In January 2011, the Environmental Protection Agency (EPA) officially started regulating greenhouse gas (GHG) emissions under the Clean Air Act (CAA). Industries that are the largest emitters of GHGs will be required to obtain CAA permits and implement cost-effective technologies and energy efficiency measures. EPA will exempt smaller sources from permitting requirements, which includes farms and ranches. However, the agency is set to reevaluate the permitting threshold in 2016. If the level is reduced to the CAA statute of 250 tons per year of GHGs, nearly 99% of U.S. dairy farms could be regulated.

Nevertheless, EPA officials could soon see their hands tied if several members of Congress are successful with efforts. With their attempts to halt the GHG regulations proving futile in the 111th Congress, several key leaders in the House of Representatives and the Senate expect to generate support once again, and this time they expect more members to join them. While it will be extremely difficult to overturn the rule that provides EPA the authority to regulate GHGs, Congress may look to defund the agency’s efforts for the foreseeable future. Without question, oversight of the EPA will be a major priority for many in the 112th Congress.

In early December, the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) applauded the successful negotiations between the U.S. and South Korea aimed at resolving areas that had prevented advancement of the U.S.-Korea Free Trade Agreement.

The White House announced that the agreement had been finalized, after much hard work during the past several months to resolve issues maximizing the prospects of getting the FTA approved by Congress.

“This FTA will be the most significant for the dairy industry since the agreement with Mexico as part of NAFTA, and it will provide major benefits for U.S. dairy producers” said Jerry Kozak, President and CEO of NMPF. “By opening up a major dairy market to our products, this FTA will deliver, on average, an additional $380 million a year in benefits to U.S. dairy producers during the phase-in period of the agreement.”

Both organizations urged the Administration to send the U.S.-South Korea FTA to Congress for immediate action. NMPF and USDEC also reiterated their support for the U.S. FTAs with Colombia and Panama. The U.S. dairy industry hopes to ultimately see congressional approval of all three pending FTAs, as all would yield meaningful new opportunities for U.S. dairy exports and net benefits for the U.S. dairy industry.

Dairy producers from around the country will pack their bags and head to Omaha, Nebraska for the May 15-17, 2011 National Dairy Producers Conference (NDPC). Formerly known as the National Dairy Leaders Conference, the NDPC will provide an in-depth discussion of the issues facing the dairy industry, with educational discussions on many of the key challenges looming in 2011.

“The NDPC gives dairy producer participants the opportunity to listen, learn, and lead,” said Jerry Kozak, President & CEO of the National Milk Producers Federation, which is organizing the conference. “It’s a way to critically analyze the status of the dairy industry now and discuss possible solutions for the future.”

The NDPC will include a farm policy outlook panel that will look at the development of the next Farm Bill and feature congressional staff, other national farm organizations, agricultural lenders, and dairy producers as speakers. A trade policy panel will address technical barriers for global dairy trade and market access and include a speaker from the U.S. Dairy Export Council, among others.

Another NDPC session will cover the dairy industry’s environmental concerns, such as carbon regulation, EPA’s Total Maximum Daily Load regulation, results from the National Air Emissions Monitoring Study, and the outlook for EPA’s Spill Prevention, Control, and Countermeasure program. Animal care challenges remains a concern for many dairy producers, and the NDPC will include a session that will feature speakers from major retailers and processors who will explain their expectations of animal care from farmers. Another NDPC session will address costs of production (such as energy and feed), and will focus specifically on managing change and risk.

The NDPC sessions will be preceded by optional farm tours that will take place on Sunday, May 15. Participants will be able to tour local dairy farms and visit a nearby ethanol production plant.

Although the conference is geared primarily toward dairy producers, anyone with a stake in the dairy industry is invited to attend. This may include dairy cooperative executives and directors, dairy processors, suppliers and consultants to the dairy business, state and federal regulators, promotion organization executives, and academics.

More information on the NDPC will be posted online at www.nmpf.org/NDPC when it becomes available.

The CWT Export Assistance program provided assistance in February to four CWT member cooperatives selling 11.2 million pounds of Cheddar and Monterey Jack cheese to 10 countries on four continents. The product is scheduled to be shipped from March through June 2011. Add to that the 22.7 million pounds of CWT-assisted 2010 cheese sales scheduled to be shipped in the first six months of 2011, and the Export Assistance program will be making a significant contribution to expanding overseas sales.

The 52 million pounds of cheese exports assisted by CWT and shipped in 2010 account for 13.6% of total U.S. cheese shipments. The 17 million pounds of butterfat (in the form of butter and anhydrous milk fat) CWT assisted and shipped in 2010 equaled 14.1% of total butterfat exports. These CWT sales produced an additional $398 million of revenue, adding an average of 18 cents per hundredweight to U.S. producers’ milk checks in 2010.

