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  September 2, 2010

Op / Ed by Dennis Wolff

Dennis Wolff is a lifelong dairy farmer, former state ag secretary and partner in Versant Strategies, Harrisburg, Pa.

David and Goliath

When news came to the countryside that the U.S. House and Senate Agriculture Committees were including dairy products in the reauthorization of the mandatory electronic reporting bill in July, the response from dairy farmers was: "Finally," we are moving in the right direction to improve price discovery. 

Unfortunately, when we received a copy of the bill we discovered the magic word "DAILY" was not included in S. 3656 nor H.R. 5852. As currently proposed, the only change would be that USDA would receive the price information via email instead of by fax, and the information would still be five to 10 days old when released by USDA. 

DPAC (Dairy Policy Action Coalition) questioned why the dairy products would not be reported daily like the beef and pork processors are required to report. We were informed it was because of the cost.  What?? The cost, according to USDA, was to write the program and educate the users.  How could daily reporting change the budget number?  Their reaction to this point was, well, so maybe it isn't the cost after all…  but the processors have told us it would be burdensome to report their sales and prices daily. 

I guess pushing that ‘send’ key each day is a considerable burden for them! But, compared with the burden of trying to cash flow a dairy farm with the new debt incurred last year, this “reason” for opposing DAILY reporting fails the common sense test, and that is one thing dairy farmers have: common sense.  To use President Obama's favorite phrase, "someone just got bamboozled".

It sure seems like 60,000 dairy farmers should have an advantage in this debate because we way out number the 97 processors required to participate in the reporting to USDA.  But when you consider the 97 processors are very large companies and united in their policy requests to Congress, while the 60,000 dairy farmers are hard working individuals—more focused on managing their herds than the decisions being made in Congress—you start to realize where the power is.  

It’s like Joe Nichols popular country song "Size Matters", and it applies here.  In this case it isn't the number of farmers versus the number of processors, it unfortunately is the size and power of the lobbying effort.

So why do we need daily electronic reporting?  I think the Chair of the Senate Agriculture Committee, Blanche Lincoln said it best in her analysis of another important bill H.R. 4173—known as "Restoring America’s Financial Stability Act"—reforming Wall Street and the banking industry, which was signed into law recently.  Sen. Lincoln’s opening bullet point regarding that bill was:  “This reform brings100% transparency to the market with real time reporting. They will no longer be able to make excessive profits by operating in the dark. Exposing these markets to the light of day will put money where it belongs."

This is a basic fundamental rule in any market.  Dairy product pricing needs some of this "light of day" to insure farmers are getting a fair market price for their milk.

As the 2007 GAO (Government Accountability Office) report requested by Senators Clinton, Specter, Feingold, Kohl and Schumer states on page 27: "The CME spot cheese market continues to be a surplus market where a few large participants buy and sell cheese and less than one percent of the cheese produced in the United States is traded. In addition, market participants continue to use the CME spot cheese market prices to set most cheese prices in the United States. As a result, concerns about price manipulation will likely remain." 

Dairy farmers, in all parts of the country, agree: We need to dilute the impact of the CME.  We need daily electronic reporting for improved transparency in the pricing of dairy products that ultimately are reflected in our milk checks.

Unfortunately, the Senate already passed their version of this bill.  The House will take up H.R. 5852 when they return on September 13th.  Please contact your Congressmen and Congresswomen, as well as your Senators, and express your opinion on the importance of having DAILY electronic reporting in H.R. 5852 to bring transparency and improved price discovery to federal dairy policy.  We think David still has a chance here. 

To find your Representative or Senator, click here

 For a list of U.S. House Ag Committee members, click here


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