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DIAC holds its first meeting – political convenience or the possibility of real change?

By Ed Maltby

Added May 16, 2010. The USDA Dairy Industry Advisory Committee (DIAC) held its first meeting in Washington DC on April 13th -15th with 17 members from every sector of the dairy industry. Secretary Vilsack welcomed the group on the first day with a strong message of support and a charge to look at farm profitability, price volatility and some immediate recommendations for either regulatory or legislative action. Secretary Vilsack spoke plainly about the need: “this industry has got to get control of itself” and that the ‘bandage approach’ was not working, and also stressed the impact that a failing dairy industry has on rural economies. On the second morning, Deputy Secretary Merrigan joined the meeting for the first hour and explained some of the work that the USDA has done in preparation for this meeting. She highlighted the importance of recognizing what has been tried before; the programs that are currently available; and the need to build consensus within the industry. The Deputy Secretary also stressed the need to look ‘outside the box’ for long term solutions while also discussing possible short term regulatory changes or programs that could be implemented quickly to assist struggling dairies.

The first order of business was for the committee members to introduce themselves, and this was a significant indication of the uniqueness of this committee. It’s not unusual for folks to spend some time introducing themselves; describing all their achievements; and clarifying their policy positions in order to ensure that their voices are heard. It was fascinating to be part of introductions that were self-deprecating, humorous and short, but with a passion to solve the problems of dairy. This very diverse group (which included an organic dairy producer with 50 cows sitting next to a non-organic producer with thousands of cows, a State commissioner of Agriculture, representatives from Nestle, Leprino and Giant Foods, cooperatives and milk processors) were willing to put aside their different perspectives in order to make best use of their time together. While many may question the appointment of different folks and the balance of the committee, it was immediately clear that those sitting around the table were intelligent, knowledgeable and willing to work together to solve challenges rather than to cement boundaries and polarize positions. It was no surprise that within a couple of days the established culture of the committee was to be positive and direct, yet polite and with a willingness to consider new ideas for their merit.

As we launched into the meeting it became clear why we had been given such a large 3-ring binder! Over the first two days, the committee heard presentations from and was able to ask questions of the following:

  • USDA Economic Research Service on Dairy Farm Financial Condition and Milk Utilization Patterns
  • USDA Agricultural Marketing Service on Federal Milk Marketing Orders
  • USDA Farm Service Agency on Dairy Product Pricing, Milk Income Loss Contract Program
  • USDA Chief Economist Trade Agreements’ and Other Countries’ Dairy Policies Impacts on U.S. Dairy Policy Options
  • USDA Risk Management Dairy Options Pilot Program & Livestock Gross Margin Insurance for Dairy Cattle
  • USDA Foreign Agricultural Service Dairy Export Incentive Program
  • Overview of Dairy Policy History and Impact on Industry Structure from Scott Brown, University of Missouri
  • Credit, Food Demand, and Environment Panel  including James Putnam, Farm Credit, Mary Christ-Erwin, Porter Novelli, Jim Baird and Gerald Heatwole, American Farmland Trust
  • Cooperatives Working Together by Jim Tillison
  • National Milk Producers Federation Four Part Program by Jerry Kozak
  • International Dairy Foods Association Policy Proposals by Connie Tipton
  • Milk Producer’s Council Price Stabilization Plan by Robert T. Vandenheuvel
  • National Farmers Union Policy Proposals by Chandler Goule

While the presentations were interesting and in many ways allowed everyone on the committee to be at the same level, the ability to ask questions and query the basis for assumptions and conclusions was as important. The presentation from James Putnam of Farm Credit gave us up to date figures on profitability but also highlighted the need for a more general, if not always current, picture that the USDA ERS service supplies. There were ongoing questions asked of USDA employees about how transparent the reporting of product inventories is especially those which are used to determine pay price. There were questions about whether the dairy industry could have the same electronic reporting that livestock and other commodities have available as the committee tried to drill down into the statistics and how they were collected. The presentations by National Milk and IDFA were familiar to most on the committee and illustrative of how all sectors of the dairy industry are aware of how the lack of profitability and the loss of equity suffered by producers across the country also dramatically affects both the processing and manufacturing sectors. The stabilization plan presented by the Milk Producers Council and supported by legislators in California and Vermont proposed a ‘new tool to keep a better balance in supply and demand’. They boldly stated that, “This is not supply management like we’ve ever seen before…this is a uniquely-American method of production management.” 

The final day was devoted to public comment, asking clarifying questions of USDA employees, and comments by committee members. The last few hours of the meeting were spent covering administrative details and setting up three sub-committees: Options under Current Law, Dairy Farm Profitability and Milk Price Volatility. The next meeting will be on June 3rd and 4th, with another meeting in late September. 

Is this just another political committee or will its recommendations be considered and acted upon? Dairy problems are not new and inadequate solutions have been many, but the dramatic lose of organic and non-organic dairies from California to Vermont, combined with a slow recovery, is unprecedented. Crises bring opportunity for change, and the personal investments of Secretary Vilsack and Deputy Secretary Merrigan give the committee the opportunity to be heard. To those that assume National Milk and IDFA already have the political lobbying power to impose their solutions, this committee has the opportunity to question those assumptions, provide a platform for ideas and perhaps provide a vehicle for a broader consensus-based solution that will address the needs of the 50 cow dairy in Maine and the 10,000 cow dairy in New Mexico.   

How might recommendations from the committee impact the organic community? The most recent oversupply increased organic reliance on the non-organic market. Processors were balancing organic fluid milk at prices which were down under $10 per cwt because of the low class 3 price. For many organic producers MILC and DELAP payments introduced because of low non-organic pay price provided a much needed cash infusion and some organic processors factored that into decisions around pay price. As the price difference between organic and non-organic dairy product increased, sales flattened and dropped for the organic product.

As we look at supply management, and as Organic Valley fine tunes its quota program and Horizon Organic works on their procurement contracts,, we need to learn from the mistakes of the non-organic dairy in plotting a path forward that ensures long term profitability for producers. If nothing else, this committee will continue to question the historical assumptions on farm profitability and price volatility; highlight the continuing lack of transparency and inadequate data reporting which causes inequity and poor use of federal funds; and look at every opportunity to improve the existing system. The committee has the opportunity to sketch out a blueprint for change and provide valuable recommendations to the Secretary. With support from the dairy industry and community this committee does have an opportunity for real change with recommendations supported by all sectors of the industry.

For more information on the DIAC meeting please go to:

http://www.fsa.usda.gov/FSA/webapp?area=about&subject=landing&topic=dia-mt-ap2010