Frustrations, Factions and Federal Fallacies
February 1, 2007
Frustrations, Factions and Federal Fallacies
As the “ole preacher” who is credited with writing most of the Old Testament book of Ecclesiastes said:
To everything there is a season, A time for every purpose under the sun. A time to be born and a time to die; A time to plant and a time to pluck up that which is planted …
Yes — it is time! It’s time for an informed and factual discussion about future government dairy policies. Current policies are often politically driven, bestow great financial rewards upon some and impose financial harm unto others. Why should the federal government be the arbitrator and decide who wins and who loses?
Perhaps a more pertinent question might be, why should the federal milk order program be operated in a manner that giveth to some and taketh away from others?
During the first 60 years of the federal milk pricing program, the basis for making decisions was consistently applied and more economically and factually based. Recent order decisions seem more whimsical — using a “which way is the wind blowing” criteria. Where is home base?
Recent USDA actions make the point vividly clear. USDA convened an emergency hearing in January 2006 to consider increasing the make allowance for Class III (cheese) and Class IV (butter and dried products). Although the criteria for setting the make allowance should have been the cost of converting raw milk into various manufactured products, USDA arbitrarily adopted a make allowance significantly lower than the hearing record justified.
Company after company, cooperative after cooperative is producing red ink. The losses may well drive some to bankruptcy. The burden of this result falls squarely on USDA’s shoulders for not basing its decision on the record facts and for not applying its normal criteria. It was far too little (less than half of what it should have been) and much too late (over a year after calling an emergency hearing).
A second example involves USDA’s quick response to call another emergency hearing, this time to consider increasing the Class I and II prices ostensibly to offset the lower Class III and IV prices previously described. USDA received a petition to hold such a hearing in October 2006, published the hearing notice in November and held the hearing in December. The statutory and long-time administrative criteria for setting Class I prices is to provide a farm price that will provide an adequate supply of milk for fluid milk consumption.
Normally, USDA would have denied a request for a hearing based on the large and more than adequate supplies of milk. But this time they not only held the hearing but called it an emergency. Where is home base? What are the criteria?
The third example was another emergency hearing USDA convened 1? years ago to consider what products should be in Class I and II. The primary driver for this hearing appears to have been federal milk order market administrators and USDA’s Washington staff. Many new beverages containing some dairy-derived ingredients, but less than the minimum required to be Class I, were being introduced at the time. USDA issued a recommended decision in May 2006 and proposed several new criteria for determining a product’s classification, but hasn’t taken any further action.
Each of these pending actions and the “hurry up and wait” process at USDA has created much frustration and friction within the industry, and great uncertainty about what action USDA might take on any given issue. Where is USDA’s compass?
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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