Thursday, December 1, 2005
“Where we stand is not as important as the direction in which we are going.”
If you walk away from this meeting with only one important fact, remember these words: “Where we stand is not as important as the direction in which we are going.”
Sure, it’s important to know where you come from, and how you got here. But the only thing that really matters is where you are going next. That’s why we chose our theme this year of “Gateway to the Future.” A gateway is a place through which you have to go to reach a particular area. Over the next few minutes, I want to talk to you about some of the gateways we will have to cross through to get to an area of continued prosperity for dairy cooperatives and producers.
Every day, we’re all moving toward the future – which always seems to come sooner than you think. That’s one reason why Jeff Thredgold’s comments were so well-timed; as he noted, the forces of globalization are spinning rapidly, and the tomorrows seem to arrive more quickly every day.
Charles did a great job yesterday of summarizing NMPF’s successes in the past 12 months. My role today is a little more challenging in that, trying to predict the future with great certainty is usually a lesson in humility. But I can promise you that the next 12 months will be even more frenetic, and more consequential, than anything we’ve seen this year. NMPF had a successful year on Capitol Hill: on environmental issues, protecting the price support program, and passing CAFTA, among others. In the marketplace, our CWT program has put millions of dollars of additional revenue in farmers’ piggy banks, and we’re now wrapping up our largest herd retirement effort to date.
But there’s lots of heavy lifting in store for us in the next year, whether it’s in Washington, in Hong Kong, or in the marketplace. And in the next few minutes, I plan on challenging you to think beyond where we stand today, and discuss how these gateways are linked, and how the fates of dairy farmers and cooperatives are linked to them all. We need an open and frank conversation about the direction in which we are going.
Let’s start by entering the first gateway, one that takes us to Hong Kong, and the future of world trade policy. In fact, I’ll be flying there in just a few days, along with Chairman Beckendorf and a handful of producers and staff from NMPF. As many of you know, Hong Kong is hosting the latest effort to negotiate a new set of trade rules under the World Trade Organization. To no one’s surprise, the biggest controversy in the WTO continues to be reforming trade in agricultural products. Also, it’s no great surprise that the outcome will really depend on what kind of deal the U.S. can get for its farmers, compared to what the European Union gets for its own. There are other factors in the negotiations, such as better access to markets in Canada and Japan, as well as what the developing world will accept. It now appears that not all of these are likely to be resolved in Hong Kong.
But the U.S. has made, in the past several months, a dramatic attempt to spur the talks toward completion. The Bush Administration has proposed eliminating export subsidies, cutting domestic support for producers, and opening our markets to additional imports. All of those ideas should give us pause for a moment, as they don’t necessarily represent good news for our dairy farmers, taken just on their own merits.
But trade, inevitably, is like any negotiation. It’s a game of give and take. Other nations that sign onto a trade agreement have to offer something else in return to satisfy our expectations. In this case, what the U.S. government has said is that Europe, in particular, must offer to eliminate its own export subsidies – which are 100 times the size of ours. It has to reduce spending on its Common Agricultural Policy, which at over $60 billion, is the largest single expense in the entire EU budget. And the EU will have to open its markets even more, by reducing its high tariffs that are among the largest, and most complex, in the developed world.
Now, I realize that many farmers look with hesitation at what our government has proposed. One thing that you can be assured of is that we recognize how perilous it is to our producers and cooperatives for such a high-stakes proposal to be put on the table. But you also have to realize that the White House is dead serious about getting the WTO talks toward a successful conclusion, and is willing to go the distance to get it done.
The other thing worth keeping in mind is something NMPF has made very clear to the White House: unless our trade competitors, primarily the EU, make far more substantial cuts in their programs than what we have to do, we cannot accept any agreement that emerges. Our stance is that the there can be no deal, if that means accepting only incremental changes in the existing huge disparities in farm supports that others use. And you can see that stance reflected in the rhetoric used by the U.S. government in its comments about the EU’s most recent counter offer to the U.S. position. Half a loaf is not good enough. Reshuffling the deck chairs does not make for an acceptable outcome for U.S. dairy producers.
