Posted: Thursday, November 17, 2011 1:00 PM
Processors say supply plan would reduce exports
Six cheese processors sent a letter to the Joint Select Committee on Deficit Reduction stating their opposition to the supply management plan contained in Rep. Colin Peterson's Dairy Security Act, HR3062.
Their primary concern is the negative impact they say such a program will have on exports.
U.S. dairy exports have grown by nearly $3 billion over the past decade and are the equivalent of about 14 percent of U.S. milk production, they stated.
"We strongly believe that the Dairy Market Stabilization Program will have a negative impact on exports, cannot be fixed by turning it off after exports start declining, and should not be part of a bill whose purpose is to reduce federal deficit spending," the Nov. 3 letter stated.
Officials from Jerome Cheese and Glanbia Foods, both in Idaho, signed the letter along with their counterparts from Sargento, Saputo, Schreiber, and Hilmar.
The processors filed their concerns with the committee because they are opposed to supply management and think Peterson is trying to get his bill worked into the deficit reduction bill, said Jon Davis, chief operating officer for Davisco Foods, parent company of Jerome Cheese.
"They are not following proper procedure, which from the outside looking in, would indicate that whatever they are doing, they don't want full disclosure," he said.
The U.S. is now the global dairy supplier of choice, they say. Supply management would not allow that situation to continue because buyers would not be able to count on U.S. dairy supplies, he said.
"They're certainly not going to put us at the top of the list. They're going to put us at the bottom of the list," he said.
The industry and producers, through the checkoff, have put a lot of work and money into growing exports. To say "you know what, now we're just not going to focus on exports" doesn't make sense, he said.
"The sole purpose of this program is to raise domestic milk prices, when triggered by weak farm profits, regardless of the global supply and demand situation for dairy products," processors stated.
Supply management is not going to move the needle one bit in regard to producer economics, Davis said
But the existence of a government supply-management program will be a signal to competitors and trading partners that the U.S. is not a serious and reliable long-term supplier, the processors stated.
It will also discourage future investment into new domestic facilities and new export markets, they stated.
Supporters say the export argument isn't the real reason critics oppose the bill. Processors are actually concerned they would have to pay more for milk, said Gary Genske, certified public accountant for dairy producers and treasurer of National Dairy Producers Organization.
He agrees with the processors, who point out that industry reports show the demand for U.S. dairy exports will grow. Dairy farmers simply want their share of that profit, which is only realized by processors and retailers, he said.
"Supply management is not going to guarantee profit for dairy farmers in any way, shape or form" Davis said. "The industry has bigger fish to fry (with) ethanol the biggest issue," he said.
Corn going to a subsidized ethanol industry has raised feed costs, which affects producer margins, and has transferred dollars from livestock producers to crop farmers, he said.
Jeff Williams, president and CEO of Glanbia Foods, was traveling this week and unavailable for comment.