we have something im sure youre familiar with something like transportation or balancing the market, that would be very beneficial to our part of the world, and would be of great help. Thank you, very much. Madam chair, i realize im out of time. Thank you for holding this hearing and im grateful to be a part of it and good food for thought as we go from here. Thank you. Our senator is senator ernst, thank you, Madam Chair and for all of our witnesses to be here today and thank you and welcome as well to christina, its great to have you here and representing our Home State of iowa and our Dairy Farmers. Id like to ask all of you, but christina, specifically, ill start with you, the pandemic was really difficult on so many of us and i remember many of those days of sitting in red oak, iowa on Zoom Or Skype calls with commodity groups and hearing the stories evolving and growing out of the pandemic and the challenges that all of our farmers and ranchers, dairy producers were going through and if you could maybe explain to us a little bit about some of the issue, experiences, you had. You talked a little about the federal Milk Marketing Orders from the iowa dairy perspective. Can you talk about some of the other issues that came out of the pandemic and what should be greatest take away that we have . One of the biggest issues that was sort of exasperated by the pandemic was the ability to hedge. Like i said, we to a Cheese Plant so we know that 100 percent of our tech is going to be based on the Cheese Price. When you ship to a different processor that has some Fluid Milk or soft, different classes of production, their Milk Check will be based on a blended number. So they cant effectively guess from month to month what that percentage is going to be and where that number is going to come from and they are effectively out of the option of hedging and protecting themselves from losses that come in with Market Volatility and then obviously, if anyone could have predicted the pandemic we could have predicted our Milk Price, but thats not going to happen so we need the ability to better predict our Milk Price so that we can protect ourselves with the programs that are offered. Yeah, thank you. And i did note through some of my discussions last year as well that because we had school closures and the school lunch, milk program, they werent using those same cartons anymore so it became an issue of how do you Ship Milk maybe in a different form rather than to the schools, to our marketplaces, and any thoughts on that as well . Absolutely. Thats a production line issue, which i think we saw in every industry, you cant just take the equipment that is producing those cartons and make it a sour cream container, it doesnt work. That takes, you know, building a new plant, building a new line. Having the employees to do that and thats one of the biggest things we look at and one of our fears right now, theres not enough truckers, what happens when we cant call our milk, a perishable product, haul it,en what happens when the staffing doesnt have the facility to take it. And its not something to put in the Freezer And Use next week. Absolutely. Any other thoughts from our witnesses . I agree with christine. Its definitely that that was a problem just the fooD Chain got upset a lot. I know that it was great, our own little group, we did an awful lot of food pantry. One of the good things the former governor of New York did was have a nourish New York program, and norrish New York program and we were paid, the fair price, price of us processing the milk to food pantries, and no waste there, it went to people that needed it. And i truly feel that the Supply Chain needs to be more robust and we all know, at least in our neck of the woods, there are help wanted signs everywhere and i dont know whats keeping people from working, but our plants in vermont during the pandemic, we had Sales Staff working double shifts, running the plant, and we had demand for more cheese and we had, god knows we had plenty of milk to make the cheese, but we had to shut down production on the weekends because there was nobody willing to work. I dont its foreign to me, as i said, i tend to work pretty long hours, much to the chagrin of my family, but im still in business and, you know, but it is a problem and we have to address it and i think one thing hasnt been made yet, but i believe that whole milk in schools would definitely be a big boon. All milk tastes better no matter who processes whole Fat Milk tastes better than low Fat Milk. And a lot of small dairies that care about quality, its a whole other story, they have not they sold out to a large dairy. Plants were closed and some schools in our state are paying over twice what they paid in New York city for milk and theyre right by the producer. Wow. So that is something that needs to be addressed and kids should be drinking milk, a true plantbased beverage and thats all theyre eating is plants for our cows, your neck of the woods. Outneck of the woods we dont do any irrigation, its all what Mother Nature provides. I appreciate it. I apologize, my name is expired, but i do appreciate the input and not only as we look at pricing and how we can modernize the Pricing System, but then also, those Supply Chain management issues so many faced over the pandemic. Thank you, Madam Chair. Thank you, senator ernst. I agree with you, mr. Davenport, i think that whole milk in schools would be wise and my children will only drink whole milk. Its better, delicious and healthy anD Children will feel fuller and eat less junk food. So im in favor of that recommendation. Our next senator is senator marshall. Well, thank you, Madam Chair and Ranking Member for doing this and guess what . I agree with you. I just want to be on Record Today that i think that milk is the most delicious, most nutritious drink known to mankind. That Man Dment Mankind has never made a drink to supplant it. Whether youre trying to vite rsv, the common cold, covid19, that milk is a part of the nutritious diet and whole milk especially because it