CWT Announces Herd Retirement

Cooperatives Working Together announced on Feb. 5th that it will conduct a herd retirement effort this spring, with bids being accepted from now until Saturday, March 3rd, and with cow removals to start in mid-March.

This is the fourth herd retirement effort by CWT. The first three, conducted in 2003, 2004, and 2005, reduced U.S. dairy cow numbers by more than 147,000, representing the milk equivalent of 2.8 billion pounds.

Detailed bid information can be found at www.cwt.coop, including a bid application, a calculator to help estimate a farmer's bid, and answers to frequently-asked questions. All bids must be postmarked by Saturday, March 3rd, in order to be considered. All dairy producers submitting bids to sell their herds must be members of CWT, either through their membership in a fully participating cooperative, or as an independent member of CWT.

Bids will be reviewed in early March, with field auditors then proceeding after March 19th to visit each accepted farm to begin the cow removal process.

"All of the economic indicators and benchmarks that we monitor in order to guide CWT's decisions show that now is the appropriate time for us to initiate this herd retirement program," said Jerry Kozak, President and CEO of NMPF, which manages CWT.

CWT is not targeting how many pounds of milk, cows, or herds will be removed by this fourth retirement round. The final tally will be determined by the quality and quantity of the bids, Kozak said.

"As always, we will operate CWT in a cost-effective and frugal manner," Kozak said. "So we will see what kind of response we receive during the upcoming bid period. If the bid prices are, in some cases, too high, we will not put ourselves in the position of taking them in order to meet an arbitrary goal."

In its first herd retirement program, CWT accepted 299 of the 2,038 bids submitted. In 2004, it accepted 363 of the 736 bids submitted. In 2005, it accepted 442 of the 651 bids submitted.

Through the herd retirement program, if a farmer's bid is accepted, CWT pays that farmer for the volume of milk produced by that herd in a 12 month period. The farmer is responsible for selling the cows for slaughter, and they retain the proceeds from that transaction.

In this round, any producer who had his bid accepted in any of the previous three rounds is not eligible to participate again. Also, those producers who have a financial interest in more than one dairy farming operation must include all their cows in their bid. A dairyman cannot place a bid for just one of his herds, if he has an interest in multiple operations.

As in the past, the herd retirement program will again operate under regional safeguard limits to guarantee that milk capacity reductions in any one region of the country do not negatively impact local supplies. The safeguard limits are strictest in the Northeast, Southeast and Upper Midwest.

For more information on how to participate in CWT's herd retirement, visit www.cwt.coop, or call 888-Info-CWT (888-463-6298).

NMPF Forms Task Force To Examine Future of Federal Milk Marketing Order System

A new task force focused on milk pricing issues has been formed by NMPF to examine how Federal Milk Marketing Orders may need to change in the future.

Approximately 66% of the nation's milk is priced under the regulations of the Federal Order system, which was established to ensure consumers an adequate supply of fluid milk, and to prevent the economic predation of individual dairy farmers by setting regional minimum prices.

The new NMPF task force will allow the organization's members to provide input on ways to improve how the system functions, with the ultimate goal of advocating long-term solutions before Congress and/or the U.S. Department of Agriculture, which oversees the Federal Order system.

"The Federal Order system is well-intentioned, but it has flaws that need addressing," said Dave Fuhrman, President of Foremost Farms USA of Baraboo, WI, and chairman of the task force. "Our role will be to think outside the bottle, and come up with ideas that can make it faster, fairer and more efficient in the 21st century."

The task force will review the functions performed currently under the ten Federal Orders, including classified prices, regional pooling, monthly minimum prices, and data reporting, and how those functions might be improved.

The task force will also compare Federal milk orders to state pricing regulations, such as the system used in California, the nation's largest dairy state, and to areas where there are no pricing regulations at all, such as Idaho, the 4th-largest dairy state.

The task force is expected to conduct its analysis throughout 2007, with the goal of producing recommendations at some point in early 2008.

USDA Announces February 26 Hearing On Class III & IV Price Formulas

The U.S. Department of Agriculture has announced it will hold a hearing the week of February 26 to consider changes to the Class III and IV pricing formulas. This follows the tentative final decision to raise make allowances. (See below.)

The hearing will begin February 26 in Strongsville, Ohio.

The current Class III and IV prices are based on cheddar cheese, butter, nonfat dry milk, and whey prices, as collected by USDA's National Agricultural Statistics Service. From each of these a manufacturing cost allowance is subtracted, and yield factors applied to arrive at component and milk prices. The new hearing will reconsider all elements of these formulas, including both fundamental revisions to the nature of the prices, or such important details as which products' prices, which price sources, what manufacturing costs, and what yield factors should be used.

The hearing notice can be found at the USDA website.

If you have any questions, please call Roger Cryan in our office.

