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2012 Shaping Up To Be Good Year For Exports

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Although dairy commodity prices have faltered in recent weeks, there’s no disputing the fact that 2011 was a year with strong milk prices, due in no small part to a robust global market. While the final, official tally isn’t yet in, it appears that 13.3% of U.S. milk production in 2011 was sold to customers outside of our borders. That’s a new record, and a welcome development for farmers and processors alike.

While the outlook for both the global economy and dairy prices in 2012 is anything but clear, what is clear is that we need to continue building on our track record of success in developing foreign customers, whether close to home in Mexico and Canada, or in Pacific Rim countries miles from home.

Several developments last year augur well for 2012. First, we’ve resolved the trucking dispute with Mexico which derailed a portion of our cheese exports last year when Mexico slapped tariffs on the U.S. because we weren’t living up to our NAFTA commitments. Mexico’s trucks are now getting approved for use in the U.S., meaning that our dairy foods won’t be penalized any longer.

Second, the U.S. free trade agreement with South Korea was approved last year (along with FTAs with Colombia and Panama). Korea is a significant, growing market for U.S. dairy foods, and we estimate that an additional $380 million per year in sales will result in the next few years as Korea’s tariffs are reduced by this FTA. The two Latin American countries will add another $50 million in annual dairy sales.

But the other big news in terms of our export capabilities comes with the renewal of Cooperatives Working Together. We announced last November that CWT will be getting a new stream of revenue starting this month, resulting from the two cent per hundredweight contribution made by its member cooperatives and individual dairy farmers producing 70 percent of the nation’s milk supply (that’s 31 cooperatives and nearly 200 individual producers).

CWT had been active last year in providing export assistance to members, however, the money used was carry-over funds from the 2009-2010 program. Now, the combination of these existing funds, plus new revenue, will allow CWT to increase the sales of commodities that have the most positive impact on dairy farmers’ milk checks. Here’s a case in point:

Since 2006, exports of cheddar cheese have accounted for a growing share of U.S. foreign sales. From the 11 million pounds exported in 2006, to the 101 million pounds exported in 2011, the percentage of cheddar produced in the U.S. that is exported has grown from 0.4%, to 3.5%. The only downturn in that steady climb was in 2009, when cheddar exports dropped by 27 million pounds, to just 0.9% of production.

Of the 101 million pounds of cheddar cheese exported in 2011, CWT assistance was used for more than 75% of that volume. In fact, 19 percent of all the cheese exported by the U.S. last year was through CWT. That’s the equivalent of nearly one billion pounds of milk, leaving the U.S. through nearly 300 individual sales facilitated by CWT.

Despite all the unfounded political rhetoric last year that the congressional Dairy Security Act will doom our future ability to export, dairy farmers care deeply about foreign sales, and recognize the bottom-line importance of exports. That’s why they formed, and continue to fund, the U.S. Dairy Export Council. That’s why they formed, and continue to fund CWT, which is no longer in the business of retiring dairy cows, and is exclusively focused on exporting products and building long-term markets for U.S.-made dairy foods.

The globalization of food production has made it a challenging world for farmers, wherever they are located. CWT gives dairy producers in America a unique and crucial tool that they will increasingly need in the future.

 
 

 

NMPF Applauds New Government School Meal Standards for Continuing to Recognize Dairy’s Nutritional Contributions

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ARLINGTON, VA – The National Milk Producers Federation (NMPF) today praised the U.S. Department of Agriculture’s updated school meal standards that continue to stress the nutritional benefits of low-fat and fat-free milk and dairy products.

A final version of those standards was released Wednesday by the USDA following more than a year of public comment and review. NMPF submitted comments to USDA last April focusing on the nutrient package of milk and dairy foods, which will continue to be a core component of school meals, with fluid milk being offered at all meals.

“The updated nutrition standards require that low-fat or fat-free milk remain a part of every school meal,” said NMPF President and CEO Jerry Kozak. “That’s essential, given that milk is the single largest contributor of nutrients in kids’ diets. A single glass of milk delivers a very affordable package of nine essential nutrients important to good health, including calcium, potassium, phosphorus, protein and vitamins A, D and B12.”

