News for Dairy Co-Ops - March 4, 2011

Volume 69. No. 3

Newsletter Stories

NMPF Analysis Shows IDFA-Funded Informa Study Miscalculated Impact of Foundation for the Future Program

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NMPF Analysis Shows IDFA-Funded Informa Study Miscalculated Impact of Foundation for the Future Program

The Informa Economics review of the National Milk Producer Federation’s Foundation for the Future dairy policy proposal was extremely limited in its scope and failed to take into consideration how producers would have cut their milk production in response to a reduction in their milk checks, according to a new analysis by NMPF relf.org/fileseased on Wednesday.

The NMPF analysis of the processor-funded Informa study shows that under the Dairy Market Stabilization program, dairy farmers would have received at least $3 billion more revenue had the stabilization program been in place in 2009. That finding is corroborated by a separate, new analysis done by Dr. Scott Brown at the University of Missouri’s Food and Agricultural Policy Research Institute.

NMPF has proposed a series of new programs for the U.S. dairy industry as part of itsFoundation for the Future dairy policy package, including the Dairy Market Stabilization Program (DMSP). That program is designed to reduce dramatic swings in market conditions that ultimately result in negative margins, such as those experienced by dairy farmers in 2009. The DMSP is activated only when margins become compressed, due to low milk prices or high feed costs. When they do, the program reduces the amount that farmers are paid, to encourage them to temporarily reduce their milk marketings. That, in turn, results in increased producer margins. The money collected under the DMSP is to be used to stimulate demand, through product purchases.

In January, Informa Economics issued a report, commissioned by the International Dairy Foods Association (IDFA), asserting that the Dairy Market Stabilization program, had it been in place in between 2000 and 2009, would have reduced farmers’ pay prices by $626 million (with $390 million of that total in 2009 alone). However, the Informa study made no attempt to estimate how producers would have altered their milk output, or how cheese purchases would have helped producer incomes, had the program been active during that period. Had it done so, the study would have found that the DMSP program would ultimately have increased total farm revenue, according to NMPF.

“The purpose of the Informa study was transparent. Its sole intent was to pit producer against producer, in region by region, by focusing on the differences in the total dollar reductions producers in various states would have experienced,” said Jerry Kozak, President and CEO of NMPF. “But the Dairy Market Stabilization Program treats all producers equitably; they are all subject to the same required production reduction percentages.”

In addition, the Informa report was incredibly one-dimensional, in that “it didn’t make any effort to acknowledge that when pricing signals are bad, farmers react fairly quickly,” said Kozak. “Real-world experience tells us that farmers respond to incentives and penalties, like all rational economic actors. If they know they’ll get paid less for their milk in the next month or two, they’ll act accordingly. But you won’t find any acknowledgment of that reality in the Informa study.”

In fact, the Informa report briefly admits that “it’s likely that farmers…will try to limit production” during months when the program is active, but then the report says that “it’s nearly impossible to say exactly what the impact on milk production will be.” In essence, it only applied the structure of the DMSP plan on activities that had already occurred, without any modeling of how people would have responded, according to Kozak.

In order to present a dynamic model of how the Market Stabilization program would actually affect milk production, NMPF’s Vice President for Economic Policy, Dr. Peter Vitaliano, estimated the behavior of dairy producers during the months when the program would have been triggered in the past two years. NMPF’s own econometric analysis shows that had the DMSP program been in place in 2009, the average U.S. all-milk price would have been $1.90/cwt. higher during 2009, raising farm revenue by $3 billion.

NMPF’s assessment is corroborated by an independent analysis of the entire Foundation for the Future program, prepared Dr. Scott Brown, of the Food and Agricultural Policy Research Institute at the University of Missouri. His report, located on the FAPRI website, found that producers would have received an increase of $3.4 billion in cash receipts as the DMSP program would have kicked in during 2009, reducing milk output and ultimately bolstering prices.

 

CWT Continues Export Efforts in February

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CWT Continues Export Efforts in February

The CWT Export Assistance program provided assistance in February to four CWT member cooperatives selling 11.2 million pounds of Cheddar and Monterey Jack cheese to 10 countries on four continents. The product is scheduled to be shipped from March through June 2011. Add to that the 22.7 million pounds of CWT-assisted 2010 cheese sales scheduled to be shipped in the first six months of 2011, and the Export Assistance program will be making a significant contribution to expanding overseas sales.

