News for Dairy Co-Ops

NMPF’s reaction was mixed toward USDA’s new Pandemic Market Volatility Assistance Program, announced Aug. 19. While the initiative, which will distribute $350 million in assistance payments to dairy farmer, arose from NMPF and member-cooperative advocacy, significant issues remain with how payments are distributed, making improvements necessary.

Under the program, USDA will reimburse producers for unanticipated losses created during the COVID-19 pandemic prompted by a change to the Class I fluid milk price mover formula that put price risks disproportionately on the backs of farmers, burdens which were increased by the government’s pandemic dairy purchases last year. Still, caps on the production amount covered by the program will limit assistance in ways that create inequitable outcomes among dairy producers.

The plan “is an initial step in this effort that will help many producers, but it unfortunately falls significantly short of meeting the needs of dairy farmers nationwide,” said NMPF President and CEO Jim Mulhern in a statement the day of the announcement.

Congress’s change to the previous Class I mover in the 2018 Farm Bill was never intended to hurt producers, and in fact was envisioned to be revenue neutral. However, the government’s COVID-19 response created unprecedented price volatility in milk and dairy-product markets that produced disorderly fluid milk marketing conditions. Those disruptions thus far have cost dairy farmers nationwide more than $750 million when compared to what they would have been paid under the previous system.

The new USDA program will reimburse qualified dairy farmers for 80 percent of the revenue difference per month on up to 5 million pounds of milk marketed and on fluid milk sales from July through December 2020. The payment rate will vary by region based on the actual losses on pooled milk in each order.

NMPF has been working on approaches to right this unintended wrong to dairy farmers by recouping as much of the loss as possible.

“The arbitrary low limits on covered milk production volume mean many family dairy farmers will only receive a portion of the losses they incurred on their production last year,” NMPF President and CEO Mulhern. “These losses were felt deeply by producers of all sizes, in all regions of the country, embodying a disaster in the truest sense of the word. Disaster aid should not include limits that prevent thousands of dairy farmers from being meaningfully compensated for unintended, extraordinary losses.”

Additional work lies ahead to remedy this shortfall more fully for all dairy producers. “We very much appreciate USDA’s persistence and efforts to find a way to cover some of these losses using existing authorities, but NMPF represents producers from all regions and of all sizes and believes that losses incurred by producers must be addressed equitably,” Mulhern said. NMPF will work with Congress to seek supplemental funding to close this gap.

NMPF also is continuing discussions about the current Class I mover to prevent a repeat of this problem.

USDA has reported the July margin under the Dairy Margin Coverage program at $5.68/cwt, a drop of 56 cents from the June margin and the lowest DMC margin since May 2020. The lower July margin resulted from a $0.50/cwt drop in the U.S. average all-milk price, to $17.90/cwt, and a six-cent per hundredweight higher feed cost. A lower soybean meal price offset a good part of a higher price of corn, while alfalfa hay prices were slightly higher.

USDA announced Aug. 19 that it will “make improvements to the Dairy Margin Coverage safety net program updating the feed cost formula to better reflect the actual cost dairy farmers pay for high quality alfalfa. This change will be retroactive to January 2020 and is expected to provide additional retroactive payments of about $100 million for 2020 and 2021.” Full details will be provided when regulations are published in the coming weeks, but it is expected that the price of alfalfa hay used in the DMC feed cost calculation will be changed, from the current 50-50 blend of the U.S. average price for all alfalfa and the average price of premium and supreme alfalfa hay in the five largest milk producing states, to just the 5-state average for premium and supreme alfalfa.

For the July DMC margin, the change would result in a margin of $5.47/cwt for the month, another 21 cents a hundredweight lower than the margin USDA has preliminarily announced. Averaged over all months from January 2020 through this past July, the change would result in an average $15 per ton higher alfalfa hay price used in the DMC feed cost calculation and a 13.1-cent higher average payment for DMC coverage at $9.50/cwt.

USDA reported that, as of August 30, the 18,992 operations enrolled in this year’s DMC program are expected to receive $669,741,798 in payments based on previously announced margins, or an average of $35,264 per enrolled operation.

