The monthly margin under the dairy Margin Protection Program (MPP) rose by $0.39/cwt from October to $10.39/cwt in November. The increase was generated by both a higher all-milk price, which rose by $0.20/cwt, as well as a $0.19/cwt drop in the MPP feed cost formula. Twelve cents of the feed cost drop were due to a decline in the corn price, $0.05 stemmed from a lower alfalfa hay price, and $0.01 resulted from a lower soybean meal price. The November monthly MPP margin was the highest since February 2017. The MPP monthly margin was last below $8.00/cwt in July 2016. The November monthly MPP feed cost was $7.71/cwt, the lowest since December 2016. The November all-milk price, $18.10/cwt., was the highest since February 2017.

The CME dairy and grain futures currently suggest that the monthly MPP margin is on the verge of a steep drop, which would take it below $8.00/cwt for the first three or four bimonthly periods of 2018. The MPP feed cost is projected to rise slowly from its current level throughout 2018, but not likely gain more than one dollar above its November 2017 level. The all-milk price, on the other hand, is currently forecast to drop by almost $3 through this winter, driven by expected falling cheese and whey prices. These changes would bring the MPP margin down to $7.00 for the March-April period. The USDA MPP Decision Tool margin forecast for next year has also moved lower, but currently shows a stronger recovery in the MPP margin in the second half of 2018. As shown in the chart above, the USDA tool projects that the MPP margin will fall below $8.00/cwt. during the first half of 2018, based on the latest available update. Just a month earlier, the tool showed the margin remaining above that level throughout 2018.

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.

The Consortium for Common Food Names’ (CCFN) work to protect common food names and safeguard global sales opportunities for cheeses finished the year with a flurry of important activity in key markets.

In early December, CCFN, founded by NMPF and the U.S. Dairy Export Council, submitted detailed filings to all four Mercosur countries (Argentina, Brazil, Paraguay and Uruguay) opposing EU geographical indications (GIs) that would restrict the use of common food names. Mercosur and the European Union (EU) are nearing the end of free trade agreement negotiations, and the EU has been pushing hard to persuade Mercosur to provide them exclusive rights for hundreds of GIs. CCFN has worked extensively with local industry allies in Mercosur countries and through direct submission such as these filings to preserve market access rights for all in that major dairy region of the world.

Also last month, Japan announced the results of its own GI review process, in which CCFN, NMPF  and USDEC were heavily engaged last year. As part of its free trade agreement with the EU, Japan announced its plans to register a lengthy list of GIs, but assured that many terms the EU had sought to monopolize would remain available for use by all, including parmesan, romano, provolone and others. CCFN will continue to work with Japan with the goal of ensuring that companies that have marketed common terms in Japan can keep using them moving forward, such as feta and asiago.

Also in December, efforts to conclude the EU-Mexico free trade negotiations stalled, and here again the EU’s bullying efforts on GIs was a major factor. As with Japan and Mercosur, the EU is seeking to persuade Mexico to restrict a host of common names as part of a GI registration process. CCFN has aggressively battled this EU effort to erase NAFTA market access rights, and that work continued with intense negotiations in mid-December that aimed to conclude the agreement. Talks will continue this year with a final few issues remaining – GIs among them – and NMPF will remain actively engaged in fighting to maintain Mexican consumers’ access to U.S. products.

These and other priority areas in the battle to preserve common name use and market opportunities for U.S. companies were among those NMPF discussed with U.S. Patent and Trademark Office (USPTO) attachés at a USPTO roundtable event in mid-December. NMPF conveyed the high stakes of this issue and updated attendees on CCFN’s global activities – many of which were conducted in conjunction with a number of those foreign-posted USPTO attaches last year. This strong partnership with U.S. government officials remains vital to CCFN success given recent EU efforts.

NMPF staff attended December’s World Trade Organization (WTO) ministerial meeting in Argentina to fight for U.S. dairy interests and ensure other countries abide by the global trading framework. In meetings with numerous key government officials and foreign industry counterparts, NMPF senior vice president Jaime Castaneda urged a renewed commitment to disciplines on tariff and non-tariff issues.

