Conaway calls dairy industry ‘unique’ as leaders ask for changes to program
March 23, 2017
"As we begin crafting the next farm bill, we must keep in mind the unique nature of the dairy industry in order to create effective policies for our dairy farmers," House Agriculture Committee Chairman Michael Conaway, R-Texas, said today at a hearing on the future of dairy policy.
"While net farm income for the entire agricultural industry has fallen 50 percent over the past four years, the nation's dairy industry is in a particularly unenviable position," Conaway said. "After reaching record-high milk prices in 2014, prices dropped drastically in 2016, from $24 per hundredweight to around $16 per hundredweight. The farm safety net is designed to offset bad times like these, but the underperformance of the Margin Protection Program left our dairy farmers with virtually no assistance. In addition, our farmers also face entry barriers from foreign competitors designed to keep out U.S. dairy products."
During the hearing, House Agriculture Committee ranking member Collin Peterson, D-Minn., said the way that the Congressional Budget Office scores the MPP will cause budget problems for the next farm bill, Politico reported.
Peterson said he didn't agree with the way CBO scored the program in 2014. CBO estimated such a high cost that Congress reduced the formula for calculating feed costs, which led to lower payments and lower participation rates in the program. The result is that the CBO score for the program is low, which will mean that Congress has to come up with more money if it is to fix the program in the next farm bill.
National Milk Producers Federation President and CEO Jim Mulhern testified that "while MPP was, and is, the right approach for the future of federal dairy policy, the program in its current form does not provide meaningful safety net support to the nation's dairy farmers."
In his testimony, Mulhern suggested a series of adjustments that will affect the way both feed prices (including corn, alfalfa and soybean meal) and milk prices are calculated, including restoring the feed cost formula to the one originally developed by NMPF, which had higher weightings of all three feedstuff components.
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Mulhern also emphasized the need for immigration reform. At least 50 percent of the U.S. dairy farm workforce is composed of foreign-born labor, he said.
"Because the seasonal H-2A visa program does not apply to dairy farms with a year-round demand for labor, Congress must provide the agriculture industry with an effective guest worker program to meet its future needs, while also providing a way to address current workers with improper documentation," Mulhern said.
He also cited the need for market access and concerns such as "Canada's protectionist attempt to undermine its trade commitments to the United States, and the European Union's attempts to co-opt the use of common food names like parmesan and feta."
Mulhern added, "If we aren't in the game actively negotiating on these issues, we are ceding ground to our competitors and those looking to make it tougher for us to do business in their markets."
International Dairy Foods Association President and CEO Michael Dykes said that dairy processors also need better risk management programs, and called for several other provisions in the farm bill.
"Forward contracting has provided an important mechanism for manufacturers to directly contract with individual farmers or their cooperatives at a fixed price to reduce price volatility. This program should now be expanded to include all classes of milk and be made permanent," Dykes said.
Dykes also emphasized the importance of exports and called for careful renegotiation of the North American Free Trade Agreement.
Dykes testified that Mexico is the No. 1 export market for U.S. dairy, accounting for one-fourth of total dairy exports. "We need to ensure that a renegotiation of NAFTA preserves our important Mexico market and gains increased access to the Canadian market," he said.
Dykes also said that the Asia-Pacific region, already the world's largest market for food and agriculture, is expected to double by 2050. "Reducing and eliminating tariffs and other restrictive agricultural policies in this region will allow our dairy industry to compete," he said.
On the domestic side, Dykes noted that only 1 out of every 10 Americans consumes the three daily servings of dairy recommended by the 2015 Dietary Guidelines. To address this shortfall and encourage more dairy consumption, Dykes advocated for voluntary incentives under the Supplemental Nutrition Assistance Program (SNAP) and more school milk options.
He also noted that dairy foods represent the second-largest and fastest-growing category of organic foods sales, totaling about $6 billion or 15 percent of all organic sales, and called for maintenance of the National Organic Program.
–The Hagstrom Report