National Milk Producers Federation

For the November CEO's Corner, we are including the joint presentation made November 15th, 2011 by Jerry Kozak and NMPF Chairman Randy Mooney at the NMPF Annual Meeting in San Diego, California.

Jerry Kozak (JK):

Good afternoon, everyone. Thanks for joining us today. I know that our presentation is all that’s standing between you and the cheese reception, so we’ll try to make this short and sweet. Let us begin by reflecting not on the time of day, but on the time of the year.

Last Friday was Veteran’s Day: the 11th day of the 11th month of 2011. So it’s appropriate that we start this speech by acknowledging and thanking the veterans in our audience. Let's have our veterans stand, and let us thank them for their service to our country.

Randy Mooney (RM):

And next week, of course, is Thanksgiving. I want to thank my wife Jan for her support as I serve in this role. I should also thank Gail Kozak, for allowing Jerry to spend the time and effort that goes into his role. I know that requires a whole lot of patience and support. It’s also worth pausing a moment to reflect on the things for which we are grateful. Certainly, 2011 was a better year for dairy farmers than the previous two years, and we can be thankful for that. That said, the U.S. economy continues to stumble along, and farmers have every right to be nervous about what that means for consumer demand, and dairy prices.

Closer to home, I think the thing we should be very grateful for is the unity that our organization has shown during the past two years that we’ve been working on major dairy policy reform. It’s been a long road since the creation of a Strategic Task Force in June 2009 designed to come up with a better safety net for dairy farmers…and yet, the end is now in sight.

JK:

But rather than first talking about how far we’ve come, it’s important to remember that we still have a ways to go…and if we falter in our efforts to work together; if we flag in our pursuit to seek consensus and compromise; and if we get fatigued before we cross the finish line…then we will fail. We’ll fail because the forces of division and dissension have gained the upper hand. We’ll fail if we end up with a dairy program that most resembles the status quo. We’ll fail because all the good intentions in the world aren’t enough to get this job done; we need a continued commitment to the hard work necessary to succeed.

RM:

And I think it’s worth reflecting for a moment on what the definition of success really ought to be. From where I stand, success is coming up with a better, more innovative way of preventing an economic crisis down on the farm; a better way of using limited federal resources to provide a safety net that treats all dairy farmers equally. That’s what we’ve been working on these past few years. I would not define success as a perfect program, or one that has to satisfy everyone. Ultimately, success in dairy policy reform is working together to get something better than before.

JK:

That’s why one of the key things we did in 2011 was to road test the Foundation for the Future program. Earlier this summer, I took a few senior staff with me on a coast to coast tour, stopping in 12 cities, in 11 states, from California to New York. The primary purpose of this was to speak directly to farmers about the need for dairy reform, and why the FFTF program achieves that goal. But the other very important purpose of this summer grassroots tour was to listen to what farmers had to say, hear their stories about their hopes and fears, and most of all, to see where we could improve things. This gave us an unfiltered insight into the producer community’s view of FFTF.

RM:

At the town hall meeting earlier today, we spent a great deal of time walking through the process of how Foundation for the Future has evolved into the Dairy Security Act in Congress. I’m not going to revisit those details, but I do want to make an absolutely critical point: this legislative package – and it is a package, not just a quick-fix rifle shot – has been more thoroughly vetted than any other dairy program in my lifetime. We’ve spent two years, in a very public and transparent manner, seeking input and listening. So it’s not a stretch to point out that the MILC program, when it was adopted a decade ago, didn’t undergo the same sort of scrutiny. Neither did the price support program, back in the 1940s.

The Foundation for the Future program has changed from its inception. It will probably change some more…that’s how the legislative process works. But we have really put Foundation for the Future under a microscope and studied it relentlessly. And it’s a better program as a result. I want to single out Congressman Collin Peterson for his leadership and hard work on our industry’s behalf, as well as Congressman Mike Simpson for his leadership and co-sponsorship of the DSA. But now is the time for all producers to rally behind this effort, and stop quibbling about their self interests, and get behind the DSA.

