Order Code IB97011
Issue Brief for Congress
Received through the CRS Web
Dairy Policy Issues
Updated June 28, 2002
Ralph M. Chite
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Dairy and the 2002 Farm Bill (P.L. 107-171)
Dairy Price Support Program
Background
2002 Farm Bill Provisions
Counter-Cyclical Dairy Farmer Assistance
Background
2002 Farm Bill Provisions
Miscellaneous Dairy Provisions
Milk Protein Concentrate Trade Issues
LEGISLATION

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Dairy Policy Issues
SUMMARY
Several major dairy policy issues are
modeled after the compact and the market loss
addressed in the context of the Farm Security
payments. Under the new program, all dairy
and Rural Investment Act of 2002 (P.L. 107-
farmers will be eligible to receive a direct
171, the 2002 farm bill), which was signed
government payment when the farm price of
into law on May 13, 2002. Included in the
milk used for fluid consumption in Boston
enacted 2002 farm bill is a reauthorization of
falls below $16.94. When monthly prices fall
the dairy price support program for an addi-
below the target, producers will receive a
tional 5 ½ years and new authorization for
government payment equal to 45% of the
direct payments to dairy farmers when the
shortfall on that month’s milk production, on
market price of farm milk falls below a target
up to 2.4 million lbs. of annual milk produc-
price level.
tion per dairy farm. The Congressional Budget
Office estimates total federal costs of $963
Previous authority for the dairy price
million for the new program, which expires
support program, which supports farm milk
September 30, 2005. Other independent esti-
prices through USDA purchases of surplus
mates show that costs could be considerably
dairy products, was scheduled to expire on
higher ($3 to $4 billion.) The payment pro-
May 31, 2002. The 2002 farm bill provides an
gram has been controversial because of its
extension of the program through December
cost and concerns that an included payment
2007 at the current level of support of $9.90
cap benefits small farmers at the expense of
per hundredweight (cwt.).
large farmers.
In each of the previous three fiscal years
Many dairy farmer groups support a
(FY1999-2001), Congress has authorized
prohibition on the use of dry milk protein
USDA to make ad-hoc “market loss” pay-
concentrates (MPC) in the production of
ments to dairy farmers to help mitigate the
cheese. Farm groups are concerned that im-
effects of volatile farm milk prices. Sepa-
ports of MPC are displacing domestic milk
rately, the six New England states had tempo-
used for cheesemaking and thus depressing
rary authority for a regional dairy compact
farm milk prices. In response, companion
from 1997 until its expiration on September
bills (S. 847 and H.R. 1786) would impose
30, 2001. The Northeast compact allowed the
tariff rate quotas on certain MPCs. Other bills
region to establish minimum fluid farm milk
(H.R. 1016 and S. 117) would prohibit the use
prices above the federally mandated minimum
of dry MPC in domestic cheese production.
price level. The enacted 2002 farm bill
Dairy processor groups generally are opposed
authorizes a new counter-cyclical direct pay-
to these bills.
ment program for all dairy farmers, which is
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On May 13, 2002, the President signed into law the Farm Security and Rural
Investment Act of 2002 (P.L. 107-171, the 2002 farm bill), which establishes federal farm
policy for the next several years. Among the farm commodity support provisions in the
enacted farm bill is an extension of the dairy price support program at the current support
price of $9.90 per hundredweight (cwt.) of farm milk, through 2007. A separate provision
in P.L. 107-171 authorizes a new, counter-cyclical payment program to supplement dairy
farmer income through September 2005. Federal payments will be given to dairy farmers
whenever market prices fall below a certain threshold. Recent independent estimates from
the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri
and USDA show that the total cost of the program over its nearly 4-year life could range
between $3 and $4 billion, considerably higher than earlier CBO estimates of approximately
$1 billion.
BACKGROUND AND ANALYSIS
Dairy and the 2002 Farm Bill (P.L. 107-171)
The Farm Security and Rural Investment Act of 2002 (P.L. 107-171, the 2002 farm bill),
which was signed into law on May 13, 2002, establishes federal farm commodity price and
income support policy for the next 6 years. Among the major dairy provisions in the enacted
2002 farm bill is an extension of the dairy price support program at the current level of
support, and authorization for counter-cyclical payments to dairy farmers when market prices
for farm milk fall below a target level.
