[background noises] [background noises] >> food safety and security, thank you all for joining us this morning. the growing need to modernize self marketing order system to bring the nations carry pricing into the 21st century market. since as of the person subcommittee of the year, or two are from ranking member smith for her leadership and her work. i look forward to working together to provide farmers the support and resources they need. we have two panels today. i'm going to introduce the team of democrats and allow for opening remarks. >> thank you very much, madam chair. i appreciate the courtesy of my neighbor from new york. this is an important and timely hearing and because of the conflict we have with appropriations, i will be here. i think everyone knows dairy never takes a day off so i particularly think our witnesses for being here. mr. ron and an indispensable member of the monastery community and i would say to her as i said before, i can always count on your predecessor and bob wellington to provide sound counsel, i know you will do the same. there is a bedrock industry and anchors are economy for generations. the years of volatility and rise in costs and small sized farms. losing farms at a devastating rate even before the pandemic. since 2012, 40% has been lost. this impacts across our communities and work in landscape and farmers continue to struggle beyond our control. last month i welcomed secretary bill talk to vermont and we announced $350 million in assistance to terry and farmers to receive more prizes due to abnormalities caused by the pandemic. we look forward to solutions and improve resilience and increase transparency and address market inequities so i look forward to their perspectives. thank you for doing this. i know i don't have to tell you what dairy farms in the northeast, you've been a champion in your own state and think we can work together so thank you very much. >> thank you. i'd like to recognize ranking member of the committee. >> thank you so much and thank you for your championship, nobody has worked for the dairy industry as hard as you have. it's such an important industry. i'd like to think our witnesses are being here today in person and virtually spending time away from your duties on the farm and from your work is not lost on us. we greatly appreciate your willingness to guide us as we do our best to serve you and the american agriculture in general. over the august recess i had the pleasure of visiting arkansas, the fifth-generation firm has survived two world wars, major depressions in the farm economy is steadily declining consumption of food, milk and dairy products is one of the remaining 40 areas, it's amazing we are here. a number of dairy farms steadily declining in southern states and i'm deeply concerned about the decline in look forward to examine this trend and figure out ways to reverse it. policy may be part of the conversation, the items i hear about most from dairy farmers and all farmers are concerns about higher taxes and import costs and increase in regulation. in rising in those concerns is tax and spend legislation where getting ready to be forced. the senate agricultural and nutrition committee has received budget reconciliation instructions 15 times between 1980 and this year five committee chairs from both parties provided leadership to ensure some level of bipartisan input into the reconciliation process whether it was a committee hearing, opening markup of legislation, bipartisan service of agriculture committee, or legislation passed for bipartisan votes and centers from both parties consideration of the agriculture provisions of the american rescue plan 2021 of 40 years this bipartisan committee tradition was not upheld. hearings were held to listen to the needs of farmers and ranchers, a business meeting held for republicans and democrats, input into drafting a bill, democrats did not convene a conference committee to consider any changes in the final flow past congress pipe partyline votes. i'm deeply concerned democrats are choosing to go down this road again. without input from agriculture committee, democrat leaders in the house prepare $3.5 trillion tax and spend built a better reflects white house parties rather than those of the agriculture community. democrats in this legislation spending billions of dollars on conservation programs yet earlier this week the house agricultural committee including no conservation programs spending as of yet. apparently $20 billion worth of conservation and overspending will be added later. the bill did have something called a civilian time in a court which is better described as the climate place. we have no information on what might be, what its purpose is or how it will work for any of our answers to the most fundamental questions american taxpayers expense. we do know president binds so-called american jobs plan for mobilizing next-generation resilience workers to advance environmental justice and we know in this bill democrats reject climate place to operate on federal forest and private land. thus the last thing farmers and ranchers meet. the part that concerns me the most is the impact this process will have on consideration of the next farmville. despite final vote passing the 2018 farmville was no simple task. he took moderation on both sides and months of thoughtful deliberation demonstrating for all. democrats are shattering the farm bill process and putting farmers futures in jeopardy. throughout this process, i and republican colleagues on the committee have everything in our power to defend american agricultural democrats reckless tax and spending agenda and i yelled back to that. thank you. >> thank you. i'd like to welcome our witnesses, welcome, we have two panels today. davenport junior, a member of hudson valley/. welcome, jim. missus christina, managing partner of grenfell, iowa and mr. mike, owner of the ferguson dairy farm in mississippi. our second panel is catherine, vice president of economic legislative affairs. mr. robert willis resident of cedar grove inc. and wisconsin and christopher, ev baker and professor of economics at the charles' quote of applied economics and management at cornell university in new york. i look forward to hearing from you all and thank you for sharing time and expertise with us today. pricing is considered one of the most complicated economic systems in our nations. when that system is working for farmers, it reaches coast-to-coast include in my home state of new york, the first fourth-largest dairy producing and the largest producer of yoga and home to 3000 dairy farms. when the milk pricing system leaves farmers without adequate pay, the impacts are felt across our economy. dairy farmers are facing rising cost of production and current dairy prices are covering them. farmers cost money like labor and fuel have been increasing for years in foreign into a huge graffiti art at his torque prices. consolidation of the dairy industry has only exacerbated these issues. large terry operations have driven prices well below cost of production in family firms can't compete with the economy at scale major producers have. too many farmers across