Ahead of the ministerial session, NMPF joined the U.S. Dairy Export Council (USDEC) and the International Dairy Foods Association (IDFA) in urging the U.S. Trade Representative (USTR) and U.S. Department of Agriculture to emphasize the U.S. dairy industry’s WTO trade priorities. The joint letter touted the importance of the WTO to dairy trade, noting that “it is the responsibility of all WTO members to uphold their existing trade commitments and engage constructively in exploring ways to further improve multilateral trade.”

Key U.S. dairy sector requests include opposing proposed new limits on U.S. domestic support while several large agricultural trading countries ignore current disciplines and refuse to meaningfully expand market access opportunities. The three organizations are also seeking to ensure that countries are not permitted to evade or undermine existing commitments, such as on export subsidies or price supports.

While at the conference in Argentina, Castaneda met with high-ranking USTR and USDA officials, as well as U.S. government embassy and State Department staff. The trip allowed further dialogue with South American leaders in government and industry on issues of mutual interest. This included the ongoing European Union-Mercosur trade agreement negotiations that could negatively impact U.S. export rights to the region. Those conferences also included meetings with both the chairman and the director general of the Pan-American Dairy Federation (FEPALE) regarding the pursuit of greater partnerships in Latin America to align the goals of the U.S. dairy industry with those in Latin America.

In a statement after the Ministerial, USTR maintained the importance of ensuring that countries abide by their WTO commitments, and affirmed the need for coordination with other like-minded countries on joint efforts in international forums such as the WTO, CODEX and the World Organization for Animal Health (OIE). NMPF will continue to work with the Trump Administration to advance global export opportunities for U.S. dairy products.

National Milk’s effort to prompt the enforcement of dairy-specific labeling terms took another step forward at the start of the new year when NMPF asked regulators to take action against Kite Hill, whose imitation yogurt products violate the federal definition for dairy foods and fail to provide the same nutrition as real yogurt.

NMPF called out Hayward, California-based Kite Hill for illegally labeling its line of products and implying the nut-based foods are suitable substitutes for the real dairy foods it attempts to mimic. NMPF President and CEO Jim Mulhern said that Kite Hill’s line of products “is doubly deceiving, first as it declares the use of ‘almond milk’ as the main ingredient in their foods, and second in calling the resulting product ‘yogurt.’ A whitened slurry of nuts does not make milk, and adding bacteria to that mix and pouring it in a cup does not make yogurt.”

In letters sent in early January to the U.S. Food and Drug Administration (FDA) and California Department of Food and Agriculture, NMPF called out Hayward, California-based Kite Hill for illegally labeling its “yogurt,” which under existing federal regulations should be termed “imitation yogurt product.” The FDA standard of identity for yogurt defines a product made by culturing cream, milk, partially skimmed milk, or skim milk, alone or in combination, with specific lactic acid bacteria. NMPF said that “without real milk’s many nutrients as a base, this fake yogurt product fails to deliver the same nutrition as the real thing.”

NMPF also noted that the Kite Hill imitation delivers 40 percent more calories and 10 more grams of fat compared to an equivalent serving of vanilla yogurt, while providing one-third less protein and zero calcium.

A shareable infographic illustrating Kite Hill’s nutritionally inferior product is now on NMPF’s website as the latest installment in its “Dairy Imitators: Exposed” effort, which illustrates the nutritional disparities between imitation foods and real dairy foods, such as yogurt.

Congress returned to session on Jan. 3 with a substantial legislative roster ahead of it, including several items on NMPF’s priority list, such as securing disaster aid for farmers, passing a new Farm Bill and addressing immigration reform.  In addition to these issues, Congress also must quickly focus on the federal budget, as a stop-gap funding package approved just before Christmas expires on Jan. 19.