JK:

While our efforts this past year on behalf of Foundation for the Future have been significant, there’s been a lot going on in other areas as well. Let’s talk now about a few of the regulatory issues we’ve been dealing with. For something you can’t even see, somatic cells have been very visible as an industry issue. Earlier this year, NMPF pushed for a gradual reduction in the maximum threshold of allowable somatic cell counts, from the current 750,000, down to 400,000. At the meeting of the National Conference of Interstate Milk Shipments, we backed a proposal to phase in that lower level, while giving state regulators the power to make some reasonable exceptions due to extreme events, like the weather. Unfortunately, that proposal was voted down on a one-vote margin…so the 750,000 level stays for now.

RM:

What’s ironic about that outcome is that we may end up with a 400,000 limit through an entirely different process. The European Union has been pushing the U.S. to certify that dairy exports from our country meet a 400,000 cell limit. That limit already exists for each tanker load of milk, but now they want it applied to each farm. Now, we know that Europe’s own farms don’t always meet that limit, but the bottom line is that we’re expecting this process to result in an effective limit of 400,000 when it’s phased in.

JK:

Another issue we’ve grappled with in the past year is drug residues in the tissues of culled dairy cows. As we’ve discussed in the past, the Food and Drug Administration has taken notice that a significant portion of residue violations come from dairy animals, and has been moving forward with a new screening program aimed at the dairy industry. They are targeting roughly 900 farms that have had tissue violations in the past few years.

RM:

The problem with the proposed screening program that the FDA has been working on is that it intends to take samples from testing labs. There’s no precedent for that approach, nor is it even clear that they can legally take those samples. But that’s what they’re planning. A related concern we have is that any samples they collect won’t be adequately blinded, meaning, it will be possible with a little poking around to find out which farm produced that sample. So what is intended to be an anonymous process could be anything but that.

JK:

We have gone back and forth with the FDA on this. But this situation is still likely to remain messy. The best thing we can do is to continue educating farmers about the best practices for using antibiotics and other cattle drugs. We have a manual on drug residue prevention that you can obtain for free…something we produced solely with NMPF membership dollars and sponsorships from individual companies. It has plenty of tips and insights into how to avoid having culled cows with drug residue violations. Here is definitely a case where an ounce of prevention is worth a pound of cure.

RM:

Reforming immigration policies to address the labor needs of farmers remains a paramount concern for NMPF. It also remains a toxic issue in Washington, as well as in many state capitals. Last year, we said that the momentum is on the side of those who either want an enforcement-only approach to dealing with undocumented workers, or those who don’t want any type of reform. That’s still true, but at the same time, we’ve had better luck in demonstrating that even in this era of nine percent unemployment, it’s nearly impossible to find farm workers. In fact, that was the subject of a Senate hearing just last month: the agricultural labor crisis, and what to do about it.

JK:

So NMPF remains focused on finding ways to fix what can be fixed, such as expanding the H-2A visa program so it can be used by dairy employers. It’s certainly not a cure-all, but it would help ensure that new workers hired are properly documented. We are also working to oppose any national E-Verify mandate that doesn’t do something to address our farms’ pressing workforce needs. Agriculture is one of the few bright spots in our economy, and we don’t need any new punitive laws that hurt farm employers and threaten their businesses.

RM:

After our last annual meeting in Reno, Congress and the White House engaged in a high-stakes battle over tax policy. NMPF was one of the leading voices in the farm community urging Congress to minimize the impact of the estate tax. If Congress had done nothing, the estate tax would have only excluded one million dollars from an estate, with a 55 percent tax rate above that amount. This would have hurt the ability of our family farmers to pass on their farms and ranches between generations. In the end, Congress set the exemption at a level of five million dollars, and reduced the top rate to no more than 35%. The exemption should also be indexed to inflation, provide for spousal transfers, and include the stepped-up basis.