In addition, Kozak said, including both plain and flavored milk in school meals is a sure-fire way to make diets more nutritious. “Milk, including chocolate milk, is the No. 1 source of three out of four nutrients cited by the U.S Dietary guidelines as lacking in children’s diets,” he said, “and chocolate milk is the drink-of-choice in school meal lines. Research shows that milk consumption can drop 35 percent or more when flavored milk is removed.” While Kozak said NMPF would have preferred if USDA allowed low-fat flavored milk in school meals along with fat-free flavored milk, “it’s essential that chocolate milk, in particular, remain available in school cafeterias to assure children are getting the nutrients milk provides.”

Kozak noted that, since 2006, the dairy industry has proactively reduced the sugar in flavored milk by nearly 40 percent, and flavored milk contributes only three percent of the added sugar in children’s diets.

“By comparison, fruit drinks and soft drinks contribute 45 percent of added sugar in kids’ diets,” Kozak said, “and many of these beverages provide few or no nutritional benefits.”

Kozak also praised USDA for keeping low-fat and fat-free yogurt and cheese on school breakfast and lunch menus. “Yogurt and cheese are kid-friendly solutions to help meet protein requirements,” he said. “They are favorites at home so it’s only natural that schools also should offer these products.”

Kozak noted that nearly two-thirds of the cheese distributed to schools by the Agriculture Department in the last school year was lower-fat varieties, and now nearly all the processed American and blended cheese USDA has available for schools will contain at least 25 percent less sodium.

“This also reflects the commitment of both USDA and the dairy industry to the address the problem of childhood obesity,” 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 31 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.

CWT Export Assistance Sets New Performance Benchmark in 2011

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In 2011, Cooperatives Working Together (CWT) helped member cooperatives make 280 export sales totaling 92.4 million pounds of cheese, a new benchmark for the Export Assistance program. That total was nearly 20 million pounds higher than exports achieved in 2010, when CWT assisted with 241 export sales totaling 73.9 million pounds of cheese.

CWT continued to play a significant role in exports of American-type cheese in general, and Cheddar cheese specifically. While data for all of 2011 is not yet final, initial analysis indicates that the volume of CWT-assisted Cheddar cheese export shipments in the first ten months of 2011 – 69.7 million pounds – accounted for 76% of Cheddar cheese loaf exports, 79% of American-type cheese exports in loaf form, and 19% of the total cheese exported in all forms.

Dairy product sales assisted by CWT and shipped in 2011 have added an average of 22 cents per hundredweight on all milk marketed. That is an increase in producer revenue of $120 million, according to an analysis by Dr. Scott Brown, University of Missouri and FAPRI.

Asian countries accounted for 35% of the total pounds sold, with Japan taking 84% of the sales volume. The Middle East was close behind, representing 32% of the total tonnage, with Saudi Arabia accounting for 50% of the pounds sold in that region.

 

FDA Milk Sampling Program Begins

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The Food and Drug Administration (FDA) milk residue survey project is now underway. The FDA residue survey involves the collection of a total of nearly 2,000 universal milk samples at central milk testing laboratories: 900 milk samples from dairy producers with a cull dairy cow tissue residue violation, and another 900 random milk samples. FDA will have the samples blinded at the central laboratories, and then shipped to the Institute for Food Safety and Health (IFSH) at Illinois Institute of Technology.

The milk samples will then be shipped to FDA laboratories for analysis. The milk samples will be tested for about 30 different antimicrobial and anti-inflammatory residues which may include the following: Ampicillin, Cephapirin, Cloxacillin, Penicillin G, Erythromycin, Tylosin, Ciprofloxacin, Sarafloxacin, Chlortetracycline, Oxytetracycline, Tetracycline, Doxycycline, Sulfachloropyridazine, Sulfadiazine, Sulfamerazine, Sulfadimethoxine,Sulfamethazine, Sulfaquinoxaline, Sulfathiazole, Tripelennamine,Thiabendazole, Pirlimycin, Flunixin, Bacitracin, Virginiamycin, Tilmicosin, Neomycin, Gentamicin, Florfenicol, Chloramphenicol and Tulathromycin.

