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Tipton: Time to phase out federal dairy pricing, pooling policies

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By Dave Natzke

 

Federal policies no longer adequately address the needs of a modern dairy industry, International Dairy Foods Association (IDFA) CEO and president Connie Tipton told industry members attending the 2013 IDFA Dairy Forum, Jan. 28.

“Unfortunately, federal milk pricing regulations, food standards and other dairy laws – some of which date back to the 1930s have not kept pace with the times,” she said. “They are antiquated and still have us in a vise-like grip. They squeeze the life out of product innovation, inflate costs and stifle industry growth both at home and in the global marketplace.”

Tipton said the situation is already creating the prospects of milk supplies falling short of demand in some parts of the country. And, she warned, the industry could no longer take for granted that regional milk supplies would be adequate to meet processor and manufacturer demand, with pressures coming both from within the region and outside U.S. borders.

”Recent growth in dairy processing capacity in the Northeast, mostly to manufacture Greek yogurt and other yogurts, has already strained regional farm milk supplies,” Tipton said.

Increased U.S. presence in a global dairy market, dairy farmer feed supplies and prices, the drought and federal biofuel policies are adding to the supply/demand stress.

“There are some disturbing trends that could be a harbinger of what lies ahead,” she said. “For example, in recent years, over two-thirds of the growing demand for U.S. farm milk has been for dairy exports. This is a huge turnaround. And not only is the export product mix very different from what our domestic consumers want, but the amount needed can vary significantly year-to-year and even month-to-month.

“Around the same time, our industry began to be rocked by volatile dairy feed costs and farm milk prices,” Tipton continued. “This was due in part to the growth in production share from U.S. dairy farm operations with just cows and little or no attached cropping operations, but also to U.S. biofuel policy and higher prices for all crops worldwide, not only dairy feedstuffs. Throw in a major drought and it’s a quadruple whammy.”

“The conventional thinking that farm milk will ‘always be there when we want it’ has to change,” Tipton told the audience made up primarily of dairy processors. “It’s dangerous nostalgia. Fortunately, dairy farm operators are spending much more time than ever before on strategic planning to ensure that the feed they need will be there when they need it. Processors and manufacturers must also pay attention to this issue, as the answers may well be different in different parts of the country.”

Tipton said the entire dairy industry had to work together to “remove the shackles of price regulation that are creating untenable market situations.” Among solutions, she urged phasing out government classified pricing and pooling.

Government price regulations are “a throwback to a bygone era of rural America when dairy farms were small individual enterprises relative to processors,” Tipton said. “Today, most farms are either part of a cooperative that bargains for them or are themselves a large entity. Streamlining our milk pricing policies would be a great start to break the milk industry out of its doldrums and put some fresh wind in its sails.

“We must embrace the marketplace rather than government patriarchy, and add value at every step from the farm to the consumer, while keeping affordability foremost in our minds,” she said. “Reliance on the government has kept the U.S. dairy industry mired in the past when we so badly need to break free and move boldly into the future.

“It’s time to get serious about finding solutions that help everyone in the supply chain,” Tipton said. “So as we again work on new safety net programs for dairy producers this is a critical consideration. We must consider farms, processors and manufacturers, exporters and consumers for our industry to find true success.”

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