For the November CEO's Corner, we are including the joint presentation made October 27th, 2010 by Jerry Kozak and NMPF Chairman Randy Mooney at the Annual Meeting in Reno, Nevada.

Randy Mooney (RM):

Good afternoon, first let me begin by thanking the NMPF Board of Directors for reelecting me to serve as your Chairman. It is a great privilege and honor, and I appreciate your vote of confidence in having me lead NMPF during what may be its most challenging year ahead. I also want to thank our officers for their support, and the unity they have shown this past year in helping guide us through our strategic planning efforts. All of our officers were fully engaged in a very thorough process, and the consensus reached reflects their leadership. Finally, I want to commend and recognize the tremendous efforts of our talented and dedicated staff in helping to formulate a new Foundation for the Future.

Jerry Kozak (JK):

Thanks Randy, I couldn’t agree with you more, and I am enthusiastic and excited about the prospects of our industry under your leadership, and that of our Board. I couldn’t be more proud of our membership, and the willingness to work together to set a new course for our dairy industry. I hope the Congress and the Administration will take note of our efforts as an example of compromise and getting things done. Our country would be so much better off if, rather than exhibiting partisanship and acrimony in Washington, our leaders would use the dairy industry’s efforts this past year as a model.

RM:

So here we are in Reno. It may not yet be considered a fall classic, like the World Series, but just like Mickey and Roger; Rollie and Reggie; and Derek and Mario; we make a great tandem. This joint presentation by Jerry and me is an important way to summarize what National Milk has been busy doing in the past year. We have taken important actions to position the dairy industry to make huge changes in decades-old policies. We are at the brink of something big, bold, and beneficial to every dairy farmer. At the same time, we have been engaged in a variety of other issues, some of which don’t get the same attention as the high-profile economic ones, but which are just as important to the future of the industry.

JK:

Let me start by lifting a quote from the speech that Randy and I gave a year ago, in Dallas. I said that in the effort to create a plan to make long-term changes in dairy policy – to build a foundation for the industry's future – I advised, “Let’s not kid ourselves that consensus will come cheaply or easily.” Given the magnitude of what we want to do, we knew then, like we know today, that a great deal of effort still lies ahead. However, one year later, we can report that we have achieved a great deal of consensus behind our plan. We are moving forward, as an organization, as a producer community, and if we maintain consensus, we will succeed in getting Foundation for the Future enacted.

RM:

Let me remind you where we were a year ago. NMPF had worked with the USDA and Congress to do a variety of things to help farmers in the short term: reactivating the Dairy Export Incentive Program (DEIP), raising the price support levels, getting government money to purchase cheese. But we knew that short-term fixes were only one aspect, and not the most important aspect, of what we needed to do. That’s why in 2009, I had established a Strategic Task Force, to study and debate the challenges we have been facing, and to come up with solutions.

JK:

Randy was smart to make certain that as part of the Strategic Planning effort, we heard from a variety of voices from within the dairy industry. I think it’s also been prudent not to rush to judge any one quick, or short-term, fix. You don’t unwind or re-write 70 years of dairy policy in a few months. And as much as our members wanted something done immediately, it was apparent that Congress wasn’t going to rewrite dairy policy this year, and even if they did, it might not have been the appropriate way to do so.

RM:

So our Task Force, with its various committees, met numerous times throughout last year, and into this year, to hash out a multi-faceted approach to revamping dairy policy. I hope by now most of you are at least somewhat familiar with it. We spent a great deal of time with it during our Town Hall meeting this morning, and we certainly will be spending even more time and effort after we leave Reno.

JK:

This new foundation acknowledges that current farmer-focused safety nets have outgrown their usefulness. In particular, it recognizes that the Dairy Product Price Support Program hinders the ability of the domestic industry to compete internationally, even while it encourages making products that don’t reflect the realities of a new century. Foundation for the Future weans us from government payments, which in an era of diminished federal resources, has strong bipartisan appeal. Most of all, replacing a price-centered safety net, with one focused on margins, gets at the heart of the problem farmers will continue to face, as the cost of inputs and production rises.

RM:

Apart from the nuances of Foundation for the Future, I believe its greatest asset is that it is achievable. It reflects hours and hours of meetings and calls about what various stakeholders in our industry need, are concerned with, and will support. It’s not a pipe dream or something that only a vocal minority will support. Foundation for the Future is politically practical, and represents something that is attainable, regardless of which party is in control of Congress after this year.

