November 12, 2002
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Phone:(703) 243-6111
email:CGalen@nmpf.org
I wish we could take more pleasure in milk prices right now; it¡¦s been a hard year for all dairy farmers. The USDA says farm income from milk production this year is going to be down 20% from last year ¡V that¡¦s a huge drop. On behalf of NMPF, I want you to know we are aware of the painful situation we farmers are in, and the struggles we¡¦re facing. I don¡¦t want to dwell on it, since that often just makes us feel worse, but this is obviously a big challenge for the entire industry. We will talk this week about some possible solutions to the economic challenges farmers are facing.
I also want to spend time today examining the good news for National Milk and its members during the past year. So often, when we¡¦re surrounded by clouds, it¡¦s hard to see the silver linings, but they are out there. That¡¦s what I¡¦ll spend some time focusing on this morning.
No doubt the most exciting development for NMPF was the passage of the 2002 Farm Bill last May. Virtually all of the elements that our organization had hoped to get passed in the Farm Bill were part of the final measure. There were some disputes over the new direct assistance program ¡V which I¡¦ll talk more about in a moment ¡V but on the whole, the formulation of the 2002 Farm Bill was much less contentious compared to previous efforts.
And that is a great tribute to you, the members of this organization. We began working together two years earlier to plot out a road map for farm policy, agreed on some core strategies, and worked together to bring the farm bill to fruition. It was a formula for success that had its beginnings in 2000 with the Dairy Producer Conclaves. The regional conclave meetings allowed farmers from across the country to discuss priority issues, and come to consensus on the things most important to them. We couldn¡¦t have achieved the successes in this year¡¦s Farm Bill without the seeds that were planted by the Dairy Producer Conclaves. Jerry Kozak will talk in a moment about putting this successful formula to use again, as we look toward the future.
I want to take a minute just to highlight some of the many items we were successful in including in the Farm Bill:
„Ï Extending the price support program ¡V No other economic program provides as much bang for the buck as the price support program. It¡¦s not a perfect safety net ¡V no program is ¡V but it does provide a modest floor under farm prices at little cost to the government. Considering that the `96 Farm Bill eliminated the price support program, getting it extended for another seven years was a major achievement.
„Ï A new national Johne¡¦s disease control program ¡V I mention this as a major achievement because, first, it was done despite stiff opposition from beef producers. Second and more important, it illustrates a key principle that guided National Milk¡¦s philosophy concerning the Farm Bill: namely, that economic programs should not be the sole focus of any farm bill. We need to look at future farm policy as a portfolio of different items, including those that focus on animal health. Johne¡¦s disease is an emerging challenge for our producers, and now we have a national program, coordinated through the USDA, to help address it. This is a perfect example of how we can work on more than just economic issues to the benefit of all producers, large and small, regardless of where they are located.
„Ï Requiring dairy importers to pay their fair share into the National Dairy Board for promotion ¡V Although small in scope, this effort to apply the checkoff to imports turned out to be a real struggle. And this was largely the result of dairy importers hoping to avoid paying their fifteen cents to help promote the products they are bringing into the U.S., such as cheese, Milk Protein Concentrate and casein. In the end, Congress recognized this as a basic matter of fairness. If those importing these dairy products benefit from the world¡¦s largest dairy market, why shouldn¡¦t they cough up their share for promotion? We all know that imports of cheese are affecting the supply and demand balance of our domestic market. It is time to end the free ride that foreign importers have had at the expense of America¡¦s dairy farmers. It was unfortunate that some producers joined an alliance with the importers in opposing the import assessment. But common sense prevailed, and soon the National Dairy Board will have some additional funds to help grow the market.
„Ï Increased funding for dairy producers through the Environmental Quality Incentives Program ¡V With the greater emphasis on environmental regulation, the Farm Bill proved to be a great asset for farmers. The bill has boosted funding for the EQIP by nearly one billion dollars per year ¡V that¡¦s almost double the current level, with 60 percent of that allocated for dairy and other livestock producers. We also fought to expand the eligibility caps for the program, meaning that producers of all sizes have better access to the funds. This, too, is a good example of how the Farm Bill can provide benefits not directly tied to economic programs.
„Ï We extended the Dairy Export Incentive Program for another seven years. Given the buildup of skim milk powder, and commercial stocks of butter and cheese, the DEIP is one of our main weapons to help sell some of that product overseas to clear our markets. We have had some challenges with the USDA over how best to manage the DEIP, but this is a vital program for the dairy industry, and it illustrates again that trade issues and domestic economic policies are directly linked together.
„Ï The Farm Bill also increased funding for the Market Access Program (MAP) from 90 million dollars a year to 200 million. The MAP is another important export tool because it helps provide funding to the U.S. Dairy Export Council. The bill also contained a technical fix in the language telling how USDA should conduct mandatory inventory and price reporting surveys.
No doubt the most notable item for most dairy producers in the Farm Bill is the new direct payment program, now referred to as the MILC program. I will be very frank about this initiative: it was not an initial priority for National Milk, and we did not lobby in favor of it in its early stages. But once it was apparent that congressional leaders were determined to provide some sort of direct payment program for dairy farmers, we lobbied heavily on two key points.
