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From The MPC Newsletter
Friday, October 8, 2010

Nation's Processors Reveal Their Strategy: Don't Argue the Facts, Argue Emotion
By Rob Vandenheuvel, General Manager

As the readers of this newsletter know, MPC and a growing number of other producer groups and coops around the country are working hard to promote production management as a strategy for moderating the extreme boom/bust cycles that have become all-to-common in our milk price.  The idea has found support not only as a standalone legislative proposal (The Costa/Sanders Bill, or H.R. 5288 and S. 3531), but also as a part of the “Foundation for the Future” proposal being developed by the National Milk Producers Federation (NMPF).

The producer side of our industry could have easily predicted that the nation’s processors would be opposed to any efforts to give producers more control over our future growth in milk production.  But what we didn’t know is what strategy the processors would use to combat our efforts.  This past week, we got a direct look inside the playbook of the International Dairy Foods Association (IDFA), the powerful national lobbying wing of the processing sector.

Yesterday, IDFA sent out a press release entitled, “Government-Mandated Milk-Supply Controls Adversely Affect Dairy Industry Growth, New Study Finds.”  A few excerpts from the press release are included below, and the full text of the release can be found at: http://www.idfa.org/news--views/news-releases/details/5236.

A new study of government-mandated supply controls and their impact on the dairy industry in other countries shows that added controls on milk supply do not prevent price volatility and can have an adverse effect on an industry poised for growth. The report by Informa Economics, "An International Comparison of Milk Supply Management Programs and Their Impacts," examines what happened in Canada, the European Union and other countries when government-mandated supply controls were implemented and enforced. It outlines the negative impact a government-run supply-control policy has on the industry, especially at the farm-management level.

The study concludes that supply control programs limit exports, create an economic incentive for imports, increase consumer milk and milk-product prices, and add layers of bureaucracy to government oversight systems.

Hopefully, IDFA didn’t spend too much money on this analysis.  MPC and a vast majority of the dairy farmers in the United States would have been willing to stipulate that a Canadian-style quota system would be a bad idea for the U.S. dairy industry.  That is why despite the devastation felt by dairy farmers throughout the 2009-2010 wreck, there continues to be no push to advocate that kind of policy.  If IDFA’s main concern is that producers not advocate for a Canadian-style quota system, I can assure them that as far as MPC and the producer groups we work with are concerned, we would oppose that type of policy right along with IDFA.

Instead, what MPC and others are advocating is a rational proposal on production management, sending direct economic signals to individual dairies to manage future milk production.  Nothing in either the Costa/Sanders Bill or the “Foundation for the Future” would give the government any ability to mandate a specific production level or prevent a dairy from growing their share of the market. 

The value of raw milk sold by dairy farmers is not a huge mystery.  It is the result of the market’s interpretation of how well supply and demand are balanced.  All MPC and others are trying to accomplish is to quickly send the signals that dairies need to help keep those two things in better balance over the long term.

We are very cognizant of the fact that the U.S. dairy industry is increasingly involved in the global marketplace.  That can be a very positive thing for our dairy farmers, which is why producers take it very seriously when critics of our proposals claim that we are trying to kill our chance of exporting dairy products.  That is why MPC and several producer groups and cooperatives from around the country joined together to hire Dr. Mark Stephenson and Dr. Chuck Nicholson to utilize their respected economic model to analyze the proposals being made.  That analysis, which was published a couple weeks ago (http://dairy.wisc.edu), clearly stated the proposals would significantly reduce milk price volatility and government expenditures when compared to the status quo.  According to their analysis, reducing the huge swings in our milk price can be done without “shorting” the market of needed milk and without greatly enhancing the average long-term milk price, which in turn results in a U.S. dairy industry that will continue to play a major and growing role in the global marketplace.

We need to remember our goal in these proposals.  We are looking to provide dairy producers with the necessary tools to maintain better balance in supply and demand.  That balance won’t eliminate all volatility, but it will help us avoid or greatly shorten the periods of oversupply that devastate the value of milk and our dairy operations.  Producers are the only ones who pay the price when we get into an oversupply situation – and it’s a steep price.  We’ve seen the tools we have, and they are simply not effective.  It’s time for a rational alternative.

No where in the analysis released by IDFA is the Costa/Sanders Bill or NMPF’s “Foundation for the Future” ever referenced.  Why is that?  What value does the report add to the debate if it ignores the details of the actual policies we are promoting?  Could it be that it’s easier to attack the Canadian quota system than to debate the merits of what is actually being proposed here in the United States?  As the old adage goes: “When you have the facts, argue the facts.  When you have the law, argue the law.  When you have neither the facts nor the law, pound the table.”  If you listen closely enough, you can probably hear the pounding noises coming out of IDFA’s headquarters in Washington, DC.

 

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