From Jim Mulhern, President and CEO, NMPF: 

ARLINGTON, VA – “National Milk has worked closely with House and Senate members on the tax reform conference package to achieve a positive outcome for dairy farmers and their cooperatives, and we’re pleased that conferees have completed work on a package that should provide important relief. The final compromise to address the loss of the Section 199 deduction will help protect farmer-owned businesses from a major tax increase at a time when America’s farm sector is struggling with low commodity prices and reduced incomes.

“America’s dairy farmers, who overwhelmingly rely on cooperatives to market their milk, appreciate the determined efforts by Sens. John Hoeven (R-ND) and John Thune (R-SD), as well as multiple House members, including Agriculture Committee Chairman Mike Conaway (R-TX), to seek a fair and reasonable solution to this challenge. Their efforts will help prevent a higher tax bill for cooperatives and avert the loss of economic activity in rural communities that these businesses help generate. We’re also grateful for the numerous senators on both sides of the aisle who elevated this issue during the debate.

“At issue is the loss of the benefit that both farmers and cooperative businesses enjoy from the Section 199 deduction, also known as the Domestic Production Activities Deduction (DPAD). This important provision of the tax code applies to proceeds from agricultural products marketed through cooperatives, making the Section 199 an important means of reducing taxation for farmers and cooperatives alike. Cooperatives pass the vast majority of the benefit – nearly $2 billion nationwide – directly to their farmer owners, then reinvest the remainder in infrastructure improvements for the marketing and processing of food products.

“The final tax package released on Friday repeals the DPAD, but the legislation allows cooperative members to claim a new 20-percent deduction on payments from a farmer cooperative. Cooperatives would also be able to claim the 20-percent deduction on gross income less payments to patrons, limited to the greater of 50 percent of wages or 25 percent of wages plus 2.5 percent of the cooperative’s investment in property. This favorable treatment for gross income will help minimize any potential increase in the tax burden on farmer-owned cooperatives.

“NMPF believes that this provision, plus components of the bill that increase exemption levels from the federal estate tax, enhance depreciation and expensing opportunities for producers, and preserve farmers’ ability to deduct interest expenses, should help farmers and cooperatives alike. The fix offered by Sens. Hoeven and Thune recognizes that farmer cooperatives play an indispensable role in our nation’s economy and need to be treated fairly in the final tax legislation.”

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The National Milk Producers Federation (NMPF), based in Arlington, VA, develops and carries out policies that advance the well-being of dairy producers and the cooperatives they own. The members of NMPF’s cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of dairy producers on Capitol Hill and with government agencies. For more on NMPF’s activities, visit our website at www.nmpf.org.

Low-fat (1%) flavored milk will be returning to schools now that the U.S. Department of Agriculture announced new regulatory changes in late November. An interim final rule implements the changes needed to reinstate low-fat flavored milk in schools, and goes into effect in time for milk processors to negotiate supply contracts for the 2018-2019 school year.

The regulation follows changes USDA Secretary Sonny Perdue initially proposed earlier this year to streamline the process by which schools can serve low-fat flavored milk. In 2012, USDA implemented new regulations that required that schools only offer fat-free flavored milk, mostly to reduce calories. Participation rates in school meal programs fell, with students consuming 288 million fewer half-pints of milk from 2012-2015, even though public school enrollment was growing. NMPF and the International Dairy Foods Association worked together to persuade Congress to address the issue.

“Secretary Perdue’s willingness to provide greater flexibility to schools recognizes that a variety of milks and other healthy dairy foods is critically important to improving the nutritional contributions of child nutrition programs in schools,” said Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF).

In October, Reps. G.T. Thompson (R-PA) and Joe Courtney (D-CT) introduced the bipartisan School Milk Nutrition Act of 2017, which would allow schools to offer low-fat and fat-free milk, including flavored milk with no more than 150 calories per 8-ounce serving. The bill allows individual schools and school districts to determine which milkfat varieties to offer their students.

