The National Milk Producers Federation’s Strategic Planning Task Force agreed last month to pursue a four-part approach to implementing sweeping changes as to how federal dairy policies protect producers and how farm-level milk prices are established.

The Task Force agreed at a September meeting in Chicago to take action on the further development of a multi-pronged approach that, if fully implemented, would assist in maintaining the on-going viability of the nation’s dairy farms and revise some of the more perplexing and less popular aspects of the national milk pricing system.

The four features of NMPF’s plan include: revamping the safety nets of the Dairy Product Price Support and Milk Income Loss Contract programs; creating a new dairy producer income insurance program; addressing the need to improve participation in the producer self-help program, Cooperatives Working Together, while allowing it to better address periodic imbalances in the milk supply; and reforming the Federal Milk Marketing Order program.

“These four tracks are the foundation for a new future direction for milk pricing in the U.S.,” said Jerry Kozak, President and CEO of NMPF. “We will move quickly, but responsibly, to fashion a dairy safety net and milk pricing system that work in tandem, leveraging the outcome of one program to the benefit of another, whenever possible. For example, we believe a producer income insurance program can be structured to achieve a measure of production control now advocated by a segment of our industry.”

The Task Force is pursuing how an income insurance program would be designed in such a way as to provide a better safety net to protect the net profit margins of farmers, which the current price support program and the MILC don’t always do during times of high production costs. In addition, the Task Force is exploring not only improving price discovery mechanisms and how changing the Federal Milk Marketing Order program would improve the pricing signals sent to farmers, but also the elimination of unpopular aspects of the current system, such as make allowances.

Rounding out its assignment from the NMPF Board of Directors, the Task Force is also seeking new ways to address the free-rider issue associated with participation in the Cooperatives Working Together (CWT) program and how the program itself can become even more effective in the future.

Congress returns from its August recess on Tuesday, September 8. A bulk of the Senate floor time next week will be spent allowing members to memorialize Sen. Ted Kennedy.

A big question in the Senate with the passing of Kennedy is how committee chairmanships may be shuffled. Sen. Chris Dodd (CT) has been acting as chairman of the Health, Education, Labor and Pensions (HELP) Committee, overseeing the healthcare reform process during Sen. Kennedy’s fight with cancer. Now, the question is will Sen. Dodd retain that chairmanship, or will he return to helm the Banking Committee? If Dodd stays, then Sen. Tim Johnson will likely become chair of the Banking Committee. However, if Sen. Dodd returns to Banking, then Sen. Tom Harkin (Iowa) is anticipated to move to chair of HELP committee, leaving the Agriculture Committee Chair in the hands of Sen. Blanche Lincoln (AR). Sen. Lincoln would be the first woman to chair the Senate Agriculture Committee.

Shortly before they recessed in July, the Senate passed an amendment offered by Sen. Bernie Sanders (I-VT) to the FY 2010 Agriculture Appropriations bill. The amendment appropriates $350 million to USDA with the intent of assisting dairy producers. The original legislation will likely be modified in the pending House/Senate conference committee, as the amendment was a bit ambiguous and was not included in the House-passed ag appropriations bill. NMPF has looked at the economics of several different spending approaches, and found that direct purchases of cheese from the market by USDA to distribute primarily through food banks would be the most beneficial, effective, and efficient use of the funds. The House and Senate will be in conference over the next week or so working on a compromise for the differences between bills. Sources report the final bill will pass before the end of September.

In a different area, NMPF continues to work on climate change legislation, although it is not a done deal yet. Prior to the August recess, expectations were that the Senate version of the bill would be introduced in the beginning of September. According to the Environment & Public Works committee, that date has been pushed back to the end of September. NMPF has been working closely with the Sen. Harkin (IA) and Sen. Stabenow (MI) to craft the agriculture offsets piece of the legislation and expect that language will be added to the pending bill, when it is introduced.

The Senate climate bill will be constructed in at least three different committees, including the Environment and Public Works committee, as well as the Finance and Agriculture committees, which also have jurisdiction over pieces of the bill. Also, the Energy & Natural Resources committee, chaired by Sen. Bingaman (NM), has already passed out of committee the American Clean Energy Leadership Act, which addresses energy efficiency and the renewable electricity standard. This legislation will be added to the larger EPW bill.

Finally, Sen. Chuck Schumer (D-NY) has reintroduced the Milk Income Tariff Equity Act bill to impose tariff-rate quotas on certain casein and milk protein concentrate products. Senate bill 1542 currently has nine sponsors. Rep. Peter Welch (D-VT) is planning to introduce a companion bill in the House once Congress returns.

NMPF's Strategic Planning Task Force met August 10 in Chicago to further analyze several proposals intended to offer long-term solutions to the twin issues of low milk prices and extreme price volatility.

