Northeast Interstate Dairy Compact

Last updated April 28, 2019

The Northeast Interstate Dairy Compact was an agreement among the six New England states to support the farm price of milk at a higher level than under federally mandated minimum prices in the region.

New England is a region composed of six states of the northeastern United States: Maine, Vermont, New Hampshire, Massachusetts, Rhode Island, and Connecticut. It is bordered by the state of New York to the west and by the Canadian provinces of New Brunswick and Quebec to the northeast and north, respectively. The Atlantic Ocean is to the east and southeast, and Long Island Sound is to the south. Boston is New England's largest city as well as the capital of Massachusetts. The largest metropolitan area is Greater Boston with nearly a third of the entire region's population, which also includes Worcester, Massachusetts, Manchester, New Hampshire, and Providence, Rhode Island.

Milk is a nutrient-rich, white liquid food produced by the mammary glands of mammals. It is the primary source of nutrition for infant mammals before they are able to digest other types of food. Early-lactation milk contains colostrum, which carries the mother's antibodies to its young and can reduce the risk of many diseases. It contains many other nutrients including protein and lactose. Interspecies consumption of milk is not uncommon, particularly among humans, many of whom consume the milk of other mammals.

A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product, good, commodity, or service. A price floor must be higher than the equilibrium price in order to be effective. The equilibrium price, commonly called the "market price", is the price where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change, often described as the point at which quantity demanded and quantity supplied are equal. Governments use price floors to keep certain prices from going too low.

Provisions

The compact created a Northeast Dairy Compact Commission, based in Montpelier, Vermont, charged with setting prices and regulating bulk milk handlers. From 1997 until its expiration on September 30, 2001, the Northeast compact required processors in the region to pay dairy farmers at least $16.94/cwt. for farm milk used for fluid consumption.

Montpelier is the capital city of the U.S. state of Vermont and the seat of Washington County. As the site of Vermont's state government, it is the least populous state capital in the United States. The population was 7,855 at the 2010 Census. However, the daytime population grows to about 21,000, due to the large number of jobs within city limits. The Vermont College of Fine Arts and New England Culinary Institute are located in the municipality. It was named after Montpellier, a city in the south of France.

The hundredweight, formerly also known as the centum weight or quintal, is an English, imperial, and US customary unit of weight or mass of various values. Its value differs between the American and imperial systems. The two values are distinguished in American English as the "short" and "long" hundredweight and in British English as the "cental" and the "imperial hundredweight".

Membership

The six New England states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont made up the compact.

Connecticut is the southernmost state in the New England region of the United States. As of the 2010 Census, it has the highest per-capita income, Human Development Index (0.962), and median household income in the United States. It is bordered by Rhode Island to the east, Massachusetts to the north, New York to the west, and Long Island Sound to the south. Its capital is Hartford and its most populous city is Bridgeport. It is part of New England, although portions of it are often grouped with New York and New Jersey as the Tri-state area. The state is named for the Connecticut River which approximately bisects the state. The word "Connecticut" is derived from various anglicized spellings of an Algonquian word for "long tidal river".

Maine is a state in the New England region of the northeastern United States. Maine is the 12th smallest by area, the 9th least populous, and the 38th most densely populated of the 50 U.S. states. It is bordered by New Hampshire to the west, the Atlantic Ocean to the southeast, and the Canadian provinces of New Brunswick and Quebec to the northeast and northwest respectively. Maine is the easternmost state in the contiguous United States, and the northernmost state east of the Great Lakes. It is known for its jagged, rocky coastline; low, rolling mountains; heavily forested interior; and picturesque waterways, as well as its seafood cuisine, especially lobster and clams. There is a humid continental climate throughout most of the state, including in coastal areas such as its most populous city of Portland. The capital is Augusta.

Massachusetts, officially the Commonwealth of Massachusetts, is the most populous state in the New England region of the northeastern United States. It borders on the Atlantic Ocean to the east, the states of Connecticut and Rhode Island to the south, New Hampshire and Vermont to the north, and New York to the west. The state is named after the Massachusett tribe, which once inhabited the east side of the area, and is one of the original thirteen states. The capital of Massachusetts is Boston, which is also the most populous city in New England. Over 80% of Massachusetts's population lives in the Greater Boston metropolitan area, a region influential upon American history, academia, and industry. Originally dependent on agriculture, fishing and trade, Massachusetts was transformed into a manufacturing center during the Industrial Revolution. During the 20th century, Massachusetts's economy shifted from manufacturing to services. Modern Massachusetts is a global leader in biotechnology, engineering, higher education, finance, and maritime trade.

The law allowed membership in the compact to expand to New York, New Jersey, Pennsylvania, Delaware, Maryland and Virginia, if the prospective state was contiguous to a member state, and if the compact was approved by the state legislature of the prospective state and the U.S. Congress. Although many states expressed interest in joining the compact or forming a separate compact, no congressional approval was granted beyond the six New England states, because of strong opposition from Upper Midwest dairy farmers and dairy processors.