the country have been driven to 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 modern-day 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. seventy-four cents addition based on his torque price difference between two classes but historically isolated formula failed to meet the needs of the present-day 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 it's 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 100-year-old 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, it's 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 it's 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 it's a hardship in itself to stop and take time to testify but we appreciate you doing this because it's vital to hear from actual producers. i'm especially pleased to welcome mike bergson in mississippi, i know him well, he's been in the dairy business over 40 years and runs an operation of approximately 150 in north mississippi. he's held a number of leadership positions in the dairy industry and has been helpful and hopeful and well-being valuable insight to the subcommittee and thank you for being available today. you've always been so genuine and concerned and active. you want to be part of the solution and that's 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 today's 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 i'm 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. i'd 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 today's subcommittee hearing is about dairy, i'd 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 usta's 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 hard-working 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 tax-and-spend 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, i'm pleased we're 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. i'd 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 day-to-day 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, i'm 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 covid-19 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 it's very easy to some of the food processors but covid-19 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 8-ounce 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 there's 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, i'm 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 she's 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 they're not paid solely on that she's 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, fmo's 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 market-based 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. i'm 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 i've 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. i'm 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 don't 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 covid-19 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 consumer-products, 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 industry's 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 don't 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 don't 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 it's 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 value-added stuff i'm going to try to keep in business by doing that. just don't 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 don't really know other than fluid milk price discovery, can't think of anything the order couldn't do to benefit the small farmers and a lot of the programs we've had, the d&c is awesome. and that's 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 don't think there's 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 in-depth so that we can follow this long-term 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 don't feel they were out of the woods yet. on this covid-19 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 month-to-month 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 long-term 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 you're going to be on the hook for paying the taxes for it. there's milk millions in the bill and for equity whatever that is, and there's 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 don't 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 else's 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 stepped-up basis, detrimental to our operations and through the process my husband i are also doing our state funding and it's 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 have's 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 i've seen my neck of the woods way too often, a family farm goes out and one sibling wants to state going in the other c-letter $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 there's 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. there's 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 it's 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 they've 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 i'll be happy to hear from any of your all of you. it mr. davenport, would you like to start. >> sure and thank you for attending virtually grade i think basically we've seen the prices of the commodities she's better now are, they reflect the world market and there is also future markets so i think they have become less reliable and as i said before, i think because fluid to demand is sort of have a steadier price on the fluids and find a different way to price fluid milk and i think that it would be especially beneficial to the higher fluid orders that don't have a lot of places to send them out, a lot of times they have no options to send to another processor and a fair price. i've seen this limiting factor in that but i do feel that the order of system can be corrected we just have to get ideas we make sure that they are good with farmers and everybody involved. >> thank you and with the other panelists like to, would love to hear your perspective on how we can account for regional differences if we think about reforms. >> thank you. we the southeast, we are in a different area than any other part of the country come over such a tremendous help deficit area where we took the whole southeastern area we only provide by 45 percent of that fluid that is consumed in the southeast and is only going to exasperate because farmers leaving yet our consumers are growing. by leaps and bounds if you look at the numbers for the population is growing. so, one of the biggest problems we have, most of them open the southeast is co-op based, the farmers are members of the co-ops and it's on the backs of the co-ops to bring in the supplemental milk or milk to feel the needs of the market. the cost of transporting that milk in his on the backs of the dairy farmers because there is no mechanism where we can recoup the cost of bringing that milk in to provide the milk to the consumer so if we have something country are familiar with something like a making allowance for transportation to the market, i would be very beneficial to our farmers in the rural area. >> i realize amount of time, thank you for holding the steering and i'm grateful