NMPF’s senior vice president Chris Galen assesses the challenges of 2023 for dairy farmers, but also the reasons to be grateful during the Thanksgiving season.
Tag: dairy margin coverage
Overcoming challenges is what we do
By Randy Mooney, Chairman, NMPF Board of Directors
We’ve had a lot of achievements this year, but it’s also been a challenging time.
A year ago, costs on the farm were extremely high, but we had prices that would cover that. This year, costs are still high, but prices are down. That’s a lot of stress on the farm. And we’re also dealing with problems that we’ve dealt with for years.
There are labor problems; you just can’t find anybody to work. Supply chain disruptions are closer to the farm this year. It’s milk trucks getting milk off the farm; it’s feed trucks bringing feed into the farm. It’s getting simple parts that we took for granted we could get anytime we wanted to. There are geopolitical issues and extreme weather events.
We have challenges all the time, but it just seems like we continue to have more. It seems like we’re in the eye of a storm. But as farmers, we always anticipate a moment before the dawn, before things turn, before things get good again.
One of the things I’ve learned is that a lot of the world is envious of what we have.
They’re envious because we have the Farmers Assuring Responsible Management (FARM) Program, a self-governing program. We have a government that recognizes what we’re doing with sustainability — it’s not being mandated down from the top.
We’re taking care of our own. Today, we produce more milk using fewer and fewer natural resources. We’re revitalizing rural communities. For every dollar generated in dairy farming, it turns over three to seven times in local communities, generating $750 billion in the United States. That‘s pretty impressive.
We’re nourishing families around the world through milk’s unbeatable nutritional value. I’ve dairy farmed for a long time, through good times and bad times, but there’s never been a time that I haven’t laid my head down on my pillow at night and been proud of what I accomplished on my farm. We’re putting the most nourishing, most nutritious product known to man in that milk tank. And when that truck leaves, I know I’ve done something good.
Our ability to evolve how we work and adapt our resiliency is becoming more and more important. This year, we came together as an industry to unite around issues that helped build that resiliency. NMPF worked with member co-ops, farm bureaus, and state dairy organizations to come to consensus on the most substantial issues. Even going back to 2021, when you talk about Federal Milk Marketing Order modernization, we’ve worked hard to get these things done. Nobody knows what the outcome’s going to be, but you telling your story has made a difference.
Beyond that, we’re going to get a farm bill passed — we’re going have an extension. We’ve been working to implement the next version of FARM, FARM 5.0, that goes into effect in July. We also will work on promoting dairy’s sustainable nutrition. Dairy offers the most complete nutritional package available, and what’s amazing is that as we produce more milk, we’ll continue to use fewer natural resources. That’s the definition of sustainable nutrition.
For years, we’ve talked about sustainability in terms of environmental stewardship and how that translates into financial value for farms. Now, the financial values are there. You take solar panels, wind, methane digesters, and a lot of things happen on a farm that’s generating electricity to run your farms and to run your neighbor’s households. We’re there now. What we need is conservation funding in the farm bill through USDA grants through state and federal programs. There’s real money available to help us continue to do that, and we will.
No imitation food from a nut, a bean, or grain can hold a candle to dairy’s nutritional package. We all know that. That’s why it’s important to keep fighting the fight on plant-based alternative labeling. In the guidance that was issued earlier this year, the Food and Drug Administration (FDA) recognized and admitted that plant-based alternatives are nutritionally inferior to real dairy.
Dairy protein plays a critical role in feeding people around the world, and it can’t be replaced by alternatives, including plant-based. Consumers have the right to understand how they’re nourishing their families, and we’re going to continue to advocate for the Dairy PRIDE Act to try to get that passed in Congress.
We’re going to continue to fight for more flavored milk in schools and higher fat levels, especially for those children whose main source of nutrition is through the school milk program. Milk is essential to their diets, and we’re not going to give up that fight. We’re all part of an industry that’s doing remarkable things. We are winning.
This has been adapted from Chairman of the NMPF Board of Directors Randy Mooney’s speech at the National Milk Producers Federation annual meeting in Orlando, Fla., on Nov. 14, 2023. This column originally appeared in Hoard’s Dairyman Intel on Nov. 22, 2023.
NMPF Statement on Farm Bill Extension in Funding Law
From NMPF President & CEO Jim Mulhern:
ARLINGTON, VA – “We commend House and Senate Agriculture Committee Chairs Glenn Thompson and Debbie Stabenow, as well as Ranking Members David Scott and John Boozman, for their bipartisan work to finalize this farm bill extension as part of the congressional spending agreement President Biden signed today.
“Along with continuing critical programs for dairy farmers, the legislation allows the Dairy Margin Coverage program to continue operating without the uncertainty of a potential disruption. DMC is an important and effective safety net for dairy farmers nationwide. This legislation includes the 2019 production history update as part of the program, and we look forward to 2024 DMC sign-up in the coming weeks.
“With this bill passed, we stand ready to work closely with the House and Senate Agriculture Committees to deliver a strong, five-year farm bill as swiftly as possible.”
NMPF’s Mulhern Reflects on Policy, Legacy
NMPF President & CEO Jim Mulhern, who is retiring at the end of this year after a decade at the helm of the organization, discusses dairy’s current policy challenges in an interview with RFD-TV. “A lot of this focus of the farm bill for us is in the bucket of either economic risk management issues, conservation issues, trade issues, and nutrition,” he said. “I would say the biggest challenge for the future is to lean in, to take on the challenges that we all see out there and look for workable solutions.”