See Table 3 below for a side-by-side comparison of the 2002 farm bill dairy provisions
with previous law or policy. For an overview of all major provisions in the 2002 farm bill,
see CRS Report RL31195, The 2002 Farm Bill: Overview and Status.
Dairy Price Support Program
Background. The Agricultural Act of 1949 established the dairy price support
program by permanently requiring the U.S. Department of Agriculture (USDA) to support
the farm price of milk. Since 1949, Congress has regularly amended the program, usually
in the context of multi-year omnibus farm acts and budget reconciliation acts. (See Table
1, below, for a recent history of spending on the dairy price support program.)
Historically, the supported market price for milk is intended to protect farmers from
price declines that might force them out of business and to protect consumers from seasonal
imbalances of supply and demand. USDA’s Commodity Credit Corporation (CCC) supports
milk prices by its standing offer to purchase surplus nonfat dry milk, cheese, and butter from
dairy processors. Government purchases of these storable dairy products indirectly support
the market price of milk for all dairy farmers. Prices paid to the processors are set
administratively by USDA at a level that should permit them to pay dairy farmers at least the
federal support price for their milk.
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Table 1. Commodity Credit Corporation Milk Price and
Income Support Operations, 1979/80-2001/02
CCC
Net Removals
CCC Support
Purchases as
Marketing
Milk Equivalent
Net Outlays
Price
Percentage of
yeara
(billion lbs.)b
(million $)
($ per cwt.)
Production
1980-81
12.7
1,975
13.10
9.6
1981-82
13.8
2,239
13.49-13.10
10.2
1982-83
16.6
2,600
13.10
12.0
1983-84
10.4
1,597
13.10-12.60
7.6
1984-85
11.5
2,181
12.60-11.60
8.2
1985-86
12.3
2,420
11.60
8.5
1986-87
5.4
1,238
11.60-11.35
3.8
1987-88
9.7
1,346
11.10-10.60
6.7
1988-89
9.6
712
10.60-11.10
6.7
1989-90
8.4
505
10.60-10.10
5.7
1990-91
10.4
839
10.10
7.0
1991-92
10.1
232
10.10
6.7
1992-93
7.6
253
10.10
5.0
1993-94
4.2
158
10.10
2.8
1994-95
2.9
4
10.10
1.8
1995-96
0.1
-98
10.10-10.35
0.1
1996-97
0.7
67
10.20
0.4
1997-98
0.7
291
10.20-10.05
0.4
1998-99
0.3
480(c)
10.05-9.90
0.2
1999-2000
0.8
684(d)
9.90
0.5
2000-01
0.3
1,140(e)
9.90
0.3
2001-02 (f)
0.2
57
9.90
0.1
Source: U.S. Department of Agriculture, Farm Service Agency, selected publications.
a. The marketing year is October 1-September 30.
b. The milk equivalent is the pounds of fluid milk used to manufacture cheese and butter, on a milkfat basis.
c. Includes $200 million in emergency “market loss” payments authorized by P.L. 105-277.
d. Includes $125 million in net outlays for market loss payments authorized by P.L. 106-78.
e. Includes $675 million in market loss payments authorized by P.L. 106-387.
f. USDA estimate.
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The 1996 farm bill (P.L. 104-127) retained the level of support at the then-current price
of $10.35 per cwt. for the remainder of 1996, but required it to fall to $10.20 on January 1,
1997, to $10.05 on January 1, 1998, and to $9.90 on January 1, 1999. In order to achieve
the support price of $9.90 per cwt. of milk, USDA has a standing offer to processors to
purchase surplus manufactured dairy products at the following prices: $0.8548 per lb. for
butter, $0.90 for nonfat dry milk, $1.1314 per lb. for block cheddar, and $1.1014 per lb. for
barrel cheese. Whenever market prices fall to the support level, processors generally make
the business decision of selling surplus product to the government rather than to the
marketplace. Consequently, the Government purchase prices usually serve as a floor for the
market price, which in turn indirectly support the farm price of milk at $9.90 per cwt.