New York is a state in the Northeastern United States. New York was one of the original thirteen colonies that formed the United States. With an estimated 19.54 million residents in 2018, it is the fourth most populous state. In order to distinguish the state from the city with the same name, it is sometimes referred to as New York State.

New Jersey is a state in the Mid-Atlantic and Northeastern regions of the United States. It is located on a peninsula, bordered on the north and east by the state of New York, particularly along the extent of the length of New York City on its western edge; on the east, southeast, and south by the Atlantic Ocean; on the west by the Delaware River and Pennsylvania; and on the southwest by the Delaware Bay and Delaware. New Jersey is the fourth-smallest state by area but the 11th-most populous, with 9 million residents as of 2017, and the most densely populated of the 50 U.S. states; its biggest city is Newark. New Jersey lies completely within the combined statistical areas of New York City and Philadelphia. New Jersey was the second-wealthiest U.S. state by median household income as of 2017.

Pennsylvania, officially the Commonwealth of Pennsylvania, is a state located in the northeastern, Great Lakes and Mid-Atlantic regions of the United States. The Appalachian Mountains run through its middle. The Commonwealth is bordered by Delaware to the southeast, Maryland to the south, West Virginia to the southwest, Ohio to the west, Lake Erie and the Canadian province of Ontario to the northwest, New York to the north, and New Jersey to the east.

Expiration

After controversy and claims of price inflation, in 1999 Congress limited the duration of its authorization of the compact, which ceased operation on September 30, 2001, after intense lobbying both in favor and against its extension.

The dairy compact has been replaced with Milk Income Loss Contract (MILC) payments under the 2002 farm bill (P.L. 107-171, Sec. 1502), which mandates direct federal payments to all participating dairy farmers nationwide when the minimum price for fluid farm milk in the Northeast falls below $16.94 per cwt.

Related Research Articles

A dairy is a business enterprise established for the harvesting or processing of animal milk – mostly from cows or goats, but also from buffaloes, sheep, horses, or camels – for human consumption. A dairy is typically located on a dedicated dairy farm or in a section of a multi-purpose farm that is concerned with the harvesting of milk.

The Federal Agriculture Improvement and Reform Act of 1996, known informally as the Freedom to Farm Act, the FAIR Act, or the 1996 U.S. Farm Bill, was the omnibus 1996 farm bill that, among other provisions, revises and simplifies direct payment programs for crops and eliminates milk price supports through direct government purchases.

In the United States, the farm bill is the primary agricultural and food policy tool of the federal government. The comprehensive omnibus bill is renewed every 5 years or so and deals with both agriculture and all other affairs under the purview of the United States Department of Agriculture.

A basing point is a geographical site used to establish minimum fluid milk prices for federal milk marketing orders. Generally, minimum fluid farm milk prices increase according to the distance from the basing point. When federal milk marketing orders began in the 1930s, Eau Claire, Wisconsin was viewed as the principal surplus milk production region in the nation and hence served as the basing point for most milk priced under federal milk marketing orders. Generally, the further a region is from the Upper Midwest, the higher that region’s minimum price for fluid farm milk. Some have argued that there currently are other surplus production regions in the country which should serve as basing points. An attempt by USDA to establish a pricing structure using multiple basing points was thwarted by legislation in 1999.

Classified pricing is the pricing system of federal milk marketing orders, under which milk processors pay into a pool for fluid grade milk. The price that processors have to pay into the pool is based on how the milk ultimately is used. Milk used for fluid (Class I) consumption generally receives the highest price and lower minimum prices are paid for the three classes of milk used for manufactured dairy products: Class II, Class III (cheese), and Class IV.

The Food, Agriculture, Conservation, and Trade (FACT) Act of 1990 — P.L. 101-624 was a 5-year omnibus farm bill that passed Congress and was signed into law.

The Dairy and Tobacco Adjustment Act of 1983 is a United States federal law.

In the United States, the Dairy Price Support Program is the federal government program that maintains a minimum farm price for milk used in the manufacture of dairy products. It is one of many agricultural support programs. Under the dairy program, the United States Department of Agriculture (USDA) indirectly assures a minimum price for milk by purchasing any cheddar cheese, nonfat dry milk, and butter offered to it by dairy processors at stated prices. These purchase prices are set high enough to enable dairy processors to pay farmers at least the support price for the milk they use in manufacturing these products.

The Dairy Promotion Program or National Dairy Checkoff is a US commodity checkoff program for dairy product promotion, research, and nutrition education as part of a comprehensive strategy to increase human consumption of milk and dairy products and to reduce dairy surpluses.

