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Small ball can score as well as the long ball

Ben Yale Published on 27 April 2011

Game 6 of the 1975 World Series is ranked by many as the greatest baseball game ever. The Big Red Machine of Cincinnati with Bench, Rose and Foster took on the Boston Red Sox with Fisk and Yastrzemski. The Reds led the series by 3 to 2. A win in Fenway Park would mean they would be the world champs.

Both teams made incredible plays on offense and defense, stretching the game into the 12th inning. In the top of the 10th inning, as Pete Rose stepped to the plate, he said to Carlton Fisk, the Boston catcher, “This is some kind of game, isn’t it?”

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The game ended two innings later when Fisk hammered one out of the park. The film showing him jumping and waving on his way to first base represents one of the best pieces of sports film ever made.

As he moved up the first base line he was looking into left field and waving his arms to direct his rocket shot that was heading to foul territory to turn fair. His waving worked because the ball hit the foul pole (fair territory, barely) and the Red Sox won.

That home run is part of baseball legend. But Fisk never would have had that game-winning opportunity without his teammates. Team members walked and singled in the eighth to set up a game-tying three-run homer.

Throughout the game, the Boston defense made one big stop after another to keep the Reds from winning.

Once a long ball is on the way, there is no defending it. The batter at the plate advances around the bases to home at his own pace, and no one can tag him out. That is why, outside of baseball, policy proponents like the home run analogy.

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More often than not, though, victories come from “small ball” – a single here, a stolen base here, a walk there and another single.

Dairy policy proposals in the current Farm Bill debate seek the “home run,” maybe even a bottom-of-the-ninth, two-out-two-strike, down-by-three grand slam home run. This analogy implies that, unless someone steps up to the plate and hits a big one, dairy is in for a loss. It also suggests the need for broad, grand and sweeping policy changes.

In the 2012 Farm Bill series, an extraordinary event happened on March 16. A team of individuals representing the breadth and depth of the U.S. dairy industry came together and agreed on nearly two dozen policy issues that they believed would improve the economic condition within the dairy industry.

It was not an individual act or even a combination of individual acts, but the act of a team. The committee came from all regions of the country. Members included those who produce milk (the very small and the very big), grow feed, bottle milk, make cheese, haul milk, sell dairy at retail, work for the government in agriculture (county, state and federal) and hold PhDs in dairy economics.

No other team with such a broad perspective has come together, studied the issues and made a wide range of proposals to help the dairy industry.

This team sacrificed their personal time in attending meetings, holding conference calls, studying and traveling. The report lays out 23 proposals that address the issues of volatility and profitability in the dairy industry.

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Despite the diversity of viewpoints, the committee approved most of the proposals unanimously. Only two received more than two votes in opposition. The final vote had only one dissenting vote and there was no minority report.

The report contains no grand slam home run that causes the fans to stand and scream. No one individual can claim a dominant or winning role. Despite not being flashy, it holds the potential to advance dairy policy proposal by proposal.

The team taught by example. The team ignored the urge to rush to decisions. They heard from agricultural economists. Presentations from the USDA, lenders and even farmers detailed the economic straits producers went through.

Some witnesses explained how the CME worked and the role of futures trading in milk and other products. They listened to USDA agencies explain what they did and how they did it.

They heard from proponents of proposals from single producers and processors to large organizations representing co-ops and plants. A panel of dairy attorneys gave their view of FMMO regulations and law. And they listened to each other.

The result is a report that details where dairy policy is today. The report explains what dairy programs such as price support, FMMOs, Section 32, MILC and other programs in place can do.

It details the various efforts by the secretary during the difficult period of 2008 through 2010. It explains the secretary’s authority was more limited than was apparent.

For example, although the statute says the secretary has unlimited ability to raise dairy price support levels, the report explains how the Office of Management and Budget can limit how much money is spent. Because Congress created programs for dairy such as MILC, the customs funds collected under Section 32 are not available to assist dairy farmers.

Regardless of one’s own view of specific dairy policies, the work provides a valuable reference for the industry. It explains the arguments on both sides of the policy choices. It defines key terms and explains them so the debate does not get lost in the use and misuse of jargon.

It leads by example by seeking the sources of the problems. After being briefed by those in the know, the committee determined an accurate measurement of farm profitability was needed.

The second proposal asks the secretary to appoint a committee to review the FMMOs. The committee was concerned that the FMMOs contributed to price volatility. The committee said, “Moreover, the FMMO milk pricing formulas may be transferring volatility in narrow subsectors of the dairy market into wider milk prices.”

It was also concerned that classified pricing dampened dairy product innovation. It recommended the secretary gather more data to better understand how competitive pricing could work.

The committee does not present its proposals as take-all-or-none. Rather it presents a menu of different proposals which address the problems of the dairy industry. The team proposes no single winning “home run” proposal, nor does it focus the recommendations narrowly on the usual areas of dairy policy.

The report addresses a wide range of policy issues beyond the typical milk order and product price issues. The committee also addresses these issues: farm credit, immigration, ethanol, taxation, competition, milk labeling, quality and dairy product standards.

The committee approved, by one vote, a proposal which recommended adoption of a growth management program. This was the closest to a shot to the bleachers.

There were no details, but the committee broadly stated that such a program should allow for new entries and permit milk production to grow. The narrow vote reflected the divisions, not only in the committee, but the industry as a whole on this issue.

At the same time the committee recommended the adoption of a tax savings account by a unanimous vote. Under this proposal, producers could set up a Farm Savings Account, patterned in part after the Medical Savings Account.

Producers could transfer an unlimited amount into the funds. Any time after six months, the producer could withdraw the funds. Taxes on those amounts and any interest would be taxable when withdrawn. Because it only postpones the tax, not eliminate it, over time it costs the Treasury nothing.

The theory is simple: Current tax law compels producers to spend cash from profits to expand the dairy. In large part, this pressure comes from bankers. Before taxes in a profitable year, a producer has a balance sheet that shows a certain level of assets. If the taxes are paid, the cash goes down, reducing the assets. Reduced assets can take the farm outside of loan compliance.

On the other hand, if the cash is converted to other assets such as feed, animals, another dairy, the total assets remains unchanged. In time these additional animals and extra feed become more milk. In good years, that means even more cash and the cycle continues.

The proposal seeks to change that by allowing dairy producers to hold onto the cash from profitable years. Later they can apply the profits to years when profits are low or nonexistent. In this way, the balance sheet remains unchanged and the expansion does not occur.

The committee received economic modeling of this proposal. The results were surprising. Deferred taxation reduced volatility as readily as other, mandatory, proposed programs.

Even those who do not understand the game of baseball understand what a home run does. Only the experienced see and enjoy the nuances of small ball. The Dairy Industry Advisory Committee has shown that small ball policies can make a difference and represent places where broad consensus can be found.

Individually swinging for the fences excites, but it also divides. The long ball is not necessary to win. Team efforts at small ball can.

The Cincinnati Reds went on to win the 1975 series. It was the top of the ninth, the score was tied and Cincinnati had two outs.

A runner got on base on a walk, he moved to second on a sacrifice bunt and moved to third on a groundout. Joe Morgan hit a single to give the Reds the one run they needed to win. PD

The report mentioned in this article can be found at found at the USDA DIAC website: http://www.fsa.usda.gov/Internet/FSA_File/diac_final_rpt_0302.pdf

Ben Yale

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