News for Dairy Co-Ops

The conclusion of the United States–Mexico–Canada Agreement negotiations late last year was welcome news for dairy — but with ratification still pending in all three nations, it was only a step in a journey not yet complete.

The USMCA would improve U.S. dairy’s trade outlook on several levels, including restored certainty with Mexico that includes continued duty-free shipping to our largest export market. The agreement also advances dairy’s trade relationship with Canada, incorporating much-needed reforms to its controversial dairy pricing system and expanding access for US dairy exports to Canada.

However, the USMCA must still be ratified by the legislative bodies of all three nations before taking effect. NMPF staff has (have?) emphasized in meetings with congressional offices the need to quickly approve the treaty to retain and expand export opportunities that will benefit America’s dairy farmers.

NMPF has also urged a swift end to U.S. Section 232 tariffs on steel and aluminum and its corresponding Mexican retaliatory tariffs on U.S. cheese exports – which some key leaders in Congress are saying must be dealt with to ensure successful passage of USMCA.

NMPF has developed a one-page handout on the USMCA that conveys the importance of this trade agreement to the dairy industry in simple-to-understand terms. NMPF is encouraging dairy cooperatives and farmers to reach out to policymakers and amplify the message that Congress should support passage of USMCA and urge the Administration to swiftly resolve the lingering metal tariffs dispute with Mexico.

The importance of maintaining dairy’s trusted trade partnership with Mexico and seizing the trade advancements made in USMCA demands that Congress pass this important agreement.

A proposal from President Donald Trump to close the U. S. southern border with Mexico spurred a united dairy front as NMPF, member cooperatives and other groups including the U.S. Dairy Export Council spoke out against the concept. The effort added crucial agricultural voices to a torrent of criticism against the plan, after which the president said he would delay any closure and pursue other ways to punish Mexico for what he considers lax border enforcement.

A border closing would cut off U.S. milk-producer access to its largest dairy export market. While the President has postponed further action on a full closure for now, reports indicate that trade is being impacted by a slowdown in the processing of goods crossing the border due to the reassignment of some CBP staff from trade to immigration responsibilities.

“The dairy industry is suffering through one of its worst economic periods ever,” said Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF). “Low milk prices are already creating hardship for farmers, and further supply disruptions would only prolong producer difficulties.” More than seven dairy farms close each day in the United States, according to data from the USDA.

“Dairy exporters already are suffering from diminished access to export markets due to high tariffs and lack of progress on U.S. trade agreements,” noted Tom Vilsack, president and CEO of the U.S. Dairy Export Council (USDEC). “Closing the U.S. southern border to Mexico would be a gut punch that could set the industry back by a decade or two.”

NMPF member cooperatives, including Dairy Farmers of America, FarmFirst Dairy Cooperative and United Dairymen of Arizona, also spoke out against the proposal, expressing concerns shared by other agriculture sectors that also rely on exports to prosper.

Mexico is U.S. dairy’s largest export customer, purchasing $1.4 billion in 2018. A border closing would jeopardize $3.8 million of U.S. dairy products that travel each day to Mexico, which is the largest customer for U.S. milk powder, cheese and butterfat. 2018 was a record year for U.S. sales of nonfat dry milk/skim milk powder and butterfat to Mexico, while milk-protein concentrate sales reached a 10-year high.

Every $1 of U.S. dairy exports to Mexico generates $2.50 of economic activity in the United States, according to a study by Informa Economics.

USDA’s National Agricultural Statistics Service margin calculation for February indicates a second month of payouts for producers who enroll at the higher coverage levels allowed under the new Dairy Margin Coverage program.

The prices used to determine the February 2019 margin under the Dairy Margin Coverage program, the new version of the previous Margin Protection Program for Dairy, generated a margin of $8.22 per cwt. That would not have produced a payment to any farmer under the old MPP, which had a $8/cwt. ceiling. Under the new DMC, that margin will generate a payment of $1.28 per cwt. for producers who purchase coverage for this year at the new maximum level of $9.50 per cwt.  For example, a farmer insuring 5 million pounds of milk production history at the maximum $9.50 per cwt. is already guaranteed to receive $6,307 and $5,347, respectively, for the first two months of the year under the DMC as currently calculated.