The publication of the interim final rule allows school districts to solicit bids for low-fat flavored milk next spring before the 2018-19 school year begins, giving milk processors time to formulate and produce a low-fat flavored milk that meets the specifications of a particular school district.

NMPF will file comments in response to the proposed rule, expressing strong support for permitting schools to offer 1% flavored milk on a permanent basis. After taking comments, USDA will issue a final rule next fall that is expected to extend the regulation to school years after 2018-2019.

As science continues to suggest health benefits from higher-fat milk varieties, NMPF continues to take a leadership role in encouraging this newer science to be incorporated in school meals and dietary guidelines.

The U.S. Dairy Sustainability Awards program is now taking nominations for 2018. Any dairy farm, business or community effort that demonstrates resourceful leadership and employs sustainable practices can be nominated.

These national awards bring deserved recognition to farmers, dairy companies and their partners that invest time and resources in continually improving their operations to benefit the environment, their community and their local economy.  Four categories are available for nomination:

• Outstanding Dairy Farm Sustainability
• Outstanding Supply Chain Collaboration
• Outstanding Dairy Processing & Manufacturing Sustainability
• Outstanding Community Impact

Nominations will be judged on measurable results; approach and innovative use of resources; communication of learnings; and the potential for adoption by other farms/businesses. The deadline to nominate a person or group is Monday, Feb. 12, 2018. Winners will be announced during a ceremony in Chicago in May later that year. For inspiration, take a look at the stories from past winners and then download a nomination form.

For additional details about the program, contact Jennifer.Block@dairy.org or your local dairy promotion organization.

The National Dairy FARM Program is wrapping up 2017 with several successful training and customer forums.

From November 13-15, the FARM Program hosted a FARM Animal Care Evaluator and Evaluator Trainer course in Albuquerque, N.M., with 20 veterinarians, veterinary students, cooperative staff and other industry personnel. Facilitated by Praedium Ventures, the course consisted of one day in the classroom and one day on a dairy farm. The classroom portion featured discussions on program history, evaluation methods and evaluation questions. Dairy Farmers of America member Jimmy Pareo of Belen, N.M., then led the group through an on-farm evaluation.

The FARM Program and the Innovation Center for U.S. Dairy cohosted the final customer forum of the year in Jacksonville, Fla. The October forum, the final of four held in 2017, shared the dairy industry’s focus on social responsibility with prominent national and international dairy customers. Representatives from grocery stores, sourcing companies and restaurant chains were in attendance.

During each two-day forum, educational sessions provided a deep dive into the FARM Program. Expert speakers shared insights into the rigorous standards of the program for animal care, environmental stewardship and antibiotic stewardship, as well as updates on emerging issues in the social responsibility arena. On the second day of the event, participants visited a local dairy farm to see the FARM Program in action.

Meanwhile, the National Dairy FARM Program, with Merck Animal Health, the University of Florida Extension and Southeast Milk, Inc. (SMI), will host a series of SMI membership trainings throughout Louisiana, Georgia and Florida during the week of December 11-15. These trainings will focus on creating a culture of cow care and continuous improvement; ensuring proper employee training and monitoring; creating and implementing standard operating procedures; and assessing farms’ vulnerabilities. For more information on these trainings, please contact Emily Meredith.

In response to an FDA proposal to create a consumer education program on bioengineered foods, NMPF told the agency that in the interests of scientific integrity it must correct common misconceptions about the health and safety of such foods.

Earlier this year, Congress instructed the U.S. Food and Drug Administration (FDA) to launch an education program to help consumers understand bioengineered foods and dispel misinformation about their origins and safety. In response to FDA’s request for input on this program, NMPF filed comments that expressed concern over the volume of inaccurate claims used in comments submitted by the public. National Milk urged FDA to catalog and refute every false notion and make them publicly available for stakeholder use.