helps us absorb fat solable vitamins a, d, e, k. Thats important as a gynecologist, and strong bones as well. We have a generation of men and wait a minute that will have Osteo Penia and osteoporosis because of a policy that basically disallowed whole milk. Whole milk gives it the flavor and taste. And thats why kids drink it. I dont like 1 milk, i get mad at my wife she doesnt bring me whole milk at home, and i try to drink it here, and two cartons of whole milk back on the diet for the senators, i want you to know that. Im excited to talk about dairy because it is personal. My dad, his family had a 30head holstein Dairy Farm and like Senator Leahy said, dont miss a day of work, cows had to be milked twice now three times a day and excited to be on this subcommittee helping out our Dairy Farmers. I think theyve probably been more negatively impacted than any other Ag Sector that i think of the past four, five years and just like the seven plagues of egypt have hit the Dairy Industry. Madam chair, im excite today learn that youre the largest producer of yogurt. Kansas has the fastest growing Dairy Herd in the nation and were proud of that. Additionally, an i remember arizona, california, texas, washington state, my home of kansas are responsible for about 40 of Milk Production and all operate in federal Milk Marketing Orders. Your 2020 exposed some significant vulnerabilities in the way that we price milk in the Milk Marketing Order system. Neighboring daries producing the same Quantity And Quality often receive different prices depending who they are selling milk to. The difference was not based on sound economic principles, but on the impact of the federal government opting to mandate the purchase of millions of pounds of cheese and a windfall for Dairy Farmers cheese manufacturing. Im in favor of cheese, its nutritious and so glad we could get more cheese out to folks who needed nutrition help, but theres no such Price Relief for the neighboring daries with local bottling with the butter manufacturing. Usda put a cap on relief and assures my daries in kansas and throughout the u. S. , a fraction of aid on a representative basis. Our policy should not pick winners and losers based on the Farm Size or geography. As i look out anD Consider the challenges in the Dairy Industry right now. My biggest concerns are the Tax Man and rules and regulations and i think that several of us have talked about stepped up basis, that that would be the end of the family dairy. Maybe that our witnesses could talk a little about concerns about input costs, inflations, waters of the u. S. And how those might impact your dairies and if those regulations are dialed up. Mr. Davenport, any thoughts about inputs anD Concerns about rules and regulations . Yeah, the input costs have always gone up since ive been milking cows, thats a fact of life. Fortunately, weve gotten more efficient and learned how to feed the cows better and kind of Counter Act some of that. Regarding the waters of the u. S. , im all for clean water, and you know, trying to keep it clean. I just think that we probably ought to not overburden the epa with rules that they cant possibly enforce, they dont have enough staff to run around anD Check everything. But i firmly believe that the Algae Bloom in the chesapeake, the western heart of Lake Erie and the mouth of the gulf of mexico, we have covereD Crops, nothing open. And we have a tough farm when its wet. And we basically have everything, our soil stays in place and we do use, you know, a little bit of herbicide. We do no tillage to speak of and, you know, Dairy Farmers are all about that because its more profitable. You know, wasting money on fertilizer if its not going to grow your crops, why bother . I think thats laudable, we just have to make sure that we dont have enforcement of rules, you know, sort of like if you have a vendetta against somebody you can pull something out of your pocket, they cant normally enforce for the whole industry, its the sort of thing, we need sensible water clean regulations. And thank you, thank you for ensuring that the farmers are the greatest conservationists. Sorry for going over my time. Thank you, Senator Gillibrant and to our Panelists Today and taking the time to be here to give us information that we find very valuable. In your testimony you discussed that in 2020 with your class three milk you received large gains as class c Milk Prices increased. And that class one Milk Prices fell. I appreciate your sentiment that we need to ensure a fair dairy Pricing System. Ive heard from producer in nebraska they received negative priorities differential because of the increase to class three prices while the class one Milk Prices fell. You mentioned youre a member of a regional milk reform committee. Have you discussed what recommendations would be most helpful to ensure a fair Milk Pricing system . In particular, how can we address what we saw last year during the pandemic with negative producing Price Differential . Ill try and address this the best i can. You diD Cut out a bit. The negative ppds are experienced by lots of people, in fact. Not just those with a blended Milk Pricement price. We saw that in our check within the last couple of months and this goes back to fundamental shifts in the Milk Market. We are no longer a fluidbased market. That Market Share has decreased by a lot over the last decade and we really need to focus our production and our pricing more on the Export Market that has emerged, which is great for us, that Trade And Offering that market to our farmers is another area we can compete and earn more money. And what do you think congress should do . Is there anything that we can do to be an i believe to ensh your that we can address some of these events like the pandemic that would help producers . Well, i have been a part of some discussions, we dont have any public answers yet and i think there are a lot of great ideas out there and Id Love to see some of our academic and processors that are on the next panel. Id love to see some of their ideas in this