News for Dairy Co-Ops

After months of negotiations between Congress and the White House, the House overwhelmingly passed an improved U.S.-Mexico-Canada trade agreement on Dec. 19. The next step is for the Senate to swiftly ratify the deal, which provides tangible benefits to dairy producers.

The trade pact contains several provisions specifically focused on improving export prospects for the U.S. dairy including USMCA’s elimination of Canada’s harmful Class 7 dairy program and the deal’s assurances that the use of many common food names will not be impeded in Mexico. The agreement is expected to add $548 million in dairy-farm revenues in its first six years of implementation.

In addition, important advancements made during negotiations between lawmakers and the White House will strengthen USMCA, including more-effective enforcement measures that will give the dairy industry greater assurance and improves tools that will put USMCA’s reforms into place.

America’s dairy farmers are counting on the Senate to move quickly to finalize USMCA, without which the industry will continue to wait for the agreement’s upgrades to NAFTA.

“USMCA will expand trade opportunities with our most valuable partners and secure immediate benefits for our rural communities,” said Jim Mulhern, NMPF president and CEO.

USMCA promises to become a template for future deals as it helps restore international confidence in the U.S. as a trading partner and encourages progress toward other agreements. Tools to keep up the pressure on Congress to complete USMCA can be found here.

NMPF commended the House of Representatives for passing the bipartisan Farm Workforce Modernization Act (H.R. 5038) December 11, before adjourning for the year. The bill includes critical provisions to address dairy’s unique workforce needs and represents the first House-passed agricultural labor reform measure in more than three decades.

NMPF thanked Immigration Subcommittee Chair Zoe Lofgren (D-CA) and Congressman Dan Newhouse (R-WA), the lead sponsors of H.R. 5038, as well as the more than four-dozen co-sponsors drawn from each party, for their work on this legislation, which has drawn wide support from prominent groups in the agricultural, business, worker, and humanitarian communities.

“The passage of legislation that helps address dairy’s unique workforce challenges is certainly a milestone and an opportunity we must pursue to the fullest,” said Jim Mulhern, president and CEO of NMPF. “Agricultural labor reform is long overdue. With the House having acted it is now imperative that the Senate strive to fully address the needs of dairy farmers and all of agriculture, helping farmers do what they do best: feed our nation, and the world.”

“The urgency to reform the agricultural labor system cannot be overstated for dairy farmers,” said Mike McCloskey, dairy farmer and chair of NMPF’s Immigration Task Force. “House members on a bipartisan basis have shown us that they are taking our labor crisis seriously. We will use this momentum to work with the Senate to build consensus in drafting an improved bill that further addresses dairy’s workforce needs.”

NMPF has begun discussions with senators on a bipartisan basis, working in partnership with other agricultural organizations.

The margin for November under the Dairy Margin Coverage (DMC) program was $12.21 per cwt., $1.33 per cwt. higher than the October DMC margin. This was the highest margin since December 2014, even allowing for this year’s change in the formula to increase the alfalfa hay cost factor, and the largest month-to-month increase in the margin since September 2016. The September to October increase was a combination of a $1.10 per cwt. increase in the all-milk price and a $0.23 per cwt. of milk lower DMC feed cost calculation. The lower feed cost was contributed mostly by a lower price for corn, assisted by a lower price for soybean meal. The alfalfa hay factor in the formula was essentially unchanged from a month earlier, as a lower average price for all alfalfa was almost offset by a higher price for dairy-quality hay.

As of December 26, USDA’s DMC Decision Tool, which can be accessed online, projected the November margin would be its maximum value through at least all of next year, yet remain above $9.50 per cwt. during that time. The falloff from the November peak is expected to be due mostly to an expected drop in the milk price during the first half of 2020, followed by a modest recovery in the second half.

As of December 9, USDA reported that 23,229 dairy operations that signed up for the DMC program for 2019 were estimated to receive a total of $310.1 million in payments. The signup represented 82.3 percent of all operations with milk production histories under the program. As of January 6, the Department reported that 12,866 operations, or 47.2 percent of operations with production histories had enrolled in the 2020 program. Enrolling in the DMC program at the generous coverage and affordable premiums available will always be a highly-recommended risk-management option for dairy farmers.

The DMC information page on NMPF’s website offers a variety of educational resources to help farmers make better use of the program. NMPF also posted a video explaining how farmers can benefit from the DMC.

