From Jerry Kozak, President and CEO of the National Milk Producers Federation

“While everyone is entitled to their own opinions about the best approach to reforming dairy policy, no one should be allowed to misrepresent the facts or make unfounded assertions. There are several misleading claims that were made in Wednesday’s statement from IDFA President and CEO Connie Tipton regarding the release of a legislative draft by Rep. Collin Peterson (D-MN).

These include:

• The U.S.’s ability to export dairy products will be severely hindered or jeopardized.

FACT: Dairy farmers have invested millions of dollars in building and fostering an export capability, through the creation and continued funding of both the U.S. Dairy Export Council, and the Cooperatives Working Together program. We are fully aware that foreign sales of U.S.-made dairy products are crucial to the current and future health of our industry, and don’t want policies that would detrimentally affect our export capabilities.

In fact, we believe export opportunities will be enhanced with the elimination of the Dairy Product Price Support program, which is contained in this proposal. Currently, the price support program acts as a government-funded buyer of last resort for a limited list of commodities, including cheddar cheese, butter and nonfat dry milk powder. Unfortunately, this program also acts as a disincentive to exports. Once this program is eliminated, markets during periods of surplus will clear more quickly. Product manufacturers will no longer have the incentive to make dairy foods intended only for the government, and every incentive to sell those products on the world market. The price support program has hindered our ability to fully develop and capitalize on foreign markets, as was the case in 2009, when U.S. dairy exports dropped and government price support purchases surged. Foundation for the Future (FFTF) changes this for the better.

• U.S. farm-level prices could become distorted and out of alignment with world prices.

FACT: While the triggers contained in the Dairy Market Stabilization Program (DMSP) are tied to margins, not price, the FFTF program was designed to account for the possibility that periodic discrepancies could occur where the U.S. farm-level milk price is above the world price, creating an imbalance that could incentivize more imports, and/or hinder exports.

That’s why this proposal contains an explicit clause that prevents the DMSP from kicking in if U.S. prices are 20% or more above world prices for cheddar cheese and skim milk powder. This clause will ensure that any market stabilizing slowdowns in milk production don’t unintentionally distort the relationship between U.S. and world prices.

• The program contains new taxes on farmers.

FACT: Any revenue collected from the DMSP will help ensure two things: one, that commercial products are purchased and used for feeding programs that benefit needy consumers; and second, that the costs of this overall package are mitigated through the DMSP revenue collection. The money collected is not a tax on consumers; it’s a user fee paid by farmers which will, only as needed, be used to help stimulate demand, and help defray the overall costs of the Foundation for the Future program. Similar fees are already collected from farmers to pay for the operation of the Federal Milk Marketing Order system.

Dairy farmers understand the importance of this approach in order to keep government expenses down in a period when reducing federal spending is a key priority in Congress. In fact, the Congressional Budget Office calculates that the savings of this program will amount to $166 million over five years, a 25% reduction from the current federal dairy program budget.

• The proposed Federal Milk Marketing Order reforms are insufficient.

FACT: This proposal establishes only two prices for milk: a Class I price for bottled milk, and a manufacturing price for all other forms of dairy products. There is no longer a minimum price for four separate classes of milk, as there is today under the current system. Under the new program, the manufacturing class of milk will be determined by a competitive pay price, and not tied directly to Chicago Mercantile Exchange prices for commodities such as cheese, whey, butter and nonfat milk powder. This evolution is the most significant change in milk pricing in a generation, and will eliminate controversial elements such as end-product pricing and make allowances.”

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 31 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 40,000 dairy producers on Capitol Hill and with government agencies.

Discussion Draft Paves Way for Further Congressional Consideration of Dairy Reforms

ARLINGTON, VA – The effort to make dramatic improvements in U.S. dairy policy took a big step forward Wednesday with the release of draft legislation incorporating the key elements of NMPF’s Foundation for the Future program.

The discussion draft text has been made available by the House Agriculture Committee’s Ranking Member Collin Peterson (D-MN) here: http://democrats.agriculture.house.gov/.

“This is a long-anticipated and very welcome next step in the process of upgrading dairy policy to better provide farmers with protection, stability, and the opportunity for growth,” said Jerry Kozak, President and CEO of NMPF. “We appreciate the attention that Congressman Peterson has brought to this issue, and we will be working with him and his colleagues on Capitol Hill to help advance and implement the concepts of Foundation for the Future.”

