As we approach a new year, we have the opportunity to revamp our goals and re-plot our course, combining wisdom from past experiences with hopes and dreams for our future. It’s a time to shed what we’ve learned doesn’t work and to refresh our approach to endeavors ahead.
Rising commodity costs, sluggish consumer spending and a teetering economy say “be cautious.” Yet the explosion of new products, such as Greek yogurt, and millions of new dairy consumers in emerging markets around the globe say “Let’s go!”
The dairy foods industry is a mixed bag. If you are in the fluid milk business, you know how tough it is to be part of a shrinking market with rising costs and burdensome government regulations. In ice cream, it’s about choices — indulgent versus portion-controlled, lower-fat and “better for you” options. For cheeses and ingredients, new formulations and new uses hold bright prospects for the future. And it’s a challenge for all to comply with regulations galore while competing for customers on value, quality, taste and, increasingly, social consciousness and sustainability.
Here are the top items on my list of what to shed and where to head in 2013.
At long last, it’s time to shed milk pricing regulations that are keeping markets from working. Fluid milk is struggling in the marketplace, yet we have a system that forces fluid processors to pay the highest price for their milk. The same regulations often discourage milk production near markets where it’s needed or from moving to plants where it’s needed.
In 2013, the unfortunate result of these regulations will become apparent to many in the northeastern United States as competition for milk goes into high gear. Repercussions will be felt in the Southeast and Midwest. California is already in a tailspin over state regulations that differ from federal ones. It’s time to phase out government milk pricing programs and let markets work.
It’s also time to shed outdated dairy standards of identity. Changes to the standards for milk, yogurt and cheese are widely supported by all segments of the industry but have languished for years at the Food and Drug Administration. The formal government rule-making process for changing standards of identity is so burdensome that it makes changes virtually impossible. This arduous approach was exactly what former Sen. Jim Jeffords (Vt.) intended when he successfully introduced a law requiring the process, thinking it would protect dairy products from the addition of inferior ingredients. But the actual effects are more widespread and restrictive.
It’s time to move toward eliminating formal rulemaking for dairy standards so we can innovate and compete on a level playing field while protecting the standards that maintain product integrity.
It’s also time for government to back off as the “food police” and focus more sharply on balanced diets and balanced lifestyles. The well-intended anti-obesity campaign launched by First Lady Michelle Obama has encouraged government insiders to take on a “we know what’s best for you” attitude. Their actions have resulted in limitations on milk, cheese and ice cream in schools and proposed regulations to change labels and marketing tools that would make our products less competitive. We must continue to offer products consumers want along with “better for you” products and fight costly labeling schemes that provide no real benefit to the public.
The dairy industry has a history of overreacting to short-term events, particularly related to milk production and price. These actions often result in long-range problems of far greater consequence than the events that triggered the response.
For instance, in 1982 we put a “milk tax” on producers; a 50-cent assessment was placed on every hundredweight of milk marketed, with an additional, refundable 50-cent assessment if producers reduced marketings. Not surprisingly, this was highly unpopular with farmers and ineffective in significantly impacting milk production.
In 1983, the Milk Diversion Program was enacted to pay producers to reduce milk marketings by 5% to 30%. It was a short-term fix, at best, and milk marketings rebounded after the program ended.
Then in 1985, the unpopular Dairy Termination Program (commonly called the whole-herd buyout) went into effect, paying dairies to idle operations for five years. There were dramatic short-term reductions in milk production, but it came roaring back after all was said and done. None of these supply management schemes have worked.
So for 2013, let’s learn from history and stop trying to manipulate our milk supply with government policies. Looking 10 years into the future, we need to make sure we have adequate milk supplies for domestic needs and continue to build robust export markets. Dairy producers need a reasonable safety net to buffer margins when feed and milk prices don’t match up, but we don’t need another government program to “manage” milk supplies.
The U.S. dairy industry has great opportunity ahead but must shed the programs that impede innovations and market growth. 2013 isn’t too soon to get started.