News for Dairy Co-Ops

Following months of advocacy by NMPF on Capitol Hill to improve the federal dairy program, Congress passed a two-year budget deal on Feb. 9 that will enact badly-needed improvements to the dairy safety net for milk producers. Effective immediately for the 2018 calendar year, the legislative package reforms the dairy Margin Protection Program (MPP) and provides access to additional risk management tools from the Agriculture Department (USDA). These key elements will create $1.2 billion in baseline spending for the next Farm Bill, paving the way for additional improvements to the MPP.

The MPP reforms included in the budget package include:

• Raising the catastrophic coverage level from $4.00 to $5.00 for the first tier of covered production for all dairy farmers;
• Adjusting the first tier of covered production to include every dairy farmer’s first five million pounds of annual milk production (about 217 cows) instead of four million pounds, a recognition of the growth in herd sizes across the country;
• Reducing the premium rates, effective immediately, for every producer’s first five million pounds of production, to better enable dairy farmers to afford the higher levels of coverage that will provide more meaningful protection against low margins;
• Modifying the margin calculation to a monthly (from bi-monthly) basis, to make the program more accurate and responsive to producers in difficult months;
• Waiving the annual $100 administrative fees for underserved farmers;
• Directing USDA to immediately reopen the program signup for 2018.

In addition to these reforms, the budget legislation lifts the $20 million annual cap on all livestock insurance, including the Livestock Gross Margin (LGM) program. This will allow USDA to develop a wider variety of additional risk management tools for dairy producers that can complement the MPP.

“This budget bill containing major improvements to the dairy safety net is an important victory for America’s dairy farmers. The enhancements to the Margin Protection Program (MPP), coupled with the expansion of additional risk management options, are coming at a crucial time for our producers. Farmers need insurance options that are both effective and affordable, and this package helps deliver on that promise,” said Jim Mulhern.

The dairy provisions are part of a disaster aid package attached to a larger spending deal needed to keep the government open after February 8. In a letter of support for the Senate bill language sent Thursday to congressional leaders, NMPF outlined the difficult economic situation facing dairy producers, including declining milk prices and global export challenges. The dairy policy changes will better help farmers weather this challenging environment, the letter said.

NMPF worked with key congressional dairy policy leaders to craft the policy changes. Sens. Patrick Leahy (D-VT) and Debbie Stabenow (D-MI) spearheaded the reforms to the MPP, which also garnered support from Sens. Thad Cochran (R-MS) and Pat Roberts (R-KS), as well as key members of the House. NMPF also thanked Reps. Mike Conaway (R-TX) and Collin Peterson (D-MN) for crafting important language to remove the existing cap on livestock insurance products, including the Livestock Gross Margin-Dairy program.

Mulhern said that NMPF’s focus will shift to the 2018 Farm Bill, adding that “we have more work ahead in the next Farm Bill, but the safety net and risk management opportunities for dairy farmers are greatly enhanced now, thanks to the passage of these changes,” he said.

In a related development, the USDA released its Farm Bill principles last month.  They start with providing an effective safety net for farmers – reflecting NMPF’s continued emphasis on its goals to fix the MPP and expand the range of risk management tools available to producers.

As the North American Free Trade Agreement (NAFTA) renegotiation process continues into 2018, NMPF is insisting to U.S. negotiators that the talks need to achieve a positive outcome for America’s dairy farmers, including preserving access to Mexico’s growing market and ending Canada’s harmful Class 7 pricing program.

NMPF has been directly engaged in the NAFTA negotiation process since it started last summer, including participating in the sixth and most recent round of talks in late January. At that session in Montreal, NMPF senior vice president Jaime Castaneda reminded trade negotiators that Canada must not be allowed to continue using its new pricing program because of the damage it is causing to U.S. exports.

NMPF delivered that same message to a congressional delegation that also participated in the Montreal meeting. National Milk and the U.S. Dairy Export Council told the leaders of the House Ways and Means Committee that to achieve a successfully modernized NAFTA agreement, the U.S. dairy sector must maintain full, duty-free access to its Mexican customers, while Canada must reform its highly protectionist dairy policy. In addition to its exorbitant dairy import tariffs, Canada’s new surplus milk dumping program has already led to a 200-percent surge in Canadian skim milk powder exports to various markets around the world.

