Dairy Industry Gives US Dairy Policies a Bad Report Card: Three 'Ds' and an 'F'

IDFA testifies current U.S. dairy policies fail consumers, dairy farmers and processors.

Published on: Jul 20, 2006

The International Dairy Foods Association issued failing grades to current national dairy policies during the Senate Committee on Agriculture, Nutrition & Forestry Oversight Hearing. Noting that most federal dairy policies date back to the 1930s and 1940s, IDFA issued a lackluster report card calling the outmoded programs damaging, distorting and divisive.

"Regrettably, our nation's dairy laws are stuck in a bygone era and are 'D'amaging to trade, 'D'istorting to markets, 'D'ivisive regionally and ultimately 'F'ailing producers, processors and consumers," says Chip Kunde, IDFA senior vice president. "Dairy processors want to work hand in hand with Congress and the Administration to write a new Farm Bill that passes the test of common sense and fiscal discipline as it relates to updating our dairy policies."

"Today's Senate Agriculture Committee provides a great chance to educate Congress on the current maze of dairy programs that often work against one another," says Kunde.

Jim Green, IDFA chairman and president and CEO of Kemps LLC, a Minnesota- based company, testified that "the outmoded dairy policies of today are preventing U.S. dairy producers and processors from taking full advantage of new opportunities here and abroad. Dairy processors across the country support a safety net for dairy farmers. However, we believe the current set of programs is failing the industry and consumers."

Green noted that USDA currently administers two costly and conflicting support programs. "The Dairy Price Support Program essentially encourages overproduction of nonfat dry milk and discourages production of valuable dairy proteins," says Green. "The Milk Income Loss Contract program actually works at cross purposes with the price support program by stimulating overproduction, resulting in huge government outlays and regional divisions among dairy farmers." Through September 2005, USDA reported over $2 billion in MILC payments were made to dairy producers. During this same period, USDA also spent $1.5 billion purchasing dairy products, mostly nonfat dry milk, under the dairy price support program.

Green highlighted the Federal Milk Marketing Order system as a classic example of how dairy policies no longer reflect today's market demands and technological advances leading to unintended and undesirable consequences. "The current federal orders have become unresponsive to on-going changes in the industry and in markets." Green says.

"The most recent example is USDA's failure to update much needed cost adjustments, or 'make allowances,' in federal order pricing formulas in a timely fashion," Green continued. "Every month of delay is costing dairy processors $26 million."

Green also urged the committee to learn from past successes and reinstate the Dairy Forward Contracting Pilot Program permanently. "This program simply levels the playing field by making forward contracting available to all producers and processors. This fair risk management tool allows all producers to control their own future and not rely on government subsidies to ensure their livelihood."

In closing, Green expressed hope that Congress would update and improve dairy policies to put the industry on the right track for future success. "Clearly, three 'Ds' and an 'F' do not make the grade and we look forward to working with Congress and dairy producers to achieve excellence in future dairy policy. The industry is too vital to our nation to demand anything less," says Green. He testified that the 2007 Farm Bill provides an opportunity for Congress to begin a transition towards a single, national safety net for dairy farmers, a level playing field for producers and processors, and a more flexible and responsive Federal Milk Marketing Order system.