NMPF anticipates that the sampling and laboratory analysis will take about one year. As a reminder, the NMPF Milk and Dairy Beef Drug Residue Prevention Manual is available on the National Dairy FARM Program website.

 

NASS Reinstates Dairy Reports after NMPF Request

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Last October, USDA’s National Agricultural Statistics Service (NASS) announced that it would cut a number of its statistical reports in anticipation of substantial budget cuts imposed by Congress. In November, Congress voted to give NASS $6 million more than anticipated, and directed the agency to re-evaluate the reports that had been slated to be cut. NMPF wrote to Cynthia Clark, NASS’ Administrator, requesting that she restore the July Cattle report, along with the annual table containing the national breakdown of dairy farms by size.

On December 8, Dr. Clark informed NMPF that both the July Cattle report and the Farms, Land in Farms, and Livestock Operations report – which contains the dairy farm size breakdown – would be restored to NASS’ publication schedule. The Cattle report, which is also published in January, provides the only comprehensive data on dairy heifers and cows. (This is the foundation for the monthly cow estimates in the Milk Production report.)

NMPF has also been in discussions with NASS about ensuring the accuracy of its reported alfalfa hay prices.

 

Farm Dust Legislation Passes House of Representatives

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In the fall, EPA Administrator Lisa Jackson said the agency will not seek to revise the standards for coarse particulate matter (PM10), or dust, alleviating major concerns for farmers and ranchers throughout the country, especially in the west. Nevertheless, there is still anxiety by some that this announcement is just a slight victory, while the days of farm dust being regulated further by EPA are not too far down the road.

There have been ongoing efforts in Congress to halt or delay EPA from revising the standards. Legislation introduced by Rep. Kristi Noem (R-SD.), the Farm Dust Regulation Prevention Act of 2011 (HR 1633), would exempt farm dust from falling under the purview of the Clean Air Act for one year. On Dec. 8, the legislation passed the House of Representatives by a resounding vote of 268-150. The bill has now been sent to the Senate, where many are skeptical it will ever see further action. Prior to the bill’s passage in the House, President Barack Obama sent a message to Congress that he would veto the legislation if it were to reach his desk. A large coalition of agriculture stakeholders, including NMPF, sent a letter pledging support for Rep. Noem’s legislation.

 

Agriculture Groups Oppose Animal Rights Bill

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A coalition of eight agricultural groups, including NMPF, the Egg Farmers of America, and the American Farm Bureau Federation, signed a letter to the chairman and ranking member of the House Agriculture Committee last month to oppose the creation of federal standards for the welfare of egg-laying hens.

The bill, introduced by Congressman Kurt Schrader (D-OR), resulted from an agreement between the Humane Society of the United States (HSUS) and the United Egg Producers (UEP). It would allow for larger, enriched-colony cages and phase out smaller cages over 15 to 18 years, which the letter argued would force additional, costly, and unnecessary animal rights mandates that could leach into all corners of animal farming, irreparably damaging the livelihoods of family farmers across the country.

 

NMPF Submits Comments on USDA Disease Traceability Proposal

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As part of the dairy industry’s strong proactive stance in advocating mandatory animal identification and disease traceability, NMPF provided comments on the proposed USDA disease traceability rule. The rule would establish general regulations for improving the traceability of U.S. livestock moving across state lines when animal disease events take place. In the comments consistent with long standing policy, NMPF stated its support for mandatory animal identification and disease traceability to serve as a collective industry insurance policy against catastrophic animal disease outbreaks.

NMPF recommended that USDA proceed with mandatory animal identification and traceability standards that are unique for the dairy industry and these not need to be aligned to any requirements for the beef industry. In the past, USDA has attempted to have a unified animal identification and traceability rule for bovines in general, thus having the same requirements for the dairy and beef industries. USDA is well aware of the differences in opinion between the dairy and beef industries relative to the need of mandatory versus voluntary animal identification and traceability.

