The Front Page is for Losers - the Sports Page is for Winners

August 1, 2006
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The Front Page is for Losers — the Sports Page is for Winners
This newspaper axiom was especially true in the July 24 edition of The Washington Post. Here are that day’s headlines from the front page:
 Pakistan Expanding Nuclear Program: Plant Underway Could Generate Plutonium for 40 to 50 Bombs a Year, Analysts Say
 Bush, Economy, Corruption, Immigration, Iraq, Turnout, Northeast, Red States: Issues That Will Shape the 2006 Elections
Civilian Toll Mounts in Lebanon Conflict
Fighting the Insurgency: One Unit’s Aggressive Approach; “It Looked Weird and Felt Wrong”
Here are the sports page headlines:
The British Open — Iron Will: Woods Stays With Strict Game Plan for 11th Major Title
Nats Win, Soriano Watch Escalates
American Landis Gets Over the Mountain; Rider Completes Comeback to Win Tour de France
Teams Look for Their Cut Among the Ticket Scalpers
This “bad news first, good news second” sequence drives America’s newspaper reporting. But even more distressing is the disproportionate space devoted to the bad news. Not only is the bad news first, it is allocated two to three times the space. In the traditional good news/bad news jokes, you get a choice of which you want to hear first. I give myself that choice because I open the sports page first.
For the rest of today’s story, I want to dwell on some disturbing news coming out of USDA regarding the Federal Milk Marketing Order program. Two recent USDA decisions are bad news for an industry that is already struggling with the burden of over regulation. One relates to the classification of beverages that contain some dairy ingredients but not enough to be considered to be milk, and the other fails to properly adjust the make allowance for Class III and IV.
In both cases, there was overwhelming testimony and evidence to support specific proposed policies. But the USDA chose to impose its own will and headed off in directions not supported by the hearing records.
Clearly based on the record and common sense, the federal order Class III and IV make allowances are inadequate to cover current costs.  Costs have increased substantially since the make allowances were established based on cost data from 1997 to 1999, and several companies and dairy farmer cooperatives are teetering on the brink of insolvency.  Nevertheless, USDA decided to delay action until after the fall elections under the ruse of needing more data. The evidence introduced during the hearing overwhelmingly documented the fact that manufacturing costs have increased significantly and that there is a real need to increase the make allowance. USDA’s inability to come to grips with reality is really bad news.
Similarly, in its recommended decision relating to classification of beverages that contain some dairy ingredients but not enough to be milk, USDA made a power play to reserve for itself the right to decide on a case-by-case basis whether products are Class I, II or III.  There was overwhelming expert testimony and evidence introduced during the hearing that if USDA chose this approach it would significantly impede the use of dairy ingredients in new beverages, which in turn would likely reduce dairy farmer income. But nevertheless, USDA decided to recommend giving itself the discretionary decision-making power on a case-by-case basis, notwithstanding the overwhelming opposition to such discretionary powers.
Current rules exclude from the Class I definition beverages that contain less than 6.5 percent nonfat milk solids by weight of the finished product. USDA’s new proposal changes the regulatory concept significantly. The government keeps the 6.5 percent standard, but adds new protein criteria and then imposes a very subjective case-by-case USDA determination as to whether the product competes with fluid milk products.  Going forward under the new rules, if they stand, a beverage containing 6.5 percent or more of any milk-derived component, or 2.25 percent milk protein (true value) would be a Class I product subject to an upcharge at the Class I price. Additionally, even if the new beverage contains less than 2.25 percent protein or less than 6.5 percent nonfat solids, USDA could nevertheless, determine that it competes with fluid milk and should therefore be Class I, subject to the Class I upcharge.
The new proposed rule, if implemented, will likely result in companies restricting dairy ingredients in their products to amounts below the trigger points, thereby effectively placing a cap on use of concentrated dairy products, or using only non-dairy ingredients to avoid federal milk order classification and the additional upcharges. In any event, the market for concentrated dairy products will likely be reduced and the market for non-dairy proteins will gain commensurately.
This is clearly a front-page loser story — the entire industry loses — but USDA seems to see it more as a sport and would likely put it on the winner page because it greatly expands their power and control of classification.
Whether on the front page or on the sports page, bad news is just plain bad news and USDA should wake up to this fact when making their next moves.  
Tip Tipton, chairman and chief executive officer of the Washington, D.C.-based Tipton Group, is the former CEO of the International Dairy Foods Association.

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