The legislative language is termed a discussion draft, rather than a bill, as it now provides members of Congress with the opportunity to allow fellow congressmen, key stakeholders, and constituents the opportunity to view the language prior to the official introduction of a bill. It also allows backers of the draft to seek cosponsors who wish to affix their names to the bill, prior to it being formally introduced.

Kozak noted that the economic impact of the reforms contained in the Foundation for the Future proposal will save the government money, compared to current dairy program spending. Such a development “becomes a critical part of the effort to help us move it forward, because all of the talk in Washington lately has been about cutting spending, and specifically, which farm program expenditures can be reduced,” Kozak said. “We now have a good answer to that question where dairy programs are concerned.”

The Congressional Budget Office has evaluated, or scored, the legislative draft to assess its budget impact, and that process necessitated two changes, compared to the original Foundation for the Future package as proposed by NMPF (which can be reviewed in this magazine describing the program).

With respect to the Dairy Producer Margin Protection Program (DPMPP), the amount of basic (no cost to the farmer) margin coverage has been adjusted to 75% of a producer’s production history. This change saves money, compared to the current baseline for dairy. However, the DPMPP supplemental coverage option remains at 90% of the producer’s production history, as NMPF had proposed.

In addition, due to a number of issues that deal with tax provisions and the overall federal budget deficit, CBO has determined that 50% of any dollars collected as a result of the implementation (i.e. “triggering in”) of the Dairy Market Stabilization Program (DMSP) will be remitted to the Treasury, rather than being spent to purchase dairy products. This provision ensures a measure of cost savings sufficiently significant to reduce the overall cost of FFTF.

Kozak said that NMPF will spend the coming weeks building support for the legislative draft, in anticipation of the subsequent formal introduction of a bill in the House, “with an emphasis on obtaining bipartisan support from across the country for this critically-important improvement in dairy policy. We also hope the Senate will take up the charge, so that we can get the legislation passed and implemented as soon as possible.”

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 31 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 40,000 dairy producers on Capitol Hill and with government agencies.

Producers interested in learning more about the reforms contained in NMPF’s Foundation for the Future may register for 12 meetings being held across the country in July and August that will provide more information on the significant changes in dairy policy contained in the proposal. The three-hour meetings are free to all attendees.

“The U.S. dairy industry has called for dramatic changes in dairy policy, and Foundation for the Future answers that call,” says Jerry Kozak, NMPF President and CEO. “Our summer meetings will explain how Foundation for the Future’s dairy policy reforms will safeguard dairy producers’ equity, ensure the future of their operations, and stabilize dairy markets.”

The meetings, starting next week, are slated to take place throughout the United States between July 12 and August 22. Each meeting will feature an in-depth presentation, and question and answer session led by NMPF’s Kozak, along with other staff. Meeting locations include:

• Olympia, Wash., Red Lion Hotel – July 12
• Visalia, Calif., Holiday Inn – July 13
• Lubbock, Texas, Overton Hotel & Conference Center – July 18
• Alexandria, Minn., Holiday Inn – July 20
• Dubuque, Iowa, Grand River Center – July 21
• Lansing, Mich., Ramada Lansing Hotel & Conference Center – July 26
• Green Bay, Wis., Comfort Suites – July 27
• Stevens Point, Wis., Ramada Hotel – July 28
• Harrisburg, Pa., Holiday Inn Harrisburg – East – August 8
• Syracuse, N.Y., Holiday Inn Syracuse/Liverpool Airport Hotel – August 10
• Ocala, Fla., Hilton – August 12
• Nashville, Tenn., Embassy Suites Nashville Airport – August 22

Dairy producers, milk processors, and other key industry stakeholders are encouraged to attend. Visit www.registration123.com/NMPF/2011FFTF/ to register, and check out www.futurefordairy.com for additional meeting information. Space is limited, so register early.

 

On September 27, 2010, the Mandatory Price Reporting Act of 2010 was signed into law, with NMPF’s support. The Act gave USDA one year to implement newly invigorated and electronic dairy product price reporting in the collection of prices used to set Federal order milk prices. On June 10, USDA published a proposed rule that would:

• Transfer the dairy product prices program from the National Agricultural Statistics Service to the Agricultural Marketing Service (AMS), as NMPF had originally proposed;
• Require plants to report prices electronically;
• Move up the plant reporting deadline by one day, to Tuesday at noon, for products sold the week before ending with Saturday; and
• Set the deadline for publication by AMS at 3 p.m. on Wednesday.

