Challenges Abound, But We’ll Survive Together
December 4, 2018
As we move toward the end of yet another financially challenging year in the dairy industry, it’s important to look forward to how we can best address the many challenges before us.
Congress is slowly moving toward adopting a farm bill that will fix many of the problems with the current dairy safety net — the Margin Protection Program (MPP). As I write this, the bill is almost done, and I am cautiously optimistic that the final obstacles will get worked out so Congress can pass it and send it to the president before the holidays.
When enacted, this bill will provide critically important support for farms of all sizes through improved MPP support for small and medium-sized farms and more risk management options for larger farms.
Two-thousand-nineteen could be a pivotal year in the dairy community’s long-standing effort to address the proliferation of fake dairy products stealing the reputation and image of real dairy foods by use of terms like milk, cheese, yogurt and butter on products that, in fact, contain no dairy. NMPF’s aggressive campaign on this issue has pushed it to the fore at FDA. Everyone in dairy has a major stake in this battle, and EVERYONE must engage in it by contacting the agency. Our website has instructions and more information on this topic.
On these and many other issues facing the dairy community, it is our collective duty to work together to tackle challenges and improve our lot. At NMPF, our members have a long and proud history of working to marshal forces to move our industry forward. Nowhere is that legacy clearer than in the Cooperatives Working Together (CWT) self-help export program.
CWT is a way for dairy farmers to help one another by giving support that boosts milk prices for everyone. And with the entire sector struggling with trade and economic challenges, this self-help effort is more important than ever.
In the 15 years since it came into existence, CWT’s Export Assistance Program has allowed U.S. dairy farmers to bypass government red tape and pool resources to bolster overseas sales through their own efforts. Since 2010, CWT export assistance has moved more than 600 million pounds of American-type cheese, 230 million pounds of (unsalted, 82 percent milkfat) butter, and 57 million pounds of whole milk powder to more than 250 customers in 58 different countries. These exports represent more than 11 billion pounds of total milk equivalent.
So far this year, CWT has helped member cooperatives capture contracts to sell nearly 1.3 billion pounds of milk equivalent. It all adds up to an improved balance of supply and demand — enough to improve the milk prices received by all U.S. dairy farmers by as much as $0.50/cwt., according to both external and internal estimates. The additional revenue — a price boost that ends up being a multiple of the $0.04/cwt. contributed by participating co-ops and individual producers — is welcomed by farmers in a year when dairy has been rocked to the tune of more than $1 billion in lost farm income due to retaliatory tariffs and market uncertainty.
Tariffs against dairy have become an unfortunate feature of this year’s trade war — and while it would be nice if global markets remained stable while trade tensions resolve, the dairy marketplace is dynamic. Large dairy companies in Northern Europe are joining suppliers in New Zealand and Australia as formidable competitors. European dairy producers who are experiencing slow domestic growth following the end of production quotas and the loss of Russian exports are increasingly trying to take U.S. market share.
Foreign producers envy CWT’s role in helping U.S. producers win business deals worldwide — there’s nothing else quite like the low-bureaucracy, high-return model of American dairy producers working together to market dairy products the world demands and doing so at competitive prices. But that doesn’t mean our competitors stop working to benefit their own interests. And in the current surplus environment, they too can drive hard bargains against U.S. products.
CWT’s value was forcefully endorsed earlier this year, when NMPF’s board voted to extend the program through 2021, seeing it as a complement to the farm-level risk-management tools in the current Farm Bill. Next year, CWT will implement recommendations from this year’s strategic review, which sought to increase innovation, address the challenges of the current market and boost collaboration with related dairy-producer export efforts. CWT will only become more important in the years to come, with exports becoming an increasingly important source of dairy demand even as the current trade environment may make some markets more difficult to reach.
When milk prices are low and domestic markets aren’t growing as fast as our dairy farmers can increase output, we must increasingly look toward exports to boost sales and demand. But that view has become clouded in 2018 due to trade policy disruptions and may remain so for the foreseeable future.
CWT helps make the vision of expanded trade a reality, providing genuine self-help assistance through trade while laying the groundwork for better times ahead. It’s something to celebrate as the year comes to an end, and because of the support for the program from both cooperatives and individual producers, it is a gift that keeps on giving — not only to the CWT membership, but for the entire U.S. dairy industry and consumers worldwide who benefit from our products.