Make Allowance Challenge Heard in Federal District Court

As we noted in the January 22 newsletter, USDA's recent make allowance decision has been challenged in a Federal district court. USDA agreed to use the old make allowances when they calculated the February advance prices on January 19; this gave them time to prepare for a preliminary court hearing that was held on February 15. On February 22, a judge is expected to decide if there will be a further delay. If there is no further delay, USDA plans to begin using the new make allowances with the March advanced prices to be announced on February 23 and the February current prices to be announced on March 2.

NMPF Asks USDA To Extend Comment Period On Opening
Of Canadian Border To Imported Cattle

In order to give the dairy industry more time to assess the potential impact of a surge of imported Canadian dairy animals, NMPF is asking the U.S. Department of Agriculture to extend the comment period on its proposal to re-open the Canadian border after a four-year hiatus.

The USDA recently invited public comments on its proposal to open the Canadian border to live animals to be used for breeding purposes, which includes dairy heifers. Canadian had been exporting approximately 60,000 dairy heifers annually to the U.S., until the border was closed in May 2003, following the discovery of bovine spongiform encephalopathy, or mad cow disease, in a Canadian cow. The comment period closes next month, after which USDA is expected to move forward with plans to reopen the border to full Canadian imports of live animals and cuts of meat.

In a letter sent recently to Agriculture Secretary Mike Johanns, Jerry Kozak, President and CEO of NMPF, wrote that NMPF "is concerned that opening the border for live bovines will have significant economic impact upon U.S. dairy producers, and the livestock industry in general."

"NMPF feels additional time is necessary, beyond the 60 days provided in the proposed rule, to thoroughly review and evaluate the proposed rule and accompanying documents with our membership," NMPF's letter said. The letter asks the USDA for an additional 60 days to comment, beyond the scheduled end of the comment period on March 12.

Even though eight cases of BSE have been found in Canadian cattle in the past four years, the USDA regards Canada as a nation at minimal risk for BSE. Under USDA's proposal, no cattle born prior to March 1, 1999, would be allowed to be exported to the U.S. when the border reopens.

On March 7th the Canadian Food Inspection Agency (CFIA) confirmed the most recent case of bovine spongiform encephalopathy (BSE) in a mature bull from Alberta. No part of the animal entered the human food or animal feed systems.

Preliminary reports state that the animal was born in 2000, well after Canada implemented a ruminant-to-ruminant feed ban in 1997.

With this recent discovery, could generate a significant negative effect on the U.S. cattle industry, NMPF noted, writing that "the economic impact of this possibility needs to be carefully examined and analyzed." The first case of mad cow disease discovered in the U.S. in 2003 was in a dairy animal imported from Canada.

Canada to Restrict Milk Protein Concentrate Imports

At the beginning of February, the Canadian government announced that it plans to restrict milk protein concentrate (MPC) imports in response to Canadian dairy farmers' concerns about the rising volume of MPCs used in cheesemaking and other dairy product production.

To do so, Canada would exercise its rights under Article 28 of the General Agreement on Tariffs and Trade. Deliberations about taking this action have been taking place for the last few years, and NMPF has monitored their progress throughout that period. As part of this Article 28 procedure, Canada must enter into discussions with its trading partners and provide some form of compensation to them for the market that would be lost as a result of this process.

Limited concrete information is available at this point concerning the specific tariff lines to be targeted, how the restrictions will operate and what compensation would likely be provided to Canada's trading partners. However, it is NMPF understands, in accordance with statements from Canada's Minister of Agriculture, that Canada's actions will not impact NAFTA countries (including the United States). NMPF will be closely monitoring the development of this case, to guard against unintended consequences to U.S. trade with Canada or other countries.

National Drug Residue Database Results

The 2006 National Milk Drug Residue Database report was recently released and it shows a continued excellent effort on the part of the dairy industry to ensure that drug residues do not end up in the milk supply. The report details which methods are used and what drug residues tested. The results indicate that, of the over 3.4 million milk tankers that were tested on a mandatory basis at processing plants, only 0.038% (less than 1 in every 2,500) were positive. When a tanker is found to be positive, the milk is disposed of, never to reach the consumer.

The report also details the additional, voluntary testing for non-beta lactam drugs. In total over 4.2 million tests were conducted in 2006.

Associate Member Focus: Nelson-Jameson, Inc.

Nelson-Jameson, Inc., a supplier of products used by food, dairy and beverage processing facilities, was founded in 1947 and is headquartered in Marshfield, WI. Nelson-Jameson represents over 750 vendors and sources over 20,000 products in hundreds of classifications providing their customers the convenience of one stop shopping.

Nelson-Jameson's member representative is Jerry Lippert, President. He can be reached at 715-387-1151. For additional information, please visit their website.