NMPF also quoted FDA’s guidance on labeling bioengineered foods, noting that the agency had determined in a 1992 policy document that it was not aware of information that determined bioengineered foods differed from other foods in any meaningful way, and that there was no safety concern. NMPF suggested that because of the quantity of misinformation and anti-bioengineering rhetoric in the marketplace, every bioengineering claim – regardless of whether a product contains bioengineered ingredients – should bear an additional statement that says there is no material difference between a bioengineered food and a non-bioengineered food.

In addition, NMPF said FDA should work with the U.S. Department of Agriculture to develop materials that explain the benefits of bioengineering, including: less pesticide use, foods and feeds with better traits, and improved agricultural sustainability. The USDA, meanwhile, continues its work on a bioengineering label disclosure regulation, and NMPF expects that the agency will release a draft of the proposal in 2018.

National Milk’s advice to dairy operators not to file air emissions reports with the National Response Center was affirmed Nov. 22 after the D.C. Court of Appeals granted the U.S. Environmental Protection Agency’s (EPA) motion to further stay until January a mandate that could eventually lead to a reporting requirement.

At issue is the lengthy court battle over whether large livestock operations must report ammonia and hydrogen sulfide manure emissions under either the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) regulation, and/or the Emergency Planning Community Right to Know Act (EPCRA). Last April, the U.S. Court of Appeals for the District of Columbia ruled that a 2008 reporting exemption granted by EPA was improper. EPA asked for and was granted a stay of the appeals court’s decision, but that stay ended on Nov. 14.

The stay’s expiration last month caused a great deal of confusion because many interested parties believed the expiration of the stay automatically triggered the reporting requirement. However, as NMPF repeatedly advised its members, the appeals court must first issue a mandate to EPA initiating the reporting requirement. The court did not issue its mandate to EPA and, in fact, on Nov. 22, the D.C. Court of Appeals granted EPA’s motion to further stay the mandate until Jan. 22, 2018.

NMPF is continuing to work with other animal agriculture organizations, the EPA and members of Congress to find a long-term solution which will preclude the need to file air emission reports stemming from the decomposition of manure.  In case farmers do need to report, NMPF has prepared guidance and instructions on how to report and will hold a conference call to explain the process further.

Cooperatives Working Together helped its member cooperatives last month to capture 56 contracts to sell 8.77 million pounds of American-type cheese and 55,116 pounds of butter to customers in Asia, Central America, the Middle East, North Africa and Oceania. The product will be shipped during the months of November 2017 through January 2018.

These recent transactions raise the total CWT-assisted year-to-date net product sales to 67.32 million pounds of cheese and 4.81 million pounds of butter. The product is going customers in 21 countries in five regions, and will move overseas the equivalent of 729.45 million pounds of milk on a milkfat basis.

Helping 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 affects 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.

The monthly margins under the Margin Protection Program (MPP) were essentially the same for the two months of the most recent bimonthly period: $9.99/cwt for September and $10.00/cwt for October. The average margin for the September-October period was $9.996/cwt. The U.S. average all-milk price for October was $17.90/cwt, $0.10 higher than the September all-milk price. The MPP feed cost was $7.90/cwt for October, as reported by USDA’s Farm Service Agency (FSA), $0.09 higher than the feed cost for September. On a per-hundredweight-of-milk basis, the $0.09 feed cost increase was the net result of small changes in the feed cost components, which individually changed the formula calculation as follows: corn, -$0.01; soybean meal, $0.06; and alfalfa hay, $0.04.

The CME grain futures currently indicate that the monthly MPP feed cost will rise slowly from its current level through the end of next year, but remain below $8.70/cwt throughout that time. The CME dairy futures currently indicate that the all-milk price will remain below $16.50/cwt during at least the first half of 2018. Combined, the futures indicate that the MPP margin will drop below $8.00/cwt but remain above $7.50/cwt during the second, third and fourth bimonthly periods next year. The USDA MPP Decision Tool margin forecast for next year has moved a bit higher over the past month. As shown in the chart, the USDA tool projects that the MPP margin will remain above $8.00/cwt throughout 2018, with less than a 50-percent probability that it will fall below that level, based on the Nov. 30 CME futures settlements.

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.