The 1996 farm bill originally required the dairy price support program to terminate at
the end of 1999. However, one-year extensions were authorized through calendar year 2000
in the FY2000 agriculture appropriations act (P.L. 106-78) and through 2001 in the FY2001
agriculture appropriations act (P.L. 106-387). The FY2002 agriculture appropriations act
(P.L. 107-76, H.R. 2330) contained a further extension of the dairy price support program
until May 31, 2002.
2002 Farm Bill Provisions. Section 1501 of the omnibus 2002 farm bill authorizes
a 5 ½-year extension of the program through December 31, 2007. It also allows the
Secretary of Agriculture to adjust the purchase prices of surplus dairy products twice
annually in order to minimize federal expenditures on the program.
Counter-Cyclical Dairy Farmer Assistance
Background. Over the previous three fiscal years (FY1999-FY2001), Congress
provided just over $32.5 billion in emergency spending for USDA programs, primarily to
help farmers recover from low farm commodity prices and natural disasters. The majority
of these funds were for supplemental direct farm payments made to producers of certain
commodities, primarily grains and cotton, but also including soybeans, peanuts, tobacco and
milk. Of this amount, dairy farmers received supplemental “market loss” payments of $200
million in FY1999 under the Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999 (P.L. 105-277), $125 million under the FY2000 agriculture
appropriations act (P.L. 106-78), and $675 million under the emergency provisions in the
FY2001 agriculture appropriations act (P.L. 106-387).
Table 2. Dairy Market Loss Assistance Payments, FY1999-2001
Payment Rate
Eligible
Maximum
Amount
($ per cwt. of
production
payment per
Available
milk
(lbs. of milk
farmer
production)
per farmer)
FY1999
$200 million
$0.22
2.6 million
$5,720
FY2000
$125 million
$0.1324
2.6 million
$3,445
FY2001
$675 million
$0.65 (estimated)
3.9 million
Approximately
$25,000
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Some dairy farmer groups were seeking a permanent direct payment program for dairy
farmers to be included in the 2002 farm bill as a means of supplementing dairy farm income
when farm milk prices are low. Prior to the emergency payments made each year on an ad-
hoc basis in FY1999 through FY2001, dairy farmers generally were not recipients of direct
government payments. However, some groups contend that farm milk prices have been
volatile in recent years and that dairy farmers need more income stability.
Separately, the Northeast Dairy Compact, which provided price premiums to New
England dairy farmers when market prices fell below a certain level, expired on September
30, 2001. These premiums were funded by assessments on fluid milk processors whenever
fluid farm milk prices in the region fell below $16.94 per hundredweight (cwt.). Supporters
of the Northeast compact had sought for an extension of the compact; the Southeastern states
were seeking new authority to create a separate compact. However, processors and Upper
Midwest producers are strongly opposed to regional compacts.
2002 Farm Bill Provisions. Section 1502 of the enacted 2002 farm bill contains
authorization for a new counter-cyclical “national dairy market loss payment program.” The
program will not replace the dairy price support program and federal milk marketing orders,
the current federal milk pricing policy tools. Instead, it will serve as an alternative to
regional dairy compacts and ad-hoc emergency payments to farmers, by authorizing
additional federal payments when farm milk prices fall below an established target price.
Under the provision, dairy farmers nationwide will be eligible for a federal payment
whenever the minimum monthly market price for farm milk used for fluid consumption in
Boston falls below $16.94 per hundredweight (cwt.). In order to receive a payment, a dairy
farmer must enter into a contract with the Secretary of Agriculture. While under contract,
a producer can receive a payment equal to 45% of the difference between the $16.94 per cwt.
target 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. All contracts
expire on September 30, 2005, and payments will be made retroactively to December 1,
2001.
This new dairy program is modeled after the Northeast dairy compact which was in
effect in the six New England states from 1997 until its expiration on September 30, 2001.
However, under the expired dairy compact, dairy processors were required to pay the
difference between the $16.94 fluid milk target price and any market price shortfall for fluid
use milk in the compact region. The new program would shift the responsibility of the
payment from the processor (and ultimately the consumer) to the federal government.
The dairy payment program is generally supported by milk producer groups in the
Northeast and the Upper Midwest. Producer groups in the Northeast region view it as an
alternative to the Northeast dairy compact. Upper Midwest producers prefer the new
program to state compacts since the new program shares the price premiums nationally.
