Vol. 75, No. 3

Newsletter Stories

Board of Directors Approves Recommended Changes to Improve Margin Protection Program

At their March 7 meeting, the NMPF Board of Directors approved a comprehensive package of recommendations to improve the dairy Margin Protection Program (MPP). If adopted by Congress, these improvements will restore several key elements from the original program as envisioned by NMPF in 2012, and enhance the viability of the program.

The final proposal includes changing the way feed costs and milk prices are calculated, to providing farmers greater flexibility in signing up for coverage. The four-point plan was developed by NMPF’s Economic Policy Committee, and reflects feedback from dairy producers, economists and members of Congress.

“Re-establishing a realistic, effective safety net is a key focus for our membership in 2017, now that we have a comprehensive and well-balanced set of ideas to make it better,” said NMPF Chairman Randy Mooney. “For dairy farmers to have confidence the MPP, we need Congress to make these corrections as soon as possible.”

NMPF developed the MPP following the dairy financial crisis of 2009. It allows farmers to insure against low margins – the gap between milk prices and feed costs – with participants paying higher premiums for higher levels of coverage. After several components of the MPP were altered in the final 2014 farm bill, NMPF began reviewing the program for much-needed changes.

NMPF’s proposal includes a series of adjustments that will affect the way both feed and milk prices are calculated. The most critical change is restoring the feed cost formula to the one originally developed by NMPF. During Congress’ deliberations on the 2014 farm bill, it implemented a 10-percent cut to the weightings of all three feedstuff components (corn, soybean meal and alfalfa hay) of the MPP feed cost formula, based on an analysis by the Congressional Budget Office. The resulting feed formula understates the price to farmers of producing 100 pounds of milk, thereby overstating the real margins farmers are experiencing.

NMPF also recommends changing how USDA determines the individual monthly prices of corn, soybean meal and hay, as well as how it measures the national average price farmers receive for milk.

Another element in need of change involves the accuracy and affordability of MPP premiums. NMPF is asking for an adjustment to premiums paid into the program for coverage above the basic, $4 margin level. This is necessary to incentivize additional participation by farmers.

Other recommendations include determining margins monthly, rather than bimonthly, and issuing payments on a more frequent basis when margins drop. NMPF also suggests placing the deadline for annual enrollment toward the end of the year prior to the calendar year for which they want coverage.

Finally, NMPF recommends that the Livestock Gross Margin (LGM) program be expanded and that producers be allowed to use both the MPP and LGM simultaneously.

To help NMPF strengthen its message to Congress, Kansas dairy farmer Lynda Foster testified last month on improvements to MPP and other farm policy issues like trade and immigration.

During a farm bill hearing on Feb. 23 at Kansas State University, Foster, a member of Dairy Farmers of America, told members of the Senate Agriculture Committee that “dairy farmers deserve better” than the current MPP.

“We need Congress to act swiftly this year and make the necessary changes in order for our industry to be able to protect ourselves from the bad year that could arrive at any time, even in years where experts are predicting higher margins,” she said.

Following the board’s approval, NMPF’s members will encourage members of the Senate and House to incorporate these changes into the farm bill as soon as possible.

NMPF Legislative Push Builds Support for DAIRY PRIDE Act

NMPF is continuing to build grassroots support for legislation that would finally rectify the long-standing misuse of dairy-specific terms on plant-based alternatives that are hijacking the term “milk,” despite their inferior nutritional offerings. To rally support from dairy farmers, NMPF is providing its members with legislative action alerts, news articles, infographics and other materials to garner additional support for two bills that would remedy this problem.

In January, Sen. Tammy Baldwin (D-WI) introduced the DAIRY PRIDE Act (DPA) – followed shortly by a companion bill in the House of Representatives sponsored by Reps. Peter Welch (D-VT), Mike Simpson (R-ID) and Sean Duffy (R-WI) – requiring the U.S. Food and Drug Administration (FDA) to enforce the long-standing rule that anything labeled “milk” must come from an animal source. NMPF argues that FDA’s inaction on standardized labeling terms leads consumers to believe that plant-based alternatives are nutritionally similar and thus acceptable substitutes for real milk.

In the last three months, dairy standards of identity have been thrust into the national spotlight, starting with a letter sent in December 2016 by a bipartisan coalition of Congress members asking FDA to enforce the long-standing standard of identity for milk and other dairy products. Both the Senate and House bills followed the next month.

To help spur support from farmers, NMPF created a user-friendly letter on the Legislative Action Center page of its website that allows individuals to send a note of support for the DPA to their House and Senate members. NMPF President and CEO Jim Mulhern has advocated the cause in interviews with the Wall Street Journal, Associated Press and New York Times. In late February, he submitted an op-ed to The Hill, in which he argued for why the DPA is important to consumers and farmers alike.