Manufacturers who process and market less than one million pounds per year of the specified dairy products would be exempt from mandatory reporting, as they are now.

Comments on this proposed rule are due August 9; this should put AMS on schedule to implement the rule by the statutory deadline of September 27, one year after the Act’s signing.

The rule can be found online. If you have any questions about this, please contact Roger Cryan at NMPF, or USDA’s Joe Gaynor at (202) 720-9351.

The Obama Administration reached an agreement on June 28th with Senate Finance Committee Chairman Max Baucus (D-MT) and House Ways and Means Committee Chairman Dave Camp (R-MI) regarding how to proceed with the three pending Free Trade Agreements (FTAs), and with the complementary trade program, Trade Adjustment Assistance (TAA), that Democrats have insisted must be part of any plan for advancing the three FTAs.

Continued Senate Republican resistance regarding how to deal with TAA, however, prevented the Finance Committee from considering the FTAs on June 30th. All sides have been continuing to work to find a way forward on these issues, given a desire from all involved to see these agreements considered before the August congressional recess.

The House Ways and Means Committee approved the draft implementing bills for the three pending FTAs on July 7th, although the version the House panel approved does not include an extension of TAA. Meanwhile, the Senate Finance Committee also approved the draft implementing bills on July 7th, and its version did include a TAA extension. As this newsletter goes to press, there is not yet an agreement to submit the FTAs and TAA to a full vote in Congress.

The past few weeks have generated a flurry of action on the labor front. Two weeks ago, Rep. Lamar Smith (R-Texas) introduced a bill mandating use of the Electronic Verification System (E-Verify) for all employers (H.R. 2164). This follows a Supreme Court decision legalizing state mandated electronic verification for employers. The legislation was followed by a companion bill, the Accountability Through Electronic Verification Act (S. 1196), which was introduced by Sen. Chuck Grassley (R-Iowa).

This past month, Sen. Robert Menendez (D-N.J.), along with Senators Patrick Leahy (D-Vt.), Harry Reid (D-Nev.), Dick Durbin (D-Ill.), Chuck Schumer (D-N.Y.), John Kerry (D-Mass.) and Kirsten Gillibrand (D-N.Y.), introduced the Comprehensive Immigration Reform Act of 2011 (S. 1258). This bill includes the AgJobs legislation language, a dairy H2A-fix introduced by Sen. Leahy and Sen. Mike Enzi (R-Wyo.) earlier this year, and some form of a mandatory electronic verification system.

Despite all of the action on this issue, unfortunately it seems as if Congress is far from reaching any type of compromise on labor issues in the near future. The National Milk Producers Federation continues to seek a workable, passable program and is working with all organizations that pursue the same goal: to help U.S. dairy farmers obtain the necessary labor to operate efficiently.

Last month, by an overwhelming vote of 73-27, the U.S. Senate overwhelmingly supported an immediate repeal of the Volumetric Ethanol Excise Tax Credit (VEETC) and the 54-cent ethanol import tariff. The amendment, offered by Sen. Dianne Feinstein (D-Calif.) and Sen. Tom Coburn (R-Okla.), was during the floor debate of a bill related to the Economic Development Administration.

Following the VEETC vote, the Senate rejected an amendment offered by Sen. John McCain (R-Ariz.) that would have prohibited funds from going to the construction of ethanol blender pumps. However, at nearly the same time, the House of Representatives passed a similar measure to Sen. McCain’s, which was introduced by Rep. Jeff Flake (R-Ariz.), by a vote of 283-128. That amendment was ultimately included in the final version of the House Agriculture Appropriations bill approved in June.

The future of these provisions is unclear. Without question, both of these bills, if they were to become law, will look significantly different than they do today. Meanwhile, several Senators are working to find a compromise on the immediate future of the ethanol industry. While still ultimately repealing VEETC and the tariff, a new agreement has reportedly been reached between Sen. Amy Klobuchar (D-Minn.), Sen. John Thune (R-S.D.) and Sen. Feinstein to allow for a transition period for the ethanol industry and continue to encourage the development of non-corn biofuels. The compromise would eliminate the tax credit by July 31, which would provide a savings of $2 billion for the remainder of the year. Of that, $1.3 billion would be directed to deficit reduction. The remaining money would be split between a number of lesser tax credits, including the production tax credit for cellulosic biofuel, an alternative fueling infrastructure tax credit and the small-producer tax credit. If enough support can be garnered in the coming weeks, there is a possibility this agreement could be tied to the debt limit deal currently being debated between Congress and the White House.

