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IDFA CEO Urges Industry to Consider Dairy Policy Alternatives in Keynote Address at Dairy Forum

(Orlando, Fla. — January 17, 2007) In her keynote speech on Monday at a leading dairy processor-producer annual conference, Connie Tipton, president and CEO of the International Dairy Foods Association (IDFA), laid out some of the association's proposals for the 2007 Farm Bill and other dairy policy initiatives this year.

Specifically, Tipton reiterated support for a producer safety net that reflects today's market and asked the industry to consider alternatives to the current Milk Income Loss Contract (MILC) direct payment program and the Dairy Price Support Program. A better safety net, she said, might include direct payments to farmers linked with farm sustainability improvements, and more risk management tools through revenue insurance programs and use of forward contracting. Tipton said IDFA would soon be announcing details of its proposal in a "blueprint" for the 2007 Farm Bill.

Tipton noted that the time is ripe for change: There is a new Congress with the job of writing a new Farm Bill this year; pressure to reduce government spending; concern about how farms affect the land, air and water; a highly competitive marketplace that calls for product innovation; and strong world dairy demand driving ongoing trade opportunities for U.S. dairy.

"We're looking at a highly dynamic market that's evolving at a dizzying rate. It seems clear that if we want to continue to succeed, dairy companies must be agile, innovative and responsive to the market, as well as price-competitive," Tipton said. "A logical question is, do our current dairy policies help or hurt us as we try to manage all of this?

"Let me be frank: My fear is that we're heading toward rough waters with the policies we have," Tipton continued. "I believe our growth is already hampered, and our position in the world will only be weakened in the future without change. And now is the time to pursue that change."

The concept of so-called "green" payments could help dairy farmers tackle their mounting environmental challenges, while providing benefits to their communities and the nation as a whole.

"Such payments could be a big plus for dairy," Tipton said, "It's expensive to build and maintain methane digesters and other investments to handle waste, and producers need help. "These payments have few if any negative impacts on the U.S. economy. Unlike MILC payments, they are not tied to milk prices," she continued. "As a result, they would not be in conflict with our current global trade obligations or future trade deals."

Tipton noted that the 2002 Farm Bill authorized similar payments for farms producing crops like corn and wheat.

"The government has gained the experience it would need to develop an effective green payment program for dairy in the Farm Bill," she said.

Tipton also urged the industry to consider alternatives to the current Dairy Price Support Program, which requires the government to buy up and store surplus dairy products whenever the market dips to a certain price.

"There are major drawbacks to the program in today's marketplace -- especially when you combine it with MILC payments," Tipton said. "MILC artificially stimulates milk production -- so you end up right back with a surplus again. And having the government as a guaranteed buyer for commodity products discourages investment to produce dairy ingredients that are increasingly demanded by the market."

Tipton suggested that greater access to government-sponsored risk management tools, like revenue insurance, might provide a solution.

More widespread access to voluntary forward contracting also would be an important addition to the Farm Bill, she said. Buyers and sellers of corn and other commodities can and do use forward contracting every day as part of running their businesses. About one-third of dairy farmers are unable to take advantage of this type of planning and price protection.

"These programs don't distort production, because signals come from real markets. And not surprisingly, exports and revenue growth for U.S. crops took off when these reforms were put in place," she said.

Tipton also addressed the highly contentious issues over the past year concerning the Federal Milk Marketing Orders. She cited a proposal on the table to change Class I and Class II pricing formulas.

"To IDFA, the bottom line on this one is that we don't need a change in Class I prices to move milk to where it's needed or to ensure an adequate supply of milk," she said.

Tipton urged the producer and processor community to consider the negative impact of such proposals on the health and growth of the U.S. dairy industry, and to support efforts to call for quicker response from government in making changes to the Federal Orders. IDFA will be calling for measures to streamline the review process in the Farm Bill, and start a dialogue for fundamental reform.

In presenting these points, Tipton urged producers, processors and manufacturers to work together to better position the U.S. dairy industry for future growth and prosperity.

"I believe we can improve dairy policies and have all stakeholders benefit. Together, we can stop the regional divisiveness of current policies, and forge programs that are fair and effective. But we need to embrace changes that allow markets to work. We need to provide opportunity and incentives for innovation. We need to partner for success."

To read Tipton's full remarks, go to www.idfa.org.

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The International Dairy Foods Association (IDFA), Washington, D.C., represents the nation's dairy manufacturing and marketing industries and their suppliers, with a membership of 530 companies representing a $90-billion a year industry. IDFA is composed of three constituent organizations: the Milk Industry Foundation (MIF), the National Cheese Institute (NCI) and the International Ice Cream Association (IICA). IDFA's 220 dairy processing members run more than 600 plant operations, and range from large multi-national organizations to single-plant companies. Together they represent more than 85% of the milk, cultured products, cheese and frozen desserts produced and marketed in the United States. IDFA can be found online at www.idfa.org.