Large dairy farmers are concerned that the new program will cause excess milk production
that will in turn decrease farm milk market prices. They contend that this would negatively
affect their income, since their annual production is well in excess of the 2.4 million lb.
payment limit, and any production in excess of 2.4 million pounds would receive the market
price and no federal payments. (Annual production of 2.4 million pounds is roughly equal
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to the annual production of a herd of approximately 120 to 130 dairy cows.) The
International Dairy Foods Association, a trade association representing dairy processors, was
opposed to the program in its earlier version when processors would have been required to
continue paying the price premiums in the Northeast. However, its opposition was lifted
when the funding responsibility was shifted to the federal government as in the final version
of the program.
Estimated Cost of the New Dairy Program. There are a wide range of estimates
on the projected cost of the new dairy program over its nearly 4-year life. Based on market
conditions in March 2002, the Congressional Budget Office (CBO) estimated total direct
federal payments of $963 million over the life of the program. However, more recent
independent estimates from the Food and Agricultural Policy Research Institute (FAPRI) at
the University of Missouri and USDA show that the total cost could range between $3 and
$4 billion. The main reason for this disparity is that FAPRI and USDA project significantly
lower market prices for milk than CBO over the 46-month life of the program.
Consequently, CBO estimates that the average monthly payment rate over the 46-month life
of the program will be about $0.45 per cwt.; FAPRI and USDA independently estimate an
average monthly payment rate of about $0.90 per cwt.
Retroactive program payments will be made in each month from December 2001
through July 2002, since the Boston market price was below $16.94 per cwt. in each month.
The average payment rate for these 8 months, based on market prices during that period, will
be approximately $0.99 per cwt. At that rate, FY2002 program costs alone could approach
$1 billion.
Miscellaneous Dairy Provisions
The conference agreement on the omnibus 2002 farm bill contains several other
provisions that affect current dairy policy and programs, including:
! a requirement that the 15-cent per hundredweight assessment to fund the
Dairy Promotion and Research Program also be levied on imported dairy
products. (Section 1505) The Dairy Producer Stabilization Act of 1983 first
authorized a national dairy producer program for generic dairy product
promotion, research, and nutrition education. The program is funded
through a mandatory 15-cent per hundredweight assessment on all milk
produced and marketed in the contiguous 48 states. Dairy farmers administer
the program through the National Dairy Promotion and Research Board.
The new 15-cent assessment on imported products is to be paid to U.S.
Customs by the importer on the equivalent of milk that went into the
manufacturing of the imported product. Dairy importers will be allowed a
proportional number of seats on the Board as the percentage that imports
represent of the total U.S. dairy market. None of the importer-collected
funds can be used for foreign market promotion. This assessment on
imports was supported by various dairy producer groups but opposed by
dairy product importers.
! reauthorization of the dairy export incentive program (DEIP) through
2007 (Section 1503a). The 1985 farm bill first authorized DEIP, which
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helps U.S. exporters counter subsidized sales by foreign competitors through
cash or commodity bonuses. DEIP has been reauthorized periodically. The
1996 farm bill had reauthorized the program through 2002.
! reauthorization of the dairy indemnity program through 2007 (Section
1503(b)). First authorized in 1964, the dairy indemnity program indemnifies
dairy farmers and processors who, through no fault of their own, experience
income losses due to contamination of milk or dairy products caused by
pesticides and certain other toxic substances. Legislative authority expired
on September 30, 1985. However, annual appropriations have been made
subsequent to program expiration.
Table 3. A Comparison of the Dairy Provisions of the 2002 Farm Bill
with Previous Law or Policy
Previous Law/Policy
Enacted 2002 Farm Bill Dairy Provisions
1. Dairy Price Support Program (DPSP)
The 1996 farm bill (P.L. 104-127), as
Extends the DPSP through December 31,2007
amended, reauthorized the DPSP at the then-
at the current level of support ($9.90 per cwt.).
current level of support ($9.90 per
The Secretary is permitted to adjust purchase
hundredweight (cwt.) of milk). The DPSP
prices of butter and nonfat dry milk twice
indirectly supports the farm price of milk
annually to minimize government expenditures
through USDA purchases of surplus cheese,
on the program. [Section 1501}
butter and nonfat dry milk (powder). The
law allows the Secretary of Agriculture to
adjust government purchase prices of butter
and powder twice annually in order to
minimize government expenditures.