“Dairy has for too long been excluded from NAFTA’s benefits vis a vis U.S.-Canada trade,” the letter to congressional trade policy leaders said. “Finishing the work started under NAFTA by doing away with the remaining exorbitant dairy tariff walls maintained by Canada is one of the most natural ways to deepen an FTA as robust as NAFTA.” The Ways and Means Committee has oversight of all trade-related policy issues, including free trade agreements.

To help fortify grassroots support for a successful NAFTA revision, NMPF joined other food and agricultural organizations last month in launching a new coalition, Americans for Farmers and Families (AFF), to help drive a loud and unified U.S. food and agricultural voice on NAFTA. AFF’s messaging activities will complement NMPF’s efforts by highlighting the need to preserve and improve NAFTA, given its tremendous importance to U.S. farmers and food manufacturers.

The dairy industry message continues to produce traction with U.S. policymakers. In January, House Speaker Paul Ryan (R-WI) charged that Canada is “a high-cost producer dumping lower cost [dairy] products…These negotiations need to help settle those things.”  Agriculture Secretary Sonny Perdue has also focused on the need to roll back Canada’s dairy policy as a key U.S. objective for the talks.

The next round of negotiations begins on Feb. 26 in Mexico City. NMPF’s Castaneda will again represent NMPF’s interests.

NMPF has been working with federal legislators and other agricultural stakeholders in recent weeks to address concerns by some agricultural interests regarding a new tax deduction for cooperatives that was passed by Congress before Christmas.

The Tax Cuts and Jobs Act replaced the old Domestic Production Activities Deduction (Section 199) with a new provision, Section 199A, that allows cooperative members to claim a 20-percent deduction on gross sales to a farmer cooperative, a deduction not provided to non-cooperative shippers.

Because the new tax law provides benefits for farmers marketing their commodities through a cooperative, some private companies are concerned they may lose business with farmers who may decide in the future to instead sell their commodities to cooperatives. The members of Congress who crafted the Section 199A tax provision are seeking to change the new law and are reviewing options to deal with this potential inequity.

NMPF is collaborating the National Council of Farmer Cooperatives (NCFC) and others in agriculture to address the competitive implications created by this new provision, while emphasizing the need to preserve the tax benefits of the new tax law for dairy cooperatives and their farmer members. A grassroots farmer effort, led by Select Milk Producers farmer-leader Mike McCloskey, has urged that the issue be addressed by providing the Section 199 deduction to all farmers, rather than simply seeking to reduce the deduction for cooperative patrons. NCFC and the National Grain & Feed Association, representing both cooperative and private grain interests, have been negotiating on potential changes to the new law.

As members of Congress negotiate with the White House over the future of the Deferred Action for Childhood Arrivals (DACA) program – set to expire next month – NMPF is urging lawmakers to also focus on the workforce needs of dairy farmers and agricultural employers seeking changes in immigration policy.

In his first State of the Union speech in late January, President Donald Trump spoke about immigration policy, laying out details for a package that includes offering citizenship for “Dreamers” in exchange for increased spending on border security and a reduction in legal immigration. The president’s speech did not address agriculture’s needs for access to a legal immigrant workforce.

Earlier that day, NMPF President and CEO Jim Mulhern visited senior legislators on Capitol Hill to advance the dairy industry’s goal of securing an adequate workforce through the creation of a new agricultural guestworker program, and to urge that the issue be addressed in any immigration policy changes. In recent weeks, NMPF has engaged in high-level discussions with the offices of House Speaker Paul Ryan (R-WI) and House Judiciary Chairman Bob Goodlatte (R-VA) to find a path forward for the creation of an agricultural visa program.

Chairman Goodlatte’s Judiciary Committee adopted the Agricultural Guestworker (AG) Act last fall. NMPF has supported the chairman’s efforts to meet agriculture’s needs, while continuing to work with him directly on additional improvements to the legislation, including: providing immediate legal status to those currently working in the United States; gaining longer periods of work time for employees under the new H-2C visa program; and allowing legal protection for family members of dairy workers. NMPF is also in discussions with other House members who seek to improve the bill.

NMPF continues to work closely with others in agriculture who share a common goal of passing a bill that solves these labor challenges, including the Agriculture Workforce Coalition, which continues to discuss possible improvements to the AG Act.

A proposed regulatory change to put low-fat flavored milk back into schools will greatly bolster the nutrition intake of America’s children, NMPF told the Agriculture Department in late January. USDA has been taking steps to enhance milk options in schools since Agriculture Secretary Sonny Perdue arrived at the agency last year.