JK:

I also understand that processors have concerns about Foundation for the Future’s Dairy Market Stabilization Program, perhaps in fear that their milk supply will be compromised. Foundation for the Future recognizes that apprehension, and that’s why it doesn’t implement any type of production quota, or attempt to forecast future market needs and regulate the milk supply. Also let me be very clear that it is not a “supply management” program, but rather, a “market management” program - it is not the Canadian system or some other restrictive supply program as some have portrayed. If we don’t utilize this type of mechanism that temporarily addresses market imbalances, then we will witness a huge exodus of farms that will negatively impact milk production. Both sides of our industry, processor and producer, need to acknowledge this fact, and work together to support this program.

RM:

But there are so many other issues that NMPF is dealing with that impact our producers and cooperatives. Let me begin by mentioning the campaign that NMPF has restarted to get the federal government to crack down on the misbranding of imitation dairy products, like rice “yogurt,” and soy “milk.” I have nothing against soybeans – I feed them to my cows – but everyone knows you DON’T GOT MILK if it comes from a bean, or seed, or weed, or nut.

JK:

But that’s exactly what we’re seeing in the stores: everything from soy cheese to hemp milk. NMPF first petitioned the Food and Drug Administration 10 years ago to remind these dairy imitators that the law says milk has to come from cows. We warned that if the FDA did nothing – and that’s precisely what it has done since 2000 – we would have more of these imitators in stores. And that’s what we’ve seen over the last decade.

RM:

So NMPF again sent a letter of protest last April to the FDA, complete with pages of examples of products marketed right there in the dairy case that use dairy-specific terms like milk, cheese, and yogurt. We were able to drum up quite a bit of attention to the issue, including working with USA Today to get a front-page story about our letter. And to get the public involved, National Milk even created this Facebook page called “They Don’t Got Milk,” to highlight examples of misbranded products, and to encourage people to write to the FDA to do something about it.

JK:

Unfortunately, we still have been brushed off by the FDA, which doesn’t view this as a food safety issue, or even a truth in labeling matter. This, despite the fact that nutrition policy is a big issue right now in Washington, and the FDA professes a concern with whether product labels are conveying accurate information to consumers. Well, when it comes to fake dairy products, as a former FDA’er, it pains me to say that the FDA is falling down on the job. And we will continue to highlight that failure until action is taken.

RM:

Jerry, you just mentioned nutrition policy being a big issue in Washington. From what I’ve seen around the country, this is a national issue with local repercussions: schools systems are attacking sugar, sodium and calories, and are in some cases throwing the baby out with the bathwater by banning flavored milks.

JK:

The good news is that we have been very engaged in the Child Nutrition reauthorization debate, and successfully managed to keep a variety of milks in the school meal programs. The bill hasn’t been finalized yet, although it may be taken up during the upcoming congressional lame duck session. The Child Nutrition Act must reflect the federal government’s Dietary Guidelines, which recommend that children and adults continue to consume two to three servings per day of dairy products. Importantly, those guidelines recognize that because dairy foods have so many nutrients, there may be room for compromise on the issue of added sugars and calories that come with flavored milk.

RM:

But because of its prominent role in school feeding programs, milk is under constant attack. It’s being attacked by people who want non-dairy alternatives, often the same ones who don’t want animal products being served, period. Unfortunately, they’ve made some inroads lately.

JK:

The vegan crowd and their agenda is an issue. In years past, their efforts were discounted. But in the House of Representatives this year, the Education Committee supported an amendment creating a pilot project of vegan meals for school children. The larger concern is what is happening right now in the fight over obesity. There are some loud voices, in Washington and across the country, targeting every manner of food that some believe contributes to public health problems. And dairy products are at risk. I want to call attention to the work that DMI has done in this regard, including efforts working with the NFL to make certain that the dairy industry is playing both offense and defense on this issue. We need to realize that not everyone in Washington understands the significant contribution that dairy products play in the well-being of our children, and the important impact that dairy has in helping to address the obesity issue that plagues our population.

RM:

Here’s another high-profile area where we have provided leadership: the issue of raw milk regulation. Even though this is a state-level issue, NMPF has made it clear that loosening restrictions on the sales of raw milk is ultimately a national public health threat. Just in 2010, there have been at least 10 outbreaks of illness from unpasteurized milk, and cheese, with hundreds of people sickened.