The House took tentative steps on farm policy prior to the end of 2017 by including assistance to dairy and cotton farmers in a larger disaster assistance bill intended to help states and communities ravaged by last fall’s severe hurricane season. NMPF applauded the House package for taking steps to improve risk management options for dairy farmers by eliminating the existing $20 million annual cap on the Livestock Gross Margin (LGM) program. This would enable USDA to offer coverage to more farmers in the current LGM program as well as provide new risk management approaches for dairy producers.  As the bill moves to the Senate, NMPF is pushing to include badly-needed changes to the dairy Margin Protection Program (MPP) in the final version of the disaster bill. Combined, these actions would help pave the way for making final fixes to the dairy safety net program in the upcoming 2018 Farm Bill.

The government funding debate is an opportunity to address other NMPF priorities, including a solution to the pending air emissions reporting requirements for dairy farms and other livestock operations under CERCLA and EPCRA that have been triggered by a court decision [see later story].  NMPF is working closely with Congress, the U.S. Environmental Protection Agency (EPA) and industry partners to resolve this issue in a timely, effective manner.

Once Congress votes to fund the government past January, attention will shift to several other pressing items for 2018, including the Farm Bill.  The House and Senate Agriculture Committees spent much of 2017 holding hearings and listening sessions, gathering stakeholder priorities, and beginning the drafting process. NMPF will continue to work closely with Congress to finalize and secure improvements to the dairy MPP to help ensure the program provides a meaningful safety net to all dairy producers.

Congress is also expected to address legislation on the soon-to-expire Deferred Action for Childhood Arrivals (DACA) program, which protects from deportation undocumented individuals who came to the United States as children. A legislative solution to this issue may provide an opportunity to focus on other pressing immigration issues, and NMPF will continue seeking all avenues to address dairy’s unique workforce challenges.

After working intently to shape the final tax cut legislation adopted by Congress shortly before Christmas, NMPF said the measure provides several important benefits for farmers and their cooperatives. NMPF had worked closely with House and Senate members on the once-in-a-generation tax package to achieve a positive outcome for the dairy community.

NMPF, along with the National Council of Farmer Cooperatives and others, urged lawmakers to preserve the economic value represented by the Section 199 deduction, which was eliminated as part of the tax package’s deep cut in corporate tax rates.  The final compromise to address the loss of Section 199 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.

Also known as the Domestic Production Activities Deduction (DPAD), this important provision of the tax code applied to proceeds from agricultural products marketed through cooperatives, making the Section 199 an important means of reducing taxation for farmers and cooperatives alike. Cooperatives have passed the vast majority of the benefit to their farmer owners, and reinvested the remainder in infrastructure improvements for the processing and marketing of food products.

The final tax package repeals the DPAD, but the legislation allows cooperative members to claim a new 20-percent deduction on payments from a farmer cooperative. Cooperatives also will 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.

In addition to the Section 199 issue, NMPF worked on several other components of the legislation of importance to the dairy sector, including:

• Depreciation. The bill would allow farms and other businesses to immediately write off 100 percent of qualified property costs through 2022.  Current law allows businesses a 50 percent write-off for 2017, which decreases in the coming years.
• Expensing.  The final bill expands the Section 179 provision made permanent by the PATH Act of 2015, thanks to NMPF’s support.  The bill would adjust the maximum allowance from $500,000 to $1 million, which would revert back to $500,000 when the value of property put into service surpasses $2.5 million.
• Estate Tax Relief. NMPF has actively supported giving farmers additional relief from the federal estate tax, which taxes the transfer of farms between generations of family members.  The final bill makes important progress on this issue, doubling the existing exemption to $11 million for individuals and $22 million for couples. Importantly, the package also preserves a full stepped-up basis for inherited property, avoiding what could have been another tax increase to offset reducing the estate tax.
• Interest Deductibility. The bill attempts to preserve the business interest deduction for most farmers.  The package allows farms with less than $25 million in average annual gross receipts for the three prior taxable years to continue to deduct interest expenses.
• Cash Accounting. The package would continue to allow farms to use cash accounting.
• Like-Kind Exchanges. The bill would limit the use of Section 1031 like-kind exchanges to real property, removing their use for equipment.
• Environmental Stewardship. The bill allows the Section 48 Investment Tax Credit for solar energy to phase down after several more years, per the PATH Act of 2015, and does not renew Section 48 for any additional technologies.  Therefore, the Agriculture Environmental Stewardship Act to expand Section 48 to cover nutrient recovery systems and digesters was unfortunately not incorporated into the bill.  NMPF will seek other legislative opportunities to address this issue over the coming months.