department. Thank you. Youve also mentioned the impact that unpredictable cooling can have on Producers Ability to utilize Risk Management programs like Dairy Margin Coverage programs. This is a concern. Ive also heard from nebraskaens who found the Fluctuation And Price caused by and the management like the bmc. Could you elaborate on unpredictable pooling and price fluctuations can impact the effectiveness of the Risk Management program . So nebraska, i believe, is part of the central Marketing Order which iowa is also a part of. So the central and midwest Marketing Orders dont have nearly the Fluid Processing Power as someone like the northeast would have and so they are under different rules. I think its a lot harder to depool in the northeast. If they had the same regulations within the central and midwest Marketing Orders, the Cheese Makers wouldnt participate and the other processor would have to pass on negative ppds to their producers. Obviously, there needs to be some change in the Milk Pricing system, but it needs to be something that we all work on together so that it can benefit both producers and processers. Thank you very much. Thank you, Madam Chair. Thank you. I have three additional questions that im going to put toward and each of them can answer if you have an opinion. Over the past year, youve all seen your operation costs continually rise, whether those cost be for feed, Fuel Or Labor and more often than that, the prices you receive for your milk hardly ever cover the cost of production. One of the pricing reforms we are looking at is more closely aligning Milk Prices with the cost of production. Could each of you briefly explain the current prices you receive for your milk and what it costs for your milk and what are some of the additional prices could affect the cost of production . Well, as for my own operations, over the last, oh, i dont know, 15 or so years, the price of milk exceeded the cast of production like at maybe two. And of course, theres an express called living off depreciation. Thats a large part of it. Most businesses well, its a cost. Depreciation is a cost, but, you know, if you have some Farm Machinery thats fully depreciated. It still keeps working, youve got to fix it more and its a little less reliable and as a small producer, i do a lot of fixing, but i think i dont really know how you would align because Everybodys Cost of production is different. I think that any artificial subsiies to production anywhere make it hard to try to get it a level Playing Field for everyone. And i sort of keep coming back to decoupling Fluid Milk price from volatile Cheese And Butter powder. If we coulD Come up with a way to price the most perishable, the least elastic in Demand Product that we produce so that the heaviest fluid markets, they are not going to be hurt by crazy Commodity Price swings, and in the less heavily produced fluid markets and the participating in the pool i think its going to have to somebody much smarter than i i would endorse a plan if i heard one i liked. So far we havent, but i think that would be great to be able to do that because i the bottom line is, you know, you want businesses to thrive and you want to be able to produce at the lowest cost possible. But the two big to fail thing ive seen happen in very large dairies in the northeast where the bank basically tells them no more money and you take it out of your vendors and theyre the ones who are going to have to support you and i always pay my bills on time. I have a good line of credit and not afraid to use it, but i know there are large operations that have outrun the ability to manage and just like a Speeding Train with no break. And i would like to see that, you know, they werent allowed to keep going when i have friends that are the same size, that are doing really well and do just as good as job i do with the cows and Milk Quality and i just would like to see the large farms that are out of control, maybe cut cut off a little sooner to sort of teach everybody else that expand within your abilities of management and thats just something personal that i see. There we go. Id like to echo that i dont think that subsidies based on the cost of production are going to be effective. Part of the beauty of living in the United States, we have the freedom to take on things in a way that we want to. We can take on as much debt, build and expand to the size that works for us, for our families. Even between our three locations, we have different sizes of operations and they all have different operating costs and we have different loans, different, you know, feeD Costs and weve milked different breeds of cattle based on where theyre located and how much space they need and i would like to maintain that freedom. Theres no way that i should be told to make a decision based on someone elses farm or what someone somewhere else wants to happen. And Thats Something i get to do based on each individual input in my operation. Thank you. From my point of view, i agree with the other two that subsidies are not necessarily the solution to this. But on a going forth basis, were going to be looking at a lot of changes that have to be made, improvements to protect the environment, become more energy efficient and i will say that grants and Loans Availability for operations that are undergoing these changes and are doing it even on a voluntary basis are an essential part of the future of us maintaining viability. And the last question is about Make Allowances. Processes for credit, for some of the costs of processing certain Dairy Products such as Cheese And Butter. Should future mmo reforms Make Allowances to farmers for making milk. Theres what are changes that can be made to make the process more simplyfied and reactive to farmers needs. If anyone has a thought. I dont know a lot about the milk allowances. I think its a pretty complicated topic, but i do know that the changes that we make in the System Id like to see them encourage innovation and processors should have the freedom to expand and discover new markets so