In comments submitted with the International Dairy Foods Association, NMPF praised the proposed regulation for the positive effect it will have on the widely recognized problem of declining school milk consumption. In 2012, over NMPF’s objections, USDA eliminated low-fat flavored milk as an option in the school meal and a la carte programs, resulting in students consuming 288 million fewer half-pints of milk from 2012-2015.

NMPF’s comments were in response to a formal proposal, issued by USDA in late November, allowing school districts to solicit bids for low-fat flavored milk this spring, prior to the 2018-19 school year. This gives milk processors time to formulate and produce a low-fat flavored milk that meets the specifications of a given school district for the next school year. The proposal also enables schools to offer low-fat flavored milk during the next school year without requiring schools to demonstrate either a reduction in student milk consumption or an increase in school milk waste.

Milk is the No. 1 source of three out of four nutrients of public health concern because they are under consumed: potassium, vitamin D and calcium. The dairy groups called the lack of adequate levels of those nutrients “a threat to public health and to the nutritional intakes of all Americans, notably children and adolescents.” Milk is also the leading dietary source of six other essential nutrients.

This interim rule, NMPF said, is consistent with the 2015-2020 Dietary Guidelines for Americans (DGA), which does not suggest that flavored milk should be fat-free or that there is any reason to avoid low-fat flavored milk. It also aligns with the recent re-examination of fat – and dairy fat specifically – that suggests previous dietary advice was misguided.

The regulation is in now effect for the Fall 2018 school year. USDA will continue to review comments and finalize the rule for future school years by this fall.

Margins under the dairy Margin Protection Program (MPP) averaged $9.71/cwt. for the six bimonthly periods during calendar year 2017. This was the second-highest average for a calendar year during the past decade, behind only the $13.30/cwt. average during 2014. The low annual average during those 10 years was $4.58/cwt in 2009.

The monthly USDA margin for December 2017 was $9.36/cwt., $1.03 lower than November’s monthly margin. Most of the decline was driven by a $0.90 reduction in the all-milk price, to $17.20/cwt. in December. On a per-hundredweight-of-milk basis, an increase in the corn price contributed a further $0.09 to the lower December margin, and a higher soybean meal price caused an additional $0.04 drop. Alfalfa hay prices were unchanged from November to December. The bimonthly MPP margin for November-December was $9.88/cwt.

The CME dairy and grain futures continue to indicate that the monthly MPP margin is on the verge of a steep drop, taking it below $8.00/cwt and possibly triggering program payments for those covered at higher margin levels during the first three, and possibly four, bimonthly periods of 2018. Most of the projected changes in the margin during the coming year will be due to a lower all-milk price, which could drop another $2.00/cwt from its December level by late winter and early spring.

USDA’s MPP margin forecasts are updated daily online. NMPF’s Future for Dairy website offers a variety of educational resources to help farmers make better use of the program.

At the start of February, a district appeals court granted the U.S. Environmental Protection Agency (EPA) additional time to delay the compliance date for manure-related air emissions reporting. The agency now has more time to modify the reporting requirements and develop helpful materials for farmers. While the EPA continues to make modifications to the requirements, NMPF strongly recommends that no reports be filed, and has prepared preliminary materials to assist dairy farmers in calculating emissions and filing any necessary reports.

In October 2017, the EPA filed a motion requesting that the D.C. Court of Appeals extend its stay on requiring livestock farm compliance with the CERCLA and EPCRA acts until January 2018. The court was expected to issue its mandate after Jan. 22, which would have triggered reporting requirements for many dairy producers. However, on Jan. 19, the EPA filed a request to delay the compliance date for an additional 90 days. The other parties involved had 10 days to file a response to EPA’s motion, after which the agency would have had seven days to respond.

In a surprise development this month, all parties filed responses in support of the motion, which meant the seven-day response time was not needed and the court issued its ruling sooner than expected.

NMPF is working with other animal agriculture groups to seek a permanent fix from Congress in the form of legislation to clarify that the CERCLA and EPCRA laws were not intended to require monitoring and reporting of manure-related ammonia and hydrogen sulfide. NMPF is working with other farm groups to build bipartisan support for a legislative solution before the 90-day extension expires.

Cooperatives Working Together (CWT) helped member cooperatives in January secure 63 contracts to sell 9.71 million pounds of American-type cheeses and 729,730 pounds of butter to customers in Asia, the Middle East, North Africa and Oceania. The product will be shipped during the months of January through April 2018.

