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Dairy Facts 2016

"Drawing a Line in the Sand against Supply Management," Washington Conference Welcome Address by Connie Tipton, IDFA President and CEO

Jun 16, 2010

(Washington, DC -- June 16, 2010) Good afternoon and welcome to our Washington Conference. It's good to see such a large group, and I thank all of you for taking the time to come to D.C.

Never have we had such an active agenda in Washington on issues that
impact your business, and that means it is especially important for
lawmakers to hear from you.

Before we jump into the issues briefing, I wanted to say a few words about a
topic that has become increasingly troubling to me in the last few months –
and that's the growing interest among some dairy groups to move toward a
government-mandated milk supply management program.

I'm not going to mince words, and I hope you don't either when you are
talking to offices on Capitol Hill. Supply management will destroy our dairy
industry's opportunity for the future.

Supply management is intended to limit growth and increase prices. And
both of these have dire consequences.

Increased prices will result in decreased demand for dairy products, both
fresh dairy products and dairy ingredients. Higher costs for basic foods, at a
time when millions are out of work, and higher-cost dairy ingredients, which drive lower-cost substitutions in product after product, are hardly a formula for success.

Supply management will kill the growth of the U.S. dairy industry and
prevent us from adding jobs and helping our nation's economic recovery.

Supply management will stop dairy exports at a time when emerging
markets are crying out for more dairy products. We all know that the U.S.
has a unique opportunity to grow and innovate to serve these markets.

And finally, milk supply management will cost our government hundreds of
millions of dollars more to fund food and nutrition programs that are the
priority of the Obama administration.

Dairy processors are sensitive to the market situation for farmers, and we are
well aware that dairy producers are coming out of a period of devastating
margins. Congress and the U.S. Department of Agriculture, with our
support, provided over $1 billion of assistance throughout 2009.

It is clear to everyone in the dairy industry that our current dairy policies do
not work. But we need a solution that offers support AND opportunity.

IDFA has been working closely with the National Milk Producers
Federation to find consensus on ditching the programs that are impediments
to our markets working, to provide a better safety net for producers through
a margin insurance program, and to make sure everyone in the milk market
has better risk management tools to manage price volatility.

As an industry we are much more effective when we work together, so it is
very unfortunate that National Milk has recently taken a position in support
of supply management.

IDFA has successfully fought supply management in many previous farm
policy debates – and, believe me, I don't relish the idea of digging this up
again. But supply management is an idea that we need to fight and fight

Congressman Jim Costa (D) of California introduced a supply management
bill that would create a massive new bureaucracy at USDA for the purpose
of deciding how much the milk supply should be increased or decreased each year. Every dairy farmer would be given a quota and would pay extra
taxes if they produced more than the government dictated.

I know it sounds crazy, but you'll find a surprising number of staff and
members of Congress who don't understand the consequences of this kind of
program, and they are thinking about supporting the Costa bill. They have
been told it will stop volatility. They may think it will protect their state's
dairy production or they may think it will help the small producers. But it
will fundamentally take away market opportunity.

Milk prices are not notably more or less volatile than other agricultural
commodity prices. In fact, other commodities have seen even greater price
swings, but those industries use government-subsidized insurance and
market-based risk management tools to smooth the bumps and valleys. We
can and should do the same thing.

As for protecting their dairy industries, many states like Washington,
Minnesota and Wisconsin have been growing much faster than average, and
they will be forced to slow down. Supply management policies will pit
producers against producers and states against states. This is NOT the
direction to take.

And what about keeping our small farms? The Canadians adopted a quota
system decades ago, but the rate of decline in the number of dairy farms in
Canada since then is about the same as in the United States. By allowing the
production allotments to be sold, the Costa bill could very well speed the
demise of small farms as larger, more efficient, farms will want to buy the
production rights of smaller operations.

Now some people are going to ask why not fix the many problems of the
Costa bill or work with the NMPF plan for supply management. But you
can't make a silk purse out of a sow's ear.

Every supply management proposal fundamentally achieves the same ends
as the Costa proposal – impose a quota and tax producers when a trigger at
USDA indicates that production needs to come down. There is no starting
point with room for discussion on supply management – we oppose it in all
of its forms and permutations.

Our dairy programs are already far too complex for most people to
understand. Supply management will not only add to the complexity but lead
to more, not less, price volatility. We need to simplify our policies and
support a strong risk management safety net, so it is time to draw the line in
the sand against supply management.

And it won't be just us – many dairy producers, dairy coops, the cattlemen
and other national agriculture organizations share our opposition to supply
management. Today, we invite them to join us again in defeating supply
management for the U.S. dairy industry.
Dairy Delivers