The February margin was $0.23 per cwt. higher than the margin in January, the result of a $0.20 higher milk price and a 3-cent lower feed cost. Together, margins from the first two months of 2019 are already enough to ensure that producers who enroll at the maximum coverage level will receive more in DMC payments during 2019 than they will pay in premiums. USDA, which has announced that signups for the 2019 program will begin by June 17, is predicting that DMC coverage at $9.50 per cwt. will continue generating payments each month from March through August.

The 2018 Farm Bill also removes the previous restriction that prohibited producers from enrolling milk in both the MPP program and the Livestock Gross Margin for Dairy (LGM-Dairy) program during the same month. It further allows farmers previously prevented from enrolling in MPP during 2018 due to this restriction to enroll retroactively in MPP and collect payments for 2018 for the months during which they were prevented from doing so. Farmers who purchased buy-up coverage under MPP during 2014-2017 are also eligible under the Farm Bill to receive a partial refund of their net payments during those years.

USDA’s DMC margin forecasts can be accessed online.

NMPF worked closely with key House and Senate dairy leaders in March to add bipartisan momentum to the U.S. Department of Agriculture’s efforts to implement the new Dairy Margin Coverage program created in the 2018 Farm Bill, highlighted by letters to Agriculture Secretary Sonny Perdue urging dairy implementation backed by members of both parties in both chambers.

Perdue has prioritized dairy programs in his farm-bill rollout, noting in testimony before Congress on April 9 that DMC outreach materials are being prepared for distribution via Farm Service Agency offices nationwide. NMPF appreciates the Secretary’s commitment to a timeline as well as congressional support for fast, farmer-friendly implementation of reforms. The bipartisan House and Senate letters urge USDA to implement the dairy provisions of the 2018 Farm Bill as quickly as possible and in a farmer-friendly manner.

House Agriculture Committee Chairman Collin Peterson (D-MN) and senior committee member Representative Glenn ‘GT’ Thompson (R-PA) led the House effort, and Senate Agriculture Committee Ranking Member Debbie Stabenow (D-MI) and Senator Roy Blunt (R-MO) led in the Senate.  As noted in the letters, DMC and the other improvements will provide critical help to dairy farmers this year.

The letters, signed by 77 House members and 38 Senators from both parties, also urge USDA to engage actively with farmers on multiple levels, including mailings, phone calls and local meetings, as well as collaboration with stakeholders including state officials, cooperatives, producer groups and institutions of higher education.

NMPF participated heavily in generating support for the letters among members, and appreciates how bipartisan, bicameral efforts in Congress draw attention to the challenges dairy farmers are facing and applauds Secretary Perdue for putting forward a timeline for implementation.  While urging action to speed up implementation wherever possible, the organization continues to work with USDA and Congress to ensure the DMC program best serves hard-working, economically stressed dairy producers.

The National Milk Producers Federation voiced strong support for the DAIRY PRIDE Act introduced March 14, calling it another means toward a crucial end for consumers: the end of mislabeled non-dairy products as “milks” in the marketplace.

The legislation, introduced by Senators Tammy Baldwin (D-WI) and Jim Risch (R-ID) in the Senate and Representatives Peter Welch (D-VT) and Mike Simpson (R-ID) in the House, further prods the FDA toward increasingly necessary action as plant-based imitators of milk, cheese, butter and other products brazenly flout FDA rules that restrict the use of dairy terms on non-dairy products. While NMPF continues to press the agency to strengthen its own enforcement, substantial support for dairy in Congress only underscores the urgency for the FDA to act, said Jim Mulhern, president and CEO of NMPF.