JK:

National Milk and the International Dairy Foods Association (IDFA) weighed in this past spring with Wisconsin’s Governor Jim Doyle, urging him to veto a bill expanding raw milk sales there – and he followed our advice. We have also urged the House and Senate, working on a comprehensive food safety bill, to make certain that farms selling raw milk are not exempt from regulations designed to reduce or eliminate safety threats to the food supply. This major food safety reform bill is intended to tighten regulations on everything from peanuts, to tomatoes, to pistachios – but it does nothing to address state raw milk regulations that allow high-risk pathogens in the dairy supply. We’ve made such huge strides in the past 100 years on milk safety; we shouldn’t backslide now because a vocal minority is ignoring the truth and endangering people’s health, especially innocent children who could be harmed for life with a deadly pathogen.

RM:

Another issue where we need Congress to do the right thing is on immigration reform. This has been one of NMPF’s key priorities during the past five years. Unfortunately, the momentum is on the side of those who don’t want to consider any type of reform addressing the real-world issues of our labor force. And while NMPF still supports the AgJOBS bill that would provide a broader reform of immigration laws, we’re always looking for any possible improvements. That’s why we were encouraged to see legislation introduced just last month in the Senate to expand the H-2A visa program to the dairy sector. Right now, only seasonal farm operators can use H-2A visas to bring in immigrant workers, but goat- and sheep-herding farms can also use it. And if the Senate bill can be adopted, dairy farmers will be able to use it as well. It’s not a perfect solution, but it represents progress.

JK:

NMPF also has been fighting for producers on the issue of oil spill regulations. Somehow, the Environmental Protection Agency has confused the threat of petroleum spills with the milkfat in a bulk tank. So we’re fighting this silly bureaucratic folly on two fronts: we have developed a tool for farmers to self-register the oil and fuel storage they do have on their farms, as producers still must comply with requirements for petroleum products. And secondly, we’re working with Congress and the EPA to get the agency to exempt milk from its category of oil products. We will get that loophole closed.

RM:

And we are still facing challenges in the issue of greenhouse gas regulation. While no carbon-focused legislation has passed Congress, the EPA is still talking about regulating a variety of sources of greenhouse gases, and Congress has not been able to stop the EPA from proceeding down that path. We believe this is an issue that needs to be addressed by Congress, not by the regulators, and will continue to work on that front. NMPF’s proactive approach on the air monitoring emissions study was another example of NMPF leading and protecting the interests of our farmers. Data collected by this study, which was funded by the National Dairy Board, will lead to a more practical and sensible approach than had we not taken an aggressive posture on this issue.

JK:

NMPF has also been active in coalitions looking to address the estate tax. If Congress does not act before the end of the year, the estate tax, or what many call the death tax, will return with a vengeance in 2011. At an exemption level of $1 million and a 55% tax rate, the future of our nation’s dairy farm families to continue the cross generational transference of dairy farms will be gravely affected by the estate tax. Instead, Congress needs to address the estate tax with a much higher exemption and lower rate to help ensure the future of American agriculture.

RM:

The good news with Congress is that we were able to get a bill passed creating mandatory, electronic reporting of dairy prices. We have been working to improve the quality of public data on product prices and inventories for a decade. In the last Farm Bill, there was actually a mandatory price reporting provision in there, but it was never funded. This new bill requires the USDA to issue weekly updates, using modern technology, about dairy prices. It’s one more piece of the puzzle to improving the accuracy and transparency of our price discovery mechanisms.

JK:

Each of these issues has either a direct, or indirect, impact on the marketing environment for dairy products, or the ability of dairy producers to run their farms and their businesses. And it’s important that NMPF, as an organization, not lose sight of the day to day operating environment for farmers. Foundation for the Future is a long term plan, but many of the things that impact producers most directly are where we devote much of our resources and staff time on a daily basis.

RM:

We also need to discuss where National Milk took a critical stand, in fact, several of them, in the area of trade policy. We are all aware that the sudden decline in dairy exports two years ago was the primary cause of the dairy depression we suffered from last year. So, maintaining our ability to sell products, domestically and internationally, remains a key concern. But there have been several challenges affecting our balance of trade.

JK:

The best known is the sudden shift in somatic cell count (SCC) compliance levels for our exports to the European Union. Currently, the U.S. testing program for dairy shipments to the E.U. requires that milk supplies – at the plant level – have to be no more than 400,000. Earlier this year, however, USDA informed the industry that going forward, the EU would need proof that SCC testing was being done for individual farms, not just tanker loads or silos of milk. This jeopardizes a significant export market for whey and other dairy products. We are currently crafting a transition plan that allows us to control the changes that may take place in future years. It is another example of NMPF leading instead of following.