Heading into 2020, two major actions provide cause for optimism that momentum is building for the Food and Drug Administration to finally enforce dairy-product standards of identity.

First, the Senate confirmed Dr. Stephen Hahn to lead the Food and Drug Administration (FDA) December 12.  In an exchange with Senator Tammy Baldwin (D-WI) during his confirmation hearing, Dr. Hahn stated his support for “clear, transparent, and understandable labeling for the American people.”

“We congratulate Dr. Hahn on his bipartisan confirmation and are hopeful that he will act on his words from the hearing and begin enforcing the FDA’s own standards of identity, which clearly reserve dairy terms for real dairy products, not plant-based imposters who mislead consumers by mislabeling nutritionally inferior products,” said Jim Mulhern, NMPF president and CEO.

More recently, the House and Senate included language in the report accompanying the final Fiscal Year 2020 government funding measure to urge FDA to complete its job and enforce dairy-product standards.  Both the House and Senate versions of the Agriculture-FDA bill report included language reaffirming bipartisan congressional concern with mislabeled imitation dairy products and directing FDA to enforce its own rules on labeling.

The report reaffirms Congress’s concern “about the proliferation of products …. that include the names of dairy products that do not contain milk or ingredients derived from milk,” as stated in Senate language. To address the problem, the Senate asks FDA to report on “steps taken to enforce against dairy imitation products marketed using dairy names,” while House language “urges the FDA to continue its work toward ultimately enforcing standards of identity for dairy products.”

The House and Senate passed the final compromise funding bill before adjourning for the holidays. President Trump signed the measure into law December 20.

The National Dairy Farmers Assuring Responsible Management (FARM) Program, the dairy industry’s on-farm quality assurance program, released a proposed Workforce Development evaluation tool for input from industry stakeholders with comments accepted through January 20.

FARM Workforce Development (WFD) is the FARM Program’s newest initiative. It focuses on human resources and safety management and has brought together stakeholders from the entire dairy value chain to create educational materials for U.S. dairy owners and managers.

FARM WFD is developing an on-farm evaluation tool that FARM Participants can choose to implement with their dairy producers. The tool is meant to help farms:

• learn about HR and safety management best practices;
• identify which best practices will be most useful to implement on their farm; and
• track improvement over time.

Also, by performing on-farm evaluations, FARM Participants can provide important assurances to supply chain customers: our dairy buyers and retailers.

The evaluation tool was developed in consultation with the FARM WFD Task Force and Working Group members, along with subject matter expert input.

FARM is getting direct feedback from dairy producers through a pilot program that runs through the end this year. Nine cooperatives have volunteered to test the evaluation tool to solicit feedback. About 60 dairy producers are participating from across the cooperatives. Public comment will complement the pilot.

After the comment period ends, FARM staff, the WFD Task Force and the NMPF Executive Committee will review and consider revisions based upon the comments, then present a final proposed evaluation tool for approval by the NMPF Board of Directors in March. The FARM Program encourages all those involved in the dairy supply chain to participate. To review the draft evaluation tool and provide feedback, please visit this link.

NMPF filed comments to FDA’s draft guidance, “Recommendations for Sponsors of Medically Important Antimicrobial Drugs Approved for Use in Animals to Voluntarily Bring Under Veterinary Oversight All Products That Continue to be Available Over-the-Counter” on December 24, emphasizing the dairy industry’s commitment to prudent and responsible antibiotic use and general support for the guidance.

NMPF has recognized that the availability of over-the-counter (OTC) antimicrobials has decreased over the years and has made the Veterinarian Client Patient Relationship a cornerstone of the FARM Animal Care Program.

FDA’s intent with GFI #263 is for animal drug pharmaceutical manufacturers to voluntarily change the marketing status of the remaining approved animal drugs containing antimicrobials of human medical importance from OTC to prescription (Rx) under the oversight of licensed veterinarians. This draft guidance comes as part of FDA’s five-year plan for supporting antimicrobial stewardship in veterinary settings as part of a strategy to address antimicrobial resistance associated with the use of antimicrobial drugs in animal agriculture.

GFI #213 was FDA’s first step to increase oversight of antimicrobial use through voluntary industry action to change marketing status of medically important antimicrobials used in feed or drinking water for food-producing animals from OTC to VFD/Rx. This also resulted in the elimination of the use of these antimicrobials for production practices. While GFI #263 will be voluntary, NMPF anticipates that pharmaceutical manufacturers will change the marketing status of the limited number of dosage forms of medically important antimicrobials still available from OTC to Rx for both food-producing and companion animals.