That’s the reason why we have committed the resources that we have in the past few years to work on the WTO process. We want America’s dairy farmers to be players in that process. We want a seat at the table. As the saying goes, you’re either at the table or on the menu.
So, the WTO is a high-stakes game at the moment, and no one really knows how it will play out. If a deal is reached in Hong Kong, or at some point thereafter, it will have a tangible impact on our farm policies in the future. But getting back to my point that there are several gateways to the future we must contend with, we also have to keep in mind that future farm policies are going to be different regardless of the WTO talks.
The next gateway we will cross through is the 2007 Farm Bill.
Anyone who has attended the series of Farm Bill forums that the USDA has conducted this past year knows that Agriculture Secretary Johanns is using these not just as listening sessions. Yes, he and his senior staff are there to hear your comments, but they are also using these regional sessions as a way to educate those involved in agribusiness. The main message that the USDA is sending is that the next Farm Bill – at least from the Bush Administration’s perspective – is going to be different than the last. Future farm polices will evolve from those of the past.
What does that mean for dairy? One thing it means for certain is that we have to be very clear about what it is we want in the 2007 Farm Bill. There’s an old saying that “Knowing what you want is the first step in getting it.” - Anonymous
NMPF as an organization has chosen not to participate in any of the regional sessions. The reason for this is that NMPF as a membership organization has yet to determine what it is we want from the next Farm Bill. We need to have an internal industry dialogue first, before telling the rest of the world what it is that we expect lawmakers to do for us. The message must reflect a unified approach, just as was the case in 2002. That’s why we were so successful in the last Farm Bill. A unified producer community is our best means to getting what we want.
So, in less than three months, we will again be conducting a series of three Dairy Producer Conclave regional listening sessions. These Conclave meetings represent our own gateway to dairy’s future. They will be a way for dairy producer leaders to have an introspective review of where we’ve been, and where we want to go. While it will be an open dialogue, I can tell you that one message we’ll start every meeting with is that there are no sacred cows in the process. We need an open discussion of all of our options. That’s not to say we will end up in a far different place. But I think we need to take a partial cue from the USDA and recognize that we need to keep our minds open, and “be creative,” as Secretary Johanns told Charles and me recently.
Even if a prospective WTO deal doesn’t restrict our internal farm programs or tariffs, it’s a solid bet that Congress is not going to be as generous with the next Farm Bill as it was with the last. The budget outlook for the government is dramatically different – let’s face it, it’s dramatically worse – than it was in 2001. Already, we’ve had a battle in the House and Senate Agriculture committees as they put together a series of modest cuts in future farm program spending. But that effort is trimming at the margins.
The real battle will be as the next Farm Bill is written, and I can tell you that the USDA will be fully engaged in this effort, unlike the situation in 2001, when the former Agriculture Secretary wasn’t much of a player in the process. So, my message to our members is that we really need to use the Conclave meetings as our first step in the process. We then have to use our Economic Policy Committee, and the NMPF Board, to help formulate our platform for the next Farm Bill, and the NMPF membership has to stand united in our efforts if we are to once again be successful.
It is critical that we develop a list of priority items that we can all rally around, and get our ducks in a row. Otherwise, we’ll be sitting ducks when the dairy section of the 2007 Farm Bill is written.
As Dwight Eisenhower once said, “The older I get, the more wisdom I find in the ancient rule of taking first things first – a process which often reduces the most complex human problems to manageable proportions.” That is the process we intend to follow with the next Farm Bill.
The last gateway to our future that I want to discuss is how we can positively impact our own economic future, through the Cooperatives Working Together program. By now, we’ve audited each of the nearly 450 farms that we accepted as part of our third consecutive herd retirement program. We’ve removed the milk output of 1.2 billion pounds, or about two-thirds of one percent of the nation’s annual milk output – that’s the same as in the program’s first two years combined. As Charles noted, we’ve had 30 straight months of above-average milk prices thanks in part to CWT efforts. I want to thank Walt Wosje, our CWT Chief Operating Officer, for his tremendous work leading this incredible effort. I also want to thank Tom Balmer, our Senior Vice President. Tom doesn’t like too much attention, but he is responsible for organizing and overseeing all of the financial aspects of CWT, and he has done a fabulous job.