RM:

But the even worse precedent here is that the EU would be applying a quality measure as a barrier to trade. It’s not even clear that Europe’s own farms could meet an absolute and constant limit of 400,000. But NMPF has jumped into the fray to negotiate a more reasonable approach to this issue. Working with the U.S. Dairy Export Council (USDEC), we have met with trade policy officials from the U.S. and Europe to make clear what our industry will not tolerate, and what is equitable for U.S. dairy farmers. And I hope that in the end, cooler heads prevail.

JK:

We’ve also dealt with another situation in China, where earlier this spring, the Chinese government suddenly and unexpectedly called into question whether our dairy exports met their health criteria, even though our industry’s track record for safety and quality is impeccable.

RM:

And while our exports to China have been permitted to continue for now, there is still this feeling of unease; that the situation could turn against us, and jeopardize a major export market. This demonstrates how important it is to keep the lines of communication open, and to continue to negotiate with our trading partners.

JK:

And now Russia has arbitrarily cut off imports of various products from several countries, including our dairy sales, and once again NMPF is in the forefront of that fight. Now even Cooperative Working Together (CWT) exports may be impacted, and we are determined to fight this type of capricious effort to prevent our products from losing out in the global marketplace. Continued negotiations are also the key idea behind what is happening with our exports to Mexico.

RM:

Earlier this summer, Mexico imposed tariffs on U.S. dairy exports because our country is in violation of its NAFTA commitments – not in the area of agriculture, but trucking. We’re blocking their trucks from making deliveries to the U.S., even though the U.S. agreed to allow Mexican trucking companies access to our market. Because of this, Mexico is imposing tariffs on cheese, and could opt to target more dairy products in the future. We simply cannot afford to let that happen. That’s why NMPF and USDEC have been working extensively to convey to the Administration and Congress the harm the tariffs are causing, the importance of that market to milk prices, and the necessity of finding a way to rationally resolve this situation. The last trade challenge is also the most far-ranging, and one we’ve talked about before: a potential free trade agreement with New Zealand.

JK:

To us, it doesn’t seem fair to pit the U.S. dairy industry against the virtual monopoly that New Zealand has domestically. It doesn’t seem reasonable to ask our farmers to swallow a free trade deal that could cost them upwards of $2 billion a year just to appease New Zealand’s long-held goal of prying open the U.S. dairy market. That’s not a good business deal, and not one we’re ready to sign our industry up for. That’s why NMPF has led the charge – with strong support from USDEC and many processors – to seek the full exclusion of U.S.-New Zealand dairy trade from the Trans-Pacific Partnership Free Trade Agreement. These negotiations are still ongoing, but we believe NOW is the time to make our voices heard to impact the talks during the process.

RM:

Another key focus for us this year has been animal care, where we continue to do battle with well-funded, highly-motivated opponents who want to do away with livestock agriculture. Meanwhile, we have a public that ranges from apathetic to fearful about food safety, animal welfare and the future of farming. You’ll recall that back in January, ABC News devoted a segment on Nightline to talk about the alleged evils of dairy farming, specifically focusing on tail docking. NMPF was fully engaged in educating the producers of that segment about the quality care that farmers give their animals. Unfortunately, the story ended up being a “glass-half-empty” focus. The only good thing is that it didn’t question the safety of our products, and it wasn’t a blanket indictment of all dairy farms.

JK:

But that story and subsequent undercover videos coming from farms – along with the huge egg recall this past summer – have continued to keep the pressure on farmers and ranchers. And in addition to playing defense, we need an offensive playbook as well. That’s why we have the National Dairy FARM program: to demonstrate and quantify the commitment that our farmers are making to responsible animal care. It’s the answer to a question that more companies, and consumers, are asking. It provides retailers with a national, uniform assurance program and avoids retailers and other customers requiring different guidelines.

RM:

At the end of the summer, National Milk announced that the FARM program has entered into its second phase: enrolling individual farms, and cooperatives, into the program. Remember, this is a voluntary effort. If your part of the dairy marketing chain is not concerned with demonstrating animal care practices, then there’s no need to proceed. But if you think it’s a question of not if, but when, your customers are going to ask about how cows are treated on the farms where their milk comes from, then I hope you will consider the value of the FARM program.

JK:

I have said over and over again that the best way to defend ourselves is to do all the right things and we are – FARM is a shining illustration of how to be proactive and demonstrate our commitment to proper care of our animals. We can spend all of our promotion dollars defending ourselves, but it is no longer acceptable just to say we are doing it; we have to verify our practices to customers and consumers. The FARM program’s validation has been questioned, with some asking why we need it. Well, the recent egg recall is testimony why: it is no longer acceptable for any industry to self-certify their own results. An independent, detached verification program that passes the smell test is necessary, and that is what FARM is putting in place. Once again we are leading, not following.

