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June Kicks Off Dairy Month Celebrations

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With the turn of the calendar, the time has come again for arguably the most important month observed by dairy farmers, processors, retailers, consumers, and others throughout the industry: June Dairy Month. Since 1939, June has been celebrated as National Dairy Month, honoring the important role the dairy industry has played in the economic and nutritional well-being of Americans. On June 14, 2010, Congress unanimously passed a bipartisan resolution that officially recognized June as National Dairy Month.

As most in the industry are aware, milk is a unique, complete nutrient package and is a good or excellent source of nine essential nutrients. In fact, milk is the top contributor in the average diet for calcium, phosphorus, Vitamin D and potassium. Milk provides three of the five nutrients of concern for children and adolescents: calcium, potassium, and magnesium. All milks – whole, low-fat, fat-free, flavored and lactose-free – are naturally excellent sources of calcium.

Throughout the month, raise a glass of ice-cold milk and toast America’s dairy farmers who make it possible to enjoy an abundance of fresh, delicious products – like milk, cheese, and yogurt – every single day.

Changing the Game

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I’m going to start this column with where I left off in April talking about dairy policy on Capitol Hill. In that article, I explained that concerning the next Farm Bill, Congress was engaged in a collective game of “kick the can” that could result in changes in farm policy being delayed until 2013. I noted that dairy farmers can’t afford to play that game.

As it turns out, the competition in which farmers really are engaged is akin to a game of financial chicken: they’re collectively careening toward the edge of financial oblivion, in the hope that someone else will stop the game first.

My analogy refers to surging milk production, from New Mexico to the Netherlands to New Zealand, which right now is producing a world-wide tidal wave of milk. There was just the slightest sense of relief when April 2012’s U.S. milk output was only up 3.2% compared to last year; the first quarter of 2012 saw average production increases above 4%. Nevertheless, April was the 27th month in a row that milk production has grown on a year-over-year basis. Cow numbers remain high based on historic patterns; milk output per cow continues to show impressive growth.

Those are the statistics. At the farm level, the hard reality is that we’re up to our udders in milk. Plants are running at full capacity; tanker loads are being dispatched across the country in hopes that someone will buy them at a steep discount. Cooperatives are instituting base plans to rein in output. And, importantly, while exports are absorbing some of the added output, the companies doing the exporting are competing with a similar milk tsunami from our global competitors.

Clearly, supply and demand are imbalanced. Eventually, conditions will correct, due to changes both here at home and abroad. But in the meantime, farmers are once again seeing margins eroded, not just from milk prices, but from high, sustained feed costs. Corn is still in the $6/bushel range for delivery this summer. Alfalfa is being sent to China to feed dairy cattle there. And hard-earned farm equity is again being lost here at home.

There is an alternative to this roller coaster, and it’s what NMPF has been promoting for more than a year: the Dairy Security Act, which will proactively and prudently trim milk output when U.S. dairy farmer margins are stressed, while at the same time providing them margin protection when conditions are poor – as they are right now.

Now, we’ve heard claims, mostly based on anecdotes, that the occasional implementation of the market stabilization program to trim milk output slightly will make the U.S. globally uncompetitive. That assertion is debunked by the recent report on the Dairy Security Act, prepared by Dr. Scott Brown of the University of Missouri for Congress. He found that milk production growth in the years 2012-2022 slows just slightly, with production of dairy products only 0.2% less, than if the market stabilization program didn’t exist.

In fact, what will really make the U.S. uncompetitive is a dairy producer community that has been so shell-shocked by booms and busts that it cannot make investments in the future. The DSA gives farmers tools they badly need to help manage their price risk, and it complements, not conflicts with, existing, private-sector risk management tools. It is this same farmer community that currently invests in new plant capacity, the funding of the U.S. Dairy Export Council, and the voluntary backing of Cooperatives Working Together, all of which together are what has helped boost our exports to 13% of current production.

