Tuesday, October 26, 2004

Good morning, ladies and gentlemen. It’s good to be with you all again, this time in Reno.

You know, in the world of gambling, the number seven is a lucky number – at least it’s supposed to be. (Of course, I only know this because someone in the casino mentioned it as I was on my way into the convention hall.)

As it happens, I’ve now been with NMPF for seven years. And while perhaps it was a gamble for me to take the CEO job back in 1997 – as well as a gamble for NMPF – I can truthfully say that I indeed have been the lucky one. This has been a great opportunity for me both professionally and personally. I hope I’ve been able to give as much as I’ve gotten from working for this organization.

It’s high-stakes work that we do for dairy farmers; it seems there’s always a big jackpot on the line with many of the decisions we make. Like Charles said yesterday, every day at NMPF is a learning opportunity, and I know there’s much more to learn in the years ahead.

In the next few minutes ahead, I’d like to draw from this year’s theme – “investing in a better future” – and talk about the investments you have made, and the dividends reaped as a result. I’d also like to focus on where we need to invest in the future to make things better for dairy producers and their cooperatives.

No single example could better illustrate how we are investing in a better future than Cooperatives Working Together. Perhaps to some, CWT looked like a crazy, bet-the-farm wager when we created it last year. But while we had some nervous moments as we developed and executed the plan, I remained confident that – far from a gamble – CWT was indeed a sound investment in the future of the dairy sector.

In fact, my largest concern was that doing nothing about that 18-month stretch of record low milk prices was the biggest gamble of all. Yes, we could have ducked our heads, crossed our fingers and hoped that prices would recover. Certainly, 2004 has been a great year for prices, and not just because of CWT’s efforts.

But I think that the record clearly shows that taking action – making the investment – when we did has made a difference in farmers’ bottom lines. I think the record will show that extending the program for another year will also make a difference in 2004 and beyond.

If you look at what happened this summer, after CWT was renewed, the evidence of our impact is clear. By using our Export Assistance Program, and by raising the trigger price for our cheese and butter export bonuses, we helped shore up the cheese market when prices dipped below $1.40. Just that action alone has helped put millions of dollars in farmers’ pockets, by helping provide a backstop against falling cheese prices.

Now, we’re about to begin our second Herd Retirement program. Next week, the bidding window will be closed, and we’ll begin sorting out the many offers we’ve received so far. By Thanksgiving, we’ll have started removing the herds we have accepted into the program.

Each of those herds retired, just like each of the cheese exports that we have facilitated, is an investment in the future. These two programs of CWT are a terrific complement to each other. The export program helps tighten the cheese and butter markets in the short term. In contrast, the cow removals of the Herd Retirement program show their impact over the longer haul, as milk output slows, and heifer replacement numbers drop. Together, our efforts represent a backstop under farm-level prices. We’ve never had this kind of private, self-funded investment program before.

Now, I’ve heard the skeptics say that the $20 milk prices we saw this spring had nothing to do with CWT. They only wanted to give credit to the closed Canadian border, or Monsanto’s Posilac production problems, or high feed costs, or poor forage conditions. So let’s set the record straight: our analysis showed that CWT helped raise the all-milk price an average of about 60 cents per hundred over the past year. As we all know, the price jumped more than six dollars this spring. So while CWT certainly helped provide a tailwind behind those higher prices, we have never boasted that it was the only factor  helping to boost prices.

But keep one important fact in mind:  it’s the only factor we really influence. Are you willing to bet the future – are you willing to bet the farm – on the weather, or the politics of the ban on Canadian cattle imports, or on the continued shortage of BST? I am not, and I hope you aren’t either. Because not only are those conditions going to change, there’s nothing we can do when they do change. CWT represents the only part of the milk supply equation that we can manage. I don’t want to oversell its impact, but at the same time, it would be a huge mistake if we overlooked its potential for the future. CWT is truly an investment in the future, and we need to make it part of our long-term portfolio.

I mentioned that I’ve been with NMPF now for seven years. As I was preparing this speech, I went back to the first one I delivered to NMPF as CEO at our annual meeting in Orlando in 1997.

One of the phrases I used in that speech still resonates with me, seven years later. That’s when I said that NMPF and the dairy industry “cannot keep running up to Capitol Hill to solve our problems.” In the intervening years, every time when we have to either propose or oppose a piece of legislation, or some policy that comes out of USDA, FDA or EPA, I have had to chuckle about that admonition.

While I still believe in the truth of the statement – we can’t count on or expect Congress to solve much broader economic issues we’re facing – it certainly appears that politics and policy are and will always remain a part of the dairy business, as much as the weather or marketing trends are. As Charles de Gaulle once noted, “Politics is too serious a matter to be left to the politicians.”

That’s why we need to continue to invest in our efforts to build relationships with members of Congress, both in Washington, and more importantly, at the grassroots level. There are many ways we do this: a lot of it is what I call retail relationships, where our lobbyist, Roger Eldridge, or our member coop lobbyists, or farmers themselves, have direct interaction with members of the House and Senate.

Part of that investment is publicly recognizing and thanking members of Congress whose have helped us on key issues. Earlier this year, NMPF, along with the U.S. Dairy Export Council, presented awards to a pair of important Senate leaders, in the Midwest and the Mid-Atlantic. Both are from major dairy states; both have worked hard on some key trade policy battles, including the MPC tariff legislation, and the Australia Free Trade Agreement. As a result of their efforts, we presented them with awards from our Congressional Education Program, which helps us educate and recognize our friends in Congress. We’ve also given awards to members of the House of Representatives from the Midwest and Northeast.