Following NMPF’s submission of a Citizen Petition to FDA in February outlining a path forward as the agency considers more than 14,000 comments submitted to it on the proper use of dairy terms, the DAIRY PRIDE Act would protect the integrity of food standards by prompting FDA to enforce labeling requirements for dairy. The measure would require FDA to issue guidance for nationwide enforcement of such requirements within 90 days and mandate that FDA report to Congress two years after enactment to hold the agency accountable.

“We hope that the FDA will soon do the right thing by updating and enforcing rules that aid consumers by providing clear, accurate labeling on what is, and what isn’t, milk, and we are ready to help the agency in any way we can,” Mulhern said. “This bipartisan, bicameral legislative effort demonstrates strong support within Congress for fixing this problem, and we commend these lawmakers for laying down this important marker.”

Key leaders in both the House and Senate have chastised the FDA for failing to enforce existing food standards that specify products labeled as “milk” have to come from a dairy animal. The legislation adds momentum to NMPF’s longstanding campaign to encourage the FDA to enforce its own regulations, which has gained steam in the past year through the FDA comment period, prompted by NMPF activism, and the NMPF’s new petition.

With the outcome of trade negotiations with China still uncertain, NMPF is taking proactive steps to engage with President Trump, his administration and policymakers to ensure that dairy-industry priorities receive top consideration in negotiations with China.

Negotiations with China, once aimed toward a March conclusion, are certain to continue well into spring. Treasury Secretary Steven Mnuchin and U.S. Trade Representative (USTR) Robert Lighthizer traveled to Beijing last month to resume trade talks, while Chinese officials returned to Washington at the beginning of April. NMPF remains hopeful that a constructive outcome is near, with an agreement between Presidents Trump and Xi that could be signed within the next few months.

NMPF, the U.S. Dairy Export Council and allied groups are working to help shape an agreement that further opens China’s market to U.S. dairy products and rolls back trade barriers, including securing the removal of all retaliatory tariffs against dairy.

Toward this end, NMPF recently worked with the US Dairy Export Council to spearhead two letters to President Trump. One letter, signed by 49 food and agriculture groups, explained that a deal that maintains retaliatory tariffs could negate any trade gains. “As part of your negotiations, we are asking that your Administration prioritize the removal of all retaliatory tariffs and make their immediate elimination a mandatory condition of any successful trade agreement,” we wrote. “Quickly restoring access to the Chinese market for agriculture products is a top priority for America’s farmers, agribusinesses and food manufacturer as negative impacts will continue to compound the longer that our trade relationship with China remains in question.”

The other letter, sent by NMPF, USDEC and the International Dairy Foods Association, delivered a dairy-specific message on the importance of securing strong results for the sector in the trade negotiations and providing for more market access to China for dairy products.

China’s retaliatory tariffs, levied in response to U.S. Section 301 tariffs on Chinese goods, have resulted in strongly negative repercussions for dairy in particular. U.S. cheese exports to China, which had been on pace to exceed records during the first half of 2018, dropped by 45 percent after retaliatory tariffs were imposed.

An agreement with China that prioritizes the removal of retaliatory tariffs, increased purchase of U.S. dairy products and removal of trade barriers will allow our industry to reclaim and increase our market share. NMPF’s focus is to encourage actions that will add momentum for immediate action to resolve this trade dispute.

With policies that include both high tariffs and onerous non-tariff barriers to trade, such as complex and excessive import requirements and bans on the use of common food names, it’s no surprise that the European Union would want to keep agriculture out of negotiations for a free-trade agreement with the U.S. NMPF and its congressional allies are working to ensure that doesn’t happen, pointing to a lopsided trade imbalance in dairy as one reason that EU hypocrisy must end before broader trade progress occurs.

The EU exports approximately $1.5 billion in dairy to the United States each year, compared to $100 million in U.S. shipments to the EU. Wanting to lock in that advantage – the product of protectionist policies — the EU is already insisting that discussing agriculture is off the table before formal negotiations begin on any trade deal. NMPF and industry stakeholders are making it clear that an “agriculture-free” model for a free-trade agreement would be unacceptable and that any agreement with the EU must address the above-mentioned drivers of the U.S. dairy deficit.

Congress has taken notice as well.