While in Cuba at the end of November, National Milk staff worked with the Pan American Dairy Federation (FEPALE) to advance U.S. dairy farmers’ interests in preserving global markets for U.S. cheeses and upholding science-based international standards that support the critical nutritional role of dairy.

More than a dozen Latin American countries attended FEPALE’s annual general assembly last week in Havana. While there, NMPF Senior Vice President for Strategic Initiatives Jaime Castaneda discussed issues of mutual interest with counterparts from across the Americas. Because of those efforts, FEPALE passed two resolutions that align with key priorities for the U.S. dairy industry:

• Rejection of the European Union’s (EU) aggressive stance regarding the treatment of geographical indications (GIs).  This is a topic of increasing relevance in Latin America, as the EU negotiates policies that benefit its own cheese products as it strikes deals with Mexico and the Mercosur bloc of countries, and prepares for talks with Chile in the near future. The resolution on current, past and future negotiations with the EU calls for no new GI restrictions on the use of commonly- used terms of importance to any country in the hemisphere.
• Resisting the World Health Organization’s (WHO) efforts to inappropriately incorporate broad policy guidelines (like restricting the promotion of milk and milk products to young children) in the Codex Alimentarius standards-setting process. The FEPALE resolution emphasizes the need for Codex standards to be based on high-quality science and objective criteria, which were not the basis of the WHO guidelines developed in 2016. It requested that the governments of the region object to incorporating WHO’s guidance into Codex standards and “continue to work with Codex under historical guidelines based on scientific foundations.”

NMPF staff have been working over the last several years to build a strong partnership with FEPALE members, an investment that helped shape the resolutions and generate support for them last week.

“The EU’s GI scheme and the WHO guidelines significantly threaten dairy trade and – more broadly – consumption,” said Castaneda. “We are very pleased that FEPALE recognized the dangers and took a strong stand in both cases.”

NMPF President and CEO Jim Mulhern traveled to Mexico shortly before Thanksgiving to engage with negotiators from all three North American countries regarding the U.S. dairy sector’s key priorities for the modernization of the North American Free Trade Agreement (NAFTA).

During the fifth round of negotiations in Mexico City at the end of November, National Milk staff met with officials from the United States, Canada and Mexico to advance U.S. dairy interests in three key areas: preservation of full access to the Mexican market; opening the Canadian market to U.S. dairy products while eliminating Canada’s market-distorting Class 7 milk pricing scheme; and improving rules designed to safeguard trade access such as those addressing Sanitary and Phyto Sanitary requirements, and geographical indications (GIs).

“All negotiations must carefully calibrate competing agendas and achieve balanced trade-offs. Hopefully the NAFTA parties are beginning to recognize that progress comes only through dialogue that strengthens the pact by addressing its shortcomings,” Mulhern said about the recent round of negotiations.  In the lead-up to the talks, as well as in their aftermath, a broad swath of organizations representing American agriculture remains concerned about preserving NAFTA, even as the Trump Administration works to improve it in important areas. NMPF has clearly and consistently underscored that withdrawal from NAFTA is not a viable option and would be devastating for the thousands of dairy farm families that rely on NAFTA to keep the door open to the industry’s No. 1 export market, Mexico.

NMPF, dairy cooperatives, state dairy associations and others in the dairy industry delivered that message to governors across the country last month in a joint letter that expressed concern about the potential U.S. withdrawal from NAFTA. More than 170 food and agriculture organizations and companies urged governors to “let President Trump know that you support a modernized NAFTA that maintains and enhances food and agricultural trade between the United States, Mexico and Canada,” and that withdrawal would have numerous adverse impacts on U.S. agriculture.

The letter was spearheaded by the NAFTA Food & Ag Trade Working Group, a coalition in which NMPF is involved, to ensure that American agriculture speaks with a united voice about the importance of preserving and improving NAFTA.

The sixth round of NAFTA discussions is scheduled for Jan. 23-28 in Canada. Negotiators hope to conclude a new deal by the end of March, as Mexico is holding elections later in 2018.