Our investment in congressional relationships also encompasses providing financial support for the candidates whose views complement those of NMPF. Campaign finance reform legislation has changed some of the ground rules for how politics is funded, but it has not removed money from the equation, and it has not diminished the role of Political Action Committees like ours.

In fact, the NMPF PAC is probably more valuable now than it was before campaign reform. As the influence of soft money to campaigns and parties is curtailed, direct contributions, in the form of PAC contributions, become more important. Our NMPF PAC is a modest-sized program; it averages about $70,000 per each two-year election cycle. Compare that in size to the PACs run by Coke and Pepsi, each about $118,000. Or IDFA’s: $115,000. Or Wal-Mart’s: $1.5 million.

While it might be distasteful to some, we need our farmers to invest in Political Action Committees like NMPF’s. Whether we like it our not, such contributions help get us a seat at the table; it’s an ante into the high-stakes pot of politics. If we can’t put ourselves in a favorable position, we’re going to be dealt right out of the game, and that would be a huge loss.

The same holds for the investment that farmers make, individually and collectively with their cooperatives, in having grassroots contact with members of Congres. Money is important; make no mistake about it. But personal contact with our elected officials is also crucial. Perhaps contrary to what some people think, federal officials actually welcome your input; certainly, they want to know what their constituents are thinking.

NMPF’s presence in Washington is only part of the relationship equation. We also need you to make your presence felt. It doesn’t have to be face to face, in person. We can provide you the tools and opportunities for you to call, write and even email your members of Congress. That can be done through our Dairy GREAT website program, and we’ll have a specific session for you Wednesday afternoon to learn more about it, and how to get the most from it.

Even if we didn’t have an election a week from today, my message would still be the same: you have to stand up – in fact, you have to stand out from the crowd – to be counted. And that means more than just voting, it means making your views known throughout the year to your representatives. There’s no better investment in the future political playing field affecting all of us.

“Bad officials are elected by good citizens who do not vote,” as George Jean Nathan once said.

Let’s look at some other investments we’re making for a better future.

Another great example is the national Young Cooperator program. Did you realize that the YC program that NMPF runs is now 54 years old? For five decades, our cooperatives – either on their own or working also with National Milk – are helping to build better farmers and better leaders. In fact, many of the people who are delegates to the NMPF annual meeting, who serve in promotion organizations, and are just plain active in dairy overall, are alumni of YC programs. Can everyone in the audience who once served as a YC please stand? I think we can say that these investments are still paying solid dividends.

Given the complexity of the issues facing cooperatives, both from an internal management standpoint, and externally, in terms of marketing, economic, and policy challenges – we desperately need to continue fostering the professional growth of our farmers. Coops are unique in that they are owned by their members. And that means, for better or worse, your ownership, your management, and the success of your organization, is a reflection of you, the member.

Another investment we are making is starting a new, more cooperative effort with the International Dairy Foods Association. This is an attempt to bring all sectors of the industry together to help boost the profitability and vitality of farmers, cooperatives and proprietary companies alike.

We recently held a summit meeting of the IDFA and NMPF officers, led by our Chairman, Charles Beckendorf, along with Lou Gentine, the Chairman of IDFA. Through their leadership, it was a very successful first step. Some may see it as a risky gamble to work more closely with an organization that has, at times, been at odds with many of our positions. However, I believe it is a risk worth taking and that it will pay dividends for the future.

Lastly, I must not overlook perhaps the most significant investment that our organization makes on a daily basis, and that is in our small, but invaluable, staff. You know, NMPF itself is really nothing more than a few computers, desks, and office space in Arlington, Virginia. Everything that we do is facilitated by people, not property. Our tangible assets are not hardware, but software, in the form of the 17 people we have working for us.

One of the things of which I am most proud during the seven years I’ve been running National Milk is that many of our staff, including virtually all of the senior staff, have been with me for that entire era. The successes we’ve had since 1997, the achievements we’ve accomplished – these have been team victories produced by a loyal staff of veterans. Their ability to get the job done is really what makes NMPF the great organization that it has become.

There is an old George Strait song entitled “Ace in the Hole” that says:

“When life deals out a surprise
Have a few surprises of your own
No matter what you do, no matter where you go
You’ve got to have an ace in the hole.”

Well, my ace in the hole is the staff I have at NMPF.

We all know that finding qualified people is a challenge in today’s business environment. That’s especially true in Washington, where the job market is very competitive. It’s even harder many times to find people who know and understand the dairy sector, with its many facets, as well as the overall Washington policy environment. I’m pleased to say that we have such a group of people, and of all the investments I’ve discussed today, that has been, and continues to be, the most important investment NMPF can make.

Consequently, I’d also like to thank our board of directors, and our officers, for providing the resources to make NMPF a success. Your support, in its many different forms, is so crucial to our success. I also want to specifically thank Chairman Charles Beckendorf for the outstanding leadership he has shown this year.

I’ll close with another gambling analogy, a familiar one, offered by none other than Kenny Rogers: “You have to know when to hold them, and when to fold them. Know when to walk away, and know when to run.” It’s now time for me to walk, not run, from the stage.

Thanks again for your support.