But these investments can’t be sustained without a better safety net. Consumer markets, here in America as well as abroad, can’t magically absorb all this milk during times like these. What we need is a mechanism to put the brakes on, and stop the rush to the abyss before it’s too late.

As NMPF’s Chairman, Randy Mooney, has said: “Whenever we have growing demand for products in the world, dairy farmers in the U.S. can supply that product, but we have to do it profitability. And if we can’t do it profitably, we’re not going to do it. The market stabilization program allows us to adjust our supply to get back to profitability, so we can feed the world.”

That’s the game we need to be playing, but we can only change those rules by passing the Dairy Security Act.

Dairy Analysis Disputes Anecdotal Claims about Dairy Title of Farm Bill

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Expert Review of Dairy Security Act Finds Little Impact on Consumers, Exporters

ARLINGTON, VA – As efforts move forward this year in both the House and Senate to complete work on the 2012 Farm Bill, the economic analysis performed of the major dairy policy option in play helps demonstrate the effectiveness of that program, according to the National Milk Producers Federation (NMPF).

That analysis was developed by Dr. Scott Brown of the University of Missouri, who was asked last month by the House Agriculture Committee to thoroughly review a modified version of the Dairy Security Act. Brown presented his analysis to the House Agriculture’s Livestock, Dairy and Poultry Subcommittee at a hearing on April 26th, the same day that the Senate Agriculture Committee approved a farm bill containing essentially the same program in its dairy title.

Now that the Senate is expected to act on that bill in the coming weeks – and with the House Agriculture Committee also expected to begin marking up its own version of the farm bill – lawmakers “should be certain to take a look at the findings of Dr. Brown’s analysis and understand the merits of what the dairy producer community is advocating,” said Jerry Kozak, President and CEO of NMPF. “The bottom line is that the ideas on the table on Capitol Hill are ones that will work on the farm once they’re part of this new farm bill.”

Brown’s report shows that the revised safety net under consideration will help protect farmers economically from the effects of catastrophically-low margins, reverse those low margin conditions more quickly, and not adversely impact consumer prices or exports of U.S. dairy products. The modified Dairy Security Act contains two key provisions: a margin protection program that farmers can opt to use to insure against low margins; and market stabilization programs that uses milk payments to more quickly and effectively send market signals to farmers when conditions are poor.

According to Dr. Brown’s analysis of the period 2012 through 2022, the average growth in milk production would be just one-tenth of one percent (0.1%) less what would occur if the stabilization program were not part of the dairy title. The analysis says the stabilization program would be in effect only 7.5 percent of the time studied: 10 months, out of the 11 years covered in the analysis.

Because of this, U.S. output of dairy products is two-tenths of one percent (0.2%) less throughout the analysis period, which should not significantly affect exports. The analysis shows that the worst-case scenario is a potential reduction in Nonfat Dry Milk exports of just three tenths of one percent (0.3%).

“This analysis clearly shows that U.S. milk output and dairy sales will hardly undergo the devastating impact that processors are claiming the program would generate,” Kozak said. He also noted that farm-level milk prices would average just four-tenths of a cent per gallon higher during the period analyzed, and that as a result, retail cheese prices are little changed on average.

Kozak said that “the opposition to the market stabilization provision of the Senate farm bill dairy title has been merely based on anecdotes, not on economic reality. The bogeyman of dried-up sales, either domestically or from exports, disappears when exposed to the light of reality.”

The analysis concludes that the dairy title will:

  • Reduce dairy farmer margin volatility
  • Have only small effects on the milk supply
  • Increase dairy farmer margins when needed the most
  • Have minimal impact on exports of dairy products
  • Result in insignificant increases in consumer prices for milk and dairy products
  • Not result in long periods of operation of the market management program.

 

The National Milk Producers Federation, 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 30 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.

NMPF Urges Senate to Act on Farm Bill as Soon as Possible

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NMPF Working with Ag Committee Leaders to Expedite Vote in Senate

ARLINGTON, VA – The National Milk Producers Federation (NMPF) is working with a bipartisan group of senators, as well as with other farm and agriculture organizations, to urge the Senate’s leaders to bring the pending 2012 Farm Bill legislation to a vote this spring.

