The Dairy Margin Coverage (DMC) program margin for May was $5.37 per cwt., the lowest since July 2013 and $0.65 per cwt. lower than the margin for April. Still, projections show that June’s margin may see the highest jump since 2000, with a strong recovery in prices that should buoy margins through the rest of the year.

The April to May drop in the DMC margin was due to an $0.80 per cwt. lower all-milk price, offset by a $0.15 per cwt. lower calculated feed cost. The May margin will generate a payment of $4.13 per cwt. that month for producers enrolled in the program this year at the $9.50 per cwt. margin coverage level and smaller payments for producers enrolled all the way down to $5.50 per cwt.

The current USDA forecast for the June margin is $10.86 per cwt., $5.49 per cwt. higher than the May margin and by far the largest one-month increase in the MPP/DMC margin since at least January 2000, the earliest margin data available.”

The USDA/FSA Decision Tool’s current forecast for the remainder of the year, shown below, indicates the margin will peak in July at almost $13 per cwt., then drop back toward $9.50 per cwt. during the remainder of the year.

The DMC information page on NMPF’s website offers a variety of educational resources to help farmers make better use of the program.

The National Milk Producers Federation, the largest organization representing U.S. dairy farmers, applauded bipartisan momentum on legislation that will enhance the many conservation and environmental efforts dairy farmers are taking as they care for air, land, and water resources.

The Growing Climate Solutions Act, introduced in the Senate on June 4 and the House on June 26, highlighted increasing congressional attention to climate-change solutions in which dairy farmers would play a prominent role.

Jason Weller, vice-president of Truterra, LLC, the sustainability arm of Land O’Lakes, testified in a Senate Agriculture Committee hearing on June 24 in support of the bill. NMPF also submitted written testimony on behalf of Environmental Issues Committee Chair Mike McCloskey and President & CEO Jim Mulhern.

“To continue and enhance our efforts to combat climate change, the dairy industry is launching the Net Zero Initiative to reduce the industry’s climate impact to ‘net zero’ by as early as 2050,” McCloskey and Mulhern wrote in their testimony. “Carbon markets will play an important role in helping us to achieve our goal, making the Growing Climate Solutions Act a valuable addition to the legislative landscape in this regard.”

The Growing Climate Solutions Act’s Senate sponsors are Sens. Mike Braun (R-IN) and Debbie Stabenow (D-MI), while the House version was introduced by Reps. Abigail Spanberger (D-VA) and Don Bacon (R-NE). NMPF is pleased with the bill’s bipartisan support in both chambers, a crucial step toward reducing agricultural carbon emissions that aligns well with dairy’s goal to achieve carbon neutrality or better by 2050 through the industry’s Net Zero Initiative.

“We are grateful that so many members of Congress in both parties have recognized the important contributions dairy farmers make to conservation and sustainability,” said Mulhern. “We look forward to working to advance this and other proposals as Congress takes up environmental legislation.”

U.S. dairy farmers are concerned about possible bad-faith actions from Canada even as the United States-Mexico-Canada Agreement (USMCA) agreement entered into force July 1, with Canada’s announced Tariff-Rate Quota (TRQ) allocations undermining the trade deal by thwarting the ability of the U.S. dairy industry to make full use of the trade agreement’s market-access opportunities and violating some of the treaty’s provisions on TRQs.

USMCA implementation caps years of hard-fought negotiations to break down trade barriers and institute fairer rules to improve the flow of U.S. dairy products throughout North America, and U.S. dairy farmers and cooperatives stand ready to increase deliveries of high-quality U.S. dairy products to Canada. The TRQ action undercuts the agreement by effectively limiting agreed-upon U.S. access.

“U.S. farmers will bear much of the brunt of this bad-faith approach by Canada to implementing USMCA’s dairy provisions.” said Jim Mulhern, president and CEO of the National Milk Producers Federation. “Canada needs to change its course and abide by its commitments.”

NMPF has repeatedly warned that the full benefits of this carefully negotiated trade agreement will not materialize without careful monitoring and stringent enforcement of Canada’s commitments under USMCA. While not unexpected, Canada’s latest efforts to manipulate its agreed upon trade obligations to protect its tightly controlled dairy market are unacceptable.

