Feb. 10 2012 08:01 AM

Former Washington legislative staffers told those attending IDFA's Dairy Forum that we may see a new farm bill before the fall election. If not passed before May, it likely would not occur until 2013.

IDFA meeting speakers
Panelists at IDFA's Dairy Forum debated what the next farm bill would look like and if it would be passed this year.
Shown are (left to right): Ed Barron, Kelly Rucker Bingel, Andrew Novakovic, Bill O'Conner, and Jerry Slominski.

Many political pundits believe there are slim odds of passing a 2012 Farm Bill even though it expires in September. However, Bill O'Conner and Ed Barron disagree. The pair, both long-time Washington, D.C., insiders with valued opinions on agricultural topics, see a shorter timeline ahead.

O'Conner once served as former chief of staff for the House Agriculture Committee while Barron held a similar position in the U.S. Senate. Both told those attending the International Dairy Foods Association's (IDFA) Dairy Forum, in La Quinta, Calif., that they believe a new bill could be passed before the fall elections.

"The House will be desperate to get it done. The question is whether you can get a bill through the Senate," said O'Conner, noting that the Senate is where "bills go to die."

Over half the members of the Senate Agriculture Committee are either chairmen of committees, ranking members, or in the Senate leadership, noted Barron. "In the end, they magically get things done," he said.

"There is slightly over a 50 percent chance that a farm bill will get done before the fall elections," suggested Barron. "The Ag Committee was the only group able to provide anything to the Supercommittee (Joint Select Committee on Deficit Reduction)," stated Barron. "That may be another reason we get a farm bill this year."

The last farm bill?
Some pundits have suggested this could be the last farm bill. O'Conner, now a senior agriculture policy advisor for McLeod, Watkinson and Miller, doesn't believe so. However, passing future farm bills will not be easy.

"Farm bills are under more scrutiny and attack," he said. "That is why there was a push to get it passed through the Supercommittee."

In the past, there has been a strong urban-rural coalition that passed farm bills because the major spending portion included nutrition programs, formerly known as food stamps and now known as the Supplemental Nutrition Assistance Program (SNAP).

"That urban-rural coalition is not as strong," noted O'Conner when comparing it to the past. "Some urban legislators are beginning to think they don't need rural legislators to pass food stamp (SNAP) measures.

As for coalitions that might pass a new farm bill, Barron suggested that it would take a group of Republican and Democratic representatives. That is why a Democrat, such as ranking Ag Committee member Collin Peterson (D-Minn.), is now a player even though his party is in the minority.

"Even though the House is controlled by Republicans, the Democrats are very important," says Barron. "There are some Republicans who only support deficit reduction, and they will not vote for the farm bill. That means Democratic support and votes are needed to pass it," said Barron, who now works at Greenberg Traurig, LLP, in government affairs.

Just what dairy's portion will look like remains to be seen. However, dairy is only a small portion of the farm bill. It accounted for one-tenth of one percent of the last package. "That is about $750 million in spending over 10 years on dairy," says Barron. "In comparison, there is $70 billion spent on food stamps (SNAP) each year."

Another panelist, Andrew Novakovic, chairman of the Dairy Industry Advisory Committee, believes dairy isn't the most controversial portion of the farm bill. "Conservation and food stamps (SNAP) will be larger issues," he said.

As for the Dairy Security Act (DSA), Novakovic told attendees what legislators might perceive as formal stands for or against the proposed legislation.

"Currently, you are either for or against Representative Peterson's bill (DSA). If you are against the DSA, legislators will think you must be for the status quo since there is no alternative," Novakovic told the group of processors. "I'd suggest if you are against Peterson's bill, then come up with another proposal."

Connie Tipton, IDFA's chief executive officer, told attendees, "Whatever work we do on the farm bill will be worth it, whether the bill gets passed in 2012 or 2013."

Volatility to persist
During IDFA's earlier market outlook session, two international dairy market experts discussed the export markets and prices with the nearly 900 conference attendees. Both predicted dairy could have great times ahead, but the road will not always be smooth.

"To date, the U.S. dairy market and its position in the export market has been similar to the sixth man in basketball," says Phil Plourd, president of Blimling and Associates, Inc. "We make significant contributions and even start from time to time. However, we still are not one of the main players," says Plourd. "The U.S. is growing its base. However, we need to get our heads around the fact that future export growth is not assured," says Plourd.

"There is indeed room for growth in the U.S. dairy export business," suggests Tim Hunt, global dairy strategist with Rabobank. "New Zealand, the world's largest dairy exporter, is slowing. Land prices continue to rise, and returns on raising sheep are heading up," says Hunt. "We don't believe New Zealand will have 5 percent growth in milk long term. We can expect 2 to 3 percent growth to become the norm," says Hunt.

The developed dairy world can be a long-term supplier to other regions. High-production dairy areas have good climates and resources to produce milk. "Also, 18 of the world's largest 20 dairy processing companies are found in the developed dairy world," says Hunt.

Consumer demand also should continue to grow. "Global dairy consumption should grow 2.4 percent on an annual rate," says Rabobank's Hunt. "We expect that growth to be unbalanced. Overwhelmingly, emerging market countries will be the larger share of dairy growth," says Hunt.

Focus on export markets
China, India, and other export markets also were a major focus of the Dairy Forum agenda. Anil Gupta and Haiyan Wang, authors of the book, "Getting China and India Right," spoke specifically about those markets.

"Emerging economies will account for 78 percent of the growth from 2010 to 2025," said Wang, suggesting China and India will be major players.

In a later presentation, Rabobank's Hunt noted Americans eat more dairy products than Chinese and Indian citizens combined. Americans drink 180 pounds of milk and eat 8 pounds of butter and 37 pounds of cheese each year. Meanwhile, the Chinese consume 25 pounds of milk and 0.2 pound of butter compared to Indians at 85 pounds of milk and 6.5 pounds of butter.

China and India are growth markets. "The biggest drivers in the Chinese fluid market are lactic acid drinks," noted Hunt. "These drinks are not made entirely of milk. Also, milk formula is growing at 14 percent a year in China," he said. "Cheese remains an untapped market."

This article appears on page 75 of the February 10, 2012 issue of Hoard's Dairyman.