In a letter sent Tuesday to Senate Majority Leader Harry Reid, and Minority Leader Mitch McConnell, 44 Senators urged that the farm bill be brought to a vote as soon as possible. If Senate action is delayed, it greatly diminishes the chance that the House of Representatives will make time to act on the Farm Bill yet in 2012 – meaning that important changes in dairy policy will not come to fruition this year.

In the letter circulated by Agriculture Committee members Max Baucus (D-MT) and Mike Johanns (R-NE), along with Sens. Maria Cantwell (D-WA) and Roy Blunt (R-MO), the Senate leadership is told: “We need to act soon to complete a farm bill in 2012 and provide certainty for farmers, ranchers, rural communities, other stakeholders, and all Americans. We very much appreciate your recognition of the need for timely action on the farm bill.”

The Senate leadership received a similar letter from farm groups last week, when NMPF joined more than 125 other agricultural organizations in pointing out how important it is to act on the farm bill quickly. That letter pointed out to Reid and McConnell that the farm bill “is one piece of legislation upon which all Americans depend, urban as well as rural. With limited time remaining before expiration of current program authorities, time is of the essence. While each of our respective organizations will continue to work to accomplish our key priorities, the farm bill must move forward.”

NMPF President and CEO Jerry Kozak said that “the clock is ticking on our opportunity to get a farm bill done in 2012. We appreciate the display of bipartisan effort by senators from across the country to move this legislation forward.”

The National Milk Producers Federation, 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 30 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.

Senate Farm Bill Conservation Title Praised by Agricultural Stakeholders

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Prior to completing work on the Senate Agriculture Committee’s Farm Bill last month, committee staff provided a preview of certain draft titles. NMPF had the opportunity to see an outline of the key aspects of Title II, the conservation title. For the most part, the elements were similar to those included in the failed Super Committee package, which has earned praise from nearly all stakeholders representing agricultural and conservation organizations. Altogether, the legislation would remove $6 billion from the conservation title, while consolidating and simplifying a number of the programs. These provisions are featured in the bill that was ultimately approved by the committee last Thursday.

For dairy farmers, the major priority in the conservation title is to continue a strong Environmental Quality Incentives Program (EQIP), while maintaining the carve-out for livestock at 60 percent. NMPF was also pleased to see additional attention to haying and grazing.

The conservation title would set up four new provisions of the title: Working Lands, Easements, Conservation Reserve Program (CRP) and Partnerships. Here is a brief synopsis of each provision:

Working Lands

Three existing programs would be consolidated into this section, which would include EQIP, Wildlife Habitat Incentives Program (WHIP) and the Conservation Stewardship Program (CSP). WHIP would be folded into EQIP since both programs can be duplicative in their efforts on the farm. WHIP would receive a carve-out of 5 percent of the funding. Again, EQIP would maintain the 60 percent funding carve out for livestock – a major victory for dairy farmers. The CSP program would be simplified and administered on more of a science-based process.

Easements

This section would consolidate the Farmland Protection Program (FRP), Grassland Reserve Program (GRP) and the Wetlands Reserve Program (WRP) into one program, with two program options dealing with agriculture lands and wetlands. An important element of this section is extra attention to haying and grazing, including making permanent a grazing pilot program from the 2008 farm bill. Also, the 2008 farm bill prohibited enrollment of land if ownership had changed during the previous seven years. This has now been changed to two years.

CRP

 

CWT-Assisted Exports Approach 90 Million Pounds in 2012

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In April, Cooperatives Working Together (CWT) accepted 55 requests for export assistance from member cooperatives accounting for nine million pounds of Cheddar and Monterey Jack cheese, and 7.5 million pounds of butter. This brought the totals for the first four months of 2012 to 46.9 million pounds of cheese, and 40.8 million pounds of butter. That is the equivalent of 1.322 billion pounds of milk on a milkfat basis, or the annual production of nearly 63,000 cows.

