The Hagstrom Report

Agriculture News As It Happens

Dairy industry continues debate on National Milk proposal


OMAHA — National Milk Producers Federation President Jerry Kozak said his group will continue to push its “Foundation for the Future” plan to revamp the dairy program in Congress, even though dairy processors and some left-leaning dairy and farm groups oppose it.

“I am very optimistic. There is a tremendous amount of producer support,” Kozak said after a session on the proposal Monday at National Milk’s annual National Dairy Producers Conference here. At the session, a number of dairy leaders said they did not agree completely with the proposal but believe it is the measure that must move forward.

“Foundation for the Future" would replace the current dairy price support programs with a new margin protection program to offset low milk prices and high input costs. It would also attempt to steady dairy production through a market stabilization program that would try to correct market imbalances and improve producer margins by holding back payments to farmers under certain circumstances and using the money to increase sales. The program would be funded with the $1 billion per year the government spends on dairy farmers, including the money in the milk income loss contract (MILC) program.

National Milk, the largest association of dairy farmers and co-ops, was motivated to develop a new dairy program after 2008 and 2009, when feed prices soared and export markets dried up due to the international financial recession and the discovery of melamine in Chinese dairy products led consumers there to avoid all dairy products.

The International Dairy Foods Association, which represents the processors, has said National Milk’s market stabilization program is supply management, and that it would raise milk prices and reduce the potential for exports.

National Milk had urged Congress to take up the bill this year, but that seems unlikely since IDFA has announced its opposition. House Agriculture Committee Chairman Frank Lucas, R-Okla., has said he would move a dairy measure separate from the farm bill only if the entire industry was united on it, including the processors.

Kozak said he expects to finalize the legislative language for the one remaining element of the bill — a rewrite of the federal marketing order system — within the next few weeks. He also said the Congressional Budget Office is scoring the proposal at the request of House Agriculture Committee ranking member Collin Peterson, D-Minn.

Of IDFA’s stand against the plan, Kozak said, “certainly they have a right to be opposed,” but noted that earlier IDFA CEO Connie Tipton had made positive comments about some aspects of the proposal.

Of the section that National Milk calls market stabilization and IDFA calls supply management, Kozak said that provision “is about as benign as you can make it.”

Jim Tillison, a National Milk senior vice president, said that producers are urging National Milk to keep pushing Congress to take up the measure even if it has to wait for the farm bill. The dairy title of the farm bill has usually been the last to be concluded because milk is produced in all 50 states and there are so many differences between regions and small and large dairies. But Tillison said he still hopes that in 2012 the dairy title will be the first section of the farm bill that is settled and written.

Jerry Slominski, IDFA senior vice president for legislative and economic affairs, said that IDFA opposes both the market stabilization/supply management plan and National Milk’s proposal to revamp federal milk marketing orders.

He said IDFA is analyzing the trade implications of that proposal, and believes that the effort to keep domestic milk prices higher by limiting supply will mean U.S. dairy products will be too expensive to compete on world markets because other countries will supply those products at lower prices.

Slominski said IDFA prefers the current system of federal milk marketing orders, but agrees with National Milk’s proposals to get rid of the price support system and to provide better risk management tools.

During a session here, George Mueller, a New York dairyman with the Upstate Niagara Cooperative, asked if the market stabilization/supply management feature could be eliminated, but Kozak replied that he does not believe Congress would pass the proposal without that section.

Several members of the panel urged National Milk to continue pushing Congress to take up the proposal, even though their individual organizations do not consider it to be perfectly in line with their views.

Bob Naerebout, executive director of the Idaho Dairymen’s Association, said his group has traditionally opposed any form of supply management but has had a change of attitude and decided to support the National Milk proposal because its members fear another 2009-type crisis in 2012.

Bill Rowell, a 14th-generation Vermont dairy farmer representing the National Dairy Producers Organization, Inc., said “you can’t have an export market at the producers’ expense. An oversupply of milk assures depressed pricing.”

Although other dairy groups have other proposals, Hank van Exel of the Holstein Association USA said, “We understand the people that will drive this bus are in this room.”

Goeff Vanden Heuvel of the Milk Producers Council, a California group, said that a new system is needed because the 2009 crisis did not lead to the reduction in the milk supply that the market would have indicated. Dairy producers have had a safety net beyond the government in the form of their own equity, Vanden Heuvel said, but noted “it is gone,” and that another downturn would put them out of business.

The panel also discussed farm savings accounts that would receive tax breaks as a stabilization tool, but Rowell said, “Before you get savings you have to have a profit,” and that such a proposal would do nothing for dairy farmers in the short term.