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From The MPC Newsletter
Friday, June 28, 2013

The Debate Over Dairy Policy Reform Continues; IDFA Continues to Spew Out Their Propaganda
By Rob Vandenheuvel, General Manager

Last week, we reported on the disappointing news from Washington, DC that the House of Representatives had approved the “Goodlatte/Scott Amendment” to the Farm Bill, which severely weakened the dairy reform proposal (Dairy Security Act) that was approved by the House Agriculture Committee.  We also reported that the House ultimately rejected their amended version of the Farm Bill, putting us in limbo for the time being.  On the other side of the Capitol, the Senate has already approved their version of the Farm Bill, which includes the Dairy Security Act as the dairy reform proposal.

With all that as background, the debate over the future of our dairy safety net policies continues in Washington, DC.  This week, yet another press release was published by the International Dairy Foods Association (IDFA), the main lobbying organization for the nation’s processors.  The press release, which can be found at: http://www.idfa.org/resource-center/market-information/update-on-dairy-markets/details/8297/, attempts to paint the Goodlatte/Scott Amendment as the optimal proposal, going so far as to argue that the Goodlatte/Scott Amendment would actually result in less U.S. taxpayer funds being expended (compared to the Dairy Security Act).

While IDFA likes to cite an analysis by the Congressional Budget Office, their claims simply fail to pass the “logic test.”  Let me demonstrate what I mean:

Let’s pretend for a minute that a plumbing problem in your home leads to flooding in your house.  Now of course, you are going to clean up the flooded area, drying out the carpet and furniture in hopes of preventing mold or other damage to your home.  But a prudent person is also going to fix the plumbing issue that caused the flooding in the first place.  What would happen if you merely cleaned up the flood damage and left the plumbing issue unchecked?  You would constantly be dealing with flood damage, ultimately resulting in destroyed carpet, furniture and other problems, at a huge long-term expense.

Applying this theory to the current debate over dairy policy, the “plumbing problem” represents the all-too-common occurrences when national overproduction of milk relative to demand causes our milk prices to drop below the cost of producing that milk.  The Goodlatte/Scott Amendment – which is merely a “margin insurance” program that makes payments when our dairy farmers are losing money – is like cleaning up the flood damage without fixing the plumbing problem.  The Dairy Security Act is a two-pronged approach that does both – provides a margin insurance program to “clean the flood damage,” while at the same time implementing a “Dairy Market Stabilization Program” that quickly addresses the underlying market imbalance that created the problem in the first place, the “plumbing problem,” if you will.

So using common sense, which of these two responses to the “plumbing problem” is more likely to cost you more?  Constantly cleaning up a flooded house, or addressing the underlying problem head on?  Do I even need to answer?!?

Now I’m sure it will be pointed out to me that this is a very simplistic comparison.  I will be reminded that unlike a plumbing problem, the problem of insufficient milk prices for dairy farmers is eventually solved.  But you know how those profitable prices are restored, right?  Through market balance!  Although it’s only after unspeakable financial pain for the dairy farmers and billions of dollars in lost equity.  We all know what needs to happen when we get in an oversupply situation – the question is do we want a coordinated approach to addressing it or do we want a slow, painful fix, with taxpayers forking out billions of dollars in the meantime?  And remember, low milk prices for dairy farmers are NOT a problem for our nation’s processors, which is why they see no value in actually addressing the problem!

Sometimes in policy debates, our industry – as well as our elected officials – get so caught up in studies, analyses and the general propaganda that we forget to use our common sense.  Common sense tells us that we need a dairy safety net that provides protection for our valuable dairy infrastructure, while at the same time addressing the fundamental root of our problem, which is market imbalance.

MPC will continue to work with our coalition partners to implement the common sense reforms included in the Dairy Security Act.  The financial future of our nation’s dairy farmers depends on it!

 

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