House Bill Would Give Dairy Industry Access to Proven Risk Management Tool

In a move strongly supported by IDFA, Reps. Cal Dooley (D-CA) and Gil Gutknecht (R-MN) along with a bipartisan group of House members introduced a bill (H.R.3308) on October 16 that would make permanent the authority for dairy forward contracting that was included in a pilot program approved by Congress in 1999. Set to expire at the end of 2004, the well-received pilot program allows milk producers and processors to voluntarily use forward contracting on milk for other than Class I use. This allows each party to know the price in advance to help manage milk price fluctuations and provide a more predictable basis for business planning.

The U.S. Department of Agriculture's (USDA) most recent data on the effectiveness of this pilot program found that dairy producers who chose to use forward contracting received a higher price on average for their milk than those producers that didn't use forward contacting.

"Forward contracting is a simple, voluntary tool that is widely used by other commodities, and we fully support this legislation that will help dairy be on par with the rest of the agriculture industry," stated IDFA Executive Vice President Connie Tipton. "We applaud Congressmen Dooley and Gutknecht, and all of the co-sponsors, for their efforts to give the dairy industry this essential risk management tool."

Specifically, the bill would amend the Agricultural Marketing Agreements Act of 1937 in order to allow dairy producers and processors to enter into a voluntary agreement for the delivery of a specific amount of milk (for all classes except Class I) for a set price over a defined period of time.

A majority of farmers already use forward contracting to lock in price and revenue of cotton, corn and wheat. Dairy farmers often utilize forward contracts to lock in feed and other input costs, but without passage of this legislation will be prohibited from using the same tool when selling their milk. According to the General Accounting Office, forward contracting is the risk management tool most frequently used by farmers outside the dairy sector. For more information, click here to read IDFA's position paper on forward contracting.

In addition to Reps. Dooley and Gutknecht, other co-sponsors of the bill include Reps. John Boehner (R-OH), Danny Davis (D-IL), Rahm Emanuel (D-IL), Harold Ford (D-TN), William Janklow (R-SD), Ron Kind (D-WI), Mark Kirk (R-IL), Steven LaTourrette (R-OH), Donald Manzullo (R-IL), Doug Ose (R-CA), Thomas Petri (R-WI), Ciro Rodriguez (D-TX), Bobby Rush (D-IL), Pete Sessions (R-TX) and Mark Souder (R-IN).

It is important that IDFA members continue to contact their local congressional representatives in the House in support of the forward contracting legislation. Let them know your company supports the forward contracting program and encourage your representative to sign on as a cosponsor to the bill. Click here for a sample grassroots letter, or click here to use IDFA's e-advocacy tool to send a letter to Capitol Hill.

If your local House representative is one of the original cosponsors listed above, IDFA recommends that you send a letter thanking them for their support. As always, please send a copy of your letters to IDFA. If you have any questions or need more information, contact Meaghan Killion at (202) 220-3534, mkillion@idfa.org.

Posted October 20, 2003