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IDFA Applauds Wells' Dairy, Producers for Advocating Forward Contracting

Mar 12, 2007

IDFA Applauds Wells' Dairy and Producers for Advocating Forward Contracting

Bruce Matson, dairy procurement manager for Wells' Dairy, and two of the company's key producers spent two days on Capitol Hill last week explaining the importance of forward contracting to several members of Congress. The producers shared their positive first-hand experiences using the U.S. Department of Agriculture's (USDA) pilot program for forward contracting and urged their congressional leaders to include the risk management tool in the 2007 Farm Bill.

IDFA believes that all dairy buyers and sellers should have the ability to enter into voluntary, long-term contracts, known as forward contracting, for their milk supplies. IDFA invited Wells' Dairy to visit Capitol Hill to express its support for forward contracting; Matson was joined by Scott Feuerhelm of Plymouth Dairies in Le Mars, Iowa, and Randy Newsome of Newsome Holstein's Inc., in Seward, Neb.

(l to r) Bruce Matson, Randy Newsome, Senator Ben Nelson (D-NE) and Scott Feuerhelm

(l to r): Randy Newsome, Bruce Matson, Representative Leonard Boswell (D-IA) and Scott Feuerhelm.

"When IDFA approached us to come to Washington and discuss forward contracting, we knew immediately that our producers had to come along," said Matson. "Dairy producers and processors both have a vested interest in stable milk prices and leveling the playing field."

Wells' Dairy, the maker of the Blue Bunny ice cream brand, uses milk from an estimated 70,000 cows to run its Le Mars, Iowa, ice cream plant at full capacity. Over the years, Wells' has developed strong relationships that included forward contracting with local dairy producers.

From 2000 to 2004, USDA implemented a dairy forward contracting pilot program, which the department reported was successful in reducing price volatility. The program expired in December of 2004, however, and has not been reauthorized. Currently, only dairy cooperatives that produce and manage milk have the ability to forward contract.

According to Feuerhelm, the pilot program allowed his family to set up a stable business plan for his farm, and invest in farming equipment and a dairy herd to enter the dairy business for the first time.

"I participated in the forward contracting pilot program. Farmers have complex business plans and financial relationships with our bankers, customers and suppliers. All dairy producers should have the ability to form a business relationship with whomever we want, for as long as we want," said Feuerhelm, who now milks 2,400 cows. "Why should dairy be the only commodity in the country without this fundamental right?"

"Something is wrong when cooperatives can forward contract and companies like Wells' Dairy cannot," added Newsome, whose herd numbers 400 cows. "I want to have the option to do business with Wells', and restricting my rights to do that is fundamentally not fair. It's clear this is really about competition in the marketplace."

IDFA and many others hope the 2007 Farm Bill will establish permanent forward contracting for all in the dairy industry.

"Bruce, Scott and Randy did a great job blanketing the Hill to discuss the issue of forward contracting with their members of Congress," said Chip Kunde, IDFA senior vice president. "Congress really listens when producers and processors work together on issues of fairness and equity, like forward contracting."

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Posted March 12, 2007

Dairy Delivers