to be a part of it. food for thought as we think about this year. >> her next senator. >> thank you to all of our witnesses for being here today and a special thank you to christina and it is great to have you here and representing our home state of iowa and are dairy farmers. i would like to ask christina specifically i will start with you read the pandemic was really difficult on so many of us remember many of those days sitting in red oak, iowa, on zoom calls or a skype call with commodity groups in this hearing the stories involving and growing out of the pandemic and the challenges that all of our farmers and ranchers and dairy producers were going through read and if you could maybe explain to us a little bit about some of the issues and experiences you had any talked a little bit about the federal milk marketing orders. from the island dairy perspective, can you talk about some of the other issues that came out of the pandemic and what should be the 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 they said, we ship to a plant so we know that hundred percent of our will be based on that price on the cheese and we ship to a different processor and is some fluid milk or soft different classes of production, there milk truck will be based on a blended number so they can't effectively get from month to month with that percentage will be and when the is going to come from and they are effectively out on the option of hedging and protecting themselves from losses that come in with market volatility and then obviously one could have not predicted the pandemic we could've we could've predicted normal price that's 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. >> thank you and i did note for some of my discussions last year as well that because we have school closures and the school lunch milk program, they weren't using the same cartons anymore so then became an issue of how you ship milk may be in a different form rather than to the schools, then to art marketplaces and any thoughts on that as well ? >> absolutely, that is a production line issue which i think was on every industry you can't just take the equipment that is producing those cartons and make it a sour cream container. it does not work. it takes billy an implanted building a new line and having the employees to do that and i think that that's one of the biggest things we look at. in one of our fears now is there's not enough truckers what happens we cannot haul our milk and perishable product to the facility that continued, what happens when the facility does not have the staffing to take it. it's all something that we can put in the freezer news next week. >> absolutely and any other thoughts more witnesses pretty. >> i agree with christina, definitely that was a problem, the foodchain really upset a lot. and i know that it was great our little group, we did food pantries and one of the good things the former governor of new york did was haven't new york problem on from and nourish new yorker program and we were paid a fair price, and the milk in the gallons and incentive the food programs, no waste happen, every bit of it went to people who 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 ones, their help wanted signs everywhere and i don't know what is keeping people from working. in our pleasant vermont during the pandemic, we had the sales staff working double shifts running the plant. the demand for more cheese then god knows we had plenty milk rated to make the cheese but we had shut down production on the weekends because there was nobody willing to work. escort to me as i said, i've been working some long hours much to the chagrin of my family but i'm still in business and it is a problem and we have to address it and i think one thing as not been set yet but i do believe the whole milk in the schools would definitely be a big boom prayed all milk taste better no matter who process it, the whole fat milk taste better than the low-fat milk. in the consolidation industry, a lot of small dairies really sure about the quality, although their story but they have not, the soul out large dairy has closed in august said, some schools in our state paying twice with the beta new york city for milk and right by their producers so that is something that needs to be addressed and kids should be drinking milk. >> plant -based beverage, that's 80 percent of our diet sometime this are cal diet. in your neck of the woods in our neck of the woods, we don't do interrogation, so what mother nature provides. >> my time has expired but i do appreciate the input not only in looking at the pricing and how we can modernize the pricing system, but then also the supply chain management issues that so many faced over the pandemic so thank you. >> thank you and i agree with you. i think the whole milk in the schools would be wise i know my children only will drink whole milk. so it was more delicious and better and very healthy and children will feel more full and eat less junk food. so i am in favor of that recommendation. and the next senator. it. >> thank you for doing this and guess what, i agree with you rated want to be in the record today to say that i think the milk is the most delicious most nutritious drink known to mankind and that mankind has never made a drink that could develop an immune system to fight rsp or flu or covid-19 i'm a milk is a very important part of that nutritious diet. and homo especially as it helps us absorb fat soluble vitamins ade indicated that is so important as an obstetrician gynecologist that we have the whole milk and grow strong bones as well and that we now have a generation of men and women are going to have osseo pdf and process in the ten - 15 years younger and the predecessors because of the federal nutrition policies that basically disallowed whole milk. that's what gives us the flavor and the taste and that's why kids drink it because it tastes good. i don't like 1 percent milk, get so mad at my wife because she doesn't bring me some whole milk home and i try to drink it for lunch every day, two cartons of whole milk and we've got it back on the diet for the senators i want you to know that. i'm excited to talk about dairy because it is personal, my dad and his family had 30 head holstein dairy farm, 30 years and like the senator said, you don't miss a day of work in the cows have to be milk twice now three times a day. i'm excited to get beyond subcommittee and helping out or dairy farmers and maybe may be more negatively impacted than any other ad sector that i can think of over the past four or five years it just feels like the seven plagues of egypt have hit the dairy industry. i just learned that your largest producer in gilbert new york and i did not know that so is very sore. in kansas is the fastest growing dairy bird in the nation as well and we are very proud of that. additionally arizona and california, colorado new mexico oregon south dakota texas, washington state and wyoming and kansas, they are about 40 percent of the milk production and all operate in federal milk marketing orders pretty year 2020 very significant vulnerabilities the way we price milk in the federal milk marketing