NMPF saw several policy improvements and funding priorities included in the Fiscal Year 2022 Agriculture-FDA Appropriations bill (H.R. 4356) at the House Appropriations Committee level. Since then, NMPF has seen even more key issues incorporated into legislation as appropriations moves forward.

During floor consideration of the House bill, Reps. Jim Baird (R-IN) and Angie Craig (D-MN) secured an amendment to provide $5 million for FDA to develop solutions on how ingredient claims on animal feed additives can be regulated as foods, not drugs. The amendment builds on the report language NMPF successfully worked to include at the Committee level to direct FDA to update its Policy and Procedures Manual to achieve this goal.

FDA’s current process raises an obstacle for dairy’s use of numerous feed additives that can reduce enteric methane emissions by 30 percent because it currently treats these food additives as drugs. Combined, the Baird/Craig amendment and report language could help address the problematic process.

The House also adopted an amendment by Reps. Peter Welch (D-VT) and Fred Upton (R-MI) to direct FDA to ensure that pending guidance on Labeling of Plant-based Milk Alternatives takes the approach of consistently enforcing against violations of the existing dairy standards of identity. Following adoption of these and other amendments, the House passed this bill on July 29.

The Senate Appropriations Committee passed its own version of the Agriculture-FDA Appropriations bill on Aug. 4. The Senate bill differed from the House measure while funding NMPF program priorities including:

• $25 million for the Dairy Business Innovation Initiatives program, which provides direct technical assistance and grants to dairy businesses to further the development, production, marketing, and distribution of dairy products
• $700 million for the ReConnect program, the USDA Rural Development program working to provide broadband service to eligible rural areas;
• $3 million for the Healthy Fluid Milk Incentives Projects authorized in the 2018 Farm Bill to create pilot programs to increase milk consumption among SNAP households;
• Nearly $105.83 billion for SNAP.

Also, in addition to mandatory funding for nutrition programs:

• $6.278 billion for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC);
• $332 million for the Commodity Supplemental Food Program;
• $90 million for TEFAP transportation, storage, and program integrity;
• $10 million for the Farm and Ranch Stress Assistance Network, a USDA program aimed at connecting those working in agriculture to stress assistance and support programs.

The Senate version also includes a provision to allowing 1% flavored milk to continue to be served in school nutrition programs through the 2022-23 school year.  The Senate measure also includes feed additive provisions similar to the House’s as well as report language similar to House language addressing FDA’s lack of enforcement of dairy standards of identity. The Senate legislation additionally provides $7.030 billion in emergency funding to support farmers and ranchers impacted by various natural disasters through 2023. Under this bill, milk would be eligible for the emergency funding and dairy cooperatives would be eligible to deliver funds directly to their producers.

Appropriations legislation may become final this fall, once Congress and the White House agree on spending numbers.

The National Milk Producers Federation (NMPF) and the National Council of Farmer Cooperatives (NCFC) on Aug. 5 led a coalition of 12 agricultural and conservation organizations on a letter advocating for significant new funding for climate-smart agricultural practices that can help farmers to build on their environmental stewardship leadership.

Congressional efforts toward infrastructure legislation provide opportunities for substantial new investments in conservation support, with more emphasis on climate-smart agricultural practices. USDA conservation financial incentives provide farmers with voluntary technical assistance to carry out numerous stewardship practices. But more can be done to enhance practices that can yield meaningful environmental benefits, such as climate-smart manure and feed management on dairy farms.

“Dairy farmers are proactive stewards of their land and water resources, but they are always seeking to innovate further. Dairy farmers in 2020 committed to become carbon-neutral or better by 2050 and maximize water quality around the country. Bolstering conservation investment and focusing on climate-smart practices better positions dairy farmers to fulfill the dairy sector’s 2050 environmental stewardship goals as envisioned in the Net Zero Initiative,” said Jim Mulhern, president and CEO of NMPF.

