06/17/99 Committee on the Judiciary

Jay Kopp

1712 Colebrook Road

Middletown PA 17057

717-944-3970

My name is Jay Kopp, I was born in Newton New Jersey on November 5, 1944. My family moved to the dairy farm that my brother and I now operate when I was an infant. I have been farming all my life. Our family farm consists of 250 head of dairy livestock. We farm 800 acres of which we own 250 acres. During my youth I participated in 4-H and Future Farmers of America. I held numerous offices in both organizations.

My wife of thirty years is the daughter of a farmer. Together we have two children who have also grown up on our farm. My son has aspirations of returning home to our farm to work, after finishing his degree Agri-Business at Cobleskill College in New York State.

I am member of the Pennsylvania Farm Bureau, the local and state Holstein Associations. I have served as a director and as a member of committees for these organizations. I have served as the Pennsylvania Dairy Representative for the National Beef Council for the last three years. In addition, I am currently a member of the Lebanon Valley Farmers Bank Ag-Advisory Committee.

In service to my community I was a member of the Township Planning Commission and a Supervisor for twenty-five years. My family and I are active members of Zion Lutheran Church.

Testimony of Mr. Jay Kopp in Support of H.R. 1604 THE DAIRY CONSUMERS AND PRODUCERS PROTECTION ACT

Judiciary sub-committee on Commercial and Administrative Law

June 17, 1999

Good morning Chairman Gekas, Mr. Nadler, and distinguished members of the committee, my name is Jay Kopp, I am a second generation dairy farmer. My brother and I operate a dairy farm in Middletown, Pennsylvania. We milk about 120 cows averaging 22,000 pounds of milk per cow per year. I have come to Washington today to testify in Opposition of H.R. 744 and would like to direct my testimony in Support of H.R. 1604 THE DAIRY CONSUMERS AND PRODUCERS ACT, which would reauthorize the Northeast Interstate Dairy Compact and allow the Southern states form a Compact of their own.

The Pennsylvania legislature has recently passed legislation to join the Northeast Interstate Dairy Compact. Once our Governor signs the bill our state will be the 24^th state to have passed such legislation. Pennsylvania, like most states has seen a significant decline in the number of dairy farms. In the last ten years alone over 3,500 farm families left the industry in our state. If we are to prevent this trend from continuing, our state will need the authority to work with the surrounding states and take a more localized approach to pricing fluid milk through a Compact.

There are three direct benefits that will be provided to our family operation through a Compact that I would like to cover today. The first of which is price stability. As a farmer and businessman the greatest challenge to our family business faces is price volatility. The dramatic swings in the price we receive for our product makes it next to impossible to create business plan.

For example, this March the Basic Formula Price dropped $6 per hundred weight. This drop has caused the amount we will earn this month for our milk to be over $10,000 less than it was in January, just five months ago. Our overhead and daily costs of operation are fixed. Cows do not respond to price swings, they still need to eat and they still need to be milked. According to the Pennsylvania

Agricultural Statistics Service, it costs the average Pennsylvania dairy farm $13.26 to produce a hundred pounds of milk. It is important to point out that this cost of production figure does not reflect any returns on management or equity. A better reflection of the returns needed to produce a hundred pounds of milk in Pennsylvania would be to include a modest return of five percent on milk receipts for management and a six percent return on equity which brings the average cost of milk production in Pennsylvania to $16.11 per hundred weight of milk. We are currently receiving a mailbox price of $11.57. Unfortunately, this drop in price hits us even harder because it comes at a time when we must spend the most. In the spring months we have the additional costs of buying seed, crop protectants and getting our farm machinery going again.

Unlike other businesses, we cannot slow down production, nor can we store our product until the price comes back up. We in the dairy business have become thankful when we break even, and have further accepted that as part of the business, there are going to be times when we don't. It is no mystery to me why so few young people choose to get into the dairy business, if success is merely breaking even.

The Compact will provide a base line of income that we can depend on. It won't prevent the fluctuations in price, but we can at least make equitable business decisions if we know the price will not go below the floor price established. Many producers today find themselves deeper and deeper in debt when the price drops out. The result is, that even when prices are higher, as they were last fall, the extra income is not reinvested in their business or taken home as extra pay, it's used to catch up on bills and trying to pay down the interest on the additional debt that has been incurred during hard times.

The second benefit I see in the Compact is not the amount of the payment, but when we would receive it. When the Federal price falls, the Compact will kick in and act as a safety net catching the price before it drops too low. When we need the payment the most, we will receive it. In comparison, while dairymen are thankful for the federal allocation we will soon be receiving to help take the sting out low prices, it has taken more than year to get that money in the hands of producers.

The third benefit is the ability to sit at the table with consumers and processors and to establish a fair floor price that everyone can live with. As it stands now both farmers and consumers are price takers, with no ability to have any input. It is not simply in the interest of my family that we continue to milk cows in Pennsylvania, it is and should be of interest to those who consume that milk and enjoy the open space our farm provides.

It is my understanding that some people say we in the Northeast should not continue to milk cows because our costs of doing business are higher. The reason our cost of doing business is higher is because we are operating our business where the people are, the people who demand and consume fluid milk. Our farm is a fifteen minute drive from downtown Harrisburg, which is our state's capitol city. Needless to say, land values are high. We must compete for land with our wealthy suburban neighbors. We pay steep property taxes and spend a lot of dollars making sure our operation is environmentally sound and with good eye appeal to our consumer neighbors. While there are cost competitive disadvantages to dairy farming near the population centers, there are real advantages to having locally produced milk for the consumer. No other region can provide the people of Pennsylvania with a better a quality for a cheaper price. Milk ages when it leaves the cow, not when it hits the shelf. Our friends in the south have shown us what happens when you start shipping milk in from other regions. Local producer price declines and consumer prices rise.

Pennsylvania has long recognized the importance of assuring an adequate and fresh supply of locally produced milk for consumers by providing over-order premiums to producers through the Pennsylvania Milk Marketing Board. However, our state pricing agency is limited by the interstate commerce clause and can only provide the premium price to producers whose milk is produced, processed and sold in Pennsylvania. Less than twenty-percent of the milk produced in the state qualifies for that premium price. Under the Northeast Interstate Compact, nearly one-hundred-percent of the milk produced in Pennsylvania for Class I use, or milk used for drinking purposes, will have the safety-net protection of a minimum price that will help the average dairy farmer in Pennsylvania have an opportunity to remain economically viable.

I hope that this committee will allow this legislation to move forward to enable farms like ours to continue to provide the best quality milk to the consumers in our area.