First, we said that any direct payment program must be national in scope. You¡¦ll recall that 12 months ago, when it was first proposed in the Senate, the program was two-tiered: it had a higher payment rate in the 12 northeastern states, and a lower, less certain payment rate in the rest of the country. Our message to the Senate was clear: we could not support a program that created regional divisions or that had widely-varying benefits. Any such program had to be national in scope and consistent in its compensation. And I¡¦m very pleased to report that our perspective on this matter carried the day.
The second matter, where we were less successful, was in arguing against volume or payment caps for the program. We believed that eligibility caps unfairly penalize medium and large-sized producers. But the political powers were opposed to an unrestricted program. Politics always has, and always will, be about compromise and conciliation.
As the MILC program has been implemented, National Milk has been adamant in lobbying both Congress and the USDA that it be administered fairly. We have been greatly disappointed in USDA¡¦s decision not to give producers the choice of when to begin the retroactive transition payments. By forcing all but the very largest producers to start with last December¡¦s low monthly payment rates, the USDA reduced the potential benefits of the MILC program by nearly 50 million dollars. National Milk was very successful in generating some outrage among members of Congress over how the USDA administered the program. But for whatever reason, it wasn¡¦t enough to force their hand ¡V not yet, anyway.
So this has been an extremely busy year for NMPF on the policy front, almost all of it surrounding the Farm Bill¡¦s passage and implementation.
But our efforts haven¡¦t stopped there. We have been very active in working to stem the flow of imported dairy proteins coming into this country ¡V products that are adversely affecting the domestic dairy supply, and ultimately, hurting our pay price. As you know, we have been pushing the House and the Senate to pass legislation imposing tariffs on imports of both Milk Protein Concentrate and casein. Congress has yet to act on these bills, but there¡¦s hope something can be done in the upcoming lame duck session of Congress. If not, we¡¦ll start over with the new Congress, and we already have dozens of sponsors in the House and Senate waiting to take up the fight once again.
But our efforts to deal with MPC imports haven¡¦t centered just on the tariff legislation. We¡¦ve taken some additional steps. First, we have formally petitioned the U.S. Customs Service to do a more proactive job in policing the MPC products coming in. We believe that many items labeled ¡§Milk Protein Concentrate¡¨ are, in fact, blends of skim milk powder, casein and whey. These are not truly MPC; they are essentially blended milk powder mislabeled as MPC to avoid paying the tariffs that nonfat dry milk imports would normally have to pay. The Customs Service has turned a blind eye to this issue, and, so far, has declined to take a strict approach to limiting which products can call themselves MPC. But we are now in the middle of an effort to force the Customs Service to defend their overly-liberal definition of what counts as MPC. I hope this will slam the door on foreign exporters who are taking advantage of our government¡¦s lax oversight of this matter.
The other thing NMPF has done to blunt the impact of imported dairy proteins is ask the Food and Drug Administration to do a better job of enforcing existing dairy product standards. The nation¡¦s largest cheese marketer is currently selling American cheese singles that list MPC as an ingredient. Technically, that¡¦s illegal. You can¡¦t use MPC in a standardized cheese such as American. Unfortunately, like the Customs Service, the FDA so far has turned a blind eye to this illegal use of MPC. We have met with FDA officials on this point, and asked them to make this a front-burner issue. Our food code should stand for something. Farmers have to abide by strict regulations, so why shouldn¡¦t processors?
In a similar vein, we have kept the pressure on the FDA to enforce dairy labeling standards, so that imitators such as soy processors can¡¦t use terms like milk, sour cream or butter. These are dairy terms, and the law says so. You don¡¦t ¡§got milk¡¨ if it comes from a soybean. We have to defend the dairy franchise we have worked so hard over the years to create, so that our competitors can¡¦t steal our terminology to use against us.
These are all tough issues for us as an industry. They fully illustrate that we will always have competition, whether from foreign imports, or domestic imitators. Our elected officials and state and federal regulators will not always agree with our viewpoint, nor will they always act quickly and decisively. The key to getting anything is persistence and patience. I believe we can prevail on these, and other issues. Not overnight, but with time.
And I¡¦d like to hold that thought as I conclude, because the message about persistence is very appropriate for the final accomplishment we had this year. It¡¦s only a coincidence that we are in California this year, just one month after California Dairies has joined NMPF. But we are most happy to come to California to welcome our newest member. I want to recognize the Board and members of CDI. Jerry and I, and the other leaders of NMPF, have long believed that farmers and their coops will have greater influence and be more effective by being part of our team. I hope the achievements in the Farm Bill that I just mentioned are good illustration of where, working together, we accomplish more than we can individually.
NMPF is not a large organization with limitless resources. But as Mark Twain noted, ¡§it¡¦s not the size of the dog in the fight, it¡¦s the size of the fight in the dog¡¨ that matters.
It¡¦s only through working together that we¡¦ve been able to accomplish all the things I just mentioned. Achievements are rarely the result of individual effort; NMPF¡¦s achievements are the direct product of cooperatives and farmers pulling together as a team. Agreeing on doable goals, uniting behind a common purpose, making the necessary compromises to achieve a win-win objective ¡V these are the hallmarks of a successful team. That¡¦s what we have at NMPF.
Thank you for allowing me to served as your board chairman. I have really enjoyed the responsibility, and I look forward to another great year ahead.
Thank you.