With Congress scheduled to take up a farm bill in 2012, milk producers and processors have ramped up their calls to reform pricing policies.

Milk Pricing Arguments Get Frothy

With Congress scheduled to take up a farm bill in 2012, milk producers and processors have ramped up their calls to reform pricing policies. The white papers (and rebuttals) started circulating last autumn. This year, the battle of ideas kicked into a higher gear.

In her keynote address at the Dairy Forum in January, International Dairy Foods Association president and CEO Connie Tipton said, “We steadfastly continue to believe that dairy policies and programs should be consistent with enhancing demand rather than controlling prices and supply.”

Then in April, IDFA’s three constituent organizations (the Milk Industry Foundation, the National Cheese Institute and the International Ice Cream Association) voted to support its dairy policy reform recommendations and to oppose the National Milk Producers Federation’s dairy policy package.

“IDFA’s plan offers an alternative path forward that would not limit milk supply through a new mandatory government program, and will give dairy farmers the tools they need to manage volatility,” Tipton said.

NMPF, Washington, D.C., represents the dairy farming community. Its Foundation for the Future is a “multi-faceted approach” that would replace “existing federal safety net programs with a new Dairy Producer Margin Protection Program to protect against both severe and unsustainable loss of margin; establish a Dairy Market Stabilization Program to help address imbalances that can negatively impact producer margins and reform the Federal Milk Marketing Order system,” said the organization’s Christopher Galen, senior vice president for communications.

The U.S. and global economic collapse of 2008 and 2009 pushed milk pricing issues to the fore. Farmers’ costs for producing milk exceeded the price they could get for it. While prices have improved since then, both NMPF and IDFA agree that volatility is here to stay and that producers need to be protected. IDFA is pushing risk insurance as a solution and NMPF proposes a margin insurance program.

A meeting of the minds

In January 2010, agriculture secretary Tom Vilsack appointed 17 members from the producing and processing communities to the Dairy Industry Advisory Committee to review the issues of farm milk price volatility and dairy farmer profitability. In March 2011, the committee submitted its report containing 23 recommendations, most of which received widespread (in some cases unanimous) support from committee members. 

But the most contentious of the recommendations was the one calling for a growth management program. It passed nine to eight, with every processor member voting against it. DIAC’s report stated the committee “is not prepared to endorse a specific plan, however, we agree that a primary challenge in taming milk price volatility is to better coordinate milk marketings with milk usage over time. We do not agree on whether this should be a public or a private endeavor.”

The report states: “The most compelling justification for a federal program to help the dairy industry better align milk production growth with growth in demand is that experience has amply demonstrated that, in the short run, milk prices can rise or fall dramatically when supply and demand are not aligned. Hence, if we could anticipate periods of excess supply, we might avoid or minimize the resulting drop in prices.”

But the report also acknowledges: “For some, a federally mandated effort to intervene in the individual production decisions of a farm business is categorically unappealing or unacceptable. Other critics have concerns that a federal program would be very difficult to run efficiently and effectively.”

Reforming the milk orders

IDFA and NMPF agree that the Federal Milk Marketing Orders needs reforming.

Rather than end the FMMO, NMPF said it wants to “mend” it by shrinking class prices from four to two, and eliminating the concept of end-product pricing for milk in manufactured products.

IDFA would like to see the Livestock Gross Margin-Dairy (LGM-Dairy) program be made more accessible with higher funding limits. Few farmers participate in LGM-Dairy because they are not encouraged to do so, IDFA said. 

Whether a bill gets written in 2012 remains to be seen. Some observers say that next year’s presidential election campaigning could divert attention away from a farm bill. In that case, look to 2013.

 -  Jim Carper, chief editor

Two Perspectives

The International Dairy Foods Association would:

  • Replace the Dairy Product Price Support Program (DPPSP) and Dairy Export Incentive Program (DEIP) with better risk management tools for producers.
  • Strengthen dairy risk management tools, including forward contracting, the Livestock Gross Margin-Dairy program, catastrophic margin insurance for all dairy farmers and tax-deferred farm savings accounts.
  • Simplify the Federal Milk Marketing Orders program.