order system. avery dairies have same quantity and quality often receive different prices based on who they were selling the milk to the difference was based was not based on sound economic principles but was based on the impact of the federal government opting to mandate the purchase of millions of pounds of cheese providing a milk price windfall, a dairy farmer invite providing the cheese manufacturing. i love cheese, very nutritious and am so glad we could more cheese out to folks who needed the nutrition help there's no such price relief of those neighboring dairies to supply local bodily trends of the better manufacturers and the usda announced last month they would provide some mitigation for the 2020 and equity capitol relief and ensuring the dairies in kansas and throughout the u.s., fraction on a representative basis in our politicians should not pick winners and losers based on the farm size or geography as i look out i consider the challenges in this area, my biggest concerns are the tax and rules and regulations. i think that several of us have talked about stepped up bases that would be the end of the family dairy maybe our witnesses could talk a little bit about the concerns about info cost inflations, waters of the u.s. how this might impact your dairies if those regulations are dialed up. mr. davenport, any thoughts but it was an concerns about rules and regulations predict. >> as the input cost is always gone up of milking cows as just a fact of life and partially we have gotten more efficient and learn how to keep the cows that are leaning kind of counteract that predict regarding the waters of the u.s., i'm all for clean water and trying to keep it clean, i just think that we probably ought to not overburden cta with rules they can't possibly enforce they don't have enough staff to run around and check everything. but i firmly believe that the algae boom in chesapeake, the western part of the leak here re- in the mouth of the gulf of mexico, think we can do a better job rated we don't have any soil open and we have land which the acronym short of one hour was a farm when it's wet and we basically have everything our soil stays in place and we use a little bit of herbicide, and dairy farmers are all about that because it's more profitable. wasting money on fertilizers is not going to grow your crops so why bother so i think that's all laudable we just have make sure we do not have enforcement of rules sort of like if you have a vendetta with somebody to pull something out of your pocket they can't normally enforce the whole industry and sort of things where we just need sensible water regulations we don't want to go overboard. it. >> thank you for sharing the farmers and ranchers of the greatest conservationists in the world we start to go over my time. >> no worries and our next senator by webex. >> thank you to you and our panelist today and we appreciate you taking the time to give us the information that we find very valuable. in your testimony, you discussed in 2020, you received gains at class three milk prices. they also mentioned that other milk prices fell and appreciate your sentiment that we need to ensure a fair dairy pricing system not heard from producers in nebraska who had negative prices. because of the increase classy prices while in class one milk prices fell. can you mentioned that your member of her regional milk pricing reform study argued can you discuss what recommendations. to ensure a fair milk price system and protect or how can we protect events like the last year with the pandemic and negative prices. >> all try to address is the best i can, you did cut out a little bit. negative are experienced by lots of people in fact, not just with the blended no price, we saw within the last couple of months. in this goes back to fundamental shifts in the milk market and we are no longer a fluid based market. the market sure has decreased by a lot over the last decade we really need to focus our production and our pricing more on the export market that has emerged which is great for us, the trade and offering a market to our farmers is another area we can compete and earn more money. >> anything congress should do. is there anything we can do to be able to ensure that we can address some of these events like a pandemic. >> i have been a part of some discussion, we don't have any public answers yet. but there are of great ideas out there would love to see some of our academic processors on the next panel, i would love to see some of their ideas in this department. >> he also mentioned the impact of unpredictable cooling to utilize risks and management programs like the dairy margins recovery program. have also heard from nebraska fluctuation in price by d pulling when guess to mismanagement by the d&c, into elaborate on unpredictable cooling and price fluctuations and impact and effectiveness of this. >> so brusque i believe part of the central marketing order which iowa is also part of soap the marketing orders do not have nearly these fluid processing power that someone like the northeast would have and they are under different rules. you think there's a lot harder to deploy the northeast and if they have the same regulations within the midwest marketing orders. they just want to participate in the other processors then have to pass on those negative cost to their producers. obviously the need to be changed milk pricing system but need to be something that we all work on together so that it can benefit both the producers and the processors. >> thank you very much. >> i have three additional questions and i will put forward it in each of you can answer if you have an opinion. over the past year, you have seen your operation costs continually rise when there is cost before fee fuel or labor and not the prices you receive for your milk hardly ever cover the cost of production. what are the pricing reforms we are looking at us more closely aligning the milk prices with the cost of production in each of you could you briefly explain the disparity between the car prices you receive for your milk and for the cost to produce the milk and where are some additional ways the prices you received to reflect the cost of the production. >> for my own operations, over the last 15 or so years, the price of milk exceeded the cost of production. and of course there is an expression called living off the appreciation, that's a large part of it and most businesses, it is a cost, depreciation is the cost but if you have some farm machinery this fully depreciated, it still keeps working, you just have to fix and born is less reliable is a small producer, i do a lot of fixing. but i think, i don't really know how you would align, cost of production is different for everybody and i think that any artificial subsidies of production anywhere make it hard to try to in level playing field for everyone. and i sort of keep coming back into decoupling fluid milk price from volatile cheese and butter and powder and we could come up with a way to price the most perishable or least elastic demand product that we produce, so that in the heaviest food market, you're not going to be hurt by crazy commodity