Guest Columns

Industry Issues

Making history with new farm bill proposal

Michael Dykes

Michael Dykes is president and CEO of the International Dairy Foods Association. He contributes this column exclusively for Cheese Market News®.

Every five years, the debate over the next farm bill carries with it some contentious issues. Who will win funding and who will lose? Programs come and programs go. How will Congress decide which programs to keep, which to let go and which new ones to add?

One notable and welcome change for us this year, however, is the lack of contention between the producer and processor segments of our industry. As Cheese Market News noted in its Nov. 24, edition, IDFA and the National Milk Producers Federation have worked side by side for several months to provide a united request to the House and Senate agriculture committees for improved dairy policies in the 2018 farm bill. In fact, members of Congress have called our collaborative efforts historic, refreshing and, best of all, exceedingly helpful to their farm bill efforts.

That’s a wonderful way to start the new year!

As we await the first draft, or chairman’s mark, of the bills from the House and Senate Agriculture Committees, I’d like to share the highlights of our collaborative efforts and our joint policy proposal that’s gaining supporters.

Last March, Jim Mulhern, president and CEO of NMPF, and I testified before the House Agriculture Committee regarding the state of the industry and our basic requests for the new farm bill. Although I focused on the needs of dairy products manufacturers and Jim focused on producers, we both agreed that enhancing demand for U.S. dairy products in a way that benefits all stakeholders will be vital for the continued growth of our industry. In that regard, we acknowledged several areas of common interest and agreed to work together to try to develop a joint policy agenda. We also promised to keep the committee members up to date on our progress.

Over the summer, IDFA and NMPF convened several meetings where members of each organization gathered to discuss our common views on dairy policy and consider ways to reach agreement on areas where opinions varied. After several fruitful meetings, we reached an agreement in August which was ultimately approved by each of our respective organizations. This fall, Jim and I returned to Capitol Hill to share a proposal covering our top priorities: improve the Margin Protection Program, increase risk management opportunities for Class I market participants and establish a purchase incentive program for dairy products in the Supplemental Nutrition Assistance Program (SNAP).

• Improve Margin Protection Program

The 2014 farm bill overhauled the farmer safety net, replacing the Milk Income Loss Contract program and the Dairy Product Price Support Program with the Margin Protection Program, a margin insurance program.

Our proposal aims to improve the Margin Protection Program and the Livestock Gross Margin-Dairy insurance program to provide greater access to effective risk management tools for producers. We emphasized that dairy processors support improvements to the safety net for dairy farmers that will provide better access to meaningful, non-market-distorting risk management tools.

• Enhance price risk management

We also stressed the need for tools that would allow dairy producers, cooperatives and processors to better manage price risk on all classes of milk. In this regard, IDFA and NMPF support changing the Class I mover from the higher of Class III and Class IV to the simple average of Class III and Class IV, plus an adjustor of $0.74 per hundredweight that reflects the historic value of the “higher of” formula to the blend price provided by Class I revenue.

Changing to this new formula would provide many benefits across the industry, including:

• Allow the use of existing Class III and Class IV futures and options to manage Class I price risk with minimal changes to the federal milk marketing orders system;

• Provide processors with the ability to hedge longer-term costs for fluid milk products, including managing risk for dairy beverage ingredients, as they currently can for nondairy ingredients;

• Allow producers to hedge the Class I portion of their milk payments, as they currently do for the other portion of their payments; and

• Increase opportunities to use dairy ingredients in new fluid milk and dairy-based beverages that meet Class I specifications.

In fact, this one formula change would provide price certainty along the entire supply chain with benefits to match, including possibly helping to reverse the decline in fluid milk consumption. With the new proposal in place, the risk associated with new Class I product development would decline, and innovative foods and beverages would have a greater chance to succeed. Reversing the decline in dairy consumption certainly is a goal that everyone in this industry can support.

In addition to adjusting the Class I mover, IDFA and NMPF support extending the current Dairy Forward Pricing Program for Class II, III and IV milk for five years. This risk management program has worked well for these classes of milk and is widely utilized in this segment of the market.

• SNAP purchase incentive program

The last priority in our proposal focused on SNAP and how it can help program participants get nutritional benefits they may be missing. The current product offerings are limited for dairy, and some participants may be confused about which products are eligible. Also, declining milk consumption among children is occurring at a faster rate than for other age groups, and 43 percent of SNAP households have children.

To help stem the decline, we called for SNAP purchase incentives for a wider variety of dairy products so program participants, especially kids, won’t miss out on nutrition and health benefits.

The chairman’s mark likely will come out early next year, and I’m pleased that our joint proposal is already in the hands of committee members. We expect to follow these actions with more collaborative efforts to help shape a positive future for dairy, so stay tuned.

Shaping the future of dairy also happens to be the theme for Dairy Forum 2018, Jan. 21-24 in Palm Desert, California. We hope you’ll join us!


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

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