Jul 24, 2001
   Washington, DC — July 24, 2001 — The Food Marketing Institute (FMI) today underscored its opposition to dairy compacts as “regional cartels that artificially inflate milk prices,” delivering boxes of the candy Milk Duds to every member of the U.S. Senate.

“Dairy compacts are a dud for consumers,” said FMI President and CEO Tim Hammonds. Since it was formed in 1997, the Northeast compact has already cost consumers $140 million in additional milk costs, according to government data and economic research. “The cost will soar well past the $1 billion mark,” he said, if Congress approves proposals to form compacts in more than 20 Mid-Atlantic, Southeastern and Southern Plains states.

He urged the Senate to reject proposals to renew the Northeast compact before it expires September 30, 2001, and not to authorize the creation of new ones. Hammonds commented as the Senate Judiciary Committee prepared for hearings scheduled tomorrow on the issue.

Dairy compacts raise the price of milk above the federal support level set by the marketing order in a specific region. Each month, the Northeast Dairy Compact Commission sets the so-called over-order premium; a typical figure is 15 cents per gallon of milk. Processors in the region are required to pay the 15-cent premium when purchasing milk ingredients from local dairy farmers. And they cannot pay less for lower-cost products from farmers outside the region.

Dairy Compact Cartels Prevent Free Flow of Milk From Low-Cost Producers

“Dairy compacts raise the price of milk in a region by preventing the free flow of milk from low-cost producers in other states,” wrote FMI Senior Vice President John Motley in a letter to each senator accompanying the Milk Duds.

“Since the inception of the Northeast Dairy Compact,” Motley added. “New England fluid milk prices have increased, milk consumption has been hurt, and small New England dairy farms continue to go out of business at an even faster rate.

“The Northeast Interstate Dairy Compact is a cartel that hurts milk consumers. It is an unfair tax that particularly hurts lower-income milk drinkers who can least afford to pay higher milk prices.”

A Dangerous Precedent That Could Destroy Interstate Commerce

“If Congress passes compact legislation,” Motley concluded, “a precedent will be set that could destroy interstate commerce. This would encourage other commodity groups to seek an exemption in order to create other cartels.”