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November 2012 Archive for Dairy Talk

RSS By: Jim Dickrell, Dairy Today

Jim Dickrell is the editor of Dairy Today and is based in Monticello, Minn.

Why Mitch and Mike Disagree on Supply Management

Nov 30, 2012

An Idaho cheese manufacturer and a dairy producer diverge over free market and market reality. The dilemma is deciding who is more right.

I had the opportunity to emcee the Wisconsin Dairy Business Association’s (DBA) 13th annual Business Conference in Madison last week. Along with getting to shake Gov. Scott Walker’s hand, I also moderated a panel of out-of-state dairy producers.

Supply management was the first question raised from the audience. Mitch Davis responded first. Mitch is part of the Davis family who owns Davisco Foods, Intl., which has cheese plants in Minnesota, South Dakota and Idaho. With milk supply short in Minnesota, Mitch serves as general manager of Davis Family Dairies, which currently milks 6,000 Jerseys and will soon add another 3,500. The Davis Family is only one of two operations that have added significant cow numbers in the last few years in Minnesota.

Mitch is a free marketer to the center of his marrow. He argues: Dairy farmers do best when they are free to decide for themselves how much milk to produce. It almost seems ludicrous to impose supply restrictions on American farmers as they try to compete in a growing global dairy market. There’s growing demand, for example, for child infant formula in second- and third-world economies. Restricting American production will limit our ability to serve these emerging markets.

In principal, Mike Roth agrees with Mitch. Mike and his family emigrated from Washington in 1995 to Jerome, Idaho, bringing their 1,200 cows with them. No wall flowers when it comes to entrepreneurship and expansion, they now milk 11,000 Holsteins and 600 Jerseys on three dairies. Mike has also been on the board of the Idaho Dairymen’s Association, and up until last month, served as its president for three years.

But Mike and his fellow Idaho producers have lived the incredible challenge of a cheese-making industry that is full to the vat brim with absolutely no incentive to bid for milk. Over the past 20 years, Idaho milk prices have trailed the U.S. All-Milk average by $1/cwt. on average, and sometimes by as much as $2. This year has been particularly brutal—Mike estimates 15 to 20 Idaho dairy producers have left the industry—nearly double that of last year’s exits.

The one saving grace has been Chobani’s new yogurt plant in Twin Falls. It is huge—“as big as a nuclear power plant,” Mike says—and will eventually require the milk of 100,000 cows. In fact, a tanker load of Mike’s milk was the first to be used in the Chobani plant as it begins plant start-up. The plant has already had spillover effects. Cheese makers, including Davisco, have offered better prices and long-term contracts to their current farmer patrons to lock up milk supplies.

Mitch argues that this is just the competitive, free market at work. He’s right, of course. No cheese maker is going to bid a nickel more for milk than his competitor, and he won’t do it until the market demands that he does. That’s just business.

Mike argues that with today’s feed, fuel and labor costs, the only option to get a break-even or better price is supply management. That’s particularly true when much of the rest of the country is in regulated (higher priced) markets. That’s why the Idaho Dairymen’s Association signed on to Dairy Security Act, which contains a market stabilization program that kicks in during periods of low margins.

In the end, both Mitch and Mike are right. The dilemma is deciding who is more right. I lean toward Mitch—but I fully appreciate Mike’s argument.

You can read more about Idaho’s competitive dairy market position here: Idaho's Dairy Dilemma and The Competitive Position of the Idaho Dairy Industry.

Election Primes Immigration Reform

Nov 18, 2012

There’s nothing quite like an election—especially if you lose—that focuses the mind.

The Republican Party had one of those come-to-you-know-who moments after it lost the presidential election. One of the key numbers in the post-mortem analysis: More than 70% of Hispanic American voters checked the box for President Obama. Only 27% voted for Mitt Romney.

And it gets even more serious. Political observers in Texas now fear this bastion of conservatism could become a blue—as in Democratic blue—state.

“If Republicans do not do better in the Hispanic community, in a few short years Republicans will no longer be in the majority in [Texas],” the newly elected Sen. Ted Cruz (R-Texas), told The New Yorker the week after the 2012 election.

“If that happens, no Republican will ever again win the White House,” he said. “If Texas turns bright blue, the Electoral College math is simple. We won’t be talking Ohio, we won’t be talking about Florida or Virginia, because it won’t matter. If Texas is bright blue, you can’t get to 270 electoral votes.”

