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RELATED: Q&A: How milk is priced

September 24, 1999
Web posted at: 11:44 a.m. EDT (1544 GMT)

(CNN) -- The House of Representatives this week rejected a U.S. Department of Agriculture (USDA) proposal to revamp the nation's 60-year-old milk pricing regulations.

The fight that has erupted has pitted the Midwest against the South, dairy farmers against dairy processors and has left the future of the $75 billion dollar dairy industry up in the air.

The USDA proposal rejected by the House would bring market economics to a depression-era milk pricing system, which still guarantees prices based on how far farmers live from Eau Claire, Wisconsin.

Under the current system, Southern diary farmers have received up to $3 per hundred pounds more for their milk than Midwest farmers over the last three years.

The USDA wants to even out prices regardless of region, arguing that milk can easily be refrigerated and trucked anywhere in the continental United States.

"You can farm based on your own merit not based on where the heck you live in proximity to Eau Claire, Wisconsin," Rep. Paul Ryan (R-Wisconsin) said.

But dairy farmers in the East and South say the reforms will cost them up to $200 million in lost revenue.

"Our fear is that's going to accelerate the exodus of dairy farmers from the business and could lead to additional price volatility at both the farm level and the retail level in the future," said Chris Galen of the National Milk Producers Federation.

On the other side, the dairy processing industry favors the new plan.

"It (the USDA plan) will actually encourage efficient producers to become more efficient. It will deliver a better competitive price to the market," said Connie Tipton of the International Dairy Foods Association.

Without reform, dairy processors say prices could go up 10 to 12 cents a gallon, but farmers contend any increase will be negligible.