CWT also decided last month to expand the products for which it will consider providing export assistance. Whole milk powder (WMP) and anhydrous milk fat (AMF) bids will be considered moving forward. As with butter and cheese, neither Mexico nor Canada is eligible as a destination for the two new product categories.

As with all the requests for assistance that CWT receives from member cooperatives, a thorough analysis of the WMP and AMF bids submitted will be done, based on market fundamentals. If the level of assistance requested is economically justified, CWT will accept the bid. If not, CWT makes a counter offer for the member cooperative to either accept or decline. Of the 397 requests for assistance submitted, 286 were accepted by CWT, either initially, or after counter offers from member cooperatives.

 

Federal Court Upholds Milk Regulatory Equity Act

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On April 13, the D.C. Court of Appeals issued its decision upholding the Milk Regulatory Equity Act, supported by NMPF and passed by Congress in 2005 to provide for more consistent regulation of milk handlers in the Southwestern United States. Among other things, the law put a size limit on the producer-handler exemption in the Arizona Federal Milk Marketing Order.

The owners of one large producer-handler took the government to court over this change, arguing that the law was an illegal attack on his business alone, and that he was denied due process and equal protection of the law. In its decision, the Court of Appeals agreed with the lower court that the government was well within its rights, based on settled constitutional law, to bring the producer-handler under the same regulation faced by other, competing handlers. According to that decision, such producer-handlers “have no liberty or property interest in the regulatory status quo.” That is, they don’t own the old regulation or have any right to compensation or remedy for its amendment.

 

CFTC Approves Dodd-Frank Rules That Limit Burden on Cooperatives and Farmers

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The Commodity Futures Trading Commission (CFTC) approved two final rules on April 18 that will help farmers, cooperative, handlers, grain elevators, and other agricultural businesses avoid unintended regulation under the Dodd-Frank Wall Street Reform Act, which has been a priority for NMPF during the past two years.

The first of these rules defines “Commodity Options” subject to regulation by the Commission. The Commission excluded most of the ancillary “trade options” (including penalties, buyouts, etc.) in contracts whose main purpose is not the option, but to buy and sell physical commodities. This exclusion was in response to comments – including those from NMPF – noting that excessive regulation of trade options in commercial contracts would paralyze American business, and urging CFTC to define an effective exclusion.

The second rule defined “swap dealers.” Many farmer cooperatives, grain elevators, and handlers provide farmers effective specialized risk management services. Initial versions of this rule would have defined such services as “swap dealing,” subjecting the service provider to heavy reporting requirement and limits on their business, driving many of them out of the risk management business, and making effective risk management difficult or impossible for many farmers to find. The final rule 1) provides an exception for bona fide hedging of physical commodity risk, 2) exempts affiliate transactions such as cooperative-member dealing, and 3) provides an additional de minimis exemption for other commodity trading of up to $8 billion in transactions per year. This $8 billion exemption phases down to $3 billion per year, which will allow agricultural businesses to adjust to the new rules.

These rules are the culmination of two years of work by NMPF in making the Dodd-Frank rules manageable for farmers and their cooperatives. This began with ensuring that the original legislation provided for substantial end-user exemptions, and continued through a long series of CFTC notices and rules which NMPF has reviewed and commented upon. Many of these rules, as initially proposed, would have brought agricultural businesses under heavy regulatory burdens, imposed extreme record-keeping requirements, set unworkable position limits, and discouraged many current providers of farm risk management services from continuing in that business. NMPF, along with other agricultural commodity groups, submitted comments, attended meetings, and made a strong case for agriculture’s risk management needs. Ultimately, CFTC recognized these needs and provided for effective differentiation in the rules between speculation and commercial agricultural hedging.

 

Department of Labor Withdraws Controversial Child Labor Proposal for Farms

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Last week, the Department of Labor (DOL) withdrew its contentious proposed rule restricting the work that children could do on farms. In a statement issued by the DOL, it was made clear that the proposed rule would not be pursued for the duration of the Obama Administration.