that we can continue to export, trade our product, anD Compete for the best price for our dairy producers. The make announce, i think, that in some areas of the country there is a service provided to take extra milk and put it into a product that has a longer Shelf Life anD Can go into international Markets Provider there are containers that wait around that go on the and thats in my testimony, written. And i think that somehow, someone has to keep an eye on Make Allowances and if Theres Something that is a little bit untoward for the Dairy Farmer that we can adjust them. Just how, the mechanism. And the second part of the question was im sorry. Do you recommend any changes to the length of time required to request and hold dairy . Oh, i think it would be nice to make the Process Move along faster. Never having participated in it myself ill probably leave that to the economists to have some ideas on that, but i believe that as long as that process has the input from all the concerns in the industry, thats very important and you know, i would rather see it take a little longer and be complete and done well than to be rushed and then have to go back and redo the whole process again. Thanks. Mr. Ferguson, any remarks . Yes, senator. As i think ive mentioned earlier, as far as Make Allowances are concerned, it would be very beneficial in the southeast to have a Make Allowance for help with the balancing costs because thats a huge issue in our marketing area. And the rule making process, sometimes its a very tedious process. Could there be some efficiencies gained that would shorten that process . I would think that any operation that tells you they cant take by tightening things up they cant do just as good or a better job, i think theyre kind of on the wrong page. I think that the process could be a little shorter because its very as it stands now, its a very frustrating process, so, yes, i think there could be some shortening. Thank you to our witnesses. Your testimony has been extremely helpful. If youd like to add anything additional to your testimony, you may write a letter to the committee. Thank you very much. Well now introduce our next panel. Ill introduce them while they get settled. Well hear from the legislative affairs from agrimart. Mr. Robert Willis Cedar grove, inc. And mr. Christopher wolfe, Baker Professor of agriculture difficult of dyson schools of applied economics at cornell. At the dairy cooperative. Katherine joined Agri Mart and watching dairy trends and forecasting prices and affecting the members. Katherine was previously employed with Massachusetts Department of agriculture resources, a bachelor and masters in economics for connecticut. Thank you, for being here. Mr. Bob Willis Owner of Cedar Grove Cheese, starteD Creamery in 2011 and is a Wisconsin Master Cheese Maker are served on the board of the american Cheese Society anD Cheese Education Foundation among numerous stints with Dairy And Agriculture anD Community boardsment prior to buying the Cheese Factor he was in professor of economics at university of wisconsin and economic u. S. Agriculture and state and federal stat tigses. Credentials include a b. A. From and jd, and thank you for being here. And dr. Wolf in dyson applied economics at Cornell University. Moved to cornell in 2019 after years on the Faculty Staff of university of michigan. He focuses on farm business management, Risk Management and hes published widely in industry outlets and stresses the effective policy of Farm Behavior and final outcome on issues of future and importance to Policy And Decision makers. A native of wisconsin he received at degree froM University of wisconsin ph. D. From california davis. Thank you for being here, dr. Wolf. Again, i thank tall of our witnesses. And keep your testimony five Minutes Inch and you may hear me tap the gavel should your time expire. Youre recognized for five minutes. Chairwoman gillibrand, Ranking Member Hydesmith and members this morning. On behalf of the Dairy Farmers, thank you for spearheading this hearing and the chance to testify before you today. To share the voices of my farmer members. Milk pricing is front anD Center for our farmers particularly with the year we just lived through. We applaud you for your continued support for Dairy Farmers in industry and greatly appreciate your efforts for the latest Volatility Program as well as the coverage performance. Your involvement and your leadership is why im here today and why it was so important for Agri Mark to be a part of this. Dairy farming is a 24 7 commitment, 365 days a year. As our Nation And Economy have evolved, the issues facing the Dairy Farmers are far more complex than generations before them. Our Dairy Farmers are resilient, but not impervious to thats forces. Todays impact that global trade has on our market, and labor pressures at all levels of the Supply Chain anD Consumer desires. Today theyve placed stress not only on Dairy Farmers, but Supply Chains anD Cooperative businesses as well. Collectively, we must work to ensure that our dairy Supply Chains are strong and viable starting with our Dairy Farmers. They help feed america and are playing an increasing role in provider sustainable nutrition to the world. Theyre critical to our local and regional Economy And Food systems. They must ensure they have the market and programs and tools to continue to operate and be sustainable for generations to come. At Agri Mark, i engage with members every day, discussing the current Marketplace And Forecast and Milk Pricing is something that theyre concerned about ab Agri Mark is working on to improve on a national level. I serve on the economic Policy Committee of each organization both of which are working on Milk Pricing and policy Issues N2019 there was a deep dive into conversations until the pandemic put an abrupt halt to the efforts. Last years extreme volatility and unique market sushgs unveiled underlying flaws in our federal Order System and drew acute attention to three key elements, negative difference in Price Differentials and for farmers, it