November 6, 1997
| "It goes way beyond what any of us attorneys who worked on the case thought (the judge) would do."...|
--Bill Oemichen, Wisconsin official, on ruling
Madison -- In a ruling officials hailed a major victory for Wisconsin's dairy industry, a federal judge Wednesday declared illegal a 60-year-old provision of the federal milk pricing system that set lower prices for Midwestern dairy farmers.
"This is wonderful news," state Secretary of Agriculture Ben Brancel said. "We think this levels the playing field, and, ultimately, our farmers in Wisconsin will be getting a better price for their product, and Wisconsin milk will be more in demand."
The ruling in U.S. District Court in Minneapolis may end an eight-year legal battle between Midwestern states and the U.S. Department of Agriculture over the aspect of the federal milk pricing system that sets federal price subsidies based on distance from Eau Claire. It was unknown Wednesday whether the decision would be appealed.
Under the system established in the 1930s, the farther a state was from Eau Claire, the higher were the federal price subsidies paid to its dairy farmers on milk sold for bottling.
For example, the maximum subsidy, or differential, paid to Wisconsin dairy farmers is $1.20 per 100 pounds of milk, while farmers in southern Florida are paid $4.18 per 100 pounds.
Because the system paid lower differentials to dairy farmers in Wisconsin and other Midwest states near Eau Claire, a lawsuit was filed in 1989 by Minnesota challenging the system. Other states, including Wisconsin, Iowa, North Dakota and South Dakota, soon joined in the legal action.
Bill Oemichen, administrator of the Division of Consumer Protection of the Wisconsin Department of Agriculture, Trade and Consumer Protection, was chief attorney for the Minnesota Department of Agriculture in 1989 and was one of the lawyers who initiated the lawsuit.
He said Wednesday he was "shocked" at the broad scope of the judge's ruling.
"It goes way beyond what any of us attorneys who worked on the case thought he would do," Oemichen said.
U.S. District Judge David S. Doty ruled late Wednesday afternoon that, over the eight years during which the lawsuit dragged on, U.S. Agriculture Secretary Dan Glickman had failed to adequately justify using Eau Claire as the base point for setting the milk price differentials.
Doty found the system was "arbitrary and capricious" and "unlawful," and he ordered Glickman to cease administering the system.
U.S. Sen. Russ Feingold (D-Wis.), who as a state senator pushed Wisconsin's government to join the lawsuit, said the ruling was "one of the best pieces of news for Wisconsin farmers in a long time.
"The effect of this is that part of the federal system, which really hurts Wisconsin farmers, will be changed," Feingold said by telephone from his Washington office.
The U.S. Department of Agriculture, under orders from Congress, is revamping the entire federal milk pricing system. During this process, Midwestern states have argued that the use of Eau Claire as a base point should be eliminated because it is discriminatory.
Gov. Tommy Thompson said Wednesday that Doty's ruling sends unambiguous direction to Glickman on the structure of the new system.
"It cannot discriminate against Wisconsin farmers as it has in the past," Thompson said.
"Judge Doty's decision recognizes what we've known for a long time: The federal pricing system discriminates against farmers in Wisconsin and the Upper Midwest."
However, Brancel, Oemichen and other dairy experts said they do not think the ruling would have an immediate impact on what is paid to Wisconsin dairy farmers.
Oemichen said Wisconsin milk prices are more in line with the market and not so dependent on federal supports as prices elsewhere. In addition, only about 15% of Wisconsin milk is bottled -- most is made into cheese -- so dairy farmers here do not receive the full differential.
"But it will have a significant impact on milk prices in other states, like Texas and New Mexico, where their differentials are much higher and more of their milk is bottled," he said.
The Eau Claire system was originally intended to ensure an adequate supply of fresh milk around the country by encouraging the growth of dairy industries in states where there were few dairy farmers.
The result of the 60-year-old system has been to boost milk prices artificially and encourage rampant growth in dairy industries in southern and southwestern states, Brancel said.
New Mexico now has the fastest-growing dairy industry in the country, he said.
Brancel said the effect of Wednesday's ruling will be to cut subsidies for states such as New Mexico and reduce the growth in their dairy industries.
Eventually, when the nation's dairy economy is more closely tied to supply and demand, Wisconsin milk will be more in demand because there will not be so much milk in the marketplace.
Wisconsin dairy farmers then will be able to compete on a more equal basis with the rest of the country, Brancel said.
It was not known Wednesday whether Glickman would appeal the ruling or at least ask to delay its implementation.
But Feingold, who said he talked to Glickman on Wednesday about the ruling, said Glickman would have to act quickly in seeking a stay of the judge's ruling because it appears to take effect immediately.