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(Washington, D.C. — October 15, 2004) The International Dairy Foods Association (IDFA) hailed the release today of a long-awaited report to Congress from the U.S. Department of Agriculture (USDA) that reviews the effects of government dairy programs. "Any way you look at this report, it presents an airtight case for fundamental dairy policy reform," said IDFA Senior Vice President Chip Kunde. "The report concludes that the current, complex web of government dairy programs does little to help dairy farmers — in fact, the many programs conflict with each other," notes Kunde. "USDA's report repeatedly notes that other forces like technology, consumer demand and underlying economic efficiencies are the real drivers of change in the dairy industry, and that current policies sometimes work against those positive forces." USDA notes in the report that "....Federal dairy programs raise the all-milk price [to dairy farmers] by only about 1%...on average, over 5 years." This comes at a cost, because "...these programs do raise consumer costs and increase government expenditures." USDA is especially critical in the report of having both a direct payment program and a price support program for dairy. The Milk Income Loss Contract (MILC) program established in the 2002 Farm Bill is designed to help dairy farmers in times of low market prices. But this encourages more milk production than would be the case without the program and keeps farm prices lower for a longer period of time. At the same time, the Dairy Price Support Program, which creates a price floor for farmers, has been used by USDA in recent years to buy up the extra milk production caused by the MILC payments. "In essence, the government (and taxpayers) have been paying twice for the same milk," noted Kunde. "Instead of continuing to add new government dairy programs one at a time, the report clearly underscores the need for dairy polices to be reformed all at once. We need a policy that promotes innovation and efficiency for future success." USDA writes, "Attempts to shelter dairy farmers from a set of diverse, powerful forces with a complex web of policies, including price supports, import protection, regulated minimum pricing, and direct payments have done little to prevent structural change...." In fact, the report notes that many current milk programs may actually accelerate structural change. The report is also critical of state efforts to replace federal dairy programs with interstate compacts. There are currently no active interstate dairy compacts, since the expiration of the Northeast Dairy Compact in 2001. But there are ongoing efforts to put new compacts in place. USDA concludes that compacts are not beneficial to consumers: "In aggregate, consumers lose due to higher expenditure on Class I milk...." Such losses are not borne uniformly across the industry, USDA states, noting that "The costs of the compact are borne by consumers within the compact region, by dairy farmers outside the compact areas, and, in the event direct payments are continued, by taxpayers." Overall, Kunde noted that "this comprehensive study concludes that existing dairy programs do little to help dairy farmers, and make milk and dairy products less competitive in the marketplace. With the approaching Farm Bill reauthorization in 2007, the time for reform is now." Click here to download USDA's report. (.pdf, 100+ pages)
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IDFA is the Washington, DC-based organization representing the nation's dairy processing and manufacturing industries, and their suppliers. IDFA is composed of three constituent organizations: Milk Industry Foundation (MIF), National Cheese Institute (NCI) and International Ice Cream Association (IICA). Its 500-plus members range from large multinational corporations to single-plant operations, and represent more than 85% of the total volume of milk, cultured products, cheese, and ice cream and frozen desserts produced and marketed in the United States, an estimated $70-billion industry. IDFA can be found online at www.idfa.org.
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