showed up as unfamiliar Milk Checks and questioning if the system was working properly or not and it gave the industry a greater urgency to revisit the need for federal Order Reform. The federal Order System provides significant value and safeguards to Dairy Farmers, cooperatives and processors, critical to price discovery, orderly marketing and ensure timely payment to dairy producers. As weve discussed the industry has changed significantly since the last Order Reform in 2000. Industry growth increaseD Costs and partial on the Export Market are reasons to revisit the orders and revise them to better reflect today as marketplace. We want our federal Order System to evolve and to be supportive of the needs of todays Dairy Market participants, especially those of our farmers. And as we work to improve orders, its critically important to recognize the intersections in Milk Pricing and how a change in one area could impact the change in the other. In this context, its significant deploying and substantially Producer Revenue which was not intended and this needs to be addressed. While i deeply and personally understand the urgency to resolve our challenges, thorough analysis of these intersections considering all perspectives is essential to guaranteeing reform success. Changes should be made through the formal rule making process to ensure that a comprehensive approach is taken and that consumer voices are heard anD Considered. There is much work to be done to evolve this federal Order System and the industry is on board and hard at work. You must continue to strengthen Pricing Mechanisms and provide aid to all farmers while needed and domestically and emerging markets across the globe. This hearing is an important step in the early stages of this dialog. Once again, i thank you for your advocacy, investment in our industry and once again the opportunity to share my thoughts with you today. Thank you very much. Mr. Rowe. Recognized for five minutes. Senator gillibrand, Madam Chair. Thank you for the opportunity to address you today. My two Cheese Factories supplied by 10 farms. And when i started the creamery Cheese Factory in milwaukee, i decided that we would be supplying consumers throughout the state. Ive always used my role in supporting dairy producers who supply milk to our factory as well as to the Health And Safety of our consumers, but today i fear for the future of the Dairy Industry. The subject of todays remarks is threat me try a few sentences. Federally established Milk Prices established by congress functions opposite of its intent. Higher dairy prices for consumers anD Create lower Milk Prices for farmers. Order system responds slowly and inadequately in changes and inefficient Trucking And Location of dairy facilities anD Complexity of the system creates opportunities for anticompetitive behavior. The infrastructures order the problems i noted below, but the outside Pressures Today are exposing how the system threatens the Dairy Farming in the United States. Today the Dairy Industry faces rising costs and uncertainty from changes and threatening to produce dairy ingredients from genetically engineered microbes. They havent been able to address the changing Dairy Industry and definitely has no tools to address global competitions, the need for more sustainable production and the disruptive replacements. The survival of the Dairy Industry depends on your decision to end in the Market System as soon as possible. Originally, most Market Orders were intended to get nutritious milk to children throughout the country and practice the orders raised throughout and paid farmers to dump milk, a horrible practice disrespectful to the animals, the hard working farmers and hungry citizens. The Milk Pricing, its priced by and shipped to manufacturer of yogurt, cheese, Butter Or Milk problem. And farmers are only better if that exceeds from the value from other classes plus inefficiencies created by the products. And the inincrease the overall value of milk. Although the Redistribution System makes it appear that all farmers are winners, and reduces the total farm revenues. Federal orders are immensely complicated. 11 different regional Market Orders have different prices and rules anD Changing the significant regulation and order, requiring that that stretches on for years. Large companies anD Cooperatives unnecessarily transport milk and among orders. Order shopping gives those large companies a value over regional processors. Their superior standings of the ability to take advantage of regional differences give big companies the stake in continuing the market Order System. The Dairy Industry has worked around the structure of Federal Orders for decades, but new challenges are coming to require efficiency that the orders prevent. Milk pricing and Federal Orders have zero provisions associated with cost for milk and Dairy Products or the addeD Costs of developing unique products tailored to the products. The challenges facing this Dairy System is imitation or clone Dairy Products, plantbased substitutes, Soy And Almond for those unable to consume dairy. And the next wave of fermentation based using genetically microbes in large tanks, as unnatural as it sounds, business startups are attracting large investors, international investors. They have dabbled in products animal free Ice Cream and the large scale mimicked whey product. And they would face the challenge of dispoing of perfectly good whey. And some entrepreneurs claim to be able to have milk by cloned saddled with the burden of federal Milk Marketing Orders. Our farmers should not lose the competition because theyre not allowed to compete fairly. Would you like five minutes . Chairwoman gillibrand, thank you for inviting me to be a part of the hearing. The u. S. Dairy industry is diverse in terms of Farm Size, production technology, geography and markets served. Changing consumption patterns, rise of a trade for outlet as Dairy Products anD Consolidation of all levels of Supply Chain. Milk Marketing Orders using Component Pricing handles majority in