Cruz is not alone in his assessment. Charles Krauthammer, the Washington Post’s anti-everything-Obama columnist, has this to say: “The principal reason [Hispanics] go Democratic is the issue of illegal immigrants. . . .

“It requires but a single policy change: Border fence plus amnesty. Yes, amnesty . . . full legal normalization (just short of citizenship) in return for full border enforcement.”

Democrats aren’t blameless, either. There was plenty of grumbling during the campaign that President Obama and his party did little to push immigration reform. Observers say Democrats have been all too willing to simply play politics with immigration reform.

Yes, the President did administratively and temporarily OK the Dream Act, which legalizes the status of several million undocumented youth. But it is not enshrined in permanent law—and for most immigration reform advocates, it is too little and too late. So Democrats, too, are under pressure to stand and deliver meaningful reform.

How soon those reforms are taken up by Congress depends a lot on, well, Congress. It must first deal with the “fiscal cliff” crisis. There’s also the stalled farm bill, which has been hanging around unfinished since the August recess.

Nevertheless, the election gives some clarity as to what each political party is dealing with, says Craig Regelbrugge, co-chair of Agriculture Coalition for Immigration Reform. “Both parties have compelling reasons to complete reforms.”

If immigration reform is to come, it most likely will happen in the first half of 2013. “That’s the open window to get something done,” Regelbrugge says.

And while agriculture has been promised reform in the past, dairy producers must get beyond their cynicism. “Dairy farmers need to re-energize on the issue,” says Regelbrugge.

“You need to rekindle your political work, especially if you wrote a political check,” he says. Once immigration reform is being taken up, re-engage those Congressmen and women to remind them of your needs.

Note: You can view Regelbrugge’s presentation on immigration reform from the Dairy Today’s 2012 Elite Producer Business Conference here.

Today’s Election and the Farm Bill

Nov 03, 2012

A whole host of scenarios could play out on a farm bill vote.

Today is Election Day 2012. Ok, unless you’ve been sleeping under a rock or were hit with one yesterday, you knew that.

Today’s results—and hopefully we’ll have results today—will impact dairy farmers. That’s because House Majority Leader Eric Cantor, (R-Va.) stated, as recently as a couple of weeks ago, that the House will vote on the 2012 farm bill yet this year.

A Lame Duck vote will be affected by today’s vote. There’s a whole host of scenarios that could play out. If President Obama wins re-election (a 50/50 proposition this morning), the Senate remains Democratic and the House remains Republican, the farm bill debate will likely follow the pre-election narrative. That is: Some cuts to the Supplemental Nutrition Assistance Program (SNAP/food stamps), fewer automatic payments to crop producers but still lucrative crop insurance subsidies.

For dairy, provisions of the Dairy Security Act will be in play. The margin insurance program is a given; the complementary stabilization program will be at issue.

At last week’s National Milk Producer Federation/Dairy Management Inc. annual meeting, NMPF officials expressed confidence that the dairy stabilization program would/will win the day. But dairy processors are equally confident that they have the votes—along with the support of House Speaker John Boehner’s (R-Ohio)—for the Goodlatte amendment. (Remember: The Goodlatte amendment caps margin insurance protection at 80% of a farm’s annual production at sign-up but has no stabilization program.)

If Romney wins the presidency, the Senate remains Democratic and the House remains Republican, the pressure to compromise falls to the Democrats. After all, they’ll still have a friendly pen in the White House during the Lame Duck.

But farm state Republican congressmen will also be under pressure. They are already on the hot seat back home for not passing a farm bill in September; they promised to finish the job during the campaign. “If Republicans don’t cut a deal but pass an extension of the current bill, they won’t do what they’ve promised to do,” says Dana Brooks, NMPF’s vice president of government relations.

There are also scenarios where the House could flip Democratic. That’s very unlikely, though Democrats could pick up a seat here or there. And there are scenarios where the Senate could flip Republican, but those are unlikely, says Stu Rothenberg, editor and publisher of The Rothenberg Political Report. Rothenberg spoke via Skype at the NMPF/DMI meeting last week as well.

Finally, passing an extension and punting into 2013 isn’t a very palatable option for anyone. First, even greater budget pressures loom either with sequestration or a new budget baseline that comes into effect March 1. Second, Congress and farmers really don’t want to revisit another prolonged farm bill fight in 2013.

There are only two pieces of advice I can give today: Vote. Then let your Congressperson know exactly which version of the Dairy Security Act you want. If you don’t voice your opinions, you can bet others will. I’m 100% sure of that.

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