Representatives Ron Kind (Wis.), Jackie Walorski (Ind.), Virginia Foxx (NC) and Angie Craig (Minn.) led a letter to the USTR dated March 14 emphasizing that agriculture must be included in upcoming negotiations. The letter attracted signatures from 114 members of Congress who wrote that “agriculture is the source of a great number of trade barriers and irritants in the U.S.-EU trading relationship. Thus, an agreement with the EU that does not address trade in agriculture would be, in our eyes, unacceptable.”

NMPF conducted outreach to House members allied with dairy to help secure support for this important message to U.S. negotiators. The organization will continue working to ensure that any potential trade deal with the EU is focused on narrowing the U.S. dairy trade deficit with the EU, not on worsening it.

CWT member cooperatives secured 50 contracts to sell 5.1 million pounds of American-type cheeses, 1.6 million pounds of butter, and 11.1 million pounds of whole-milk powder in March. These contracts bring the 2019 total of the CWT-assisted product sales contracts to 25.4 million pounds of cheese, 2.8 million pounds of butter, and 22.2 million pounds of whole milk powder and will move the equivalent of 459.6 million pounds of milk on a milkfat basis abroad this year.

CWT also announced that effective April 1, it will add pasteurized process cheese, cream cheese and anhydrous milkfat to the other dairy products eligible for export assistance – American-type cheeses, butter and whole milk powder.

“World dairy markets are evolving and the addition of these products to those eligible for CWT assistance will help U.S. dairy farmers serve world consumer demand,” noted Jim Mulhern, President and CEO of NMPF.

Assisting CWT member cooperatives gain and maintain world market share through the Export Assistance program expands the demand for U.S. dairy products and the U.S. farm milk that produces them. This, in turn, positively impacts all U.S. dairy farmers by strengthening and maintaining the value of dairy products that directly impact their milk price.

The amounts of dairy products and related milk volumes reflect current contracts for delivery, not completed export volumes. CWT will pay export assistance to the bidders only when export and delivery of the product is verified by the submission of the required documentation.

All cooperatives and dairy farmers are encouraged to add their support to this important program. Membership forms are available at http://www.cwt.coop/membership

The National Dairy Farmers Assuring Responsible Management (FARM) Program in April released additional materials as part of its new Workforce Development initiative.

FARM Workforce Development focuses on the people who work year-round to provide excellent cow care and produce wholesome milk: dairy farm families and their employees. The program’s resources offer guidance and best management practices around human resources and health and safety.

The new FARM Human Resources (HR) Reference Manual is designed to help dairy farm owners, managers and other relevant staff develop a consistent and compliant human resources programs on their farms. It guides farm owners and managers in handling a variety of human resources activities. The manual also helps address employee-related challenges that owners and managers might face in their day-to-day farming operations.

A set of HR templates and a sample Employee Handbook accompany the FARM HR Manual. These resources can be downloaded and tailored by owners and managers to fit the needs of their operation. The manual can be found here.

Spanish-language versions of the manual and templates will be available soon.

NMPF is pleased to announce that Claudia Larson has joined the staff as Director of Government Relations to work with NMPF Vice President of Government Relations Paul Bleiberg.

Claudia Larson

Larson arrives from the office of Representative Jim Costa (D-CA), Chairman of the House Agriculture Subcommittee on Livestock and Foreign Agriculture and a longtime friend of dairy and agriculture. She served as Costa’s Communications Director and Strategic Policy Associate, working on a wide range of legislative areas.  Prior to her work on the Hill, Claudia was a researcher and educator at Northeastern University – including agriculture-related projects – and other Boston-area institutions.  Claudia holds bachelor’s and master’s degrees in Political Science from Boston College and a Ph.D., also in Political Science, from Northeastern University.

“We’re very pleased to have Claudia join our team,” said NMPF President and CEO Jim Mulhern. “Her skills and background make her a valuable addition to NMPF’s government relations efforts and we’re excited to have her working with us on behalf of America’s dairy farmers and their cooperatives.”