the country pay farmers based on Component Value and Price Differential that represents the full value in components. In 2020 negative Price Differentials occurred not just abnormal in magnitude, unpredictable anD Contributed to Farm Price Milk volatility. And recent declines in Price Differential were caused by a host of factors including trans trends in milk component production, change in class one skim milk, anD Class three processors. The impact varied across the Milk Marketing Order ap over time. The regional impact depended on Utilitization And Market factors. On average the largest impact to negative producer Price Differentials in 2020 was pooling of milk and the aforementioneD Class one pricing change. Both of these factors were exacerbated by the historically wide divergence in class three anD Class four Products Consumption of milk away from home to exclusively at home, as well as Dairy Product. With respect to Consumption Beverage Milk consumption is downward on per Capita Basis with the rates of decline increasing since 2010. In contrast, cheese, butter, total Dairy Product consumption have been growing. The rise of exports coincided with u. S. Milk production. Since 2005, dairy exports have grown from accounting for 5 of Milk Production to currently accounting for more than 16 . Export markets insist on balancing products of milk and protein. And the influence of international Supply And Demand factors as well as the political impacts to trade. The issues that motivate this hearing relate to farm Milk Pricing, under the Marketing Order. When the orders were traded the majority were used in fluid products. Shrinking relative share of class one for fluiD Consumption milk means theres less money in the revenue pool. Given the age of the System And Length of time anD Changes in the market from production anD Consumption side is time to likely reexamine the federal Marketing Orders. Issues widely regarded in need of attention is class one maker and moving allowances. Class one processes were changed from the Farm Bill and implemented to make the class three and four, advanced skill million being plus, the 74 cents. That was chosen to be revenue neutral. One implication changes that differences between class three anD Class four, prices exceed, and resulting class one price fell from the new farm la less than using the higher. And price differences this have magnitude were not unheard of previously, but the pandemic resulted in a wide divergence. The large diverse against in class one would have won lower than the previous rule and focused on this previous aspect. Make allowances are the Wloel Sale Dairy and Manufacturing Cost with the Component Farm Value of milk. All else equal increasing the Make Allowance for Cheese Or Butter means the amount of the wholesale dairy prices passed on to farmers is lower. If Make Allowances are inadequate processes with higher costs will be driven out or must make up the difference he will where. The entire Supply Chain from farmers to processors must be healthy for a prosperous Dairy Industry. The markets and institutions that we have around the Marketing System and ripple effects should be carefully formed for all parties including equity as well as economic efficiency. Thank you for your time and i look forward to any questions or comments you might have. Thank you, witnesses. I know that class one is the only Milk Class required to participate in the federal Milk Market order pools, but the new pricing methods and depooling clearly caused disorderly marketing conditions for farmers last year. Can you talk more about this how the producer Risk Management tools were impacted . Yes, and thank you for the question. So i think theres really three parts to that so the first one, you asked about class one being the only class thats required to participate in the pool. You know, as was mentioned here, hour federal Order Systems were designed for a Fluid Marketplace and pooling revenue to make sure that every farmer is equal. In order for that to work class one needs to participate in that because traditionally class one has been the highest price. Its essential for how the orders were signed designed if we want to have pooling class one participants. To get to the second question about disorderly marketing. Disorderly markets caused by the pandemic, chris, i think you did an excellent talk on that, but ill echo some comments there. When we have an extremely fast rise in class three prices due to the pandemic, crashing prices and Food Box Program coming in and recovering class three markets, it was that rapidly rise that got us into an unfarm pricing relationship. It caused the class three price to exceed far beyond what we had ever really seen and the differences between class three anD Class four was extremely wide and as mentioned was so wide that the new Pricing Mechanism with a the class one had not intended for that to happen and did not account for that and producers were not revenue neutral. To your last question about Risk Management, when this takes place, when we have volatility in the marketplace, that makes it extremely hard for a producer to make an accurate price Risk Management decision. Producers make Risk Management decisions based on what they think the futures markets might do and what traditional relationships may look like so what we saw last year was really an anomaly and producers Risk Management decisions were not based on the anticipation after Food Box Program or a Covid Pandemic happening so just generally that Market Volatility was what drove some really significant challenges in Risk Management decisions. We know that Fmmo Pool deficits from depooling producers. How were different processors affected in terms of Profit And Loss . What would your recommendation be for updating and pooling . Rules . I think as i indicated theres no other industry thats priced like this and my recommendation would be to eliminate the pooling rules because i dont believe theyre actually increasing the value of milk overall. On the other hand, depooling the option