In 2006, the focus will shift to what we can and need to do with our export assistance program. We have budgeted money in the CWT program to pay for cheese and butter export bonuses, and we intend to use those resources aggressively. The past history of the export program demonstrates that we have helped keep cheese prices above our target level since the beginning of 2004. That’s a winning streak we need to continue.
In fact, CWT may be remembered in the year ahead more for its export program, and its impact clearing cheese and butter inventories, than for its retirement program. I know producers like the cow removal aspect of CWT, and it is very important to our industry’s economics. But we actually get more bang for your collective buck with export assistance. We just need to be more aggressive about using it. That’s one reason why the CWT committee recently approved revisions in the CWT Export Assistance program to be more user-friendly, and expand participation by our CWT members in exporting more types of cheese and butter products overseas in 2006. Our goal is to become a formidable and reliable supplier in the world markets.
And what of the future of CWT? It is clear to me that the CWT program is essential in effectively complementing a government safety net program. I think of it now as an inherent part of a series of foundations beneath producer income. I believe the government should play a role in establishing a true safety net that doesn’t create price enhancement, while CWT operates above that level to strengthen and stabilize milk prices. This to me is the future framework for the price that producers receive for their milk. It must be a combination of a government safety net and a producer self-help program such as CWT.
So these are the three important gateways that all are linked, and shows us the direction in which we are headed:
1. Expanded trade opportunities with more access to other markets, including our own;
2. A 2007 Farm Bill that will contain less support overall for agriculture, including dairy;
3. A greater dependency on self-help initiatives such as CWT.
We can enter these gateways with the determination to craft a framework that continues to allow all of you to prosper, or we can stand here where we are today and insist on the status quo. We can control our destiny by planning, unifying, being creative and adapting. I hope that like me, you choose to move in the direction of a new plan for the future, rather than go the way of dinosaurs who didn’t and became extinct.
Before I conclude, there is one other final issue that I want to discuss with you, and this is the future of our cooperatives. There are many serious challenges facing coops, both internally and in the marketplace. There are people outside of this room who would like nothing better than for the cooperative framework to be dismantled. If this were to happen, in my opinion, it would have extremely serious consequences for all farmers, and the entire industry.
Ladies and gentlemen, now is the time for all of us to rally around and embrace the cooperative structure, to utilize the potential of our Capper-Volstead rights, to take advantage of the magic of the word “cooperative.” You have demonstrated your ability to work together in the CWT program, but now it is time for all coops to strengthen your relationships in the marketplace, and together unleash the power than exists under the law for the benefit of all producers. It is time for cooperatives to focus more on partnering with other coops for the benefit of all producers.
There is so much more we can do when we all work for the common good of the whole. Part of NMPF’s strength is helping our members build better relationships with each other, and I intend to work harder on it in the next several years.
Lastly, I want to thank the staff of NMPF. They have once again been outstanding in their performance and effectiveness. They are a small but highly talented, passionate team dedicated to the goals of helping dairy cooperatives and producers.
I also want to thank Charles Beckendorf for his dedicated leadership and support. I also want to thank the NMPF Officers, the Board, our committees, and all of our members, for their support and confidence in the NMPF team.
I’m now starting my ninth year as NMPF President and CEO, and I am delighted to sign on again for another four years. I am as enthusiastic and committed today to NMPF as I was on my first day on the job in October 1997. Before Tom Camerlo signed my first contract in 1997, he asked me if I had fire in the belly for all of the challenges I would face at NMPF. I answered “yes” back then, and I told Charles that the fire is still burning intensely to get the job done for NMPF’s members.
There is a new country-western song by Gary Allen that is topping the charts says, “Best I Ever Had” – that’s the way I feel about this job.
Thank you.