The Dairy Termination Program or the "Whole Herd Buyout" is a program created by Cooperatives Working Together (CWT). Participating farmers must submit their entire herds to slaughter. The farmer is then compensated for the amount of milk that animal would have produced over the course of one year. CWT acquires funding from cooperatives throughout the country who aim to raise the price of milk. CWT receives no federal funding.

In United States agricultural policy, utilization rates refer to the percentage of milk in federal milk marketing orders that is used in each of the classes: Class IV, Class III (cheese), Class II, Class I. Utilization rates serve as weights for determining the weighted average price, or blend price, received by dairy farmers within a region each month.

The Food Security Act of 1985, a 5-year omnibus farm bill, allowed lower commodity price and income supports and established a dairy herd buyout program. This 1985 farm bill made changes in a variety of other USDA programs. Several enduring conservation programs were created, including sodbuster, swampbuster, and the Conservation Reserve Program.

The Southern Dairy Compact was an agreement between thirteen states in the southern United States. It was proposed to ensure the continued marketability of dairy producers in the member states and to supply a stable, local supply of milk products to the region. The proposed agreement was modeled on the Northeast Interstate Dairy Compact, that would allow member states to jointly establish a minimum farm price for fluid milk that is above the federally mandated minimum price level in the region.

The National Fluid Milk Processor Promotion Program was first authorized by the Fluid Milk Promotion Act of 1990. Fluid milk processors through a commodity checkoff program develop and finance generic advertising programs designed to maintain and expand markets and uses for fluid milk products produced in the United States. The mandatory national fluid milk program is financed by a 20¢ per hundredweight assessment on all fluid milk processed and marketed commercially in consumer-type packages. Fluid Milk Board annual revenue is approximately $110 million.

The Minnesota-Wisconsin price, prior to May 1995, was a component of the basic formula price for farm milk formerly used in federal milk marketing orders. It represented a survey of the average price Minnesota and Wisconsin plants were paying farmers for Grade B milk to be used in processed dairy products. In 1995, the M-W price was replaced with the basic formula price as the price mover under federal milk marketing orders.

Milk Income Loss Contract (MILC) Payments is the name given by USDA to the dairy farmer counter-cyclical payments program, authorized by the 2002 farm bill. Under the program, dairy farmers nationwide are eligible for a federal payment whenever the minimum monthly market price for farm milk used for fluid consumption in Boston falls below $16.94/cwt. A producer potentially can receive a payment equal to 45 percent of the difference between the $16.94 per cwt. target price and the market price, in any month that the Boston market price falls below $16.94. A producer can receive a payment on all milk production during that month, but no payments will be made on any annual production in excess of 2.4 million pounds per dairy operation. On average this limit is reached by a milking herd of 130 cows. MILC payments apply to production beginning December 1, 2002 through September 30, 2012.

Marketing orders and agreements in United States agricultural policy allow producers to promote orderly marketing through collectively influencing the supply, demand, or price of a particular commodity. Research and promotion can be financed with pooled funds.

In Canadian agricultural policy, the Market Sharing Quota (MSQ) is the federally determined target for the amount of industrial milk to produce nationwide each year as part of its policy of supply management. It is determined by estimating the domestic demand for dairy products on a butterfat basis, adding about 3% to cover exports and subtracting the volume of approved imports. Provincial shares of the national quota are adjusted in line with changes in the total and each province allocates its share to its producers according to its own quota policies. The Canadian Dairy Commission sets a target price for industrial milk based on production costs, including a return to labour, capital and management. Dairy farmers receive a payment from their provincial marketing board on in-quota deliveries of industrial milk. Farmers who produce in excess of their quota do not receive payments and in some provinces, may face a financial penalty. Each province maintains and administers its own quota scheme for fluid milk.

The Fluid Milk Promotion Act of 1990 the designation given to Subtitle H of Title XIX of the Food, Agriculture, Conservation, and Trade Act of 1990. Subtitle H authorized the establishment of a national fluid milk processor promotion program, or commodity checkoff program for fluid milk promotion. The program is funded through a 20¢/cwt. assessment on all milk processed for fluid consumption.

Supply management (SM) is a national agricultural policy framework used in Canada that coordinates supply and demand of dairy, poultry and eggs through production and import control and pricing mechanisms designed to prevent shortages and surpluses, to ensure farmers a fair rate of return and Canadian consumer access to a high-quality, stable, and secure supply of these sensitive products.

References

This article incorporates public domain material from the Congressional Research Service document "Report for Congress: Agriculture: A Glossary of Terms, Programs, and Laws, 2005 Edition" by Jasper Womach.

The Congressional Research Service (CRS), known as Congress's think tank, is a public policy research arm of the United States Congress. As a legislative branch agency within the Library of Congress, CRS works primarily and directly for Members of Congress, their Committees and staff on a confidential, nonpartisan basis.

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.