What a difference a year makes. At last year's Dairy Forum, Dave Fuhrmann, CEO of Foremost Farms and chair of the National Milk Producers Federation's (NMPF) Federal Orders committee, glumly reported that co-ops simply could not agree on reforms. Too many co-ops had too much invested in bricks, mortar and the status quo to contemplate a better way.
Then, the global recession washed away a third of dairy producer equity in 2009. Co-op leaders realized that the status quo was no longer an option. In its stead, they are proposing one of the most innovative approaches to dairy policy in 75 years. See "Radical New Plan,” page 6.
As I reported in this space last month, U.S. dairy leaders have come to a fork in the road. Either they decide to compete in the global economy, which offers both opportunity and risk, or they become Canada South.
The Bain report, commissioned by the Innovation Center for U.S. Dairy, suggests the U.S. is uniquely positioned to increase its share of world markets. But the window to take advantage of those opportunities is tight—a decade or less. If the U.S. industry does not restructure, emerging dairy industries in South America and Eastern Europe will eventually fill the global supply and demand gap.
So it's now or never. The NMPF plan takes the leap: letting the market set prices, eliminating dairy price supports and make allowances, offering a limited safety net of margin insurance.
It's a good plan, but it won't fix everything. Jerry Kozak, CEO of NMPF, acknowledges as much: "We're not going to eliminate volatility from our pricing system. But we can decrease that volatility and some of the other problems we're having, and create a more dynamic industry.”
Getting the new policy written into law won't happen overnight, either. The place to make these changes is the 2012 farm bill, Kozak says.
That's unfortunate, but realistic. "Anyone who thinks Congress will open the 2008 farm bill [in an election year and a polarized political environment] is on drugs. And it's disingenuous to give false hope that it will,” Kozak says.
NMPF plan details
Bain report coverage