[Section 141]
The FY2002 agriculture appropriations act
(P.L. 107-76) extended the DPSP through
May 31, 2002 [Section 772(a)]
2. The Northeast Dairy Compact and
Counter-Cyclical Payments for Dairy
Farmers
The 1996 farm bill (P.L. 104-127) gave
Authorizes a new counter-cyclical payment
contingent authority for the six New
program for dairy farmers through September
England states to create an interstate dairy
30, 2005. Whenever the minimum monthly
compact. [Section 147] The compact
fluid farm milk price in Boston falls below
required fluid milk processors in New
$16.94 per cwt., all eligible farmers
England to pay a minimum price for farm
nationwide will receive a direct government
milk used for fluid consumption that is
payment equal to 45% of the difference
higher than the minimum price established
between $16.94 and the lower Boston price.
under federal regulation. Compact was
Payments to individual farmers can be
established in 1997 at a minimum price of
received on up to 2.4 million lbs. of annual
$16.94 per hundredweight (cwt.).
production. Retroactive payments will be
Legislative authority expired on September
made for each month back to December 2001.
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Previous Law/Policy
Enacted 2002 Farm Bill Dairy Provisions
30, 2001.
No budget limitations on how much can be
spent each year or in total. CBO estimates the
Separately, emergency authority included in
total cost of the program at $963 million over
the agriculture appropriations acts of
the life of the program. [Section 1502]
FY1999 (P.L. 105-277), FY2000 (P.L. 106-
78) and FY2001 (P.L. 106-387) provided
ad-hoc direct government payments to all
dairy farmers in response to volatile farm
milk prices.
3. Recourse Loan Program
P.L. 104-127 permanently authorized a new
No provision.
recourse loan program to help dairy
processors balance their inventories, to be
implemented once the dairy price support
program (DPSP) expires. [Section 142]
P.L. 104-127 originally required the
elimination of the DPSP on January 1, 2000.
However, subsequent legislation extended
price support authority. Recourse loan
program was never implemented, and its
authority was repealed by P.L. 107-76.
4. Dairy Export Incentive Program
The 1985 farm bill (P.L. 99-198) first
Extends program authority through 2007.
authorized the dairy export incentive
[Section 1503(a)]
program, which helps U.S. exporters counter
subsidized sales by foreign competitors
through cash or commodity bonuses.
[Section 153]
Program was reauthorized periodically in
subsequent farm bills. Most recently, the
1996 farm bill (P.L. 104-127) reauthorized
the program through 2002. [Section 148]
5. Dairy Indemnity Program
Authorized in 1964, the dairy indemnity
Reauthorizes the program through September
program indemnifies dairy farmers and
30, 2007. [Section 1503(b)]
processors who, through no fault of their
own, suffer income losses due to
contamination of milk or dairy products
caused by pesticides and certain other toxic
substances. Legislative authority expired
September 30, 1995. However, annual
appropriations have been made subsequent
to program expiration.
6. Fluid Milk Processor Promotion
Program
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Previous Law/Policy
Enacted 2002 Farm Bill Dairy Provisions
The Fluid Milk Promotion Act of 1990
1) Gives permanent authority to the fluid milk
(contained within the 1990 farm bill (P.L.
promotion program; 2) strikes the statutory
101-624)), as amended, authorized a
definition of a fluid milk product and use the
research and promotion program for fluid
definition promulgated in USDA regulations;
milk products. [Sections 1999A-1999R]
and 3) changes the definition of a fluid milk
The program is funded through an
processor for the purpose of the required
assessment on fluid milk processors who
assessment, to exclude any fluid processor that
handle more than 500,000 lbs. of fluid milk
handles less than 3 million pounds of fluid
products each month. The 1996 farm bill
milk products each month. 4) Fluid milk
(P.L. 101-624) extended program authority
delivered directly to consumer residences does
through December 31, 2002. [Section 146]
not count toward the 3 million pound
minimum requirement for the processor
assessment. [Section 1506]
7. Dairy Promotion and Research
Program
The Dairy Producer Stabilization Act of
1) Extends the 15-cent assessment to imported
1983 authorized a national dairy producer
dairy products. The 15-cent assessment is to
program for generic dairy product
be paid to U.S. Customs by the importer on the
promotion, research, and nutrition
equivalent of milk that went into the
education. The program is funded through a
manufacturing of the imported product. 2)
mandatory 15-cent per hundredweight
None of the importer-collected funds can be
assessment on all milk produced and
used for foreign market promotion. 3)
marketed in the contiguous 48 states. Dairy
Importers must be represented on the Board in
farmers administer the program through the
the same proportion that imported dairy
National Dairy Promotion and Research
products comprise the total U.S. dairy market.