price swings and in a less 70 produced fluid markets that there cheese or processes were still participating in the pool. i think it will just have to or somebody much smarter than i, i would endorse of plant that i like but so far i haven't but i think that would be great to be able to do that because the bottom line is you want businesses to thrive and you want to be able to produce at the lowest cost possible. but the too big to fail thing, i have seen happen in very large dairies in the northeast where the bank basically tells them no more money, you to get out of your vendors and they're the ones who are going to have to support you and i've always paid my bills on time pretty good line of credit and i'm afraid to use it but i know large operations and if outrun their ability to manage and are just a speeding train with no break. and i would like to see they weren't allowed to keep going when i have friends that are the same size they're doing really well and you just as good of job as i do the cows milk quality and i just would like to see these large farms that are out of control maybe get cut off a little sooner if short of teaching everybody else that expanding within your abilities management and there's just something personal what i see. ... ... i'd like to echo that i don't think subsidies based on the cost of production are going to be effective. part of the beauty of living in the u.s. is we have the freedom to take on things in a way we want to, we can take on as much debt and expand to the site works for us for our families even between our three locations we have different sizes operation and they all have different operating costs. we have different loans, different feed costs and we milk different breeds of cattle based on where there located and how much space they need and i'd like to maintain that freedom. there is no way i should be told to make a decision based on someone else's farm or what someone somewhere else wants to happen, something i get to do based on each individual input in my operation. >> from my few, i agree with the other two that subsidies are not necessarily the solution but we're going to look at a lot of changes that have to be made and focus to protect the environment and energy sufficiency and grants and loans and availability for operations undergoing these changes and doing this even on a voluntary basis are a central part of the future of maintaining it. >> the last question is about make allowances, processors for credit or cross of processing dairy products through allowances. should reforms include enter make allowance for the cost of producing milk, there's criticism in the hearing process including length of time required to request and hold hearings and implement changes, what are some changes can be made to make this more simplified and reactive to farmers needs? >> i don't know a lot about it, i think it's a complicated topic but i do know the changes we make in the system, i'd like to see them encourage innovation and processors should have the freedom to expand and discover new markets so we continue to export and trade products and compete for the best price for dairy producers. >> the make allowance i think in some areas of the country there's a service provided to take extra milk and put into a product that has a longer shelf life and go into international market providing containers that wait around long enough to get on dairy products and not go back and i think somehow someone has to keep an eye on make allowances and if there's something that's a little for the dairy farmer that we can adjust, just how, i don't really know. the second part of the question was -- [laughter] sorry. >> do you recommend any changes to the length of time required to request hearings? >> oh yes. it would be nice to make the process move along faster knowing never having participated myself, i promise to be back to the economist to have ideas about but i believe that as long as that process has input from the concerns and the industry, that's very important and i'd rather see it take a little longer and be complete and done wealth and rushed and have to go back and redo the process again. >> mr. ferguson, any remarks? >> yes, as i think i mentioned earlier as far as make allowance is concerned, it would be beneficial in the southeast to have a make allowance for the balancing cost because it's a huge issue on our marketing area and the rulemaking process sometimes is a tedious process. could there be efficiency gained to shorten that process? i would think any operation that tells you to vacate, tighten things up can do just as good or a better job, i think the process could be a little shorter because as it stands now, it's a very frustrating process so i think there could be some shortening. >> thank you to our witnesses, your testimony has been helpful. if you would like to add anything additional to your testimony, you may write a letter to the committee. thank you and we are going to introduce our next panel. i'll introduce them while they get settled. will hear from catherine, vice president of economics. mr. robert willis and mr. christopher, baker professor of agricultural economics economics at cornell. catherine is vice president of economic, catherine joined in 2017 and responsive for watching trends and working on state and federal legislation affecting members. catherine previously was employed with the massachusetts department of agricultural resources. catherine holds a bachelors and masters in resource economics and the university of connecticut, thank you for being here. mr. bob is owner since 1989. a wisconsin master cheese maker. he served on the board of the american cheese society and chair of the american cheese education foundation among numerous other volunteers of dairy and agricultural community. he worked as a research associate and instructor in the department of agricultural at the university of wisconsin. he credentials include ba from american university international economic and jd from the university of wisconsin. thank you for being here. the professor of agricultural economics and school of applied economics cornell university. he moved to cornell in 2019 after 21 years in michigan state university and conducts research focuses on dairy market policies, risk management, prime animal welfare. he's published in academic outlet, the program stresses public policy on firm behavior, focusing on issues and current and future decisions. he received his bachelors from the university of wisconsin. thank you for being here and again i think all of our witnesses today. with testimony for five minutes each. >> chairwoman gillibrand, ranking member and members of a subcommittee, good morning. on behalf of the 720 dairy farmers, thank you for spearheading this hearing and the opportunity to testify before you today. it's an honor to share the voices of my former members. we applaud you for your continued to support of dairy farmers and industry and greatly appreciate efforts in the pandemic market volatility assistance program and dairy margin coverage adjustment. your involvement in leadership is why i am here today and it is important