These transactions will send cheese and butter to 10 countries in four regions of the world, and will move overseas the equivalent of 106.08 million pounds of milk on a milkfat basis. 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.

Helping CWT members gain and maintain world market share through the Export Assistance program in the long term 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.

All cooperatives and dairy farmers are encouraged to add their support to this important program. Membership forms are available on the CWT website.

In mid-January, National Milk expressed support for the U.S. Department of Agriculture’s (USDA) withdrawal of an organic farming regulation that would have created a variety of new animal care and housing standards, as the changes would not have improved on the standards already employed by the National Dairy Farmers Assuring Responsible Management (FARM) Animal Care Program.

On Jan. 17, National Milk submitted comments to USDA’s National Organics Program on Organic Livestock and Poultry Practices, which requested feedback on potentially withdrawing the final rule that amends the organic standards by adding new provisions for livestock handling and transport for slaughter, and expands and clarifies existing requirements covering livestock care and production practices.

NMPF initially commented on the proposed animal production standards in July 2016, saying the changes fall short of what is already used in FARM Animal Care program. In the comments shared with USDA last month, NMPF stated that the FARM Animal Care program assures animal care and wellbeing throughout the U.S. dairy industry, and thus the requirements in USDA’s final rule are unnecessary and duplicative for dairy cattle. Already, the leading organic cooperatives and independent producers participate in the FARM Program.

The basis of the FARM Animal Care program is sound science, and standards are updated every three years to accommodate the latest research around animal health and wellbeing. NMPF will continue to work with USDA on any future National Organic Program animal welfare standards to ensure their alignment with the FARM Program.

The U.S. Food and Drug Administration (FDA) issued materials on Jan. 24 to help importers and food producers comply with the food safety rules mandated by the Food Safety Modernization Act (FSMA). One of the documents, “Chapter 15: Supply Chain Program for Human Food Products,” covers the supply-chain program, required by the Preventive Controls Rule for Human Food. NMPF is reviewing the complex document and will work with FDA to prevent the imposition of burdensome audits across the dairy processing chain related to FSMA compliance.

At issue for the dairy industry is a ready-to-eat (RTE) food manufacturer’s use of milk powder or cheese in a RTE food. FDA says that because L. monocytogenes (Lm) can cause serious health issues, there must be an annual on-site audit to ensure the dairy manufacturing facility is controlling the pathogen. The guidance describes how to approve suppliers, determine supplier verification activities and determine the frequency of conducting verification.

In addition, FDA discusses how an environmental monitoring program is used to verify that the supplier’s sanitation controls are working, and described situations where an immediate supplier may not be the only one performing a preventive control. For example, if a RTE food manufacturer’s immediate supplier does not make the cheese, but cuts and wraps it, then the RTE food manufacturer will need information from its immediate supplier about its environmental monitoring program. The RTE manufacturer will also need from the cheese manufacturer (or the supplier’s supplier) information regarding milk pasteurization and its environmental monitoring program.

NMPF envisions that most cut-and-wrap operations will secure the appropriate verification from the cheese manufacturers and pass it along to the RTE food manufacturers, thereby cutting down on an endless stream of on-site audits. NMPF has told FDA in the past that too many audits detract from food safety.

While the draft guidance does not specify a due date for comments, NMPF plans to file and address this issue.

NMPF is still accepting applications for its National Dairy Leadership Scholarship Program for academic year 2018-2019. Applications must be received by Friday, April 6, 2018.

Each year, NMPF awards scholarships to outstanding graduate students (enrolled in master’s or Ph.D. programs) who are actively pursuing dairy-related fields of research that are of immediate interest to NMPF member cooperatives and the greater U.S. dairy industry.

Graduate students pursuing research of direct benefit to milk marketing cooperatives and dairy producers are encouraged to apply (applicants do not need to be members of NMPF).  The top scholarship applicant will be awarded the Hintz Memorial Scholarship, which was created in 2005 in honor of late Cass-Clay Creamery Board Chairman Murray Hintz, who was instrumental in establishing NMPF’s scholarship program.

Recommended fields of study include, but are not limited to: Agriculture Communications and Journalism, Animal Health, Animal and/or Human Nutrition, Bovine Genetics, Dairy Products Processing, Dairy Science, Economics, Environmental Science, Food Science, Food Safety, Herd Management, and Marketing and Price Analysis.

For an application or more information, please visit the NMPF website or call the NMPF office at 703-243-6111.