Board.
4) The Secretary of Agriculture is required to
consult with the U.S. Trade Representative to
determine whether this provision is compatible
with U.S. trade obligations. 5) dairy products
must be promoted without regard to the
country of origin of the product. [Section
1505]
8. Dairy Product Mandatory Reporting
The Dairy Market Enhancement Act of 2000
(P.L. 106-532) established a mandatory
Amends the 2000 act to include “substantially
reporting system for dairy product
identical products designated by the Secretary
inventories and prices. It requires USDA’s
(of Agriculture)” as part of the mandatory
National Agricultural Statistics Service to
reporting system. Changes the definition of a
regularly collect data on the prices and
covered dairy product to include
inventories of cheese, butter and nonfat dry
“substantially identical products designated by
milk sold by dairy manufacturers.
the Secretary.”
[Section 1504]
9. Dairy Studies
No provision in previous law.
Requires the Secretary of Agriculture to
submit to Congress two reports. Both are due
by May 13, 2003. 1) a comprehensive
economic evaluation of national dairy policies
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Previous Law/Policy
Enacted 2002 Farm Bill Dairy Provisions
(i.e., the price support program, federal milk
marketing order, over-order premiums and
state pricing programs, dairy compacts and
export programs) and their effect on the farm
and rural economy, domestic food and
nutrition programs, and consumer costs. 2) a
series of studies on a) the market effects of
terminating all federal dairy programs relating
to price support and supply management; and
b) the effects of changing the standard of
identity for fluid milk so that the required
minimum protein content of fluid milk is
commensurate with the average nonfat solids
contents of farm milk directly from the cow.
[Section 137]
[Note: California has a standard of identity for
fluid milk that requires a nonfat solids content
higher than the national requirement and
higher than the average content of raw milk
from the cow.] [Section 1508]
Milk Protein Concentrate Trade Issues

Milk protein concentrate is a product in which certain milk proteins necessary for
cheese production are selectively included and all or most of the water is removed from the
milk, thus making it efficient to ship long distances. Dairy farmer groups, which support a
prohibition on the use of dry MPC, are concerned that imports of MPC are displacing
domestic milk used for cheesemaking and depressing farm milk prices. Certain
concentrations are not covered by tariffs or quotas under the existing World Trade
Organization agreement. The importation of these products was not an issue when the
agreement was debated in the 1990s.
On March 5, 2001, the General Accounting Office released a study on the production,
imports, and regulation of milk protein concentrates. The study found that MPC imports
grew rapidly from 1990 to 1999 – from 805 to 44,878 metric tons, including a near doubling
in 1999 over 1998 alone. According to the study, six countries (New Zealand, Ireland,
Germany, Australia, the Netherlands and Canada) accounted for 95% of the 1999 imports.
For the full text of the GAO study, see [http://www.gao.gov/new.items/d01326.pdf].
Currently, neither wet nor dry MPC is allowed as an ingredient in any U.S. cheese
which has a standard of identity defined by the Food and Drug Administration, which
includes most cheese. Cheese processors had petitioned FDA for a change in standards to
allow MPC in cheese production. Conferees deleted from the FY2001 agriculture
appropriations bill a Senate provision that would have prohibited FDA from issuing any
regulations that would allow MPC as an ingredient in the production of cheese. Companion
bills (S. 117 and H.R. 1016) have been introduced in the 107th Congress that would prohibit
FDA from allowing milk protein concentrates as an ingredient in any cheese with a standard
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of identity. Other bills (S. 847 and H.R. 1786) would impose a tariff rate quota on MPC and
casein (the major portion of milk protein). Supporters of these bills, including most milk
producer groups, contend that foreign MPC and casein is being dumped in the United States.
