Government-Induced Uncertainty

Volume 137, No. 50, Friday,June 7, 2013

Uncertainty is endemic to business, and in the food business, the most fundamental uncertainties should reside with our consumers — Is anyone going to buy this stuff? — and the weather — Is it going to rain this summer?

At this time, however, matters of regulation and government are adding a surprising and troubling amount of uncertainly to the dairy business. Need an example? Here’s 10:

1. Farm Bill. For several years, it has been unclear if the United States will end its dairy price support program, create margin insurance for dairy producers and possibly push dairy processors into the role of withholding portion of dairy farm milk checks if USDA declares that it’s time to “stabilize” milk production. The US Senate is expected to vote soon on a farm bill that includes dairy market stabilization; the US House will debate its own farm bill version later this month.

2. Milk Price. Milk pricing formulas are difficult enough to fathom, but in California the state legislature and the Department of Food and Agriculture are working to adopt temporary fix after temporary fix to adjust milk prices. A bill in the state legislature — AB31 — demanding a specific upcharge on California farm milk has stalled in committee. On May 20, CDFA held a hearing to determine if the state’s latest 30 cent add-on to the 4b milk price (and hikes on other milk classes) should be extended. Producers asked for $1.20/cwt add-on to the 4b price; processors asked for the 30 cents to continue through December. Expect an answer in late June. Nothing creates more uncertainty than adding politics to milk pricing.

3. Milk Quality. In 2012, the US Food & Drug Administration (FDA) collected about 1,800 farm milk samples, 900 milk samples from dairy producers that had a drug residue violation in the tissue from culled cows and another 900 random milk samples. The agency has scanned these milk samples for residues of 30 antimicrobial and anti-inflammatory medications. And while this survey has been complete for months, FDA hasn’t released the results. Is dairy facing another PR storm over drug residues in milk, or not?

4. Health Care. Volumes have been written about the impact of new taxes and new insurance requirements in the Affordable Health Care Act. The prospect of new costs, paperwork and bureaucracy adds uncertainty to business growth and business hiring.

5. Phosphorus Regulation. New lower limits in Wisconsin for the amount of phosphorus in dairy plant wastewater are forcing costly decisions for state cheese plants. Wisconsin’s Department of Natural Resources (DNR) and EPA’s Region 5 brandished the Clean Water Act to push through the nation’s toughest phosphorus regulations in 2011, and in many cases only multi-million-dollar filtration systems can scrub the last fraction of phosphorus from already-treated wastewater. The DNR’s complex alternatives, such as nutrient trading between industries and farms, have proven nearly unworkable.

6. Immigration. Dairy has long been uniquely challenged to maintain steady immigrant labor, facing immigration laws designed for seasonal agricultural laborers. A long-term Guest Worker status for dairy farmhands, with a pathway to a Green Card, could bring certainty to dairy farmers. But debate over the US Senate immigration bill is far from over and an attempt at a similar bipartisan bill in the US House now appears dead.

7. Raw Milk. Each new legislative session in Wisconsin brings a return of legislation to legalize the sale of raw (unpasteurized) milk to consumers. A bill promised this year from state Senator Glenn Grothman (R-West Bend) hasn’t emerged, but legal proceedings against Wisconsin dairy farmer Vernon Hershberger may embolden raw milk advocates. Hershberger was acquitted by a jury May 25 on charges of operating a dairy farm and a dairy processing facility without a license. Hershberger told the Madison Capital Times he never stopped selling raw milk and other farm products to members of his “buyers’ club” despite being barred from doing so until he obtained a license. The certainty of the Rule of Law doesn’t appear to apply to selling raw milk in Wisconsin.

8. Monthly Milk Production. USDA selected the industry for extraordinary uncertainty when it chose to end monthly milk production reporting earlier this spring. Following an outcry from all corners of dairy, USDA agreed to release a modified report using outsourced data from states and federal milk marketing orders. Cow numbers and production per cow are lost under this lesser reporting.

9. Tax Credits. A major bill in Wisconsin from Rep. Dale Kooyenga (R-Brookfield) seeks to reform and simplify the state tax code. Amidst many useful ideas in the bill is language to end the dairy manufacturing facility investment tax credit, the beginning farmers tax credit, and dairy and livestock farm investment credit. These credits helped spur growth in Wisconsin’s dairy industry in recent years, including new dairy plants and new full-time jobs. The possible cancellation of these programs sends an inconsistent message on the state’s support for dairy growth.

10. Nitrogen. The Wisconsin DNR’s decision to ratchet down limits on nitrogen in land application of dairy plant wastewater has left several plants with permits in limbo. For years, permits to land apply wastewater have faced increasing restrictions, and WCMA pushed back on lower limits for nitrogen — limits that could stall dairy plant growth. Disputed permits, late approvals, unexpected restrictions all fuel uncertainty in dairy investment.

Government-induced uncertainty frustrates entrepreneurs and growing businesses. Effective, timely application of effort, combined with trust and cooperation between government and business, could un-stick most of the issues noted above. Happy June Dairy Month. JU

John Umhoefer has served as executive director of the Wisconsin Cheese Makers Association since 1992. You can phone John at (608) 828-4550; Fax him at (608) 828-4551; or e-mail John Umhoefer at jumhoefer@wischeesemakersassn. org

Other John Umhoefer Columns

 Decades Ahead on Food Safety
 Wisconsin’s Hot Winter
 A Successful Campaign for Babcock
 Ireland: Gearing Up For Growth
 Mired in Wash Water
 Less Government, More Dairy
An Interview With Jim Sartorii
The Other Solids Price Crush

 The Policy Answer Is Exports
 Rolling The Dice On Dairy Reforms
 Productive Changes In Wisconsin

 The Successful Idea Of DBIC
 Cheese Cuts Both Ways:
Consolidation and Growth
 IDFA's Deep Dairy Reforms
 Wisconsin In The Spotlight
 An Overbuilt Foundation

 What the New Governor Means To Wisconsin
 No Man's Land
 Dairy & Wisconsin’s New Leadership

Wisconsin Cheese Is Investing, Expanding
 Talking Competition
 Being Big Dairy
Upper Midwest Prospects in 2010
Upper Midwest Growth: Perspectives From The Farm
Blue Skies or Bust
Pushing Back Against A Tough 2009
Support Demand, Not Price
Dairy: A Good Bet in a Bad Economy
Wisconsin's Future: Growth
Keeping Sustainability Real
Nose Dive
Dairy Dives into 2009
Consider This...
 Fulls Vats
Implement Make Allowances ASAP
Security Reforms
Spring Forward
A Week of Clarity

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