NMPF recognizes that there may be geographic and farm size challenges for some dairy farmers to have access to large-animal veterinarians. These concerns were outlined in our comments.

In a guest column featured in Cheese Reporter, NMPF president and CEO Jim Mulhern offered an alternative approach to comments by the Cheese Importers Association of America (CIAA) regarding the WTO-authorized tariffs on European cheeses.

Mulhern noted that current dairy trade between the U.S. and the EU is mostly a one-way street. The EU’s restrictive trade policies have resulted in a deeply unbalanced, $1.6 billion dairy trade deficit, with the United States importing about $1.74 billion worth of dairy products from the EU, while the EU imported only $144 million in U.S. dairy in 2018.

That imbalance, in addition to the EU’s flooding of the global dairy market last year with government-held stocks of milk powder, has crucially contributed to the economic pressures that have driven thousands of American dairy farmers out of business.

Mulhern pointed out that cheese importers have access to some of the best cheese in the world in the U.S. and encouraged them to embrace this opportunity to support America’s dairy farmers and manufacturers by choosing to sell high-quality American products in place of European ones.

Many European cheeses and butter will still be imported if the WTO-compliant tariff penalties stay levied at their present 25% rate; higher tariffs are necessary for the United States to take the strongest stand possible against the EU’s mistreatment of American dairy products. NMPF is encouraging the administration to keep the existing dairy products on the retaliation list and increase tariffs on European dairy products, particularly those the United States is barred from shipping to the EU by geographical indications monopolies on common food names, in order to elicit action from the EU and truly establish a level playing field for U.S. farmers.

NMPF signed on to comments with the Agriculture Nutrient Policy Coalition and wrote a letter of support for Newtrient’s comments, which were submitted to the water quality trading docket December 18. The comments detailed support for Water Quality Trading as an important tool for water quality improvement in the United States.

NMPF has a long history of supporting water-quality trading, serving on the steering committee of the National Network on Water Quality Trading that published “Building a Water Quality Trading Program: Options and Considerations” and “Breaking Down Barriers: Priority Actions for Advancing Water Quality Trading.” NMPF has also been involved with Maryland’s effort to launch a water quality trading program and Pennsylvania’s water-quality procurement legislation.

In November, Clay Detlefsen, NMPF’s senior vice president for regulatory affairs, provided oral comments stating its strong support for the Environmental Protection Agency’s (EPA) efforts to promote water quality improvements at a lower cost than traditional regulatory approaches, agreeing with EPA that the Clean Water Act allows for pollutant reductions from water quality trading to achieve compliance with regulatory requirements.

Detlefsen also said NMPF appreciated EPA‘s efforts this year to update its water quality trading policy to  encourage technologies and practices that reduce nonpoint source pollution.  NMPF also concurred with the six principles laid out in the 2019 Memorandum, namely:

• States, tribes and stakeholders should consider implementing water quality trading and other market-based programs on a watershed scale.
• EPA encourages the use of adaptive strategies for implementing market-based programs;
• Water quality credits and offsets may be banked for future use;
• A single project may generate credits for multiple markets;
• Financing opportunities exist to assist with deployment of nonpoint land use practices; and
• Encouraging simplicity and flexibility in implementing baseline concepts

NMPF hosted the National Conference on Interstate Milk Shipments (NCIMS) Liaison Committee November 19 and 20 for a two-day discussion on how Grade “A” (GA) milk plants will be inspected under the Pasteurized Milk Ordinance (PMO) and the Food Safety Modernization Act (FSMA).

The Food and Drug Administration (FDA) and the Liaison Committee have been discussing the matter for several years without much success, but progress is finally being made. The long-term goal is to have a single inspection that will cover all products made at the facility, GA and Non-Grade “A” (NGA).  In 2018, FDA tried back-to-back inspections, first a PMO inspection, followed by an FSMA inspection. Plant personnel described that as an overwhelming experience and NMPF urged the FDA not to conduct inspections that way in the future.