JK:

In another small but important tax policy victory earlier this year, we were able to work with other business groups to get Congress to overturn the new tax reporting requirement known as the IRS form 1099. As it stood, this requirement would have been a huge paperwork burden to farmers and other small businesses. Congress repealed it in April, representing one of the few solid victories for the business community in 2011.

RM:

Another significant regulatory victory this year was the final exemption of milk storage from the EPA’s regulation of on-farm oil storage. As we repeatedly told environmental regulators, the questions Got Milk? and Got Oil? are not the same, and they should not have the same answer. So after two years of hard work, the EPA formalized its exemption of milk from this regulation, so farmers’ bulk milk storage equipment doesn’t get regulated under the SPCC rules.

JK:

Many of the major policy battles in which we’re engaged can take years to bear fruit. But with persistence comes reward. There’s no better example of this than the recent passage by Congress of the three Free Trade Agreements we’ve been working on with Colombia, Panama and South Korea.

RM:

The effort to negotiate and pass these deals extends back a good five years. But last month, the House and Senate finally approved them all. While the expanded export opportunities in Colombia and Panama are worth about $50 million annually, the big payoff is in Korea, which is worth $380 million a year. South Korea is already our sixth-largest export market, and there is a great deal of upside potential there. The same is true, on a smaller scale, in the two Latin American countries. Taken together, these free trade deals are a great opportunity for the U.S. dairy industry.

JK:

And less than a month ago, the U.S. and Mexico agreed to a resolution of a dispute over trucking that was derailing a portion of our cheese exports to Mexico, our number one customer. Mexico had imposed tariffs on certain exports because the U.S. was blocking Mexican trucks from coming north of the border. Now that we’ve resolved that disagreement, Mexico has lifted those tariffs. This is another issue where NMPF, working with the U.S. Dairy Export Council, has relentlessly pushed our regulators to fix the problem so that dairy farmers don’t have to suffer the consequences of a dispute that they have nothing to do with.

RM:

Apart from the free trade deals approved in October, the other long time in coming development this year has been the implementation of the promotion checkoff on imported dairy products. Starting this past summer, importers of dairy products and ingredients began contributing to the national checkoff program. This development is the culmination of more than ten years of work on National Milk’s part, to get Congress to extend the promotion program to foreign products.

JK:

Since the national dairy checkoff was started, 27 years ago, imported products have gotten a free ride on the promotion bandwagon that has been paid for exclusively by America’s dairy farmers. That free ride has finally reached its end. Importers will pay four million dollars in the first year that they’ve been covered by the checkoff. Ultimately, the outcome of this issue is not about equity, but justice for America’s farmers. And although justice in the matter of the dairy import assessment was long delayed, at least it has not been denied. Tom Camerlo gave me a personal assignment to get this done when he was our NMPF Chairman – Tom, I know you are watching up there – mission accomplished, Mr. Chairman.

I also want to take a minute to thank Tom Gallagher and Tom Suber for their support and partnership amongst our organizations. Together the three of us work in an effective and harmonious environment to better the prospects of our cooperatives and producers.

RM:

We’ve spent the last few minutes reviewing the past year, but we also wanted to devote a minute to someone whose entire career has been one of accomplishment. You’ll recall that last year, we created a new award category: the NMPF Leadership Hall of Fame. The purpose of this award is to recognize individuals possessing superlative and unparalleled leadership abilities, whose lasting accomplishments have brought about the betterment of NMPF, and the dairy producer community it serves.

JK:

This is not an award we intend to distribute on a routine or annual basis. It’s to be the exception, not the rule, for people who are exceptional in their impact on our industry. But this year, there’s an obvious recipient who deserves this: long-time Board member and First Vice Chairman, Clyde Rutherford.

Clyde has been, and continues to be, a special individual to many of us in this industry. The list of people he has hired, mentored and advised is enormous, and will continue to be part of his incredible legacy to the industry. If it weren’t for Clyde, I wouldn’t be delivering my 15th speech as CEO. Clyde believed in me and fought the conventional wisdom in 1997 that I was not the right person for NMPF at that crucial point. Clyde, I hope we both proved conventional wisdom wrong, and that I haven’t let you down.