RM:

While this is the second annual meeting at which I served as Chairman, this is the first where we are missing – and I mean that in many senses of the word – where we are missing former Chairman Tom Camerlo. As many of you know, Tom was ill during last fall’s conference, and he passed away shortly afterwards.

JK:

We’ve been thinking about how best to recognize someone who was so instrumental in leading this organization. He really left an indelible stamp on the entire dairy industry, and beyond eulogies and memorial services, I know that Randy and I felt something else, something special, was needed to recognize someone who was so special himself.

RM:

That’s why we are creating a new award category: the NMPF Leadership Hall of Fame. The purpose of this award is to recognize individuals possessing superlative and unparalleled leadership abilities, whose lasting accomplishments have brought about the betterment of the National Milk Producers Federation as an organization, and the dairy producer community it serves.

JK:

We will have more on this tomorrow, when we present the award posthumously to Tom. But I hope you will agree that if there was ever anyone who deserved some type of recognition along these lines, it is Tom. His presence and leadership is still evident in our organization, and will be for years to come.

RM:

And let me say that if there was any one thing that Tom really strove for during his nearly 20 years as chairman of NMPF, it was keeping farmers, and their cooperatives, working together. CWT is a product of that mentality, but it was by no means the only type of program or organization that reflected Tom’s great interest in building a sense of collaboration and cooperation among farmers. I am sure that Tom would be happy to see that CWT’s Export Assistance program will continue at least another two years.

JK:

So to end this presentation, we’d like to believe that Tom would look with great favor upon the Foundation for the Future that we are still in the process of building today. Making changes in dairy policies that date back decades is not easy; it does not come without controversy, or compromise or personal commitment. But it needs to come.

RM:

Tom, first among all people, would acknowledge that fact. And I hope that those of us still serving in leadership capacities in our respective organizations will heed that legacy, rise to that challenge, and pitch in together to finish constructing our mutual Foundation.

JK:

There have been many well-intentioned ideas and proposals over the past year, and we have incorporated many of them in the Foundation for the Future – it is no longer a NMPF plan, but a plan for everyone in the producer and processor community.

RM:

But now the time has come to RISE behind the one comprehensive plan that has the best chance of achieving success, and one that has been a series of calculated choices, with much compromise.

JK:

I am reminded of what Colin Powell observed about the Founding Fathers: “Just as they did in Philadelphia when they were writing the Constitution, sooner or later, you've got to compromise. You've got to start making the compromises that arrive at a consensus and move the country forward.” It’s time for all of us to RISE up and move in a new direction through the Foundation for the Future.

RM:

It will be a tough fight and a long road to the finish, but together we can rise above our differences and get it done. Some have questioned NMPF’s sincerity in keeping this package together – let me assure everyone that we are fully committed to all aspects of the Foundation for the Future.

JK:

I want to share with you something that I haven’t discussed publicly before, because it brings back a painful remembrance of my dear friend and long time Chairman Tom Camerlo. It was in the early fall of 2009, when Tom was optimistically recovering from surgery, but unfortunately, it was the last time I spoke to him. It was a clear and sunny fall day and I was sitting on our patio talking to Tom over the phone - our call lasted an hour and a half, with Tom counseling and advising me as he so often did. I was preparing for our annual meeting and our continued deliberations on Foundation for the Future. As usual, he was the ultimate cheerleader and motivator. His words to me that day were: “No matter what obstacles, no matter how much criticism, no matter how many differences there may be, it is crucial that you as CEO of NMPF push forward to gain consensus to change the direction of our industry and its future. Nothing must stop us from achieving our goal.” His words ring in my ears every time I discuss Foundation for the Future: “don’t stop, Jerry, I am counting on you to get this done – this will be the most important thing you will do at NMPF.” It is a quite a mandate from quite an exceptional individual.

RM:

Jerry, that is so much like Tom; even in the face of his own personal adversity, he always was thinking about our producers and cooperatives. And I want to commit to you and everyone else that we will not stop until we see Tom’s dream come true. Together, we will not stop.

JK:

Thank you Randy - now is the time to RISE above our individual differences, to RISE above our own personal preferences, to RISE above our own egos, and more importantly to RISE against the fear of change and push forward with Foundation for the Future for the collective good of our industry.

RM:

Let’s use this meeting here in Reno to leave here pledging to work together in a partnership that will steer a new course, create a new path, that helps protect, stabilize and grow our industry.

JK:

Today, we should leave here with a great sense of pride, optimism and hope, for the RISING of a new Foundation for the future of our industry.