Dairy processors agree these are troubled times for farmers. Connie Tipton, CEO and president of the International Dairy Foods Assoc. (IDFA) admitted in Wednesday’s DairyLine that the dairy industry is “pretty fragile right now.”
“Dairy farmers have been through months of economic stress,” Tipton said, and while milk prices have rebounded in 2010, margins are still tight and “The bottom line is that producers have had a rough time lately. We understand that.” 

She said it’s a “fair question” to ask as to what IDFA believes is the solution and said it’s “an easy one to answer.” “We’re for programs that will help our industry grow, by increasing dairy consumption and by expanding exports,” Tipton said.

“We’re for policies that make the pie larger and benefit not only IDFA’s members, but the thousands of dairy farmers who supply their milk.” She stressed the importance of “putting the right policies and tools in place” to “help our producers make it through the hard times.”

She pointed out that all agricultural commodity markets have price fluctuations, but that farmers in other sectors have the tools to manage the swings. “Without the tools, it’s kind of like sending a football team on to the field with no helmets or pads,” Tipton said. “Not a good idea.”  

IDFA strongly supports the creation of a new government-subsidized margin insurance program. According to Tipton, “that will buffer dairy farm income when the margins between feed costs and milk prices are squeezed. And will help prevent equity erosion.”

She added that, “If this sounds a lot like the Dairy Producer Margin Protection Plan proposed by the National Milk Producers Federation, it’s because it is.”
Tipton said margin protection “needs to be passed as quickly as possible before the market puts the squeeze on farmers again, before 2011, 2012 or whenever the next farm bill is passed by Congress,” but she stopped short in endorsing any supply management provision, which is also a part of National Milk’s proposal.

“Let’s spend our energy on getting something done, rather than quibbling about details that have not yet been worked out or may not have the same kind of broad support,” Tipton concluded. “We are ready to join ranks immediately to get Congressional action on a dairy margin insurance program. We need something in place to protect dairy farms within months, not years. Let’s not let perfect be the enemy of the good.” 

Estate tax law expires on Dec. 31
One more issue of concern for all farmers is estate taxes. A Tuesday press conference by 10 farm and agriculture organizations called on Congress to act on estate tax reform during the lame-duck session, which resumed on Tuesday.
“The estate tax comes back with a vengeance,” warned National Milk’s Chris Galen Thursday. If Congress does not act before Dec. 31, the current law reverts to the 2001 rate with an exemption level of $1 million and a 55 percent tax rate and would negatively affect the ability to pass farms, ranches, and small businesses from one generation to another, according to a NMPF press release.

National Milk was represented at the press conference by Billy French, a Maurertown, Va. dairy producer whose farm has been in his family since 1872. French testified that estate planning was essential in keeping the farm in his family and expressed concern over the uncertainties regarding estate taxes.
Estate tax is one of two major tax issues that Congress needs to deal with in December, Galen reported. The other one is individual income tax rates, which was discussed Tuesday at the White House with Congressional leaders.
Republicans appear to have more support for easing the estate tax burden on farmers, according to Galen.

“But, because we now have a divided government, with Republicans in the House and Democrats keeping the Senate and the White House, you need to come up with bipartisan solutions,” he said. Republicans won’t take control of the House until January, he concluded, so “there’s a lot of jockeying to get ready for other big battles, including deficit reduction in 2011, a topic we’ll be talking more about in the coming year.”

Senate approves bill to give more authority to FDA

And, while we’re on Capitol Hill, the Senate approved what’s called the most sweeping changes to U.S. food safety laws since the 1930s. Dairy Profit Weekly Editor Dave Natzke reported Friday that the Food Safety Modernization Act passed 73 to 25 and gives the Food and Drug Administration new authority to oversee the U.S. food supply, including power to issue mandatory food recalls. The bill requires more frequent inspections of food facilities, gives FDA greater access to food company records, and increases oversight on imported foods.

Most dairy and agricultural organizations support the Senate version of the bill, over the House version, which was passed more than year-and-a-half ago, Natzke reported, and the Senate bill does little to change FDA’s jurisdiction over most farms, which are still regulated by USDA.

Among dairy interests, the IDFA and National Milk worked to require FDA to coordinate with state inspection programs, such as inspections under the Pasteurized Milk Ordinance.

An IDFA/National Milk call for including raw milk distributors to be under new FDA regulations was not included in the Senate bill, according to Natzke, and small farms and businesses were granted exemptions, an amendment which split the agricultural community somewhat along “size” lines.

“The bill faces hurdles,” Natzke concluded. “The biggest may be whether the Senate violated a constitutional provision by requiring fees, technically-considered taxes.” Constitutional law gives the power to tax only to the House.
“If that can be worked out, proponents hope the bill gets to President Obama’s desk by the end of the lame-duck session and, in any event, the final law will likely take years to implement.”

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.