In a move strongly supported by the International Dairy Foods Association (IDFA) and an alliance of dairy producer organizations, U.S. Sens. Mike Crapo (R-Idaho) and Ron Wyden (D-Ore.) last month introduced a bill that would make permanent the authority for forward contracting.

Supporters say a pilot program, which expires at the end of 2004, has allowed both buyers and sellers to achieve stable, fair and reliable milk prices. Without this program, only dairy cooperatives would be able to offer forward contracts to their members.

“We applaud the leadership of Senators Crapo and Wyden for recognizing how important this common sense risk management tool is for all milk buyers and sellers,” says Connie Tipton, IDFA president and chief executive officer. “We will continue to work with the U.S. Department of Agriculture and Congress to ensure that the program is made permanent.”

Language of the Senate bill (S2565) is identical to a House bill (H.R. 3308), introduced last October by U.S. Reps. Gil Gutknecht (R-Minn.) and Cal Dooley (D-Calif.), which now has 40 bipartisan co-sponsors.

The alliance of forward-contracting supporters includes dairy producer organizations from around the country, among them the Idaho Dairymen’s Association, which represents the 760 dairy producers in Idaho, and the Tillamook County Creamery Association in Oregon, comprising 150 member dairy farmers.

“Today’s dairy producer is a businessperson who deals with a number of variables, the most frustrating of these is the ever-changing milk price,” says Bob Naerebout, Idaho Dairymen’s Association’s executive director. “Forward contracting helps secure stable prices for milk and we want to be able to continue using this tool.”

Forward contracting also provides a more predictable basis for business planning, by providing stability for producers to anchor bank loans for land, make capital improvements, purchase equipment and secure other supply arrangements.

“Forward cash contracts have directly helped us remain viable in today’s marketplace,” says Jim McMullen, Tillamook’s president and chief executive officer. “The pilot program was the fundamental reason that our new dairies survived through hostile market conditions.”

Specifically, the bill would amend the Agricultural Marketing Agreements Act of 1937 in order to allow dairy producers and processors to enter into a voluntary agreement for the delivery of a specific amount of milk (for all classes except Class I) for a set price over a defined period of time.

Original co-sponsors include Sens. Gordon Smith (R-Ore.), Larry Craig (R-Idaho), Pat Roberts (R-Kan.), Richard Lugar (R-Ind.) and Peter Fitzgerald (R-Ill.).