Opponents of the legislation include dairy processor groups, the largest of which is the
International Dairy Foods Association, who contend that MPC imports are not displacing
U.S. production of nonfat dry milk. They maintain that the domestic support price for nonfat
dry milk should be lowered instead to stimulate the market for domestic powder.
The National Milk Producers Federation (NMPF), the largest trade association
representing milk producer cooperatives, has urged the federal government to examine
several trade policy options for addressing the milk protein concentrate import issue. These
include provisions in the Trade Act of 1974 that allow the President (following an
International Trade Commission investigation) to provide relief to a U.S. industry adversely
affected by imports; a 1974 Trade Act provision that allows the U.S. Trade Representative
to retaliate against certain foreign trade policies; and the use of antidumping laws and
countervailing measures. On April 17, 2002, the NMPF filed a formal challenge of how the
U.S. Customs Service classifies various dairy product imports, including MPC. Under
Section 516 of U.S. tariff law, interested parties are permitted to challenge the tariff
classification of imported items. The NMPF claims that imported MPC is not a true
concentrated milk protein, but is instead a blend of other dairy products (such as nonfat dry
milk, whey powder and casein). These blends, they say, “take unfair advantage of U.S. trade
policies that allow the unrestricted entry of MPC, but not the individual components found
in the blended products.”
LEGISLATION
P.L. 107-171 (H.R. 2646)
Provides for the continuation of agricultural programs through fiscal year 2011.
Introduced and referred to the House Agriculture Committee on July 26, 2001. Reported by
the House Agriculture Committee on August 2 (H.Rept. 107-191, part I). Supplemental
committee report (part II) filed on August 31. Referred sequentially to the House
International Relations Committee, which reported the bill on September 10 (H.Rept. 107-
191, part III). Passed the House on October 5, 2001 by a vote of 291-120. Received in the
Senate on October 9, 2001. Conferees appointed February 28, 2002. Conference report
(H.Rept. 107-424) filed on May 1, 2002. Conference agreement adopted by the full House
by a vote of 280-141 on May 2, 2002. Conference report adopted by the Senate on May 8,
2002 by a vote of 64-35. Signed by the President on May 13, 2002, became P.L. 107-171.
(See S. 1731 below for action on Senate version of the 2002 farm bill.)
H.R. 1016 (Baldwin), S. 117 (Feingold)
Quality Cheese Act of 2001. Prohibits the Food and Drug Administration from making
regulatory changes that would allow milk protein concentrates or casein as an ingredient in
certain cheeses. H.R. 1016 introduced on March 14, 2001; referred to the House Energy and
Commerce Committee on March 14, 2001; referred to the Subcommittee on Health on March
22, 2001. S. 117 introduced and referred to the Senate Agriculture Committee on January
22, 2001.
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H.R. 1786 (Obey), S. 847 (Dayton)
Impose tariff rate quotas on certain casein and milk protein concentrates. H.R. 1786
introduced and referred to the House Ways and Means Committee on May 9, 2001. S. 847
introduced and referred to the Senate Finance Committee on May 9, 2001.
S. 1731 (Harkin)
The Senate Agriculture Committee reported version of the omnibus farm bill. Full
committee markup of the chairman’s mark of the farm bill was completed on November 15,
2001. A revised version of the mark was introduced as S. 1731 on November 27, 2001.
Motion to proceed to the consideration of the measure on November 30. Cloture motion on
the motion to proceed on November 30. Daschle substitute amendment (S.Amdt. 2471)
considered as a complete substitute to S. 1731 on December 10-14, 2001 and December 17-
19, 2001. Two cloture motions to S.Amdt. 2471 not invoked by Yea-Nay Votes of 54-43 on
December 18 and 19, 2001. Debate resumed February 6-8 and 11-13, 2002, with many
amendments adopted. Senate incorporated this measure as a complete substitute to the
House-passed bill (H.R. 2646) on February 13, and passed H.R. 2646, as amended on
February 13, 2002, by a vote of 58-40. Conferees appointed February 28, 2002. (See
P.L.107-171, H.R. 2646 above for further action on the measure.)
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