of depooling is absolutely necessary if youre going to keep people in business. Depooling is a Pressure Relief when the Market Order forces companies or would put companies in the position of having to pay a higher price than what theyve earned for their products. The bizarre thing, of course, in Milk Pricing is that today or yesterday. I learned what the milk cost me that i bought August 1st and my producers will find out tomorrow when they receive the checks what they got for the milk that they produced August 1st and that the delayed system creates the negative ppds and puts people in a position where they both cant make good planning as to where their as to how to run their businesses and how much milk to produce, but also forces them to have that option of depooling at times because the prices are not reflective of value. And based on your years of Research And Analysis of federal Milk Pricing, what suggestion do you have that would help farmers receive a fair price for their milk and given the prices and volatility how can small Dairy Farmers survive in this environment and what could be implemented to help . Thanks. Yeah, well, i think updating the federal Milk Marketing Orders to reflect some of the current realities of the market are very important before going to continue to have this system be the foundation. But i think its important to also consider the fact that the farm Milk Prices built from several components. The Marketing Orders are a major part of it, but the regional anD Cooperative aspects are another part of it and part of whats been driving the volatility has been the differential experiences from the Market Access and the whats been going on in the different product markets in and around the country. Thats greatly contributing. What weve seen, theres the Farm Levels and theres a wide variation and 2020 was a particularly stark demonstration of that as some farms seem to weather it well and others were devastated by the Market Situation that they had. And you know, i think the biggest things that can help the smaller farms to the extent that theyre that we want to consider that is to make certain that this they continue to have Market Access, that they continue to have Bargaining Power to the extent that they can and that they have the Market Information that they need to make the proper decisions and thats actually one place that i would argue that the Marketing Orders are pretty important is in providing Levelling Marketing Information for everybody to have. Thank you. Senator bosen. And did you see the article last week regarding stepped up basis . Yes, sir. In that article, corrects me if im wrong, but my reading of it was that he essentially said that the only people that would be affected by stepped up basis would be just a handful of corporate farmers and that everybody else it didnt matter and that he felt like they should go forward with stepped up basis, is that correct . Well, if i remember correct, im sure that youre right. If i remember correctly, he said something like 2 would be affected. Exactly. But the Usdas Number of farms. Exactly. Weve asked usda for that information to back it up and silence. And the only reason i say that weve heard others say today that stepped up basis is over, but you have the secretary of agriculture coming out as recently as last week saying, no, we need to push forward for this. So according to the study completed by texas a M University on the impacts of the proposed stepped up basis on representative farmers, texas a m found that the northeast would be subject to hundreds of thousands of dollars of increased taxes. In your review of farm financial data, can you share what impact these tax liabilities in your opinion would have on Dairy Farmers in the northeast . Sure, senator. So im not an expert in this topic. I have no reason to distrust the analysis and i havent done analysis myself. I can tell by working on the farm business management, that Estate Planning is the next very large challenge for, you know, especially for commercial farms. Modern agriculture is very capital intensive, and farmers dont tend to be overcapitalized because its expensive to be so, so they dont tend to have more capital than they need, but need enough to make a living and its not the same as passing on nonbusiness investments and so, you know, i could see that that would be a significant concern for farmers to make certain that they could make the next generation viable. All right. Dr. Wolf, youre one of the leading dairy economists in the country. Have you recently provided any academic input to policy makers in the development. 135 billion in Agriculture Reconciliation provisions with regard to what might best address the specific needs of dairy producers and the Dairy Industry . No, senator, i have not. Okay. Which is sad. Would if you had that opportunity, i want to give you that opportunity now. You mentioned Market Access and things. What suggestions summarize for me. This has been such a great hearing. Tell us in your opinion some of the most important things, if you could give that advice, which you are now, what do we need to be doing to make things function better . Well, senator, i think that there are a lot of opportunities to help the Dairy Industry in particular. The issues that theyre struggling with right now largely have to do with input costs, with the Labor Situation in particular, with feeD Costs, Market Access is a big issue, and then the one thats kind of looming that everybodys going to need to deal with at some point, probably relates to greenhouse gases and environmental change and i think that, you know, there are many opportunities there to both in the Research Side and helping at the Farm Level side, with, you know, making certain that farms are resilient and that they are contributing to the solutions, you know, the problem because i think u. S. Farms can be a big part of the solution there. And the costs with inclusion of the green new deal and significantly increasing gasoline prices, which again would deliver such an important