Some producers have questioned why CWT provides export assistance when the cheese price is $2.00 a pound. The purpose of CWT is to help maintain the role of the U.S. as a consistent, reliable exporter of value-added dairy products, which is not a role that American suppliers have played historically. In the past, the tendency of U.S. manufacturers was to export only what the domestic market would not absorb. By 2008, the export arena became a major buyer of U.S. milk solids, with total sales of 11%.

In 2009, a combination of factors resulted in U.S. dairy product exports dropping 15.5%, the equivalent of 1.7% of total U.S. milk solids produced. However, it was in products that most impact producer milk prices where the biggest drops occurred – cheese exports down 50 million pounds, butter exports down 126 million pounds, and skim milk powder (protein standardized nonfat powder) down 314 million pounds.

In order to prevent a re-occurrence of 2009 in the coming year, CWT must continue to assist U.S. cheese sales in the world marketplace. When the participation in CWT reaches the 75% level necessary for the 2¢ assessment to begin, CWT will be able to add to the products receiving export assistance and maintain U.S. dairy producers’ world market share and reasonable margins.

The Senate passed major food safety reform this week by a three-to-one margin. S. 510, the FDA Food Safety Modernization Act, is the first comprehensive reform to food safety laws in seven decades.

S. 510 had been backed by NMPF prior to the inclusion of Sen. Jon Tester’s (D-MT) amendment which exempts small farms and business from certain safety and disease prevention control requirements. NMPF was successful including specific language recognizing the Pasteurized Milk Ordinance as compatible to the mandatory Hazard Analysis & Critical Control Points (HACCP) plan required in the reform.

The final approval of the bill is still in limbo, however, because of differences between what the Senate just approved, and the need to have its revenue-raising provisions reviewed by the House of Representatives. The House has not yet decided how to handle that procedural issue.

The bipartisan child nutrition bill, the Healthy, Hunger-Free Kids Act, was approved Thursday by the House of Representatives. The President should sign the bill into law before year’s end, as the White House and USDA have been on record in support of the measure. First Lady Michelle Obama has made this a priority in conjunction with her “Let’s Move” anti-obesity campaign. NMPF supported the bill as well.

“The health of the nation’s school children will be enhanced by the bill’s requirement that milk be served with each school meal,” said Jerry Kozak, President and Chief Executive Office of NMPF. “School meals provide an important venue to help assure that children are consuming three servings of low-fat or fat-free milk products that are recommended by the U.S. Dietary Guidelines. We are pleased that the bill will improve the nutrition environment in schools by encouraging consumption of healthier foods like milk and milk products.”

The bill reauthorizes the child nutrition programs for five years. The largest portion of the funding goes towards the school meal program and the special nutrition program for women, infants, and children, known as WIC. The bill increases the reimbursement rate for school meals by six cents costing an additional $4.5 billion. NMPF was successful in maintaining a variety of milk (both varying flavors and fat content) in the school meal program.

NMPF joined nine other farm and agriculture organizations at a National Press Club news conference on Tuesday, November 30 to urge members of Congress to address estate tax reform during the lame-duck session.

Dairy farmer Billy French (pictured at left) of Maurertown, Va., who operates French Bros. Dairy, a 125-head dairy and a 200-head cow/calf operation, spoke on behalf of NMPF about his experiences inheriting a multi-generational farm.

French, whose home farm has been in his family since 1872, explained how estate planning has been essential to his family's partnership, especially in a large family where French is one of nine siblings. "Being able to plan for transfer of assets to the next generation is essential to the success of a business like ours," French said.

When French's father died in 2003, his estate was under the current exemption amount, which was important for the continued success of the farm's operations. However, it has been difficult for French and his wife to start planning for the transfer of the assets to their four children with the uncertainty of estate tax reform right now.

"We realize we need to start planning for transfer to the next generation, but the uncertainty is holding us back," French said. "I especially don’t like the position we are in during 2010 without the stepped-up basis. Without it, paying the estate tax on the current value of land assembled by generations before us will be very hard to do in this dairy economy."

"Families like ours in this situation often have to sell land to pay estate taxes," French continued. "That's no way to help maintain the family farm that is the backbone of U.S. agriculture."

If Congress does not act before December 31, 2010, the current estate tax law (also known as the death tax) will revert to the 2001 rate with an exemption level of $1 million and a 55% tax rate. That rate would negatively affect the ability to pass farms, ranches, and small businesses from one generation to another.

NMPF supports permanently raising the exemption level to no less than $5 million per person, and reducing the top rate to no more than 35%. The exemption should also be indexed to inflation, provide for spousal transfers, and include the stepped-up basis. Dairy farmers may contact their members of Congress through Dairy GREAT to explain why they should vote for estate tax reform.