“From a nutritional standpoint, the stakes for consumers are high,” he said. “It is misleading for these highly processed products to be marketed as something they are not: a consistent package of nine essential nutrients like the one found in milk. FDA needs to step up and do its job. These bills will force the agency to finally take action.”

NMPF has also created a series of colorful graphics on Facebook and Twitter that promote the DPA.

NMPF’s Focus on NAFTA: Fix What’s Broken, Preserve What’s Not

As informal talks began among the United States, Mexico and Canada on the future of the North American Free Trade Agreement (NAFTA), NMPF told government officials last month that the countries should preserve elements of the pact that are working well, while focusing on the parts of the relationship that are broken – especially trade with Canada.

NMPF used the important opportunity of Canadian Prime Minister Justin Trudeau's visit to the U.S. last month to shine a brighter spotlight on the need to tackle trade issues with Canada. Following NMPF's request, House Speaker Paul Ryan (R-WI) raised the matter during meetings in February with Trudeau and Foreign Minister Chrystia Freeland. Ryan had shared U.S. dairy industry concerns about the importance of breaking down trade barriers and improving market access for America's dairy farmers during these meetings.

Ignoring U.S. concerns, however, Canada last month began implementing its new Class 7 dairy pricing policy, part of its National Ingredients Strategy. The new policy will harm bilateral trade with the United States and dump large amounts of milk powder onto global markets, despite Canada’s trade obligations to limit those practices. NMPF continues to call on Canada to be more transparent on the new program’s details, while also asking Trump to urge Canada to roll back this harmful policy because of the negative effect it will have on American farmers, manufacturers and dairy plant workers.

At the same time, NMPF is working to maintain access to the United States’ largest export market. NMPF President and CEO Jim Mulhern will travel to Mexico this month to speak at a major Mexican dairy industry conference and hold meetings with various members of the Mexican industry and government. U.S. Dairy Export Council President and CEO Tom Vilsack, and International Dairy Foods Association President and CEO Michael Dykes, DVM, will join Mulhern for these joint discussions. NMPF will reiterate its commitment to the U.S.-Mexico dairy industry relationship, further strengthened through the U.S.-Mexico Dairy Alliance created last year.

NMPF Raises Concerns over Abuse of Food Names, Dietary Policy with U.S. Trade Representative

NMPF told government trade officials last month that Europe’s restrictions on the use of common food names are a continuing problem that needs attention from trade negotiators. NMPF shared comments with the U.S. Trade Representative’s (USTR) office as the USTR solicits information for an annual report identifying trade barriers to U.S. companies and products due to intellectual property laws in other countries.

National Milk told USTR that geographical indications – restricting the use of certain common names to certain parts of the world – is an abuse of intellectual property rights. NMPF endorsed a detailed, 25-page submission filed by the Consortium for Common Food Names cataloguing the European Union’s (EU) efforts to unjustly block U.S. companies from continuing to sell their American-made products using a variety of common food terms. NMPF said the EU’s actions are leading to harmful impacts on American companies, and bans on what types of products they can freely sell in a variety of countries around the world. NMPF said these results “are not collateral damage of the EU’s GI policy agenda. Rather, they are the express intent of the way in which the EU has pursued its GI agenda.” 

In addition to protesting EU common food name efforts, NMPF expressed concerns to the USTR about the World Health Organization’s (WHO) food marketing guidelines for young children, developed last year. NMPF mounted a campaign in 2016 to protest WHO’s “Guidance on Ending the Inappropriate Promotion of Foods for Infants and Young Children” because it could have negative impacts on children, and was developed through a non-transparent process that did not fully address WHO members’ concerns.

NMPF noted that “[S]everal countries are poised to implement all or parts of the Guidance, without evidence it will improve nutrition for infants and young children. The text of the Guidance document runs contrary to long-standing dietary guidance issued by the WHO, the UN Food and Agriculture Organization (FAO), and national governments recommending that milk and other dairy products can contribute to a healthy, balanced diet for young children.”

NMPF urged USTR to “ensure that countries are not undermining child nutrition by imposing restrictions on milk and other nutritious dairy products and are abiding by their international commitments on trade and intellectual property.” NMPF will continue to champion the critical role that milk and other dairy products play in ensuring that children over age 1 are getting adequate nutrition and the best start in life, in keeping with pediatricians’ and nutritionists’ recommendations.

NMPF Welcomes President Trump’s Executive Order to Roll Back Waters of the U.S. Rule

National Milk praised the Trump Administration in late February for its decision to begin rolling back the controversial Waters of the U.S. (WOTUS) rule, which expanded federal authority over certain waters and led to widespread concern from farmers about its ambiguity and potential for serious regulatory overreach.