for me to be part of his hearing. as mentioned this morning, dairy farmers, it's a 24 hour commitment 365 to zero. as our nation and global economy have evolved recently, you issues facing today's dairy farmers are more complex than generations of farmers before them. our dairy farmers are resilient but not impervious to combat forces. today's challenges encompass impacts global trade has on our market, pressure that all levels of the supply chain and changes in consumer desires. together they placed tremendous amount of stress not only on dairy farmers by supply chains and businesses as well. collectively, we must work to ensure dairy supply chains are strong and viable starting with dairy farmers. dairy farmers helping america and play an increasing role providing sustainable nutrition to the world. dairy farmers are critical to local and regional economies creating jobs in siri land and supporting local food systems we must ensure they have the market programs and tools to continue to operate and be sustainable for generations to come. i engage with numbers everyday discussing marketplace and forecast. no price or something farmers work and concerned about and something markets actively work on to improve on a national level. cooperative is a member of the national milk producer federation as well as international dairy foods association. i serve on economic policy of each organization, both working on the pricing and policy issues. both of these committees started a deep dive into wide conversations until the pandemic brought an abrupt halt. last names unique market circumstances unveiled underlying laws in federal system and drew attention to three key elements. negative producer price differential, or farmers that showed up in unfamiliar unease, misunderstanding and many questioning the system was working properly or not. the industry in even greater urgency to revisit the need for federal order reform. the federal order system provides significant value and safeguards to terry farmers, cooperative and processors. they are critical for price and ensure timely payment to dairy producers. as we discussed today, the industry changed significantly since the last order reform in 2000. industry growth, increased costs and participation on export market are viable reasons to revisit orders and advise them to better reflect today's marketplace. we want federal order system to evolve and be supportive of the needs of today's dairy market participants especially those of our farmers. as we work to improve order, it's critically important we recognize intersections and milk pricing and a change in one area can have an impact and change another. current class has cost significant pulling and substantially reduced producer revenue which was not intended. it needs to be addressed. while i deeply and personally understand urgencies to resolve challenges, thorough analysis of these intersections considering all perspectives is essential to guaranteeing reform success. changes should be made through the formal rulemaking process to make sure a comprehensive approach is taken and producer processor and consumer voices are heard and considered. there is much work to be done to evolve this system in the industry is on board and hard at work. we must continue to strengthen pricing and provide a 12 farmers and build trust domestically in emerging markets across the globe. the hearing is an important step in the early stages of this dialogue so i thank you for your advocacy, investment in our industry was against the opportunity to share with you today. >> thank you for today. my two cheese factories are supplied by terms. ten years ago i started creamery, i decided we'd be supplying consumers of the state. i viewed my role to supply to factories as well as supporting health and safety of consumers but today i fear for the future of the dairy industry. subject of today's remarks public but let me try in a few sentences. federal and mr. established by congress functions opposite of intense. federal market orders have hired dairy prices for consumers and create lower milk prices for farmers. slowly and inadequately to change in costs and demand and encourages inefficient location of care facilities and complexities in the system creating opportunities for anticompetitive behavior and consolidation. the 90-year-old structure creates the problems with outside pressures today exposing how the system threatens the existence of dairy farming in the united states. today there industry faces increased international competition with rising costs and uncertainty from climate change and we face disruptive culture technologies and turn produced dairy ingredients from genetically. is not evolved to address changing dairy industry and the mechanism has no tools to address global competition, the need for sustainable disruption and disrupting replacements. a survivor of the dairy industry depends on your decision to end market order system as soon as possible. originally, both orders were intended to get nutritious consumers, especially children throughout the country and practice orders raised their prices and pay farmers, horrible practice is disrespectful to animals, hard-working farmers and citizens. in this part of the system, milk pricing. milk is prized by class premium at two milk shared among farms and ship to manufacturers of cheese and butter and milk. farmers are better off only if there's premium exceeding the value from lower prices in the other classes plus inefficiencies created by the process. process conditions are required with segmentation to increase overall value although the distribution system makes it appear all farmers are winners, adjusting classified in the total farm revenues. orders are complicated, 11 different regional market orders have different prices and roles changing a single regulation requires a costly hearing process that stretches on for years. a large countries companies transport milk to take a picture of price differences. order shopping give large competitive advantage over regional processes. superior understanding the system and ability to take advantage of differences giving companies that they can continue the system. there industry works along structure challenges are coming to require efficiency and innovation that it provides. milk pricing has zero provisions to recognize costs associated with exporting dairy products or the ability or added cost of developing unique new products tailored to the taste of consumers and other nations. the newer challenge facing system is imitation or clone dairy products. plant -based such as why enrollment drinks provide an important alternative for people unable to consume dairy sales have grown but only a small amount of consumption seems to replace milk but the next fermentation based technology using genetically alternated microbes to produce specific dairy proteins in march amounts. as unnatural as it sounds, business startups are attracting large investments for international investors. these companies have dabbled in products like animal free ice cream but the first large threat they pose is large-scale production of whey protein, byproduct. without