NMPF has been in close contact with USTR and USDA to urge swift action towards a resolution that ensures Canada is held strictly responsible for abiding both by the letter and intent of USMCA.

The organization also has been in contact with lawmakers, most recently working with Congressional offices to spotlight Canada USMCA compliance concerns during Congressional oversight hearings and lending support to a letter sent by Senator Charles Schumer (D-NY), urging USTR to ensure that Canada live up to the commitments it made to the U.S. on dairy access, including on the negotiated TRQ allocations as well as the elimination of Classes 6 and 7, which created conditions for dumped Canadian exports.

Midway through a history-making year, we in dairy can take with us important lessons from its first half as we face whatever the second half may bring. To do that, it’s important to take a brief moment to reflect on what we have learned and what it means for the months ahead.

First – A catastrophic collapse in dairy prices has been followed by a dramatic rebound. But once-bitten, twice-shy. Current news on the dairy economy is promising: Prices are up, and forecasts are for them to remain relatively strong. A combination of farmer initiative, federal action and consumer support has meaningfully advanced our industry.

But as we have painfully learned this year, expect the unexpected.

Yes, dairy farmers have reason for optimism, but recent experience has taught us the importance of smart risk management like never before. Signing up for next year’s Dairy Margin Coverage Program, as well as understanding the full range of tools available to producers, will be all the more important going forward, even as we at NMPF seek additional needed assistance from Capitol Hill.

Second – Retail consumers are revitalizing milk demand, but trade remains crucial to our future. One of the most important silver linings of the coronavirus cloud is dairy’s rediscovery in households across the nation. That’s a genuine gain, and it’s something to build upon. But it shouldn’t obscure the fact that expanded trade and increased access to foreign markets is critical to U.S. dairy’s future, and we will need to fight even harder for our international share going forward.

Robust trade was an unsung hero for dairy demand this spring, and that underscores the need to redouble efforts to expand our presence in global markets. But barriers remain, and other countries are creative at erecting new ones. We must be vigilant.

Third – The past few months have seen major upheaval not only because of a global pandemic, but because of a nationwide reckoning with racial injustice and inequality that must finally be acknowledged and addressed.  Dairy producers share the same concerns and desire for progress that our fellow citizens do.

Knowing how to respond to such a massive issue that permeates our history and touches every aspect of national life can be challenging. It’s sometimes hard to watch what’s happening in cities when you’re in a rural area, where the police are your neighbors and outrages seem far away. It’s also difficult to admit the extent to which these tensions exist in our own lives, and within our own community of agriculture. But to move forward as an industry – indeed, as a country — we must always look toward the broader national landscape even as we grapple with our own challenges as individuals and leaders in our own communities.

It’s not only our economy that’s reaching for a new normal. Our society is as well, and in the months ahead we will need to do our own part, in our own soul-searching ways, to keep our country moving toward what our founders called “a more perfect union.”

Finally – We have once again learned dairy is never stronger than when it works together. That has been recognized industrywide through our collective experience of seeing how dairy’s united voice on Capitol Hill and among federal agencies helped secure swift, meaningful assistance that will help dairy farmers weather this crisis.

But the true heroes are dairy farmers and the cooperatives they own, who have lived up to the spirit of self-help that has embodied NMPF since its founding in 1916. Through smart farmer stewardship and base plans implemented at cooperatives nationwide, production was throttled back effectively in April in May – a crucial factor in fostering the rapid price recovery we have seen.  That leadership is dairy farming at its best – and it shows that whatever happens in the second half of the year, we will face it with that much more strength because of what we’ve been through.

None of us have ever experienced anything like we have in the first half of 2020, and all of us hope we never experience a year like this one again. But we’re halfway through it. We’re resilient, we’re better prepared for what’s to come, and we’re in it together. Let’s continue our work.

The U.S. dairy industry celebrates the U.S. Trade Representative’s office and Congress for the strides made in the United States-Mexico-Canada Agreement (USMCA) as it enters into force today. At the same time, the National Milk Producers Federation (NMPF) and U.S. Dairy Export Council (USDEC) also noted that harvesting the full benefit of those hard-fought wins now relies on robust enforcement of the agreement.

