Guest Editorial
2007 Farm Bill: Trick or treat?

by Connie Tipton

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

I still remember as a kid dumping out my bag of goodies at the end of a heady Halloween outing, organizing into separate piles my hard-acquired booty between the gems (usually chocolate) and the duds (some strange hard candy or nutritional item that I would surely never consume).

Watching the outcomes from the Farm Bill debate on Capitol Hill is not unlike gazing down into that Halloween bag, hoping the gems out-number the duds. So far, though it’s not always readily apparent, they do.

Most of the provisions in the 2002 Farm Bill expired on Sept. 30; it’s almost Halloween and Congress has yet to put a new farm law on the books. The House passed its version of a Farm Bill in July, but the Senate has let deadlines slip, and only now appears to be ready to move ahead. We’re pleased that it looks like Congress will not have to revert to simply extending the 2002 Farm Bill for lack of agreement on a new bill. Given the effort IDFA members have put into working with Congress and producer groups on a few positive changes that are included in the House-passed bill, I hope that the Senate is successful, and that we get a new Farm Bill before the end of the year that includes the good points in the House bill.

Compared to the 2002 Farm Bill, the dairy industry stands to gain if some of the provisions that passed in the House bill are maintained or even improved in the Senate. These include bringing back the USDA dairy forward contracting program for Class II, III and IV milk. This Farm Bill provision will ensure that all processors and producers have another tool available to manage price risk and volatility through forward contracts.

Another important addition is a Federal Milk Marketing Order Commission to guide the industry through the maze of federal order problems, and to help avert any legislative changes that could negatively impact the industry. The proposed 18-member federal order commission would include producers and processors, as well as dairy economists and consumer representatives. The commission would have two years to reach some consensus on ways to fix the intractable federal orders. But during that time, another provision in the House Farm Bill is designed to streamline the federal order process, to address the current slow pace of federal order hearings and decisions. It’s pretty clear that the notion of doing something to facilitate reform of the federal order system has gained widespread support in the industry.

The rest of the pending dairy title in the House-passed bill looks a lot like the 2002 Farm Bill. The Milk Income Loss Contract (MILC) and price support programs would be continued with slight changes, as the preferred safety net by many producers and cooperatives — even though processors and some producer groups prefer a safety net that is less market-distorting. It appears that in the Senate there will be an effort to raise MILC payments, even though funding is scarce. I would argue that any additional resources would be better spent on different programs that support farmers. Under current record high milk prices, it is very unlikely that MILC payments will be triggered, so the Farm Bill money will not be spent. Other commodity groups enjoying high prices are vying to retain government payments that are not triggered by price. This type of support is available year round — regardless of the current level of prices. Dairy producers would be wise to lock in their Farm Bill funding under a similar payment plan.

Much depends now on the Senate. The trick is to get a bill passed that is as good as, or better, for dairy than the House version. No short order, since in addition to disagreements on funding priorities, the Senate has input from members concerned about how our dairy policies impact trade.

The Senate finance committee has already rejected a proposed Farm Bill amendment that would have imposed new tariffs on milk proteins. Not only would such a tariff violate our trade obligations, it would also be an unnecessary trade barrier. After all, our production of value-added milk proteins continues to grow, while the imports we use to close the gap are declining.

Strong international gains in U.S. dairy exports have put our domestic policies in the spotlight overseas. Just as the Senate wisely rejected milk protein concentrate tariffs, I think they’ll question whether the dairy import assessment is worthwhile. The assessment is in the 2002 Farm Bill but was never implemented because the U.S. trade representative determined that it would violate our trade agreements. None of the funds from the dairy import assessment would go to farmers — yet the measure would risk retaliation on our dairy exports. Clearly not a treat I’d call a “gem.”

Members of Congress have agenda items that may lead to attempts at other new provisions in the 2007 Farm Bill — we may see more goodies and duds before Congress adjourns for the year. IDFA is working to ensure that dairy is well positioned. If new policies such as nutrition standards in schools and food import safety measures are considered, the dairy industry needs to be vigilant to ensure that these measures don’t stymie dairy demand.

There’s no doubt we’ll have a mixed bag of initiatives when it’s all said and done. I just hope we can move forward with some improvements in a 2007 bill, which is looking to be a step in the right direction for dairy.

CMN

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