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  February 24, 2010

Holden: ‘Congress seeks national milk policy agenda’ Price discovery, electronic reporting top short-term agenda

By SHERRY BUNTING - Farmshine Feb. 26, 2010

LEBANON, Pa.—Even as key aspects of the 2007 Farm Bill have not yet been implemented, U.S. House Agriculture Committee members took talk of future dairy policy outside the beltway over break. Last Thursday (Feb. 18), vice-chair Tim Holden was no exception. He met with 40 dairy farmers from multiple counties in his home district at the Midway Church of the Brethren near here.

“For the long run, Congress seeks a national milk policy agenda, with no more regional warfare,” said the 18-year veteran member of the House Ag Committee.

The good news? Congress is listening and looking for things they can do under the present authority of the 2007 Farm Bill.

The bad news? There will be no significant change to federal dairy policy until the 2012 Farm Bill.

As far away as 2012 may sound, the official start of farm bill discussions—from a policy development standpoint—is already underway. Holden said national hearings across the country will kick off this spring, with the first on an undisclosed date in April at the Pennsylvania Farm Show complex, Harrisburg.

Before the current congressional break, House ag leadership met and “instructed members to get out and talk to their dairy people to find out what they think needs to be part of the solution,” said Holden. “The door is wide open. We want your input.”

Thursday’s meeting here was a sequel to a September 2009 meeting at Holden’s Lebanon office, where about a dozen dairy producers brought the congressman a “short list” of short term and long term recommendations they had put together with 60 of their peers a day earlier.

Zach Meck, Womelsdorf; Nelson Troutman, Richland; and Daniel Brandt, Annville—who are part of the 20-member charter board for the nationally-focused Dairy Policy Action Coalition (DPAC) formed last November—were instrumental in initiating those September meetings, and they organized last week’s meeting with Rep. Holden as well. Bernie Morrissey of Morrissey Insurance provided lunch and moderated the event.

Before lunch, the farmers heard about DPAC’s purpose and progress from members of the coalition board. They also heard from Dennis Wolff, former state secretary of agriculture who is now a government relations consultant with DPAC as one of his clients.

After lunch, Rep. Holden joined the discussion, along with his senior legislative assistant Jake Kuhns. “We have some ideas Jake will run by you, so we can take your suggestions back to Washington with us,” said the congressman.

In the short term, Holden confirmed that he is committed to seeing implementation of electronic price reporting, which was authorized by Congress in the dairy title of the 2007 Farm Bill, but has not yet been implemented by USDA.

“This was never funded, and it’s something we can do—now—without any additional authority,” said Holden, explaining how Congress works by authorizing committees and appropriating committees. Electronic reporting has already been authorized, but the funds have not yet been appropriated.

Wolff noted that Sen. Arlen Specter’s office is working with USDA to “get their arms around what it would cost to implement electronic price reporting.” Sen. Specter is a member of the Senate Committee on Appropriations.

Implementation of electronic reporting is an immediate action priority of DPAC because it would help to improve dairy price discovery and moderate the volatile and at times irrational influence of the thinly traded spot market for cheese, butter and powder on the Chicago Mercantile Exchange (CME). The electronic reporting provision of the 2007 Farm Bill also lays the groundwork for more frequent reporting as well as future inclusion of more dairy products in the prices that are reported.

During Thursday’s discussion, it was mentioned that when USDA was recently asked to provide a budget cost to implement electronic reporting, the request was met with a surprisingly ho-hum response. A department economist suggested electronic reporting is unnecessary because the CME is doing the job just fine.

“I can find 7600 dairymen in Pennsylvania, alone, who will disagree with that,” said Wolff. “One thing dairy producers (and others in the industry) agree on is the price discovery system is broken. Electronic reporting is a key first step to improving it.”

Market transparency was definitely top-of-mind for dairy farmers at the meeting Thursday. “Anything you can do to bring price discovery to light will help take the ‘shell game’ out of the equation,” Troutman said.

Several other dairy farmers voiced similar concerns, citing the ever-widening spread—over the past ten years of industry consolidation—between what consumers pay and what farmers receive.

As one dairyman put it: “Consumers are paying enough for our product, but it’s not getting back to us."

With that, Rep. Holden had his legislative assistant Jake Kuhns run ideas past the attending dairy farmers for their feedback: 1) Reduce the number of milk classes to two—manufacturing and fluid; 2) Increase price stability by moving away from the influence of the CME as the driver; 3) Provide ‘margin insurance’ similar to LGM Dairy or something similar to a crop insurance model.

Holden also wanted the farmers’ thoughts on supply management. According to Kuhns, the CWT (Cooperatives Working Together) program and the Holstein USA Dairy Price Stabilization Program (DPSP) are “two plans we are looking at. What do you think?” he asked the farmers.

“Supply management will not work if it is not tied to imports and exports,” said a Berks County dairyman.

“To have a supply management program, we would have to figure out a way to account for the imports,” Rep. Holden acknowledged. “But the ag committee has no jurisdiction on trade.”

DPAC chairman Cliff Hawbaker, a Franklin County dairy producer, noted that the coalition's supply management action group is beginning to “look at all the supply management plans out there to see what farmers can agree on in that area.”

But, stressed Hawbaker: “Price transparency is the first step we are focused on. We need to get to the way milk is priced throughout the system. We see milk pricing as something that should be simple enough that I can explain it to you as a congressman, and you can explain it to me as a farmer.”

Rep. Holden agreed: “The system has to be simplified, but it has to be done within the big picture of the farm bill. There are other commodity groups that are also in trouble, even if dairy is in the worst shape.”

“The dairy industry—as we have known it—will not survive to 2012,” Hawbaker added.

“This gets us back to the electronic reporting and why it is so important,” Wolff stated. “It’s all about knowing supply and demand. Corn and soybean producers know their market. They can go to the computer and see what their price is doing over a three-hour period. For dairy, the NASS weekly product price survey tomorrow (Friday) is actually information they received yesterday (Wednesday) for the previous week’s sales. That information is two weeks old (or older) on the day it is released. It doesn’t ‘read’ the market. Implementing the electronic reporting we have in the 2007 Farm Bill is the first step.”

A farm consultant attending the meeting brought up the idea of pricing milk based on retail trends with each sector receiving a percentage of the retail price. “I talk to a lot of dairy farmers, and most of them tell me they hate the idea of taking MILC (Milk Income Loss Contract) payments, and they don’t like the federal dairy support program. They don’t like getting their income from the government,” he said.

Several dairy farmers said that while they appreciated the emergency payments Congress authorized in October and paid in December, the funds were a proverbial drop in the bucket, maybe enough to pay one bill.

“Government payments are not a solution, especially when the consumer is already paying enough in the store for our product,” one farmer explained.

Better price discovery, two classes of milk instead of four, and a consensus that dairy product price supports do more harm than good, were three key aspects of long term policy that had wide appeal among the dairy farmers and a good reception from Congressman Holden. But everyone agreed, true reform means digging deeper.

“We also need to push on with the immediate needs, the things in the 2007 Farm Bill that are good things we can do right now," Wolff added. "These are specific issues to improve the complex price discovery system."

“I like what I heard today and what DPAC is doing,” said a Lebanon area dairy farmer as the meeting drew to a close. “We have to address the corruption, and then let the free enterprise system work.”


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