The modernized trade deal is a testament to the tremendous bipartisan effort from both the Administration and members of Congress to improve trade rules. USMCA is designed to usher in significant changes to U.S.-Canadian dairy trade, restore certainty to U.S.-Mexico trade relations and establish important protections for common name cheeses.

Given the importance of these reforms to the growth of U.S. exports and economic health of the dairy industry, it is critical that the U.S. Trade Representative and U.S. Department of Agriculture utilize USMCA’s stringent enforcement measures to ensure Canada and Mexico are held accountable to their trade commitments.

This is of particular importance given that Canada’s recently announced TRQ allocations run counter to USCMA commitments crafted to expand access to the Canadian dairy market. In the next few months, Canada will finalize its plans for future TRQ allocations and the elimination of its Class 6 &7 pricing programs, making it incumbent upon the U.S. to insist on full alignment with USMCA obligations.

“As USMCA enters into force, America’s dairy farmers and cooperatives are looking forward to a brighter future built on the foundation of this modernized trade agreement. Dairy is counting on this trade agreement, carefully crafted by USTR and with strong bipartisan support, to deliver tangible benefits to our industry during an uncertain time when our farmers need additional export markets and trade opportunities more than ever. To fulfill the promises of USMCA, the U.S. government can’t take its eyes off the goal of ensuring that this deal is fully enforced and implemented as intended,” said Jim Mulhern, president and CEO of NMPF.

USMCA also strengthens the relationship between Mexico and the U.S. and establishes new protections for products that rely on common cheese names, such as parmesan and feta. It is critical that Mexico abide by these new requirements and refrain from introducing new trade mandates, such as product conformity assessments, that place a larger burden on U.S. exporters than on Mexican companies.

“After years of hard work by the Administration and Congress to bring this new agreement to fruition, the U.S. dairy industry is pleased to celebrate USMCA as it enters into force, mandating new access into Canada’s restrictive markets and establishing groundbreaking protections for American-made cheeses in Mexico,” said Tom Vilsack, president and CEO of USDEC. “If implemented in good faith and diligently enforced, USMCA will deliver positive benefits to dairy, and all of agriculture, as it facilitates the smooth flow of trade in North America. The implementation of USMCA’s provisions is

not the end of our work, it’s simply the beginning as we continue our efforts to break down global barriers to fair dairy trade and to ensure this agreement is fully enforced.”

According to the International Trade Commission, if USMCA is implemented as negotiated, U.S. dairy exports are projected to increase by more than $314 million a year. These dairy sales will have a positive effect on American farmers, bolstering dairy farm revenue by an additional $548 million over the first six years of implementation, according to industry estimates.

There’s no way around this fact: The past three months brought a near-death experience for many dairy farm families across the U.S., even as consumers boosted support and the federal government showed it understands dairy’s importance to rural communities and the economy. Coronavirus impacts were swift and severe for milk producers, with plunging prices and evaporating foodservice markets from March into May.

At least for now, that moment seems to have passed. Prices have recovered. Economic forecasts for the rest of the year more closely resemble pre-pandemic assumptions than anyone could have dared hope in April. Restaurants are re-opening. Federal aid has been helpful and timely. But at the root of dairy’s recovery is the work of farmers themselves — specifically those in farmer-owned cooperatives who collectively crafted an effective response to the crisis on the fly and lifted the entire industry as a result.

The story is as simple as supply and demand. At the beginning of 2020 producers were increasing production to take advantage of the highest prices they’d seen since 2014. They added cows and boosted production. By March, the year-over-year increase in U.S. milk supplies was nearing 3 percent.

But the collapse in sales to schools, restaurants and other public eating places sent overall demand into a tailspin, even as retail consumers stocked up on dairy. That imbalance between supplies – because cows can’t be turned off with a switch – and demand quickly became severe. Farmers entered a spring that loomed with the specter of emergency milk-dumping, culled dairy herds and drastically reduced revenues.

But dairy farmers – specifically, cooperative farmers – stepped up to the challenge. And something incredible happened. Cutbacks in production in response to low prices that normally take years to achieve, occurred in two months.

