Guest Columnist / Editorial

Connie Tipton is president and CEO of the International Dairy Foods Association. She contributes this column exclusively for Cheese Market News®.

Consensus is growing for new direction for dairy policy

When things get exciting for dairy in Washington, D.C., it usually means a battle raging between industry sectors — but a couple of weeks ago I saw something different.

In late April we had producers, processors and co-ops testifying before House and Senate agriculture committees on how to improve dairy policies. Many groups seriously called into question the effectiveness of current dairy programs and put forward new ideas. For our part, IDFA released our proposals in a report called, “Ensuring a Healthy U.S. Dairy Industry: A Blueprint for the 2007 Farm Bill” and launched a new website at www.healthydairyindustry.org.

In my 25 years watching the push and tug over dairy policies in this town, I am struck by something different this year: The various sectors of the industry truly are close to agreeing on some of these new ideas. That’s an opportunity we shouldn’t let pass! It’s clear that we should get these done now — they’re a “slam dunk” so to speak.

For instance, out of all of IDFA’s Farm Bill suggestions, the need to reinstate permanent forward contracting seems to be universally supported. The National Milk Producers Federation (NMPF) supports it, as well as groups in the Upper Midwest, the Northeast and other regions. At the hearings it was clear that there is no downside to allowing dairy farms and milk buyers to enter voluntary agreements that help level out price volatility.

We also see agreement that other agricultural commodities, unencumbered by government price regulation, have more reliable risk management tools for suppliers and buyers. Groups like the Pennsylvania Department of Agriculture have proposed voluntary milk revenue insurance as a missing critical component to an effective producer safety net. This is another good idea — a new direction that IDFA and many others support for further development and funding.

Just about every segment of the dairy industry is voicing frustration with the federal milk marketing orders and wants to see change. But the system is so complicated that it’s hard to find consensus about what those changes should be. Some want to streamline the administrative processes, others to change the pricing mechanisms. Both IDFA and NMPF have established committees to review these issues. It makes sense for Congress to bring these groups together in a Blue Ribbon Commission made up of industry stakeholders and experts to try to find a consensus for long overdue changes to the federal order system.

There appears to be general agreement that we need a better safety net for dairy producers. In previous columns, I’ve talked about the great opportunity we have with this Farm Bill to build a better safety net and reposition our dairy policies to take advantage of growing global and domestic demand for U.S. dairy products. Our “Farm Bill Blueprint” website and report have more details on our proposals; this is another area where IDFA is not alone.

With federal resources for dairy so limited, more groups — representing producers and processors from the Northeast, Midwest and the West — say they want to get rid of programs that don’t provide effective support. The dairy price support program, for instance, has few defenders left; most producers recognize that this program has outlived its usefulness. The Idaho Dairymen’s Association has called for its elimination, and several departments of agriculture, academics and industry leaders from the Northeast call it a hindrance to growing dairy exports. Only a handful of plants in the West cling to the security of government purchases. But the current price support program has kept the U.S. dairy industry from responding adequately to the exploding demand for higher value dairy proteins. Today, with record high milk prices, the dairy price support program offers no help to producers, yet continues a commodity production mentality. This is a good opportunity to eliminate rather than resuscitate this program and put these resources into better dairy programs.

IDFA and others, including NMPF, have proposed a different type of direct payment program. It is not just the western states that see that the current Milk Income Loss Contract (MILC) program does not equitably treat farms, and distorts market signals to stimulate excess production, which lowers prices for everyone. Our idea is to encourage environmental improvements on farms with direct payments not tied to price or production. This is important, because the futures markets are projecting record high milk prices, so no MILC payments will be triggered, yet farm income is severely squeezed by soaring feed costs. Others also have proposed direct payments that, unlike MILC, would spread the resources more equitably and cut the connection to price. This would make payments less market-distorting and more trade-compliant and reliable in today’s market.

All these new ideas spell a positive direction for continued growth for U.S. dairy products — except one: a provision in the 2002 Farm Bill calling for new assessments on dairy imports, which was never implemented. Our trade prospects have changed dramatically since 2002 and so should our approach on this issue. As our exports are growing and driving better prices for our producers, we think it’s the wrong time to put up new barriers to other countries’ imports — there are simply too many opportunities here and abroad. The dairy import assessment should be repealed.

The basic message at the congressional dairy hearings was a positive one: Dairy programs can be changed to provide more meaningful benefits to producers, processors and the consumers we serve. Where we can agree, and see growing consensus, it is important that Congress listen. Some changes can and must be made in the 2007 Farm Bill to move dairy programs forward. This means a positive new direction that will give all dairy producers and processors the opportunity to succeed.

CMN

The views expressed by CMN’s guest columnists are their own opinions and do not necessarily reflect those of Cheese Market News®.