“President Donald Trump’s decision today to rescind the Waters of the U.S. regulation is a welcome development for the nation’s dairy farmers, who have been concerned by the continuing lack of clarity and certainty generated by this policy,” said NMPF President and CEO Jim Mulhern in a statement. “This action signals that the Trump Administration recognizes we need to go back and rethink the entire process that led us to this point.”

The original WOTUS regulation, proposed in April 2014 by the U.S. Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers, included “navigable” waters, but was later expanded to include upstream waters and streams, which farmers often use for drainage and irrigation. NMPF was not satisfied with the EPA’s first attempt to develop the regulation, and supported efforts to halt its implementation. WOTUS has since been tangled up in litigation, with numerous lawsuits filed against the EPA by states and industry stakeholder groups. On Oct. 9, 2015, the U.S. Court of Appeals for the Sixth Circuit ordered a nationwide stay of implementation, and earlier this year, the U.S. Supreme Court halted it indefinitely to determine which courts have jurisdiction over the matter.

Trump’s executive order provides the opportunity to rewrite the regulation, Mulhern said, adding that NMPF and the dairy industry will work with EPA and Army Corps of Engineers to find a solution that maintains a healthy ecosystem while protecting farmers from regulatory confusion.

He said: “Clean water is central to healthy ecosystems, safe water supplies for human and animal consumption, and to the production of milk and other dairy products.”

NMPF Challenges FDA’s Hazard Analysis Guidance

In late February, NMPF challenged a number of flaws in FDA’s Hazard Analysis and Risk-Based Preventive Control for Human Food Draft Guidance for Industry, also known as the Preventive Control for Human Food rule, under the Food Safety Modernization Act (FSMA).

In the guidance, the U.S. Food and Drug Administration (FDA) identified hazards that the dairy industry should consider when developing food safety plans, as required by the rule. NMPF replied that FDA’s definition of a “hazard” includes consideration of the severity of a potential injury or illness, as well as the probability that one will occur. FDA listed many hazards that NMPF argued would not result in an injury or illness or had little to no probability of occurring.

FDA identified drug residues in dairy products as a chemical hazard that should be considered when conducting a hazard analysis. NMPF challenged this concern, pointing out that the dairy industry tests approximately 99 percent of the raw milk supply for beta-lactam residues. Last year’s national survey of milk tankers found that only 0.011 percent tested positive, while the testing of retail-ready dairy products found zero residues. In addition, a review of the scientific literature failed to identify any allergic reaction to drug residues in milk. FDA also identified lactose as a potential hazard, and suggested allergen labeling as a form of preventive control. However, lactose is not an allergen and therefore would not trigger an allergic reaction. NMPF asked for that section of the guidance to be redrafted to avoid confusing consumers about the distinction between milk protein allergies and lactose intolerance.

However, NMPF did concur with FDA that pathogens in raw milk are a hazard that should be addressed, which is why milk and dairy products are pasteurized and raw milk sales should be restricted.

In a second set of comments on the guidance, NMPF pointed out that the product categories were inappropriately named. NMPF argued that for the sake of consistency, clarity, and to avoid consumer confusion, the names of non-dairy alternatives should reflect federal standards of identity. NMPF requested the names for some products to be changed to rice or soy “beverage” and “soy-based frozen dessert,” or else include the word “imitation.” NMPF will continue to argue for proper use of standardized dairy terms. 

MPP Margin Above $11 in January

The U.S. average all-milk price rose $0.10 a hundredweight in January to $18.90 per hundredweight, as reported by USDA’s National Agricultural Statistics Service (NASS). NASS also said the ingredient prices in the MPP monthly feed cost were $7.84 per hundredweight, generating a monthly margin of $11.06 per hundredweight. The January MPP margin was down $0.04 a hundredweight from the December margin.

USDA’s current MPP margin forecast, based on the March 3 CME futures settlements, projects the margin will remain above $9 per hundredweight during most of 2017. However, this forecast has been dropping in recent weeks, and the department now projects a 25-percent probability that the margin will fall somewhere below the $8-per-hundredweight coverage level during both the May-June and the July-August bimonthly periods. USDA’s MPP margin forecasts are updated daily online.

NMPF’s Future for Dairy website offers a variety of educational resources to help farmers make better use of the program.

NMPF Backs CFTC Decision Not to Limit Dairy Futures Contracts

NMPF has endorsed a recent decision by the Commodity Futures Trading Commission not to propose position limits on Class III milk futures, options and equivalent swaps contracts. The CFTC rule is a victory for dairy farmers and cooperatives using risk management tools, and the latest development in a multi-year process through which the Commission is attempting to further regulate speculative activity in futures markets by limiting the positions any individual party could take in such contracts.