RM:

When Tom Camerlo became ill and passed away, and Charles Beckendorf retired, I suddenly found myself as acting Chairman of DFA and Chairman of NMPF, at a time when our dairy producers were suffering the worst crisis in 60 years. I immediately turned to Clyde for his help, and counsel. He helped mentor me through a very critical and emotional time, and helped me organize my efforts in dealing with all the vital issues of both organizations. Clyde’s wisdom and experience and fortitude helped prepare me to serve in both roles, and I thank him for his support, and more importantly, his friendship.

JK:

And one of the things Clyde was instrumental in helping create is the Cooperatives Working Together program. He saw the value in having NMPF take the lead in assembling coops, and individual farmers, to collaborate effectively in addressing the economic challenges all farmers face. I’m happy to report to you today that CWT will continue in 2012 and 2013. We’ve reached our goal of getting 70 percent of the milk supply to support the program for another two years. And that outcome is a tribute to Clyde, and all of the other leaders who steadfastly believed in using CWT to help everyone.

RM:

As we wrap up, let me thank the NMPF Board of Directors for reelecting me to serve as your Chairman for another year. It is a great privilege and honor, and I appreciate your vote of confidence in having me lead NMPF during this challenging time. I also want to thank the tireless NMPF staff for their incredible efforts in 2011. Even with all of the demands on them, they have never SETTLED for second best in anything they do.

JK:

And that thought is a fitting way to end here: with a reference to the Sugarland song “Settlin’.” The one that says “I ain't settlin’ for just getting by/ I’ve had enough so-so for the rest of my life/Tired of shooting too low so raise the bar high/ Just enough ain’t enough this time/ I ain’t settlin’ for anything less than everything.”

RM:

So we leave you with these words, and this thought: We aren’t settling until we see the strategic principles of Foundation for the Future passed into law. We aren't settling until we accomplish our mission for our producers.

JK:

As we pursue that mission, we aren’t settling for regionalism rearing its ugly head, and forcing our industry to choose between small and large farmers. We aren't settling for policies that discriminate amongst regions and farmers.

RM:

We aren’t settling for the policies of the past, or accepting the failures of the status quo. We aren't settling for a new safety net that is ineffective, and doesn't provide the tools that our dairy farmers need to prosper, and continue providing the most nutritious product on Earth.

JK:

We aren’t settling for the lack of improvement to milk quality, and the failure of NCIMS to lower the somatic cell counts in the PMO. We aren’t settling for a one-vote margin in a secret ballot by state regulators.

RM:

We aren't settling for the lack of progress on reforming immigration policies so we have a legal way to maintain our current and future labor force, and we aren't settling for continuing attacks on our hard working farm labor without the chance to do things properly.

JK:

We aren't settling for residues in milk or meat, and we aren’t settling for enrolling just half of the industry in the FARM animal care program. We won't settle until we get 100% of our milk supply covered with this important program. We aren’t going to settle and allow the unwarranted attacks on dairy by vegans and other animal rights groups.

RM:

We aren't settling for discord and the lack of unity among our producer community and public attacks by organizations who want to continue to put all the risks of the marketplace on the backs of dairy farmers. In order to achieve our goals and objectives, NMPF will continue its professional and constructive efforts to unify the entire industry.

JK:

We aren’t settling, legally or otherwise, on frivolous legal attacks on the integrity of CWT, and the ability of producers to use the Capper-Volstead Act to work together. We will never settle for relaxing or giving up on our basic cooperative principles and precepts.

RM:

And we won’t settle for an unfair Trans Pacific trade agreement that includes dairy trade with New Zealand. We won’t settle for mediocrity. We will push ahead, make progress, and navigate a new and better course for NMPF and its members on a variety of fronts.

JK:

And finally, as the song goes….We will never settle for just getting by and being so-so. This applies to me and Randy, the NMPF staff, our leadership, and our cooperatives. We will never settle on anything less than what our producers deserve. Thank you.