    The National Milk Producers Federation’s Foundation for the Future would:

  • Replace existing federal dairy support programs.
  • Introduce a new margin protection program to protect producer equity.
  • Reform milk pricing regulations set by the Federal Milk Marketing Order System.
  • Implement a stabilization program to address market imbalances.

    Sources: International Dairy Foods Association, National Milk Producers Federation

  • Dairy Brands Turn to Bunnies, Laughing Cows and Baseball

    The Nesquik bunny will be hopping onto housewares by the end of the year. Nestlé Glendale, Calif., signed a licensing agreement with Evriholder Products, Anaheim, Calif. The deal covers licensing in the United States and its territories.

    Laurelle Widgerow, an assistant marketing manager with Evriholder, told Dairy Foods that specific products and number of SKUs have not yet been determined. The licensing group’s strength is in the food-storage category, she said, especially with sandwich containers and thermoses.

    Widgerow says the items are expected to roll out in the supermarket channel the third or fourth quarters of this year. The licensed products will be merchandised on clip strips and on counter and floor displays near Nesquik-flavored milk powder, syrup and ready-to-drink products. Evriholder develops and manages licensed products for other food brands, including Campbell’s, Kellogg’s and Pepperidge Farm.

    The Laughing Cow, a unit of Bel Brands USA, Elk Grove Village, Ill., announced in April that it will donate at least $250,000 and as much as $500,000 to support health and wellness initiatives at YMCAs throughout the United States. The brand launched the Life Well Laughed Project on April 1; it runs through July 15. Laughing Cow will donate $1 for each UPC code from Laughing Cow cheese wedges or Mini Babybel cheese entered at www.LifeWellLaughed.com. The company positions the individually wrapped cheeses as portion-controlled snacks. BelBrands USA is a subsidiary of Fromageries Bel, Paris.

    Fans of minor league baseball and Kraft Singles American cheese can double their fun this summer. The Tuesday Night Tickets promotion delivers one free ticket with the purchase of a ticket and the redemption of any Kraft Singles package wrapper at the box office. The plastic wrappers are collected by TerraCycle and made into consumer products. This is the third season of the promotion by Kraft Foods, Northfield, Ill. It said that in 2010, wrapper redemption increased 43% compared to 2009. The promotion runs through Sept. 6.

    Washington Watch: IDFA CEO Expresses Concerns over New Dairy Import Tax

    Connie Tipton, president and CEO of the International Dairy Foods Association, Washington, D.C., expressed concerns about the impact that the implementation of controversial new assessments on dairy imports will have on trade.

    “We trade with more than 150 countries and continually advocate for open markets and trade policies that comply with international laws,” Tipton says. “This international tax does not help expand our U.S. dairy export markets and has been widely opposed by our trading partners.”

    The Obama administration reversed a Bush administration decision when the U.S. Department of Agriculture, Washington, D.C., announced the final rule on the establishment of a dairy import assessment. The program was first authorized in the Farm Security and Rural Investment Act of 2002 (2002 Farm Bill) and later amended in the Food, Conservation and Energy Act of 2008 (2008 Farm Bill), with clear instructions from Congress that the program was not to be implemented if it did not comply with U.S. trade obligations.

    “With this decision by USDA, we are concerned about how other countries will respond to our dairy exports once they become aware of the extra administrative burden and cost with limited or no benefits,” says Tipton.

    USDA will now collect 7.5 cents per hundredweight on imported dairy products and other foods with dairy ingredients, including cocoas and dough. The money collected by the government will be turned over to an advertising and promotion program currently operated and funded by U.S. dairy farmers. The new rule stipulates that, because importers are adding funding to the program, USDA will require U.S. dairy producers and importers to jointly develop programs to build demand for imported dairy products and dairy ingredients.

    “It’s unclear to us why dairy producers are willing to promote dairy imports at a time when U.S. dairy imports are declining and our U.S. exports are growing,” says Tipton.