a way of marking, cheese plant struggle to make a profit, fewer dollars to pay terry farmers and would face environmental challenges exposing a peripheral could wave. some entrepreneurs claim to be able to copy milk exactly by using cloned cells. none of these challenges regarding international competitors and processors of vegetable replacements conform with federal milk marketing orders. we should not lose the competition just because they're not allowed to be paid fairly. >> doctor wolf, would you like to give five minutes? >> thank you for inviting me to be part of this hearing. u.s. dairy industry is diverse in front terms of firm size, geography and market. major change in consumption patterns, rise of international trade major outlet for terry products and consolidation at all levels of the supply chain. marketing orders using multiple component pricing handling majority of production in the country, component value plus producer price individual and access products, producer prices occurred which are not just abnormal magnet to price volatility. recent research plan-producer prices provide a host of factors including utilization driven market trends production, change in class one skim nuisance. impact of eateries marking order and overtime. regional impact capacity and other market numbers. on average across marketing orders, the largest impact contributed to negative producer pricing in 2020 and others a significant impact in class one pricing change. these factors were exacerbated by diversions in class three and class four milk prices in 2020 due to change in consumption from food away from home to almost exclusively at home as well as government purchases of dairy products. in respect to consumption, beverage milk is down anna capra basis with the inclined increase in 2010. in contrast, cheese, butter and total dairy consumption has been growing. increase u.s. milk production. since 2005, dairy has grown 5% to currently accounting for more than 16%. export market system balance, there are implications of growing dairy experts including international supply and demand as well as political impacts of trade. the issues that motivate this hearing relate to firm milk networkers, majority was used in fluid products. shrinking class one or food consumption milk means less money and revenue. given the age of the milk marketing order system makes of time since last major reforms and changes in the construction site is likely time to re-examine aspects of the mark order. issues are the regarded in need of attention at this time. class one milk pricing was changed in the 2018 farm belt and implemented in 2019 class one skim milk and advanced skim milk prices for 74 cents rather than the higher of those advanced prizes. seventy-four cents but differential chosen to be revenue neutral. one application with the difference between class three and four milk pricing is a dollar 38. the resulting class when price in the new formula is less than using the higher up. price differences were will focn this aspect. glasses are the amount of the wholesale dairy product price accounting in the component value of milk. increasing to mug allows for cheese and butter is the wholesale dairy product is lower. if they are inadequate, processes will be driven out or must make up the difference elsewhere. the entire supply chain from farmers to processors help markets and institutions we have around existing federal marking system and report facts of reforms should be carefully considered parties including economic deficiencies. you might have thank you. i know class one is the only one but the new pricing method we market conditions farmers last year. talk about this how risk management tools impacted? >> yes and thank you for the question, i think there is three parts to the first part in the pool. the order system design or fluid marketplace and revenue to make sure every farmer is equal for that to work, we need to participate not because christmas is the highest price so it is essential how orders were designed, need to make sure has once participate. your second question about marketing caused by the pandemic, you did an excellent job talking about that but i'll echo your comments there. when we had a fast rise in class three due to the pandemic, crashing prizes in the food box program coming in, it was rapid rise that cause into unfamiliar pricing, class three price to exceed probably on what we had ever seen in the difference between class three and four became extremely wide and as mentioned, it was so wide that new pricing mechanisms with class one had not intended for that to happen it did not account for the and producers were not revenue neutral. management, when it takes place and we have volatility in the marketplace, it makes it extremely hard for producers to make accurate risk management decision. producers make decisions based on what they think the future might do and what traditional relationships may look like so that was how last year was an anomaly and producers management decisions were not based on anticipation of a food box program or covid pandemic happenings are generally that market volatility was what drove significant challenges in the decisions. we note pool deficits affected producers but how were different processors affected in terms of profit and loss? what's your recommendation for updating pooling rules? >> i think as i indicated, there is no other industry like this and my recommendation would be to eliminate pooling rules because i don't believe they are actually increasing the value overall. on the other hand, the option of deploying is necessary if you keep people in business. deploying is a pressure relief when the market order would put companies in the position of having to pay a higher price than what they earned. milk pricing today or yesterday i learned what milk cost, august 1. my producers were find out tomorrow with a produced august 1 in that system is what creates the negative and puts people in a position where they both can't make good planning how to run their businesses and how much milk to produce but forces them to have the option of deploying because prices are not reflective of value. >> based on years of research, what suggestions you have on pricing reform to help farmers receive fair price for milk and given prices involved, how can small dairy farmers survive in this environment and what policies could be implanted to help? >> i think updating the marketing orders to reflect current realities in the market are important if we continue to have this system be the foundation but it's important to consider the fact farm milk prices from several components, marketing orders are a major part but regional cooperative aspects are another part and part of what's driving volatility is differential expanses from the market access and what's going on a different product market across the country so that contributing so at the prime level is a wide variation in the prices in 2020 was particularly a stark demonstration is some farms seem to other pretty well and others were devastated. i think the biggest thing that could help smaller firms want to consider is to