NMPF was encouraged by the Department’s recognition that the path it was on with this proposal was an affront to millions of family members on farms and ranches across America. Many of them had objected to what the Labor Department was planning to do, and they voiced their concerns to the DOL, as well as to Congress. The withdrawal of the proposal “is a victory for common sense,” according to NMPF President and CEO Jerry Kozak.

The proposed child labor rule would have changed the definition of the “parental exemption,” changed the student learner exemption, and significantly redefined what practices would be acceptable for youth under the age of 16 to participate in. These changes drew objections from NMPF, along with other major agricultural organizations, because of the significant impact the change would have had on rural communities and families. Instead, the DOL says it will work with rural stakeholders to develop education programs to reduce accidents to young workers and promote safer agricultural working practices.

 

The Happy News About Mad Cows

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In its quest to find the proverbial needle in a haystack, the U.S. government has looked through a lot of hay, and found four…not needles, but cases of bovine spongiform encephalopathy (BSE), or mad cow disease. After taking upwards of one million neurological samples of brain tissue from America’s cattle supply in the past decade, the U.S. Department of Agriculture (USDA) has confirmed a quartet of cases, the most recent of which was in California last month.

The good news on this is both short-term, and especially, long-term. In the short run, beef markets bounced around, but ultimately shrugged off the impact of the discovery. In the long run, the news is that the system of deterrents we have in place to prevent the introduction and spread of mad cow continues to work. Even with extensive testing, we’re not finding a significant number of infected cows. The firewalls are holding. The effectiveness of these firewalls also demonstrates why a teaspoon of proactivity is worth many pounds of late-to-the-party responses, if and when things hit the fan.

The best example of this is the significant effort made in the U.S. to prevent a British-style breakout of mad cow disease. Keep in mind that the disease started in England in the 1980s when sheep were rendered and added to cattle feed. The sheep disease scrapie apparently crossed between species, and began to infect cows, causing BSE. And when humans ate the neurological tissues of BSE-infected cows, they started contracting a variant of Creutzfeldt-Jakob disease (CJD), an always-fatal neurological disorder that, in its normal form, strikes one in a million people.

So, starting in 1997, what regulators and industry did in America was to prevent the feeding of ruminant tissues to other ruminants. With NMPF’s strong backing, the USDA and FDA put a feed ban in place so that the potentially infectious materials in other mammals couldn’t be part of the diet of our beef and dairy animals. Eight years earlier, the U.S. had already banned the importation of ruminant animals and animal products from countries with cases of BSE; but the 1997 feed ban was crucial to proactively preventing an infectious disease from taking hold in the U.S.

The government also took two other crucial steps in 2004: first, it banned the inclusion of neurological tissues in the human food supply. Muscle cuts of meat don’t carry the infectious prions that cause BSE and CJD, only tissues like brains and spinal cords do. So, it was vital to protecting our food supply to keep those products out.

Second, the USDA also banned the processing of non-ambulatory, downer cows. Now, not all cows with BSE have been downers, and certainly the great majority of non-ambulatory cows are not infected with BSE. But because there is a theoretical correlation, NMPF endorsed the idea that to further shore up food safety, downers had to stay out of the meat supply.

The appearance of America’s first case of BSE in 2003 demonstrated both the need, and wisdom, of these approaches. That cow, a dairy animal discovered in Washington state, was born in Canada: a country that has had more cases of BSE than the U.S., likely because of tainted feed it imported from England. That imported animal had the typical form of BSE infection, identical to the hundreds of thousands of mad cows discovered in the U.K. in the 1980s and 1990s.

However, the three cases of BSE discovered in America since then: in Texas in 2005, in Alabama in 2006, and now this recent case in California – all have been infected with what’s called “atypical” BSE. While much is still unknown about prions and BSE, from all appearances, these three domestic animals all had BSE that occurred spontaneously, not because they ate infected feed. These may well be the bovine equivalents of the several hundred Americans who develop the traditional CJD disease each year.