The current concept is for the Office of State Cooperative Programs, Division of Milk Safety (DMS) Milk Specialists to be responsible for inspectional coverage and regulatory compliance of all food products manufactured at NCIMS-listed dairy processing facilities, with some exceptions. Those exceptions include infant formula, low acid canned food and seafood. Milk Specialists will expand their Preventive Controls for Human Foods (PCHF) review for compliance to all food products, GA and NGA products manufactured at GA plants. They will also use guidance provided by the Office for Food Safety (OFS) for decision making.

The Milk Specialist’s check rating and inspection may count as the Title 21 CFR Part 117 Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food inspection (limited scope Preventive Control (PC) inspection), provided that the firm had an adequate food safety plan that includes environmental testing and monitoring, and was verified by the Milk Specialist during the PC inspection.

FDA’s Milk Specialists, as part of the Check-Rating (CR) every three years, must verify that the firm has adopted comprehensive controls for both GA and NGA products as part of a food safety plan, and that the state had been doing comprehensive inspections to address preventive controls for all dairy products. If these criteria are not met, the FDA Milk Specialist, or state under contract, will conduct a traditional PC inspection for the NGA products. In most cases, one FDA Milk Specialist staff performs the inspection and check rating for all listed manufacturing facilities.

The FDA, in collaboration with state liaisons, will pilot this approach this year.

Last month the U.S. and China struck a Phase One trade deal that covers a wide range of issues, including many relevant to U.S. agriculture. At the time of this newsletter’s publication, details of the deal remain under wraps and available only on a strictly confidential basis to trade advisors. NMPF’s staff that serve in that capacity are therefore prohibited from sharing information on the agreement until the U.S. government releases it more widely.

The agreement includes results on important areas NMPF, working side by side with USDEC, has championed the need for progress on such as geographical indications, resolution of non-tariff barriers to U.S. dairy exports, and additional purchases of U.S. agricultural products.

A major determinant of the positive impact of this agreement will be the extent to which it includes or is linked to a roll-back of the punitive retaliatory tariffs imposed on our dairy products by China. This element is one NMPF has consistently pointed out is the linchpin to restoring inroads to the Chinese market.

December’s CWT-assisted sales of 4.1 million pounds of cheese, butter, whole milk powder and cream cheese raised the 2019 export sales to 48.9 million pounds of America-type cheeses, 5 million pounds of butter, 46.1 million pounds of whole milk powder, and 6.8 million pounds of cream cheese. The milk equivalent of these 2019 CWT-assisted sales is 956.3 billion pounds on a milkfat basis.

These sales mean an estimated 135 million pounds of CWT-assisted dairy products have been shipped out of the U.S. and into overseas markets in 2019, the milkfat equivalent of 1.257 billion pounds of milk.

In December, CWT assisted six member cooperatives in securing 42 sales contracts for 2.1 million pounds of American-type cheeses, 332,898 pounds of butter, 1 million pounds of whole milk powder, and 634,931 pounds of cream cheese. The products will be shipped during the months of December 2018 through April 2019.

Assisting CWT member cooperatives gain and maintain world market share through the Export Assistance program positively impacts all U.S. dairy farmers by strengthening and maintaining the value of dairy products that directly impact their milk price. It does this by expanding the demand for U.S. dairy products beyond the domestic market thereby increasing the total demand for U.S. farm milk.

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 all dairy farmers benefit from CWT’s activities and should add their support to this important program in 2019 and beyond. Membership forms for 2019-2021 are available at http://www.cwt.coop/membership.

Election years always pose challenges for getting things done on Capitol Hill, but dairy is well-positioned to make gains in 2020, according to Paul Bleiberg, the National Milk Producer Federation’s vice president of government relations.

Senate approval of the USMCA trade agreement and a Senate plan on agricultural labor are only two topics in which positive steps could occur, said Bleiberg, NMPF’s chief policy staffer for the past two years. Child nutrition, transportation could also get put on the front burner, depending on what Congress decides to take up this year. “The completion of the USMCA process and the work in the Senate on ag labor are the top two priorities,” Bleiberg said.

Bleiberg also discusses dairy’s role in the 2020 elections and how dairy producers and allies can affect policy. To listen to the full podcast, click here. You can also find the Dairy Defined podcast on Apple Podcasts, Spotify,  SoundCloud and Google Play. Broadcast outlets may use the MP3 file below. Please attribute information to NMPF.

(Note: NMPF’s Dairy Defined podcast explores today’s dairy farms and industry using high-quality data and podcast-style interviews to explain current dairy issues and dispel myths.)