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Guest Columns

Perspective:
Industry Issues

Time to think farm bill

Connie Tipton

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

The current farm bill expires at the end of fiscal year 2018, so the members of Congress who will be sworn in this coming January will be in the driver’s seat to map out the future, and whoever inhabits the White House will play a role in how that all shapes up. Ah, yes, another dimension of the upcoming elections presents itself.

In my 35-year career with the dairy industry, it has always seemed these farm bills roll around pretty quickly, but it’s especially hard to believe the current five-year farm bill will come to a close in a couple of years. I’ve learned it’s always time to think of what’s next, so that’s exactly what the International Dairy Foods Association will be doing in the coming months.

One of the biggest questions is who will lead the various committees and occupy the relevant seats in Congress? Watching how the next administration shapes up also will be compelling. Of course, we won’t have any firm answers until well beyond Nov. 8, but, as the election seems to be tilting toward a Clinton administration, the guessing game has already begun on who will be the next Secretary of Agriculture. Some of the rumored possibilities include Blanche Lincoln, former senator from Arkansas and Senate Agriculture Committee chair; Karen Ross, current head of California’s Department of Food and Agriculture; Kathleen Merrigan, former USDA deputy secretary; and two governors, John Hickenlooper from Colorado and Steve Beshear, former governor of Kentucky.

It’s always an interesting time in Washington, and it’s looking like a real nail-biter even on whether Republicans or Democrats will control Congress. Republicans probably will hold the House majority, but everything is in pretty big turmoil at the moment. Just be sure to do your part and get out to vote!

So what’s next for dairy? IDFA will evaluate possibilities based on politics and people in charge, then begin in earnest to develop policy alternatives that might make sense to address in a farm bill. Other organizations will be doing the same thing, so it’s important to come to the table with ideas. The magic is in how all of this comes together — the people, politics, timing and, of course, money (which the federal government doesn’t have). These are all uncertain elements in the policy-making process, but, what the heck, that’s kind of the fun of it all.

IDFA’s economic policy committees will convene after the elections to discuss possible program options, and at the core of dairy policy will be an adequate safety net for dairy producers that doesn’t adversely affect markets and demand for products.

What exactly do I mean when I say an adequate safety net that doesn’t adversely affect markets? To me, that means something like the margin protection program put on the books in the last farm bill, perhaps adjusted to make sure it helps with catastrophic losses, which is how it was intended. Then to ensure that it works, two things have to happen: We need to convince dairy producers to sign up for it, and they need to take more market responsibility.

Farms simply cannot produce as much milk as they want or are capable of producing and expect to be paid top dollar for all of it all of the time. At this point I can hear many of you saying, “That’s exactly why we wanted supply management as part of the government program in the last farm bill.” But government-imposed supply management is a blunt instrument with many unintended consequences. Look at quotas in the European Union or Canada — they can’t really anticipate what markets will need. In my opinion, such ideas are at the base of the great disconnect on what dairy policy can and should do for farms.

I would like to see buyers and sellers making advance contracts for supply in honest negotiations that take into account risks on both sides. That’s what happens in markets for other perishable commodities. Dairy farms should be responsive to markets. That means if you don’t have a buyer for as much as you can produce, produce less. Sure, it’s complicated with cows, but a good dairy farmer can adjust production to meet contracts for milk purchases so long as timing allows for proper planning and herd management.

To make sure this planning happens, all milk buyers taking farm milk directly (including cooperatives who are buying the lion’s share of farm milk) should require contracts for volumes and clarify that payments on added volumes will be based only on what the spot market will return. That’s how it works for other perishable commodities. Federal milk marketing orders complicate all of this, of course, highlighting yet another reason to consider phasing out federal order pricing and pooling provisions.

Although I have never run a dairy farm, I know this concept of producing for a market works with all sorts of products, perishable and otherwise. I’m sure the smart people in dairying can figure this out, particularly with the right safety net in place.

So, getting the dairy safety net right and having better free-market management of milk production then sets the stage for other approaches that may help markets work better and grow. IDFA will collaborate with the National Milk Producers Federation to try to find common ground on how this safety net can work best to meet the needs of the entire industry, since we all want a healthy farm sector and an adequate supply of milk.

And that’s just the beginning of the possible policy options to be considered.

It’s important for IDFA to hear from members about your ideas for policy improvements that can enhance sales of dairy products. Please reach out to our legislative and economic staff members and let them know your thoughts.

Every new farm bill presents an opportunity for advancement of the industry. I look forward to seeing innovative policy ideas in the 2018 farm bill that will advance the U.S. dairy industry.

CMN

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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