However, there’s one other deterrence process where the U.S. has been a laggard: having a mandatory, national animal ID system. To its credit, our Canadian neighbors have a system that allows a traceback for cattle, like the one we imported that had BSE. In the dairy industry, we have internal record-keeping systems that allow for animal identification, which is why we know the history of the ten year-old cow found in Tulare, Calif. But that system is not mandatory. And there are gaps as a result.

In the case of the Texas cow found with BSE, the USDA was never able to fully trace its herd mates. The lack of a mandatory, national system is evidence that we need to remain proactive and keep pushing our legislators and regulators to move in that direction. Our good luck with mad cow disease isn’t just happenstance; it has happened because of the many steps, not all of them popular at the time, we have taken. But more is still needed.

 

National Milk Producers Federation Statement on Department of Labor Child Labor Announcement

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From Jerry Kozak, President and CEO of NMPF

ARLINGTON, VA – “Yesterday, the Department of Labor (DOL) withdrew its contentious proposed rule restricting the work that children could do on farms. In a statement issued by the DOL, it was made clear that the proposed rule would not be pursued ‘for the duration of the Obama Administration.’

“The National Milk Producers Federation (NMPF) is encouraged by the Department’s recognition that the path it was on with this proposal was an affront to millions of family members on farms and ranches across America. Many of them had objected to what the Labor Department was planning to do, and they voiced their concerns to the DOL, as well as to Congress. The withdrawal of the proposal is a victory for common sense.

“This proposed child labor rule would have changed the definition of the ‘parental exemption,’ changed the student learner exemption, and significantly redefined what practices would be acceptable for youth under the age of 16 to participate in. These changes drew objections from NMPF, along with all the other major agricultural organizations, because of the significant impact the change would have had on rural communities and families. Instead, the DOL says it will work with rural stakeholders to develop education programs to reduce accidents to young workers and promote safer agricultural working practices.”

The National Milk Producers Federation, 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 30 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.

Senate Agriculture Committee Approves Dairy Policy Reforms in Farm Bill

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WASHINGTON, DC – The Senate Agriculture Committee today approved a farm bill draft that contains critically-needed improvements in dairy programs, according to the National Milk Producers Federation (NMPF). The bill passed by a vote of 16 to 5, and now will proceed to the full Senate for consideration.

The Senate legislation includes a new, voluntary margin protection program, endorsed by NMPF, to better safeguard farmers against disastrously low margins, such as those generated by the low milk prices and high feed costs that cost dairy farmers $20 billion in net worth between 2007 and 2009.

“The Senate has taken a huge step in the right direction by including the dairy reforms modeled after NMPF’s Foundation for the Future program,” said Jerry Kozak, President and CEO of NMPF. “We commend Senators Stabenow and Roberts for their leadership and diligence in shepherding the farm bill past this point.”

Kozak said the dairy title contains a better safety net for farmers in the form of the Dairy Production Margin Protection Program, which offers them a basic level of coverage against low margins, as well as a supplemental insurance plan offering higher levels of protection jointly funded by government and farmers. Those who opt to enroll in the margin program will also be subject to the Market Stabilization program that asks them to reduce milk output when margins are poor.

The Committee approved two amendments to the dairy title of the farm bill: one, offered by Sens. Johanns (R-NE) and Casey (D-PA), that authorizes a review of the Market Stabilization program at the end of the five-year farm bill lifespan; and a second, offered by Sen. Gillibrand (D-NY), that extends the MILC program through June 2013, at a reduced rate, so there is a safety net in place while the USDA implements the new dairy margin insurance program. The bill was not amended in any way that diminishes the value of the margin protection or market stabilization elements, according to Kozak.

“We’re very appreciative that members of the Agriculture Committee have preserved the carefully-crafted economic and political compromises that went into the creation of Foundation for the Future. We look forward to working with the full Senate as it considers this legislation later this spring,” Kozak said.

The National Milk Producers Federation, 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 30 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.