The 52 million pounds of cheese exports assisted by CWT and shipped in 2010 account for 13.6% of total U.S. cheese shipments. The 17 million pounds of butterfat (in the form of butter and anhydrous milk fat) CWT assisted and shipped in 2010 equaled 14.1% of total butterfat exports. These CWT sales produced an additional $398 million of revenue, adding an average of 18 cents per hundredweight to U.S. producers’ milk checks in 2010.

Some producers have questioned why CWT provides export assistance when the cheese price is $2.00 a pound. The purpose of CWT is to help maintain the role of the U.S. as a consistent, reliable exporter of value-added dairy products, which is not a role that American suppliers have played historically. In the past, the tendency of U.S. manufacturers was to export only what the domestic market would not absorb. By 2008, the export arena became a major buyer of U.S. milk solids, with total sales of 11%.

In 2009, a combination of factors resulted in U.S. dairy product exports dropping 15.5%, the equivalent of 1.7% of total U.S. milk solids produced. However, it was in products that most impact producer milk prices where the biggest drops occurred – cheese exports down 50 million pounds, butter exports down 126 million pounds, and skim milk powder (protein standardized nonfat powder) down 314 million pounds.

In order to prevent a re-occurrence of 2009 in the coming year, CWT must continue to assist U.S. cheese sales in the world marketplace. When the participation in CWT reaches the 75% level necessary for the 2¢ assessment to begin, CWT will be able to add to the products receiving export assistance and maintain U.S. dairy producers’ world market share and reasonable margins.

 

Dairy Groups Applaud U.S. Government Action to Resolve NAFTA Trucking Dispute with Mexico

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In response to the long-standing lack of U.S. compliance with its trucking obligations to Mexico under the North American Free Trade Agreement (NAFTA), Mexico has been legally levying tariffs on a variety of U.S. exports since March 2009. In August 2010, Mexico added a new retaliation list that included many U.S. cheeses.

At a meeting Thursday in Washington between the heads of states of both nations, an agreement was announced to put the U.S. on the path to resolving the cross-border trucking dispute.

NMPF and the U.S. Dairy Export Council said they are looking forward to a swift process by the Department of Transportation (DOT) to complete a final agreement. It is expected that DOT will issue a Federal Register with the proposed rules for a 30 day comments. Once the Department of Transportation reviews all of the comments, it must issue a final rule. This rule will be deemed the final agreement.

The Government of Mexico has announced that once a final agreement has been reached, Mexico will suspend its retaliatory tariffs on dairy products by 50 percent (if the retaliatory tariffs are 20%). After the final agreement, the tariff will be reduced by half to 10 percent and will suspend the remaining half when the first Mexican carrier is approved to cross the border.

Congress Funds Government…For Two More Weeks

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To avoid a shutdown of the federal government, Congress passed a short-term Continuing Resolution (CR) this week that will allow the government to continue operating through March 18. Altogether, the short-term fix will reduce current spending levels by $4 billion by rolling back certain earmarks and eliminating a handful of programs, many of which were already targeted by President Obama in his fiscal year 2012 budget proposal. President Obama signed the temporary funding bill just prior to the current CR expiration on March 4. By passing the short extension only, the rhetoric and debate on Capitol Hill is expected to escalate in the coming weeks.

Prior to this week’s short-term extension debate, the House passed a measure last month to fund the government through the end of the fiscal year, which would have provided over $60 billion in savings. However, many of the provisions in the bill brought much controversy and political overtones, leaving little chance that the Democrat-controlled Senate will pass it.

Along with health care and food safety, the Environmental Protection Agency (EPA) quickly became a main target of the House GOP. Through the amendment process, EPA’s efforts on a multitude of issues concerning agriculture would be effectively stopped, including the agency’s actions in the Chesapeake Bay, their efforts in the State of Florida with numeric nutrient criteria, as well as the ongoing work to further regulate dust particles. Meanwhile, the House also voted on multiple amendments regarding biofuels. Amendments that would stop EPA from implementing E15 and halt federal funding from going to the development of certain ethanol infrastructure, successfully passed in the House.