NMPF, NCFC, and their colleagues call in the letter for increased spending on conservation incentives, including strong technical and financial assistance, with a greater focus on climate-smart practices. The organizations also support new rural broadband resources in pending infrastructure legislation. The letter also reiterates the signers’ major concerns regarding several proposed changes to tax policy that would undermine the transfer of family farms from one generation to the next.

Congress is expected this fall to pass a major budget package using a process known as reconciliation, which eliminates the 60-vote threshold normally needed to adopt legislation in the Senate. The budget resolution Congress is advancing this month to tee up that bill includes instructions to the House and Senate Agriculture Committees to enable them to boost funding for conservation and climate smart ag practices. The Senate passed the budget resolution on Aug. 11, and the House subsequently adopted it Aug. 24.

Organizations that joined NMPF and NCFC on the letter include the Agricultural Retailers Association, American Seed Trade Association, CropLife America, National Association of Conservation Districts, National Association of State Departments of Agriculture, National Association of Wheat Growers, National Farmers Union, National Potato Council, Produce Marketing Association, and U.S. Apple Association.

NMPF welcomed bipartisan legislation introduced by Representatives John Garamendi (D-CA) and Dusty Johnson (R-SD) on Aug. 10 to address unfair practices and charges implemented by ocean carriers. The legislation, entitled The Ocean Shipping Reform Act of 2021 (H.R. 4996), was the result of a strong push from NMPF, the U.S. Dairy Export Council (USDEC), and a coalition of agricultural exporters.

The bill would increase the Federal Maritime Commission’s authority to oversee and regulate ocean carrier activities, expand the agency’ enforcement options and penalties against violations, increase transparency and accountability of the commission and ocean carriers, and provide new opportunities for exporters to seek redress from ocean carriers for violations.

NMPF, with cooperation from the U.S. Dairy Export Council (USDEC), worked closely with congressional offices as the legislation was drafted, providing detailed examples and economic impact analysis with critical input from NMPF and USDEC members. The legislation represents an important step forward, but much work remains to be done to see it passed by congress.

The House also increased enforcement funding by $525,000 in late July for the maritime commission in the Department of Transportation’s appropriations bill and directed the agency to enhance assistance to U.S. exporters and importers without hiring lawyers.

Supplementing this congressional action, the maritime commission finally responded to persistent calls from NMPF and other agricultural organizations for more proactive enforcement measures by launching an audit of ocean carriers’ billing practices on July 20. The commission on Aug. 4 asked eight ocean carriers to justify port congestion surcharges as part of its investigation into unreasonable detention and demurrage charges.

NMPF will continue to proactively advocate with the administration and Congress to pursue additional solutions to support and complement the congressional action, including an effort to drive a more comprehensive near-term response from the administration to the shipping crisis.

As a result of significant advocacy and technical engagement by NMPF in collaboration with USDEC August yielded two major milestones in NMPF’s year-long work with the U.S. government to preserve workable access opportunities for U.S. dairy exports requiring EU certification.

NMPF met Aug. 3 with a broad U.S. interagency team regarding the U.S. government’s plan on implementing the new EU certificates. That meeting provided critical clarifications on the extent of the new requirements and – most importantly – reassurances that the process would not impose new burdens on U.S. dairy farmers and processors. USDA on Aug. 13 then published a summary of that information, outlining that the new EU certification process would simply entail verification that the milk used was either regulated as Grade “A” or under AMS’s milk for manufacturing program.

That announcement resolved the crux of the concern – whether the U.S. would be able to implement the new EU certificates in a non-burdensome manner. The hard-won victory followed months of painstaking discussions between U.S. and EU officials regarding the strength of the U.S. dairy system and the upheaval that would unfold from either upending trade or imposing onerous new requirements on U.S. dairy This recognition that the U.S. dairy regulatory reliably produces safe products that meet the underlying goals of EU regulations even though implementation differs is precisely what NMPF had hoped to see achieved with the EU and had advocated for throughout the past year.

That breakthrough on core issues was complemented by an Aug. 12 announcement that would delay implementation of the new requirements from Aug. 21 to Jan. 15. Throughout 2021, NMPF advocated strongly both for a workable resolution to the new EU requirements and for more time to implement them.

