The “lame duck” has been pretty busy. The House passed the Child Nutrition Act last week, the Senate passed the Food Safety Bill, and agreement was reached this week regarding the Bush tax cuts. National Milk’s Chris Galen reported in Thursday’s DairyLine that the food safety bill was quite controversial because it exempts a lot of smaller food producers from its regulation, something National Milk is concerned about, but it also contains user fees, which are in essence taxes, and that presents a Constitutional snafu that may prevent it from becoming law because taxing authority is only given to the House.

National Milk praised the passage of the Child Nutrition Act, Galen said, because it still mandates that milk and dairy products have a prominent role in school feeding programs.

The final issue is the tax question, specifically estate taxes, which we talked about last week. President Obama and Congressional Republicans reached a compromise. You’ll recall that last week that we pointed out that, if Congress failed to act before Dec. 31, the estate tax comes back with a vengeance, having only a $1 million exemption and a maximum tax rate of 55 percent.

Under the deal announced Monday, the estate tax exemption would go to $5 million and the maximum tax rate would only be 35 percent, something National Milk supports, according to Galen, however Congressional Democrats are not happy with the compromise so we’ll have to see what finally gets negotiated before Congress recesses for the Christmas and New Year holidays. The target date for ending the session was Dec. 17, according to Galen’s ear to the rail, however the controversial issues being dealt with may mean the session drags out until just before Christmas, he said.

Congress cuts ethanol tax credit
Dairy Profit Weekly’s Dave Natzke reported the next day on other Congressional action affecting dairy farmers and said “There’s nothing like deadlines to get Congress moving, and that seems to be the case this December.”

One contentious issue with a Dec. 31 deadline includes tax credits and import tariffs for corn-based ethanol. First implemented to finance a domestic renewable fuels industry and reduce reliance on foreign oil, the program pays the ethanol industry to blend the biofuel with gasoline, Natzke explained.
Opponents, including dairy farmers, however charge that the subsidies are a drain on taxpayers, and say that the use of corn for fuel, by some estimates up to one-third of the U.S. corn crop, also raises food and feed costs.

An interesting sidelight; the Renewable Fuels Assoc. reports that the U.S. ethanol industry produces about 36 million gallons of ethanol per day and uses about 13 million bushels of corn. The process yields about 90,000 metric tons of distillers grains, which can be used for livestock feed.

Earlier this month, a compromise bill was introduced, extending the ethanol tax credit, but cutting it by about 25 percent, to 36 cents per gallon, and extending the import tariff at its current rate of 54 cents per gallon. As of this week, it appears the ethanol debate may be rolled into the larger tax proposal being debated in Congress, according to Natzke. In the area of trade, Natzke reported that it appears ratification of a free trade agreement with South Korea will have to wait until 2011. Trade negotiations, which were hung up over cars and beef, were resolved last week, he said, and agricultural groups, including dairy, have urged quick congressional approval. National Milk says the agreement could increase U.S. dairy exports by $380 million annually.

Also related to trade, the International Dairy Foods Assoc. reported that a dairy promotion checkoff paid by U.S. dairy farmers since the early 1980s, may finally be applied to dairy imports. Congress authorized the assessment in 2002, but program changes to make it compliant with world trade obligations were not approved until the 2008 Farm Bill. Natzke reported that the IDFA opposes the import checkoff, which would fund dairy promotion and research in the U.S., while dairy producer groups approve it.

Idaho increases beef checkoff assessment
Speaking of checkoffs – sometimes farmers are a little skeptical of them, especially in tight financial times, but most realize the importance of advertising and promotion, just as the McDonald’s and the Wal-Mart’s of the world do.
Such was the case in Idaho where the state’s dairy producers voted to increase their beef checkoff assessment to $1.50 per head. Idaho beef Council executive director Traci O’Donnell reported in Wednesday’s DairyLine that part of the extra 50 cents stays in Idaho and the rest goes to the national organization for national and international marketing programs. She added that about 70 cents of the $1.50 stays in Idaho and the rest goes outside the state to “drive beef consumption outside our state and our borders.”

When asked about the major accomplishments of the beef checkoff, O’Donnell said the increased assessment enabled them to dive deeper into some of their key market areas to build consumer awareness and consumption of beef.
It enabled cooperation with partners and a pilot test with 28 retailers across Idaho was done last Christmas where pop up timers commonly placed in turkeys were inserted in prime rib roasts.

The checkoff provided training in-stores as well as merchandizing materials in store meat cases to get consumer attention and “tackle poultry sales at Christmas.” She said the test was very successful and retailers reported sales increases of 20 to 60 percent. This year the promotion will be expanded to 60 stores across the state.

The increased funding aided their consumer outreach program, according to O’Donnell, and in 2009 they partnered with the World Triathlon Corporation to be the official protein of the Boise Iron Man Triathlon.

Colorado dairy producer Lester Hardesty is chairman of the U.S. Dairy Export Council (USDEC) and talked with me about his new role at World Dairy Expo. That conversation aired on Monday’s “DMI Update,” and he stressed that USDEC is a farmer funded, membership organization that works with the entire dairy industry to get more U.S. dairy to consumers around the world. He said USDEC works to develop markets and defend them by working with exporters and companies to fill the needs of their customers and plays a key role in assisting them.

U.S. dairy farmers have learned the value of the export market to their bottom line. Hardesty acknowledged that the U.S. domestic market is stable, with 300 million people in the U.S., but pointed out that 6.6 billion people live around the world so 95 percent of potential dairy customers live outside the U.S.

“To me as a farmer it’s an opportunity to help feed the world,” Hardesty said. “It’s an opportunity for me to stabilize or enhance the prices that I receive at my farm gate, and an opportunity to grow either internally through management practices as our production increases yearly and or should I as a farmer choose or decide to milk a few more cows, it’s an opportunity for me to do that.”

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Lee Mielke may write to him in care of this publication.