Judge Rules Against System of Milk Pricing

A federal judge on Thursday ordered the U.S. Department of Agriculture to stop enforcing most parts of the system that sets prices for milk because it has “no rational connection” to supply and demand in most of the country.

“This is a major milestone in the battle for a more equitable milk-pricing system,” said Sen. Russell Feingold (D-Wis.).

The USDA planned to seek an immediate stay in the ruling by U.S. District Judge David Doty of Minneapolis to “avoid chaos” in the nation’s milk markets, where some handlers were already refusing to pay government-set prices, agency spokesman Tom Amontree said Thursday.

But he said the request for a stay would not challenge the merits of Doty’s decision and added that the ruling is likely to have far-reaching impact because, by law, the USDA must adopt a new pricing system by January 1999.

“We believe the court’s ruling could have a profound effect on how USDA responds to the congressional mandate to reform milk-marketing orders,” Amontree said.

The Minnesota ruling will not have an impact on California dairy farmers or consumers, experts said. “We’re the only state in the union that has its own marketing system,” said UC Davis agricultural economist L.J. “Bees” Butler.

Sen. Patrick Leahy (D-Vt.) called the decision a “runaway ruling” that could jeopardize the income of dairy farmers outside the Upper Midwest by in effect creating a single milk price.

“A flat pricing system, which this decision would impose, is flat-out wrong,” Leahy said.

Doty’s decision came in a lawsuit filed in 1990 by the Minnesota Milk Producers that challenged a system created 60 years ago to ensure steady supplies of fresh milk nationwide and stable prices for farmers and consumers.

The main component bases the price paid to farmers on their distance from Eau Claire, Wis. As the nation’s top-producing dairy region, the Upper Midwest once shipped its surplus milk to areas that didn’t produce enough. The so-called distance differential was meant to cover transportation costs.

Over the decades, however, most regions have developed sufficient dairy capacity to produce their own milk, in some places even surpluses. In practice, this means higher milk prices for farmers and consumers who are far from Wisconsin, lower prices for those in the Upper Midwest.

Tom Cox, a University of Wisconsin agricultural economist, said that without milk-marketing orders, the wholesale price would fall in many parts of the country--the Southeast, Southwest, Appalachia and parts of the Northeast.

In Florida, the wholesale price of milk would be likely to drop by $3 per 100 pounds and in Appalachia by 85 cents, Cox said. But as wholesale prices dropped in some places, the price paid to farmers in Wisconsin and Minnesota would be likely to rise by 50 cents per 100 pounds.

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Times staff writer Susan Abram contributed to this report.