The extension will enable USDA to ensure that the AMS Dairy Program will have its new electronic Agriculture Trade Licensing and Attestation Solution (ATLAS) system ready to be used by U.S. dairy exporters to complete the EU’s new certificates by the time they are required on Jan. 15. NMPF continues to work with the U.S. government to help ensure for a smooth transition and will closely continue to monitor implementation of the new certification program to make sure it works as advertised.

NMPF Executive Vice President for Policy Development and Strategy Jaime Castaneda testified in a hearing convened Aug. 12 by the Colombian Ministry of Trade, Industry and Tourism, calling on the Colombian government to terminate its safeguard investigation on imports of U.S. milk powder.

The Colombian government began the investigation in June to determine whether imports of U.S. milk powders were injuring its domestic industry, a move that appears to be politically driven. NMPF staff worked closely with USDEC’s regulatory team and South American office, as well as with U.S. exporters, to submit extensive data and information to Colombia to counter the Colombian livestock sector’s push to impose tariffs on U.S. milk powder exports.

Castaneda in his testimony highlighted that any imposed safeguard would create inefficiencies in the Colombian dairy processing sector and a market deficit of certain dairy products in Colombia, without helping its dairy producers. Castaneda called the safeguard request by Colombia’s cattle breeders purely political with no legal or factual basis.

“The milk powder import safeguards petition is a political action pursued in the months leading up to a presidential campaign at the expense of Colombia’s poorest and import-dependent small and medium-sized industries; it has no economic or commercial merit,” Castaneda said in his testimony. “By imposing a political safeguard, the Colombian government would create a serious conflict between Colombia and the United States, impacting Colombian exports of other products to the U.S.”

Castaneda encouraged the U.S. and Columbia to work together to expand overall milk consumption, benefiting farmers in both nations.

The National Dairy FARM Program will host a luncheon at World Dairy Expo in Madison, WI on Sept. 30 that will feature a panel discussion from industry stakeholders involved in the newest FARM initiatives, FARM Biosecurity and the Calf Care & Quality Assurance (CCQA). Space is limited and registration for this in-person only event is required.

Panelists for the luncheon include:

• Josh White, Executive Director, Producer Education, NCBA
• Kris Scheider, Wisconsin, Foremost Farms Dairy Farmer
• Jennifer Van Os, PhD, Animal Welfare Assistant Professor and Extension Specialist, UW – Madison
• Justin Potts, Senior Manager, Dairy 2025, Land O’ Lakes.

Visit FARM in the Exhibit Hall at booth EH 4508 where farmers can register to win a pizza party for their employees. NMPF and FARM will sponsor two World Dairy Expo Seminars – Dairy Cow Productivity: More Important to the Profitability of Your Dairy Operation than You Think presented by Peter Vitaliano, Ph.D., Vice President, Economic Policy and Market Research at NMPF and Practical Employee Management Strategies presented by Dr. Robert Hagevoort, Associate Professor and Extension Dairy Specialist, New Mexico State University.

CWT member cooperatives secured 49 contracts in August adding 3.0 million pounds of American-type cheeses, 882,000 pounds of butter, 344,000 pounds of whole milk powder and 344,000 pounds of cream cheese to CWT-assisted sales in 2021. These products will go customers in Asia, the Middle East, Oceania, Central America and South America, and will be shipped August 2021 through February 2022.

CWT-assisted 2021 dairy product sales contracts year-to-date total 34.1 million pounds of cheese, 12.7 million pounds of butter, 5.1 million pounds of anhydrous milkfat (AMF), 9.1 million pounds of cream cheese and 18.5 million pounds of whole milk powder. This brings the total milk equivalent for the year to roughly 945.1 million pounds on a milkfat basis.

Exporting dairy products is critical to the viability of dairy farmers and their cooperatives across the country. Whether or not a cooperative is actively engaged in exporting cheese, butter, anhydrous milkfat, cream cheese, or whole milk powder, moving products into world markets is essential. CWT provides a means to move domestic dairy products to overseas markets by helping to overcome U.S. dairy’s trade disadvantages.

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.