The Congress that will convene next month on Capitol Hill will be very different than the one still finishing up business in early December 2010. Given the large number of freshman legislators, NMPF will have a significant education effort ahead of it to explain how current dairy policy works, why changes are needed – and why those changes, in the form of the Foundation for the Future program, need to be implemented as soon as possible.

Given our new divided government in Washington, successful legislation must be bipartisan, and must achieve a consensus in Congress, as well as among farmers. NMPF continues to work across the entire dairy industry to build support for the program, with the goal of having the details of our Foundation for the Future package written into legislation starting in January.

In addition to existing education materials available at the News and Resources page of the FFTF website, a narrated copy of the slides that explain Foundation for the Future in depth is now available at FutureforDairy.com. We are hoping that as cooperatives and producer associations hold their member meetings this fall and winter, they use this presentation to explain in detail the merits of Foundation for the Future.

With the large turnover in Congress – particularly in the House of Representatives, where there are nearly 90 new members – the timing of when the new leadership addresses farm policy generally, and dairy policy specifically, remains up in the air. There are also new chairpersons of both the Senate and House Agriculture Committees, respectively, and we will have many new members on those panels with no experience in writing farm policy. NMPF remains focused on what it can control, which is educating both the producer community, and elected officials, about the need for change, and the benefits of our solution.

At the Cooperatives Working Together (CWT) committee meeting in October, the committee reviewed an analysis by NMPF staff economist Peter Vitaliano which clearly demonstrated the effectiveness of the CWT Export Assistance program in enhancing dairy farmer revenue, as well as the value and importance of continuing the program in the future. As a result, the committee voted to move forward with CWT in 2011 and 2012, focusing its efforts on the Export Assistance program.

CWT is expected to carry over $30 million from the 2009-2010 program period and those funds will be utilized evenly in 2011 and 2012. The monies will be supplemented by the two-year commitment from cooperatives and individual producers marketing a minimum of 75% of the eligible milk production to invest two cents (2¢) per hundredweight in the CWT program. The 2¢ per hundredweight assessment will not go into effect unless the 75% participation goal is reached.

In working toward achieving that goal, a brochure has been developed that describes the benefit to all producers of the CWT Export Assistance program and why it is important to for it to continue in 2011 and 2012. The brochure is available at the CWT website –www.cwt.coop. A narrated PowerPoint presentation, “The Importance of the World Dairy Market to U.S. Dairy Farmers,” will also be available to download from the CWT website next week, and a CD of that presentation will be available as well.

Finally, 2011-2012 CWT Membership Agreements are available on the website. It is hoped that every CWT member will reach out to their fellow producers and encourage them to join CWT. As stated above, the two-cent assessment requested will not go into effect until the 75% participation level is reached.

At the beginning of November, NMPF announced that Dana L. Brooks has been promoted to Senior Vice President of Government Relations, effective immediately. Brooks, who has worked for NMPF for nearly two years, had been serving as VP of Government Relations.

“Dana’s passion for agriculture and energetic personality continue to enhance our capabilities to deal on Capitol Hill with the numerous challenges facing our cooperatives and dairy producers,” said Jerry Kozak, President and CEO of NMPF, to whom Brooks reports.

Brooks previously worked in Washington as a legislative assistant for two members of Congress: Rep. Marion Berry (D-AR), and later, Rep. JoAnn Emerson (R-MO). After her legislative positions on Capitol Hill, Brooks served as Director of Congressional Relations for the American Farm Bureau Federation in Washington, DC. Brooks most recently worked on national policy issues at the Florida Farm Bureau in Gainesville, FL.

During Brooks’ tenure at NMPF, she has helped focus attention in Congress on the economic crisis that affected dairy farmers in 2009, while also helping to shepherd dairy-friendly provisions into the Child Nutrition Reauthorization bill. She also worked in 2010 to ensure that the mandatory, electronic reporting of dairy prices was signed into law.

NMPF delegates last week passed a resolution calling on the 2011 National Conference on Interstate Milk Shipments to lower the Somatic Cell Count (SCC) limit over a period of three years. The resolution, adopted during the NMPF Annual Meeting in Reno, Nevada, calls for reducing SCC levels in a stepwise fashion to allow producers sufficient time to meet the lowered SCC requirements, with the following thresholds:

• 600,000 per mL, effective January 1, 2012;
• 500,000 per mL, effective January 1, 2013;
• 400,000 per mL, effective January 1, 2014;
• Regulatory discretion ― while assuring public health ― to temporarily allow for seasonality-dependant increases or events outside of human control; and
• Continuation of current regulatory enforcement of a warning notice when two of the last four Somatic Cell Count tests exceed the limit, and suspension when three of the last five Somatic Cell Count tests exceed the limit.

Please contact Jamie Jonker for more information.