Because animal diseases do not respect political boundaries, NMPF believes that disease traceability must be consistent across all state, tribal, and territorial governments. Without this consistency, there will be a negative impact on the effectiveness of the program for animal identification and disease traceability for the dairy industry. It is conceivable there could be different systems implemented by each political entity. Since a significant number of dairy producers operate in more than one political jurisdiction, this will likely result in confusion and added expense for producers. Therefore NMPF recommended that USDA exercise federal preemption to provide a far more beneficial national system with all state, tribal, and territorial governments utilizing a central system, making it easier for producers and other industry partners to participate.

NMPF recommended that USDA require official 840-RFID tags for all female dairy cattle and those male dairy cattle used for reproductive purposes. Along with our IDairy partners, NMPF has long supported the use of RFID tag technology as the appropriate animal identification for dairy cattle to allow for disease traceability at the speed of commerce. RFID tag technology is being readily adopted by dairy producers as part of their herd management systems for animal health, reproduction, performance, genetic, and other purposes. NMPF also recommended to USDA for the allowance of the replacement of AIN’s with the same number which will protect the long-standing and important animal management philosophy the dairy industry utilizes today.

 

APHIS Urged to Review Indemnification Calculators for TB and Brucellosis Eradication Programs

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NMPF recently commented on the U.S. Department of Agriculture (USDA) Animal and Plant Health Inspection Service (APHIS) Veterinary Service (VS) proposals for “Appraisals Using Beef and Dairy Calculators” and “Options for Federal Indemnity Payments Veterinary Services Bovine Tuberculosis and Brucellosis Programs.”

Based on the USDA “Appraisals Using Beef and Dairy Calculators” proposal, the milk cow appraisal calculator appears to generate a reasonable engineered price. It depreciates a recently freshened first-calf cow until it is a cull cow, with logical adjustments for higher productivity and, through productivity, for breed. In comments to USDA, NMPF states that the milk cow appraisal calculator appears to overstate this depreciation in the first year or two, and encourage USDA to investigate this possibility. The dairy replacement appraisal calculators are a bit more ad hoc, because they rely on less consistent information, but also seem to be reasonable. Nevertheless, NMPF encouraged USDA to examine all these models’ ability to predict actual market prices (especially if that was not part of the original validation process) and to periodically review the models’ accuracy, especially for appraising whole herds.

One important purpose of the indemnity payments is fair compensation of producers for the cost they bear for the public’s benefit and fairness demands effective valuation. Providing fair market value for livestock is also important for eliminating an owner’s incentive to hide an infection or to resist taking appropriate steps for wider animal health. In that light, NMPF commented on four options presented in the USDA “Options for Federal Indemnity Payments Veterinary Services Bovine Tuberculosis and Brucellosis Programs” proposal.

NMPF suggested that enhancement of the management tools available for producers who have a tuberculosis or brucellosis infected animal is required to advance this disease eradication program. Traditionally, USDA and states have relied on whole herd depopulation as the preferred response to maintain state status. The recent TB experience in California, where a single TB-infected animal is identified out of thousands of animals, demonstrates the need for a viable test-and-cull strategy. At the same time, whole herd depopulation must remain in the suite of management strategies. A linchpin to these efforts is an effective animal ID system.

Full comments are available on the NMPF website.

 

A Busy Year Ahead

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Supposedly, the Mayans predicted that the world will end in 2012. Of course, I don’t place any stock in their thousand year-old forecast, but I do predict that it will be a busy and turbulent year ahead…picking right up where 2011 left off. Here are a few things that we’ll be watching in the months ahead:

First and foremost, farmers need to push Congress to pass a new Farm Bill – sooner, rather than later. The current one expires in nine months, but what’s worse, the distractions caused by the upcoming elections in 10 months will make it increasingly difficult to get the House, Senate and White House to agree on anything as the year unfolds.