part of dairy and uprighting the farm in rural america, the gas prices, electricity prices, what would that do to the input of our Dairy Industry . Producing crops but i also think to the extent we take advantage of potential Gas Production from Dairy And Manure and others would benefit from energy as well. Very good. Thank you, sir. Thank you, Madam Chair. Thank you. I think thats all we have no, senator marshall, you are here, thank you. Thank you, Madam Chair. You represent 700 farm families, and what would be the impact of stepped up, losing steppedup anD Cutting the limits in half to those families over their future . So let me just talk a little bit about what our membership looks like. So 720 members, very diverse very diverse. Weer range from a five Count Amh Farm to over 1000 head. One thing that is incredibly important for us as a cooperative is Sustainability And Sustainability of the next generation to come. We work incredibly hard to foster relationships, provide professional opportunities for our young farmers to make sure that they ready to be that next generation for us. We worry about what opportunities they have and what challenges are going to be before them. Anything we do that is good impact their ability to continue to farming on the land that their families have been on for generations is going to be detrimental to the next generation. Being a Fifthgeneration Farm kid myself, i mean i would suppose if we would lose the steppedup basis we would have to sell asi third of our farm to pay the taxes. Is that a fair statement that people would have to sell land and ordered to pay the steppedup basis and the dairies would be getting smaller rather than bigger . So we have not looked at in detail with the impactsts of tht would be in terms of how much land we would lose farmers, Et Cetera but we do know it would have a massive impact. Thank you. Mr. Willis, you make cheese, right . Yes, sir. Im not sure how many producers you are involved with but a bit theres a place in town where you guys go and have coffee together and maybe when they bring their milk to you guys you have a place to share a cup of coffee. If those farmers, producers were here today or when you sit down with them what are the biggest concerns when it comes w to agriculture, going forward . I think for a lot of my producers they tend to be smallerhe producers and i thinka lot of them are considered by continuing to have Access Toce E market. As the Buying Industry consolidates, that even in wisconsin where theres more competition probably for dairy than most of the country, that there had been incidences were we fed fatty hard time finds for some farmers have been cut loose by the bigger plants. Theres a a tendency for the g plans to only pick up milk from placesca where they can get an entire truckload, 50,000 pounds of milk rather thann from making a lot of stops at small places. The impact of losing all those producers, weve gone from 140,000 Dairy Farmers in wisconsin down to fewer than 7000 now and were losing about 10 a year. That hollows out the communities. When youre talking about sitting down and having coffee with the producers, theres not a restaurant in town anymore to have coffee. And so weve lost our hardware store, a grocery store, and a lot of that has to do with the rural communities being hollowed out, and so the ability to maintain and support a small farmers is not only important for those farmers but also for our communities. Thanks. Certainly as the agriculture grows, so goes rural america. Dr. Wolf, will finish up with you with the question. The federal Milk Marketing programs that come up for the past couple of years, just ina broad stroke, what has the impact been on small producers versus larger producers and isnt there fair is there in your opinion as an economist . That Dairy Program is very much into the small producers and in particular with the changes that have been made recently is much better for them. I kind of look at it as Dairy Margarine Program coverage more Protection And Livestock with margins are programs for the bigger farms. With those programs in place we are in a pretty decent situation from a Risk Management point of view, although maybe not necessarily for what was hopefully a onceinalifetime pandemic. Well, would you agree with me that small producers have much more, then successful from the programs than the bigger producers have not had much help through these tough times . Well, maybe come certainly the bigger ones get less relative help like the Dairy Margarine Coverage program but the bigger operators are much more likely to be doing their own Risk Management programs, like dairy rp. If you had that in place in rank 2020 then they probably did pretty well from that. Thank you so much, Madam Chair. Any additional questions and it went on webex . I want to thank our panelist for expert testimony. If you want to supplement your testimony submitted to the committee. With that, our hearing is adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] weakens on cspan2 are an intellectual feast. Every Saturday Youll find events and people that explore our nations past on american history tv. On Sundays Booktv brings you the latest in nonfiction books and authors. Its television for serious readers. Learn, discover, explore weekends on cspan2. A political dynasty and a notorious philander. He was ambitious and defeatist. Use the words of a journalist and former reporter at the wall street journal. 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Last Year Congress established the Paycheck Protection Program Lending Money to employers so they could pay their workers during the economic downturn caused by the coronavirus pandemic. Now the small Business Administration which operates the program is allowing employers to file for loan forgiveness. Up next a hearing of the house small Business Committee on the program. Without objection the chair is authorized to declare a recess at any time. Let me begin by saying that standing has an committee rules are practiced, we will apply du