In June, Sen. Jim Inhofe (R-Okla.) and Sen. Kent Conrad (D-N.D.) sent a letter to Environmental Protection Agency (EPA) Administrator Lisa Jackson requesting the implementation timeline be extended for the Oil Spill Prevention, Control and Countermeasure (SPCC) rule for farmers. Justifying the need for an extension, the letter lays out a number of concerns with SPCC compliance, including the lack of access to professional engineers, ambiguity regarding recently released Clean Water Act guidance, and confusion over certain responsibilities of ownership. Altogether, 33 senators signed the letter to EPA.

Currently, farms in operation on or before August 16, 2002, must maintain or amend their existing SPCC plan by November 10, 2011. Any farm that started operation after August 16, 2002, but before November 10, 2011, must prepare and use a plan on or before November 10, 2011.

To aid farmers with compliance, NMPF, in part with USDA’s Natural Resource Conservation Service (NRCS), developed an SPCC template to assist dairy producers with SPCC compliance. The NMPF SPCC template is available online. Also, the template isn’t only for dairy producers. According to NRCS, 84% of farmers may be able to utilize the template.

If you have questions about this issue, please contact Jamie Jonker or David Hickey.

The Obama Administration took yet another step this week towards the final resolution of the long-running NAFTA dispute with Mexico regarding cross-border trucking access. Lack of U.S. compliance with NAFTA on this issue has resulted in tariffs being applied to many U.S. cheese exports to Mexico since last August.

The U.S. and Mexico announced on July 6th an agreement on the final details of a plan to put in place a long-haul cross-border trucking program that prioritizes U.S. road safety while simultaneously providing a path towards compliance with U.S. trade obligations to Mexico.

As part of that July 6th announcement, Mexico reported that, effective immediately, it would cut in half the level of all retaliatory tariffs on U.S. exports, meaning that the tariffs on targeted cheeses will drop from 20-25%, to 10-12.5%. This step provides an immediate measure of relief to U.S. exports while the Department of Transportation (DOT) works to evaluate and approve the first Mexican trucking carrier. Once that first carrier is approved for operation by DOT, which is expected in the coming weeks, the remainder of the tariffs on U.S. exports will be lifted by Mexico. NMPF continues to impress upon Congress the importance of not interfering in this process and to underscore that the pains that DOT is taking to ensure that upholding our trade commitments in no way compromises U.S. road safety.

From Jerry Kozak, President and CEO of NMPF

The Supreme Court today struck down a significant portion of Arizona’s effort to prosecute and deter illegal immigrants, but left one key part of that state’s laws intact.

The mixed high court ruling, along with the recent executive order by the Obama administration to stop the deportation of some younger, undocumented individuals, fully illustrates how that, regardless of which path is chosen, the few options for immigration reform remain controversial and divisive. At the same time, these developments also show how critically necessary it is to resolve the immigration policy conundrum, especially for farmers and other employers concerned with maintain and recruiting a workforce.

The court upheld the law’s directive that state and local police may check the immigration status of people they stop when they suspect them of lacking legal authorization to be in the United States. The justices unanimously stated that federal law already requires immigration officials to respond to status checks from local authorities, and therefore federal immigration law does not preempt this section of the Arizona law.

However, much of SB1070 was overturned as interfering in the federal government’s role as the sole arbiter of immigration law. In a 5-3 ruling, the court said Arizona in effect had tried to set up a parallel enforcement system that punished illegal immigrants more harshly and interfered with congressional authority over the nation’s borders. The court rejected parts of the state law that made it a state crime for illegal immigrants to seek work, to fail to carry immigration papers, and that authorized warrantless arrests of people suspected by state and local police of committing deportable offenses.

This decision highlights the need for continued efforts to reform federal immigration laws, and NMPF will continue to work with regulators and lawmakers to create workable solutions for dairy farmers and their workers.

The National Milk Producers Federation (NMPF), based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 30 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.