Many dairy cooperatives, which collectively handle 85 percent of the nation’s milk, implemented programs encouraging producers to cut output – and farmers went to work. They cut back on the number of milkings per day, took some cows out of production, changed feed rations to stimulate less milk production per cow – and it all added up. Meanwhile, cooperatives themselves sought out new distribution chains, redirecting supplies and working with nonprofits to distribute more milk to families in need. As demand crept back and production fell, emergency milk-dumping disappeared. Cows that would have been culled stayed on farms. And consumers, families in need, and dairy farmers all benefited.

When welcome federal aid started to arrive, dairy farmers had done much of what they could do to help themselves – allowing that aid to shore up dairy’s damaged bottom lines. That combination of cooperative-led farmer self-help, a broader market recovery, and federal support have all brightened the outlook for farmers this year, as both the USDA’s Dairy Margin Coverage “Decision Tool” forecaster and NMPF’s own estimates illustrate.

This story isn’t assured a happy ending: With the economy in the grip of a virus that doesn’t care about supply or demand, nothing is certain. And damage has been done. Farmers with already-stretched finances from five years of low prices were understandably ill-equipped to manage the COVID-19 shock, and the cloud that hangs over them hasn’t lifted. The need for federal assistance isn’t over, and as everyone has seen this year, skies can darken very quickly.

But crises teach lessons, and this one has taught several so far to dairy. One is that retail consumers are big fans of milk and dairy products. Another is that, for all their marketing hype, plant-based beverages aren’t what people turn to in a crisis.  And yet another one, shown by trends in supplies and in prices, is that dairy farmers have an incredible power to work together to help themselves and each other when times turn hard.

Of course, that’s been true for more than a century of the cooperative movement. But the refresher is valuable, and the lesson bodes well for the future. And that’s good, because the disruption isn’t over yet, and for all the hope, we don’t know what lies ahead. But in dairy we do know that, together, we will rise to whatever challenges the future may hold.

NMPF Senior Vice President for Communications Alan Bjerga explains how farmer-owned cooperatives led production cutbacks that have driven dairy’s price rebound on RFD-TV.

Supporting the hard work of dairy cooperatives and providing a voice for them on Capitol Hill are core parts of the National Milk Producers Federation’s mission. In conjunction with National Dairy Month, NMPF has developed a new “Sharing Our Story” page on its website highlighting its member dairy-farm families and offering a place where the latest and most compelling arguments on behalf of the dairy community can be found.

Leading the page is a revamped “Farmer Focus” feature, spotlighting the work of NMPF cooperative farmers from across the country. NMPF’s “Dairy Defined” thought-leadership series is also featured, dispelling myths about the industry and offering fact-based views on its current challenges through timely essays and a regular podcast. “CEO’s Corner,” a monthly column on the dairy policy environment from NMPF President and CEO Jim Mulhern, rounds out the page.

“Dairy has a compelling, and crucial, story to tell readers and listeners from farms and grocery aisles to Capitol Hill. It’s only fitting that we launch an effort to get the word out during National Dairy Month,” Mulhern said. “We hope visitors to Sharing Our Story will better understand all that dairy has to offer and be motivated to become an ally to the important work dairy farmers do every day.”

The new page is NMPF’s second significant web addition this year, following the establishment of its special page devoted to dairy’s response to coronavirus in March.

Dairy prices have rebounded dramatically because farmers quickly adjusted their milk production and consumers boosted retail demand as government purchases kicked in to help offset lost food-service sales, said Peter Vitaliano, chief economist for the National Milk Producers Federation.

“That has resulted in a very, very rapid change in the market price outlook,” Vitaliano said in an NMPF podcast released today. “The markets currently are looking like there’s going to be a very strong rebound, and prices will get to a more normal level in the second half of this year,” he said.

Vitaliano, who writes NMPF’s monthly Dairy Market Report, said the continued spread of the coronavirus and whether farmers quickly increase milk production remain significant questions that will affect dairy’s further recovery. To subscribe to the Dairy Market Report, click here.

To listen to the full discussion, click here. You can also find this and other NMPF podcasts on Apple Podcasts, Spotify and SoundCloud. Broadcast outlets may use the MP3 file. Please attribute information to NMPF.