For Immediate Release, October 8, 1998

Contact: Tina Wisell, (802) 229-1941

Compact Commission Approves Change to Regulation to Address Diversions

and Transfers of Milk from the Region: Finalizes Process for

Distribution of CCC Reserve Fund Balance to Farmers

The Northeast Dairy Compact Commission on Wednesday took formal action to amend the Compact price regulation in order to place limits on the amount of milk that could be diverted or transferred from the region and still be eligible for Compact payments. The final rule allowing the regulation change will have to be approved by producers before it can take effect. The Commission also finalized a process yesterday by which certain farmers in the Compact region could receive refunds from the Commodities Credit Corporation Reserve Fund balance.

The Commission began a rulemaking proceeding in June in order to address the issue of supplies of milk being diverted or transferred out of the compact region. The Commission originally put forth a proposal that would have excluded all milk from the Compact pool that is either diverted or transferred in bulk out of the region. However, after receiving testimony at public hearings held in July and September, as well as testimony submitted during a public comment period, the Commission on Wednesday agreed to place certain seasonal caps on the amount of milk that could be diverted or transferred and still receive the Compact payments.

The final rule adopted by the Commission would change the regulation to limit the payment of the Compact over-order producer price to milk disposed of in the Compact area with a seasonally adjusted allowance for diverted or transferred milk. The rule would allow milk handlers to divert or transfer up to 8% of their total producer receipts during the fall months, 10% in transition months, and 13% in spring months. Any amount of milk diverted or transferred above those percentages would not qualify as eligible for the Compact payment.

Commission Executive Director Ken Becker said, "The Commission undertook this rulemaking out of concern that the Compact premium was attracting milk from outside the region that was not needed to supply the region. The rule change would limit Compact payments on the amount of milk that is diverted or transferred back out of the region as part of market balancing needs."

Becker continued, "Part of the mission of the Commission is to assure an adequate, local supply of pure and wholesome milk to consumers in the region. In order to ensure the availability of milk to consumers in this region in periods of low supply and high demand, New England milk processing plants do, on a regular basis, supply milk to markets outside of New England. This balancing is a necessary part of milk marketing that allows a steady supply of milk to consumers here at all times. Therefore, the Commission's proposal is designed to allow the amount of balancing to take place that is needed in order to provide consumers in this region with an adequate supply of milk. But, it prevents Compact payments from being made on milk that is shipped out of this region above what is necessary as part of the normal balancing of the region."

The change to the regulation must first be approved by a producer referendum before it can take effect. The Commission scheduled the producer referendum to be held October 26, 1998 through November 6, 1998. If approved, the regulation would take effect on January 1, 1999.

The Commission also finalized on Wednesday the process by which farmers who did not increase production during fiscal year 1998 could receive refunds from the balance of a fund the Commission had set aside for payments to the Commodities Credit Corporation (CCC).

The Commission is required to reimburse the federal government for the cost of CCC purchases of any such surplus production during the fiscal year that might occur should the regional rate of increased production exceed the national rate. The Commission began escrowing payments in a reserve fund for the CCC obligation in March and paid its obligation of $1,762,000 to the CCC in September, leaving a balance of approximately $400,000 in the reserve fund.

The Commission concluded that the balance of the account should be refunded to farmers who document that their production from October 1, 1997 through September 30, 1998 was equal or less than their production from October 1, 1996 through September 30, 1997.


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