NMPF expressed thanks to Sens. John Hoeven (R-ND) and John Thune (R-SD), as well as multiple House members, including Agriculture Committee Chairman Mike Conaway (R-TX), whose determined efforts to compensate for the loss of Section 199 will help prevent a higher tax bill for cooperatives and avert the loss of economic activity in rural communities that these businesses help generate.

“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,” said NMPF President and CEO Jim Mulhern. “The compromise advanced 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 tax reform legislation.”

ARLINGTON, VA – The National Milk Producers Federation (NMPF) urged state and federal regulators today to take enforcement action against a plant-based food company whose imitation “yogurt” violates the federal definition for dairy foods and fails to provide the same nutrition as real yogurt.

NMPF called out Hayward, California-based Kite Hill for illegally labeling its line of products and implying the nut-based foods are suitable substitutes for the real dairy foods it attempts to mimic.

NMPF President and CEO Jim Mulhern said that Kite Hill’s line of products “is doubly deceiving, first as it declares the use of ‘almond milk’ as the main ingredient in their foods, and second in calling the resulting product ‘yogurt.’ A whitened slurry of nuts does not make milk, and adding bacteria to that mix and pouring it in a cup does not make yogurt.”

In letters sent today to the U.S. Food and Drug Administration(FDA) and California Department of Food and Agriculture, NMPF said that under existing federal regulations, the proper term for Kite Hill’s products is “imitation yogurt product.” The FDA standard of identity for yogurt defines a product made by culturing cream, milk, partially skimmed milk, or skim milk, alone or in combination, with specific lactic acid bacteria. NMPF said that “without real milk’s many nutrients as a base, this fake yogurt product fails to deliver the same nutrition as the real thing.”

NMPF noted that the Kite Hill imitation delivers 40 percent more calories and 10 more grams of fat compared to an equivalent serving of vanilla yogurt, while providing one-third less protein and zero calcium. “This is another outrageous example where plant foods misappropriate the names of real dairy products, but offer inferior levels of nutrition,” Mulhern said.

“Adding a word or two in front of the name of a standardized dairy food does not represent an appropriate common or usual name of the food. It only adds confusion for consumers about the nutritional content of foods,” according to the letter signed by Beth Panko Briczinski, Ph.D., NMPF’s Vice President of Dairy Foods and Nutrition.

National Milk also wrote to the California Department of Food and Agriculture because Kite Hill is based in northern California, and because the agency has jurisdiction over the labels of products manufactured and marketed in that state.

NMPF is revealing the company’s nutritionally inferior product in a shareable graphic, the latest installment in NMPF’s “Dairy Imitators: Exposed” effort that illustrates the nutritional disparities between imitation foods and real dairy foods, such as yogurt.

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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.

For the January CEO’s Corner, NMPF President and CEO Jim Mulhern took the last few days of 2017 to review the major priorities National Milk worked on over the year, and what to expect as we enter 2018.

From Jim Mulhern, President and CEO, NMPF:

ARLINGTON, VA – “We applaud the U.S. House of Representatives for taking steps to address the needs of dairy producers in the disaster aid package it approved Thursday. Thanks to the efforts of Agriculture Committee Chairman Rep. Mike Conaway (R-TX), with support from ranking member Rep. Collin Peterson (D-MN), the House bill will eliminate the existing $20 million annual cap on the Livestock Gross Margin program, enabling the U.S. Department of Agriculture to offer coverage to more farmers in the current LGM program and provide new risk management options for dairy producers.

“As the bill moves forward, dairy farmers still badly need changes to the ineffective dairy Margin Protection Program (MPP), and we strongly urge the Senate to include such changes when it takes up the disaster bill.  We support the efforts of Sens. Patrick Leahy (D-VT) and Debbie Stabenow (D-MI) to include MPP improvements in the final supplemental spending bill.

“Combined, these actions can help pave the way for making final fixes to the dairy safety net program in the upcoming 2018 Farm Bill.”

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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.

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.