USDA's DIAC Approves Recommendations to Reform Dairy Industry

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USDA's DIAC Approves Recommendations to Reform Dairy Industry

On Thursday, the USDA’s Dairy Industry Advisory Committee (DIAC) voted 16 to 1 to approve the final report of the committee, which will be release officially by USDA in mid-March. [A draft copy of that DIAC report is available online.]

In a conference call, the DIAC reviewed the 23 recommendations to Secretary of Agriculture Tom Vilsack. It is expected that the Secretary will issue the final report the week of March 14. This was the last meeting of the committee. The recommendations include many of the concepts included in NMPF’s Foundation for the Future, and NMPF issued this statement today in response.

 

NMPF Accepting Applications for 2011 Scholarship Program

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NMPF Accepting Applications for 2011 Scholarship Program

The National Milk Producers Federation is now accepting applications for its National Dairy Leadership Scholarship Program for academic year 2011-2012.

Each year, NMPF awards 4 to 5 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 US 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 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 who was instrumental in establishing NMPF's scholarship program.

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. Applications must be received no later than Thursday, April 21, 2011. For an application or more information, please visit the NMPF website or call the NMPF office at 703-243-6111.

 

Calling All Producers: Mark Your Calendars for the NDPC

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Calling All Producers: Mark Your Calendars for the NDPC

Preparations are well underway for the National Dairy Producers Conference (NDPC), where producers and others in the dairy industry will descend on Omaha, Nebraska from May 15 - 17, 2011, to participate in discussions on many of the key challenges looming in 2011.

Formerly known as the National Dairy Leaders Conference, the NDPC gives dairy producer participants the opportunity to listen, learn, and lead. It provides a way to critically analyze the status of the dairy industry now and discuss possible solutions for the future.

Registration for the conference is now available. Participants are encouraged to secure their farm tour spot, meeting registration, and hotel reservation online at www.registration123.com/NMPF/2011NDPC. However, conference registration forms submitted through the mail with credit card or check payment will be accepted.

Information about the NDPC is posted at www.nmpf.org/NPDC, including the agenda and details about the conference's location.

Although the conference is geared primarily toward dairy producers, anyone with a stake in the dairy industry is invited to attend. This may include dairy cooperative executives and directors, dairy processors, suppliers and consultants to the dairy business, state and federal regulators, promotion organization executives, and academics.

NMPF Board of Directors Prepare to Meet Next Week in Arlington

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NMPF Board of Directors Prepare to Meet Next Week in Arlington

The members of NMPF's Board of Directors will gather March 7 - 8 at the Ritz-Carlton, Pentagon City hotel in Arlington, Virginia for their spring meeting.

Committee meetings will begin at 10:00 am on the 7th, including the Officers Meeting, the Political Action Committee meeting, and the Dues & Budget Committee Meeting. The day will conclude with a membership reception. The full Board of Directors meeting will start at 8:00 am on the 8th.

Anyone with questions about the Board of Directors meeting should contact Anuja Miner.

Activities and Accomplishments Report Chronicles 2010 Achievements

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Activities and Accomplishments Report Chronicles 2010 Achievements

This week, NMPF released its 2010 Activities and Accomplishments Report, which chronicles the organization’s various achievements throughout the past year. The new report highlights important issues ranging from economic policy, government relations, food safety, nutrition, animal health, and standards and labeling. It also reflects on the NMPF membership, featuring the board of directors, member cooperatives, and Young Cooperators. The report is available on the NMPF website.

CEO’S CORNER


Jim Mulhern
NMPF President & CEO
Associate Member Focus: 

 

The employees of Blimling and Associates study the ins and outs of the dairy marketplace. Their purpose is to help their clients navigate the markets, informing them of critical decisions along the way.

Their clients include domestic and international companies and organizations who are concerned with manufacturing, marketing, and merchandising dairy products. They come from many areas, including: foodservice, retail, dairy and food manufacturing, packaging and marketing, farmer-owned cooperatives, and investment companies. They also provide varying levels of customized services in the areas of market insight, training, risk management, and customized intelligence.

You can learn more about Blimling by visiting their website at www.blimling.com.

Their company representative is Phil Plourd, who can be reached at 608-839-5565 or by email at PPlourd@blimling.com.