In a response to provisions of the Dodd-Frank Act to regulate speculative activity in futures markets, the CFTC proposed limits in 2013 for Class III milk and 27 other physical commodity contracts. At that time, NMPF, several of its member cooperatives and others in the dairy industry argued that such limits would reduce the effectiveness of Class III contracts for dairy farmers.  National Milk said the proposal would diminish the liquidity needed in dairy futures contracts and make it more difficult for NMPF’s cooperatives to offer risk management programs for their members.  In such programs, cooperatives take offsetting, non-speculative Class III milk futures positions on often sizeable volumes of member milk production.

NMPF also argued that, in contrast to delivery-settled futures contracts, position limits were less appropriate for dairy futures contracts, which are cash-settled to a USDA announced price, and in which open interest positions remain high through contract expiration, thus making the risk of distorting speculative activity very minor.

The Commission cited this earlier push-back from NMPF and dairy groups as a key reason for its recent decision to defer imposing limits on Class III milk and two cash-settled contracts for other animal agriculture commodities. However, CFTC declined to exempt cash-settled contracts altogether, and indicated it would revisit the issue of position limits on such contracts at some future time.

In its recent comments to the CFTC, NMPF again argued that there is little reason to impose limits on dairy futures contracts, and it will continue to argue to this effect in response to any future Commission proposals on the issue. The CME exchange has rules that are adequate to guard against any distorting speculative activity in dairy futures contracts, NMPF said.

CWT February Assistance Totals 6.5 Million Pounds of Dairy Exports

Cooperatives Working Together member cooperatives gained 44 contracts in February to sell 6.54 million pounds of cheese and 52,360 pounds of butter to customers in Asia, Central America, the Middle East, North Africa and Oceania. The product will be shipped from February through May 2017.

These CWT-assisted transactions will move the equivalent of 132.12 million pounds of milk on a milkfat basis to customers in 11 countries on five continents.

Assisting CWT member cooperatives gain and maintain world market share through the Export Assistance program in the long-term expands the demand for U.S. dairy products and the U.S. farm milk that produces them. This, in turn, positively impacts all U.S. dairy farmers by strengthening and maintaining the value of dairy products that directly impact their milk price.

The amounts of dairy products and related milk volumes reflect current contracts for delivery, not completed export volumes. CWT will pay export assistance to the bidders only when export and delivery of the product is verified by the submission of the required documentation.

All cooperatives and dairy farmers are encouraged to add their support to this important program. Membership forms are available on the CWT website.

FARM Program Launches New Website, Training Materials

The National Dairy FARM Program released more resources in February to help farmers train their employees in quality animal care – and to better educate consumers about the proper care being taken of cows on America’s dairy farms.

The FARM program website has been updated to feature more technical information and training materials for all three silos of the program: Animal Care, Antibiotic Stewardship and Environmental Stewardship. Each component has its own page containing frequently asked questions, technical resources and background information. This is to better help consumers find relevant information on any part of the program.

Because FARM Animal Care Version 3.0 requires annual employee training, the program is expanding its collection of educational resources. This includes a stockmanship training video, in partnership with the National Beef Quality Assurance program, that is now available on the FARM Program website. The first video in the FARM training series focuses on cattle flight zones, points of balance and tools to utilize when moving cattle. It will eventually also be offered in Spanish.

The program is also hosting a new training course for evaluators and evaluator trainers on April 25-26 in Grand Rapids, Mich. Registration is now open.

NMPF Scholarship Program Now Accepting Applications for 2017-2018

The National Milk Producers Federation is now accepting applications for its National Dairy Leadership Scholarship Program for academic year 2017-2018. Applications must be received no later than April 7, 2017.

Each year, NMPF awards scholarships to outstanding graduate students (enrolled in master’s or Ph.D. programs) who are actively pursuing dairy-related fields of research that are of immediate interest to NMPF member cooperatives and the U.S. dairy industry at large.

Graduate students pursuing research of direct benefit to milk marketing cooperatives and dairy producers are encouraged to submit an application. Applicants do not need to be members of NMPF cooperatives to qualify.  The top scholarship applicant will be awarded the Hintz Memorial Scholarship, which was created in 2005 in honor of the late Cass-Clay Creamery Board Chairman Murray Hintz.

Recommended fields of study include, but are not limited to, Agriculture Communications and Journalism; Animal Health; Animal and/or Human Nutrition; Bovine Genetics; Dairy Products Processing; Dairy Science; Economics; Environmental Science; Food Science; Food Safety; Herd Management; and Marketing and Price Analysis.

For an application or more information, please visit the NMPF Scholarship page or call the NMPF office at 703-243-6111.

CEO’S CORNER


Jim Mulhern
NMPF President & CEO