make sure they continue to have market access and bargaining to the extent that they can in the market information they need to make proper decisions and that's one place i argue marketing orders are important, providing leavening marketing information for everybody to have. >> thank you. senator boseman. >> thank you, madam chair. did you save it article wrote last week regarding isis? >> yes, sir. >> in the article, correct me if i'm wrong but my reading was he essentially said the only people affected would be a handful of corporate farmers and everybody else and he felt like they should go forward, is that correct? >> if i remember correctly, i'm sure you're right, you said something like 2% would be elected for the farms -- >> we've asked usb i for the information and the reason i say that is we've had others but you have secretary of agriculture coming up as recently as last week saying no, we need to push forward. according to a study completed by texas university on the impacts of proposed changes on representative of farmers, the northeast would be subject to hundreds of thousands of dollars of increased taxes. in your review, can you share what impacts our abilities to have on dairy farmers? >> i'm not an expert on this, i have no reason to distrust the analysis and i haven't done enough detail myself but i can tell you working with farm business management estate planning a large challenge especially for commercial farms, modern agriculture is capitol intensive and farmers don't tend to be over capitalize because it's expensive so they don't tend to have more capitol than they need but they needed enough capitol to make a living so it's not the same as passing on business investment so i could see i would be a significant concern to make sure they make the next generation bible. >> have you recently provided academic input policymakers and development on the $135 billion in agricultural reconciliation in regard to what my best address for dairy producers and dairy industry? >> i have not. >> okay. which is sad. if you have the opportunity, i would to give you the opportunity, what suggestions -- has been such a great hearing, tell us in your opinion the most important things if you could give out address, what you need to do to make things function better? >> tar a lot of opportunities to help the dairy industry in particular, the issues they are struggling with largely has to do with input cost and labor situations with feed costs, market access is a big issue and the one looming that everybody is going to need to deal with probably relates to greenhouse gases and environmental change and there are many opportunities both on the research site and helping at the prime level making certain farms are resilient, u.s. firms can be a big part of the solution to. >> with the inclusion of the green new deal and significantly increasing gasoline prices which would deliver important port of the prompt, cast prices and electricity, what would that do to the input for the dairy industry? >> energy costs are important because they use energy both and milking cows and 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. >> thank you. >> thank you. i think that's all we have -- no, senator marshall. >> thank you. you represent 700 farms and what would be the impact of losing stepped-up basis coming limits and half to the families over their future? >> let me talk a little bit about what our membership looks like. 720 members, very diverse. we range from amish farm to over 1000. one thing incredibly important for us as a cooperative is sustainability and sustainability of the next generation to come. we worked incredibly hard to foster relationships, provide professional opportunities for young farmers to make sure they are ready to see the next generation for us. we worry about what opportunities they have and what challenges are going to be before them. anything we do to impact their ability to continue farming on the land their families have been on for generations will be detrimental to the next generation. >> being a fifth-generation farm kid myself, i would suppose if we lose up on the stepped-up basis, we have to sell a third of our firm to pay the taxes, is that a fair statement people would have to sell land to pay and dairies would get smaller rather than bigger? >> we have not looked in detail what the impact would be in terms of how much we would lose but we do know it would have a massive impact. >> thank you. mr. willis, you make cheese, right? >> yes, sir. >> i'm not sure how any producers you are involved with but i bet there's a place where you go have coffee together and maybe when they bring their milk to you, you have a place to share a cup of coffee. if the farmers and producers were here today and when you sat down with them, what are their biggest concerns when it comes to agriculture going forward? >> i think a lot of my producers, they tend to be smaller producers and a lot of them are concerned about continuing to have access to market as the larger -- the buying industry consolidates evening wisconsin were those north competition for dairy than most of the country, there are instances where we have a hard time finding homes for some farmers cut loose by bigger plants in the is a tendency for big clients who want to pick up only milk from places where they can get an entire truckload of 50000 pounds of milk rather than making a lot of stops at small places. the impact of losing the producers we've gone from 140,000 dairy farmers in wisconsin down to fewer than 7000, we lose about 10% a year and that powers of the communities so when you talk about sitting down and having coffee with producers, there is not a restaurant in town anymore to have coffee at so we've lost our hardware store and grocery store and a lot has to do with communities being hollowed out so the ability to maintain and support small farmers is not only important for the farmers but also our communities. >> as agriculture grows -- i'll probably finish up with a question, the federal milk marketing program for the past couple of years, just a broad stroke, what is the impact on small producers versus larger producers and is there fairness there in your opinion? >> the dairy program is aimed at small producers with changes made recently is much better for them. i look at it as more at small and dairy revenue protection. with two programs in place we are in a dizzy situation from risk management view although maybe not necessarily was hopefully a once-in-a-lifetime pandemic. >> would you agree producers have been successful from the programs and bigger producers not having much help through these tough times? >> certainly the bigger ones get less relative help through these programs but the bigger operators are more likely to do their own risk management program. if they had that in place entering 2020 they probably did pretty well. >> thank you so much, madam chair. >> any additional questions and anyone on m ask? how to think panel is for excellent testimony. if you like to separate your testimony, submit it to the committee. with that, our hearing is adjourned. 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