The group concluded that more information is needed regarding the ramifications of dairy imports and exports on the efficacy of a mandatory supply management proposal that several dairy industry organizations are promoting. The Task Force also recognized the critical importance of evaluating the unintended consequences that could result from the implementation of such a program. The Task Force further agreed to examine a plan to reform the Federal Milk Marketing Order program by eliminating make allowances.

Reflecting a desire to review the most current and complete information available on the impact of globalization on the domestic market, the Task Force was presented with a major research report, conducted by Bain and Company, of how the U.S. dairy sector currently fits into the global dairy system, and how that role may change in the future depending on the course of action taken by the domestic industry in the coming years.

"There is strong interest on the part of our Task Force in making dramatic and positive changes in milk pricing so that we don't have to find ourselves in the same position again in the future," said Jerry Kozak, President and CEO of NMPF. "Because the stakes are so high, we want to be certain that we have fully explored all the consequences of any actions that we recommend, such as how the position of the U.S. dairy business may evolve over time compared to our competitors in other countries."

The Task Force heard detailed analyses of the so-called price stabilization plan, being promoted by the Holstein Association USA and other groups, by Dr. Chuck Nicholson of Cornell University, and Dr. Richard Sexton of the University of California-Davis. Each economist offered his perspective on how that supply management program would be implemented, affect farm-level prices, and alter the flow of both imports to, and exports from, the U.S. market.

"We recognize that the proposals the Task Force is reviewing won't relieve the current pain and suffering on dairy farms across the country. However, the severity of the present situation raises the stakes for our effort, and strengthens the resolve of our group to make certain we are as thorough as possible in suggesting changes in future dairy policy," Kozak said.

While the NMPF Strategic Planning Task Force is focused on future changes in milk pricing, Kozak said that NMPF is continuing to take short-term steps to help improve the pricing situation. This includes having Cooperatives Working Together (CWT) conduct its second-largest ever herd retirement round in August and September, and continuing to work with the U.S. Department of Agriculture to implement corrective improvements, such as the recent increase in the dairy product price support program.

NMPF's joint 2009 Annual Meeting with the National Dairy Promotion and Research Board (NDB) and the United Dairy Industry Association (UDIA) will be held November 10-12 at the Gaylord Texan Hotel & Convention Center in Grapevine, TX. Official meeting notices have already been sent out to the membership. With the theme "Building Partnerships, Building Opportunities: Now More Than Ever," the meeting will address the critical issues currently facing the dairy industry.

Potential exhibitors and sponsors are encouraged to participate in the 2009 Annual Meeting. For more information, please contact Anuja Miner at 703-243-6111 or by email atAMiner@nmpf.org.

More information is available at www.nmpf.org/annual_meeting, including the full meeting notice, the schedule, and instructions on how to register. Meeting registration and hotel reservations should be made by October 16, 2009, or else late fees will apply.

At the beginning of August, NMPF endorsed new Senate legislation, S. 1542, to impose tariffs on imports of Milk Protein Concentrate (MPC), casein, and caseinates.

Sen. Chuck Schumer (D-NY) introduced legislation called the Milk Import Tariff Equity Act, which would create tariff-rate quotas on foreign dairy proteins that currently come into the U.S. in unlimited quantities. Since 2001, NMPF has supported the passage of the MITEA in order to close a loophole in the U.S. dairy sector allowing certain dairy proteins, such as MPC and caseins, to enter the U.S. and disrupt farm-level prices.

The legislation contains language directing the U.S. government to ensure that the new TRQs are consistent with the U.S.'s World Trade Organization commitments. The tariff rates would be consistent with existing U.S. tariffs on similar products, such as nonfat dry milk.

In ongoing efforts to ensure that healthy nutritious dairy products are included in all diets, NMPF recently commented on two efforts that could affect recommended dairy product use in diets.

In a letter to the Institute of Medicine's Committee on Strategies to Reduce Sodium Intake, NMPF cautioned the use of blanket recommendations that could have a negative impact on the nutritional composition of a person's diet without addressing the nutrient, caloric, and sodium content of the diet in a moderate and achievable manner that will be the most effective in ensuring the public health.

In a joint letter with the International Dairy Foods Association (IDFA) to the Center for Disease Control on the report "Recommended Community Strategies and Measurements to Prevent Obesity in the US," which recommends banning flavored sweetened milk from licensed child care facilities, NMPF expressed concern that the report does not consider the science that supports the positive role of milk, including flavored milk, in child health and nutrition or the science-based statements of multiple health and government authorities.

On August 14, NMPF joined a coalition of 19 other agricultural organizations to submit a letter to the White Houseurging the Obama Administration to consider the significant political and scientific complexity of the use of antibiotics on farms to prevent, treat, and control disease in food producing animals. The organizations, representing American food producers and the industries that serve them, asked for continuing discussion about the specifics of the issue and exploring what science-based, practical options were open to industry and the Food and Drug Administration (FDA).