We were tantalizingly close to making this happen a few months ago, when the congressional supercommittee was looking at incorporating a budget-cutting farm bill as part of the overall effort to trim $1.2 trillion in federal spending. That effort fell apart last in November, but as I wrote last month, there’s absolutely no reason why the leaders of the House and Senate Agriculture committees shouldn’t pick up right where they left off. There will be hearings, and a further review of existing proposals, but those efforts are not likely to result in any major new learnings.

Not only do the politics get more challenging the longer the Congress waits to act on the Farm Bill, but the budget situation gets worse as well. That’s why we have to send clear, compelling signals that a delay in reformulating dairy policy, and farm policy overall, means less money, fewer good options, and a higher likelihood that we end up with some last-minute deal that satisfies no one.

Beyond the Farm Bill battle, we are facing this year a new milk sampling program from the Food and Drug Administration (FDA) that is likely to be a headache on a number of fronts. NMPF has had ongoing discussions with the FDA about how best to verify whether current drug residue testing protocols are effective. Any day now, the FDA is planning to roll out a program where they take samples from approximately 900 dairy farms that have had past residue violations – not in their milk, but in the tissues of culled dairy cows. NMPF has raised several concerns with the FDA plan, but as it stands now, the FDA is likely to move ahead with this program in the coming months. We will try as hard as possible to avoid this program being a black eye for the dairy industry.

Another federal agency is also going to make waves in 2012 with the release of a new environmental risk assessment for dioxin. The Environmental Protection Agency (EPA) is planning to release data assessing the health risks to Americans of their potential exposure to dioxin, which is a potent toxin. Because dioxin is common throughout our air, water and soil, we’re all exposed to trace amounts of it. Dairy products are one source, but there are many others. The good news is that dioxin levels in the U.S. have been declining for years; the bad news is that this EPA report is likely to scare at least some people into believing that few if any foods are safe to eat. That’s why we’ve asked the EPA to consider carefully the implications of the assessment they seem intent on issuing.

The other challenge – and opportunity – that will come our way in 2012 is the Trans-Pacific Partnership (TPP), a huge and growing free trade agreement. The TPP is not a new development – we’ve been warning for years that dairy trade between the U.S. and New Zealand should not be part of the TPP. The latest news, however, is that Japan may well join the other nations that are part of these negotiations. The inclusion of Japan represents a huge potential opening for more U.S. dairy exports, if we can get a balanced and workable deal. The devil will be, as it always is, in the details of what gets negotiated…which may well be in the coming months.

So even if Washington will be gripped by partisan gridlock in 2012, there is the potential for both good and not-so-good developments this year as well. As always, we’ll be working hard to represent our members’ interests, placing our farmers and cooperatives in the best possible position.

 

Farm Bill Agreement Contains Dairy Reform Proposal

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Capitol_Hill_1.JPGEven though the congressional supercommittee process failed to reach an agreement on how to make $1.2 trillion in spending cuts, the leaders of the House and Senate Agriculture committees did agree last month to a 2012 Farm Bill framework that includes the NMPF-backed Dairy Security Act.

The top Democrats and Republicans on the House and Senate panels had been negotiating throughout the autumn on the outlines of a new farm bill, in an effort to reduce overall agriculture spending by $23 billion. That effort paralleled the larger supercommittee process that targeted farm programs as part of its package of trillion-dollar cuts. Because the Dairy Security Act provides a budget savings compared to current policies – and because it offers farmers a better safety net – the Ag committee negotiators included the DSA as part of the overall package.

Specifically, both the Dairy Margin Protection Program and the Dairy Market Stabilization Program were featured in the Farm Bill draft, while the Dairy Product Price Support Program, the Milk Income Loss Contract Program and the Dairy Export Incentive Program were eliminated.

Although the demise of the supercommittee process has now pushed consideration of the next Farm Bill into 2012, NMPF is confident that the Dairy Security Act remains the foundation of dairy policy reform as the next Farm Bill is refined. NMPF will continue working with its members to urge House and Senate members to build on the agreement achieved last month, so that dairy policy reform can be finalized next year.