SEPTEMBER 24 (legislative day, SEPTEMBER 11), 1975.-Ordered to be printed Mr. HUMPHREY, from the Committee on Agriculture and Forestry, submitted the following REPORT [To accompany S.J. Res. 121] The Committee on Agriculture and Forestry, to which was referred the joint resolution (S.J. Res. 121) to provide for quarterly adjustments in the support price for milk, having considered the same, reports favorably thereon with an amendment and recommends that the joint resolution as amended do pass. SHORT EXPLANATION This resolution would require effective for the period beginning on the date of enactment and ending on March 31, 1979-that the Secretary of Agriculture adjust upward the support price of manufacturing milk at the beginning of each quarter to reflect any estimated increase during the immediately preceding quarter in the index of prices paid by farmers for production items, interest, taxes, and wage rates. COMMITTEE AMENDMENTS When introduced, the resolution contained the parenthetical clause "beginning with the third quarter of the calendar year 1975". As a technical matter, this clause is unnecessary because the effective date of the legislation is the date of enactment and as a practical matter the third quarter will end within a few days. Therefore, the clause was stricken from the resolution. PURPOSE Under existing law, price supports for manufacturing milk are usually set at the beginning of the marketing year (April 1) at such a level not in excess of 90 percent nor less than 75 percent of the parity price there for as the Secretary determines necessary in order to assure an adequate supply of pure and wholesome milk to meet current needs, reflect changes in the cost of production, and assure a level of farm income adequate to maintain productive capacity sufficient to meet anticipated future needs. Under existing law, it has been the general practice of the Department of Agriculture that the price support level, in dollars and cents, announced on April 1 is not again changed until the beginning of a new marketing year even though the dollar level of support subsequently falls below the original percent of parity and even in some cases below the absolute minimum of 75 percent of parity prescribed by law. This occurs because increases in prices paid by farmers causes the parity price for milk to increase in months subsequent to April 1. Therefore, the dollar and cents level of supports announced at the beginning of the marketing year decreases as a percent of parity over the ensuing 12 months. Under the resolution, the level of price support established April 1 each year, however, would be adjusted July 1, October 1 and January 1 following, to reflect estimated increases in the index of prices paid by farmers for production items, including interest, taxes, and wage rates. For example, for the current marketing year beginning April 1, 1975, the price support level for milk was established at $7.24 per hundredweight and the index of prices paid by farmers for production items was 666 (1910-14-100). Had S.J. Res. 121 been in effect the price would have been adjusted July 1 from $7.24 to $7.38. This adjustment would reflect the change in the index of prices paid from 666 on April 1, to 681 on July 1, or 2 percent. Assuming that the index of prices paid by farmers will continue to advance at the same rate (8 percent per annum) for the balance of the marketing year, the price support level for milk would be adjusted to $7.52 October 1, and to $7.66 on January 1, 1976. It should be pointed out that the $7.24 price support level on April 1 was 77.8 percent of parity. By July 1, the support price at 77.8 percent of parity would have been $7.37, essentially the same as the $7.38 price level which would have resulted from the proposed quarterly adjustment. The intent of the Agriculture and Consumer Protection Act of 1973 was to assure farmers of a price support level of not less than 80 percent of parity through March 31, 1975. Had the price been established at 80 percent of parity April 1, 1975, it would have been $7.45 rather than $7.24; and the price as adjusted July 1 would have been $7.60 rather than $7.38. S.J. Res. 121 would be effective through March 31, 1979. Its effect on milk prices to farmers and CCC purchase prices will depend solely upon changes within each marketing year of the index of prices paid by farmers for production items. This index generally will parallel the rate of inflation for the economy as a whole. It may be more or it may be less depending upon whether feed prices and other farm production items escalate more rapidly or less rapidly than commodity prices in general. S.R. 388 |