No conclusive scientific studies have demonstrated that the use of antibiotics on farms contributes significantly to an increase in human resistance. A growing body of evidence shows just the opposite, namely the responsible, professional use of these products reduces pathogens in and on foods, enhancing animal welfare while not contributing to resistance.

The approach of Fiscal Year 2010, which begins October 1, means that some dairy producers may have some paperwork to fill out at their FSA office.

The Milk Income Loss Contract (MILC) program has a cap of 2.895 million pounds of eligible milk per year. Producers large enough to be affected by this have had the option of picking a month to begin applying their eligible milk. If the election for FY 2009 is not changed, it becomes the default for 2010.

Producers who chose a specific start month last year, and who want to change it either to or from October for this year, have until September 14th, 2009 to do so. This is based on the MILC rule that a start month election must be made by the 14th of the month before the previously chosen month or the desired start month, whichever is earlier.

NMPF estimates that the average MILC payment rate for the eight months from February through September 2009 will be $1.60, and that about 50% of U.S. milk production during those months will have been eligible to receive payments.

For more information, go to the USDA/FSA MILC website at http://www.fsa.usda.gov/FSA/webapp?area=home&subject=prsu&topic=mpp-mi.

NMPF has renewed its call for the U.S. Department of Agriculture (USDA) to finally implement the long-delayed promotion checkoff on dairy imports, seven years after the measure was first passed into law.

The USDA issued a Proposed Rule in May, and invited public comment on the measure, which was first written into law in the 2002 Farm Bill, and was later affirmed in the 2008 Farm Bill. But a year after the most recent Farm Bill was approved, the import assessment is still languishing. Now, some have called for a farmer referendum on the entire promotion checkoff in order to justify the assessment on imports.

"The history of efforts to implement the assessment is filled with denial, disinformation, and delay," said Jerry Kozak, President and CEO of NMPF. "All we have ever wanted is to have importers of foreign products pay to help promote the U.S. dairy market from which they benefit, the same as our farmers do. But importers continue to grasp at every straw they can to further impede the process."

Kozak said that some comments submitted to USDA as part of its rulemaking process suggest that the department should hold a national farmer referendum before implementing the import assessment. These comments argue that the promotion program approved in previous referenda is not the same program as will exist once USDA implements the import assessment. Other comments also have expressed concern that state- and regionally-specific promotions, such as those administered by the Wisconsin Milk Marketing Board and the California Milk Advisory Board, may no longer be allowed if imports are assessed.

NMPF said such comments "are part of the continuing misinformation being spread to scuttle this initiative, and have no merit. There is no valid reason to conduct a lengthy and expensive referendum process that ultimately is paid for by our farmers," Kozak said. "Given the extensive history behind implementing this import assessment, any referendum would only serve to further delay implementation since any referendum will most certainly pass.

As CWT wraps up its third herd retirement conducted in the last nine months and the second-largest herd retirement ever, it expects to complete farms audits for this current round in mid-September, with the removal of cows completed by the end of the month.

The current herd retirement round will accept 86,710 cows and 1.8 billion pounds of milk. When combined with the previous two herd retirements, CWT's actions will result in approximately 400 million fewer pounds of milk a month going to market this fall.

"These two summer 2009 herd retirements, combined with the USDA's recent price support increases, should result in very positive movement in dairy farmers' milk prices," said Jerry Kozak, President and CEO of NMPF, which administers CWT.

For more information about CWT, please visit www.cwt.coop.

More than half a dozen U.S. dairy farm organizations met in Chicago last month to review a handful of concepts designed to improve dairy farm prices and offer long-term solutions to the economic volatility afflicting farmers across the country.

NMPF's new Strategic Planning Task force hosted a meeting "to consider both how the current milk price crisis developed, and how best to reduce the chances that a similar situation could arise in the future," said Jerry Kozak, President and CEO of NMPF. "Coming out of the meeting, I believe we have a keener sense of what has brought us to this point, and we definitely have a stronger sense that the industry needs to make significant changes in the economic regulation of milk prices."

The Task Force spent much of its time reviewing a plan to manage milk supply growth by assigning production bases to farmers, a program endorsed jointly by the Holstein Association USA, the Milk Producers Council, and Dairy Farmers Working Together. Representatives from each of those organizations discussed how such a program would work, and how it would have to be implemented legislatively in order to make it mandatory for all dairy farmers.

NMPF's Task Force is now in the process of conducting a more detailed analysis of the price stabilization plan discussed in Chicago, and will meet again later this month to review that, and other ideas to reform the milk pricing system.

The Task Force also heard presentations from other farm policy organizations about their perspective on the dairy crisis, including the National Farmers Union, the National Farmers Organization, the American Farm Bureau Federation, and Western United Dairymen.

"Each organization has a somewhat different perspective on what potential future steps our industry can or should take, but there is a common understanding that this crisis presents an opportunity to make positive changes in our industry," Kozak said. "There is also a shared understanding that long-term changes have to be initiated by those farm organizations who best understand the nature of milk production and marketing."