DMC Margin Gains Almost $2 in September
The Dairy Margin Coverage (DMC) margin in September rose rapidly from August, as markets have been anticipating for months. The margin was $8.44/cwt for the month, rising $1.98/cwt over August, which itself was up almost $3 from July’s record low of $3.52/cwt.
As with the August increase, September’s DMC margin rise was driven primarily by a higher all-milk price, which rose by $1.30/cwt over August to hit $21.00/cwt. The September DMC feed cost formula shed $0.68/cwt, due mostly to a lower corn price, with a smaller drop in the September soybean meal price partially offset by a small rebound in the price of premium alfalfa hay.
The September margin will generate $1.06/cwt payments to $9.50/cwt DMC Tier 1 coverage. The futures markets are currently expecting the DMC margin to hover around that maximum coverage level each month during the fourth quarter of the year.
Milk Prices on the Rise
DMC Margin Drops Below $4 for First Time Ever
The June Dairy Margin Coverage (DMC) margin dropped by $1.18/cwt from a month earlier to $3.65/cwt, the first time it’s been below $4/cwt since margin protection became the basic federal safety net mechanism for dairy in 2014. It will generate a lot of $0.35/cwt payments for Tier 2 coverage at the free $4/cwt coverage level, as well as payments of $5.85/cwt for coverage at the maximum $9.50/cwt Tier 1 coverage level. The June all-milk price was $1.40/cwt lower than in May, the same as the April to May drop a month earlier, while the DMC June feed cost was only $0.22/cwt of milk lower than May’s, due relatively evenly to slight drops in the prices of all three feed formula components.
Available forecasts indicate the margin will improve slightly in July from the June level, then increase rapidly from August through October and approach $9.50/cwt by December.
Butter Buoys Milk Prices as Inflation Ebbs
NMPF’s Galen on Farm Bill Progress
NMPF Senior Vice President Chris Galen discusses the state of play in the upcoming farm bill on Dairy Radio Now. Current spending debates are slowing progress on the five-year reauthorization of USDA programs, which include nutrition assistance and commodity payments. The current law expires Sept. 30 — because many commodity programs, including dairy, run on a calendar-year basis, any threat of near-term disruption is limited, Galen said.
DMC Margin Drops More than $1 in May to Record Low
The May Dairy Margin Coverage (DMC) margin dropped by $1.01/cwt from April to $4.83/cwt, the lowest it’s ever been and the first time below $5/cwt during the life of the current program or that of its predecessor, the Margin Protection Program (MPP), triggering payment at both the Tier I and Tier II levels.
The May all-milk price dropped by $1.40/cwt from a month earlier to $19.30/cwt, while the DMC feed cost eased lower by $0.39/cwt in that time, on lower corn and soybean meal prices. The May payment for the maximum Tier 1 coverage at the $9.50/cwt level will be $4.67/cwt. The May payment for the low-cost Tier 2 coverage at the $5.00/cwt level will be $0.17/cwt.
Available forecasts anticipate the margin dipping down closer to $4/cwt during early summer, with a bottom in July, and not rebounding above $9.50/cwt until early in 2024.
NMPF Board of Directors Approves Comprehensive Farm Bill Recommendations
NMPF’s Board of Directors approved June 7 a suite of farm bill policy priorities covering the commodities, conservation, trade, and nutrition titles, working to enhance federal support for producers and expand access to nutritious dairy products for consumers at home and abroad.
With the current farm bill set to expire Sept. 30, Congress is working to enact a new bipartisan five-year farm bill. NMPF’s recommendations will aid in enacting an on-time farm bill that provides dairy producers the certainty they need as they manage their risks and resources while seeking market opportunities at home and abroad.
“The farm bill is crucial both to dairy farmers seeking to effectively manage their risk and to the consumers who benefit from the nutritious products dairy farmers work every to provide,” said Randy Mooney, chairman of NMPF’s board and a dairy farmer outside Rogersville, MO. “We stand ready to work with lawmakers as they craft this complex, extremely important legislation that touches everyone.”
In the Commodities title:
NMPF seeks to build on its successes in the last farm bill to strengthen the dairy safety net and provide producers with access to a range of risk management tools. NMPF’s board voted to support continuing the Dairy Margin Coverage safety net while updating the program’s production history calculation. The board also voted to prioritize improving the Livestock Gross Margin-Dairy and Dairy-Revenue Protection programs should new funding become available.
The board also voted to seek farm bill language to direct USDA to conduct mandatory plant cost studies every two years to provide better data to inform future make allowance reviews. This would complement the near-term make allowance update NMPF is pursuing through its Federal Milk Marketing Order initiative via the USDA hearing process announced last week. Similarly, the board also voted to pursue restoring the previous “higher of” Class I mover in the most expeditious manner possible, either administratively via the FMMO process or legislatively through the farm bill, in which the mover was last changed in 2018.
In the Conservation title:
NMPF is advocating for policies that better position the dairy industry to meet its voluntary, producer-led goal of becoming greenhouse gas neutral or better by 2050. NMPF’s board voted to support maintaining robust funding for voluntary conservation programs, such as the Environmental Quality Incentives Program that supports dairy farmers in their ongoing land and water resource management efforts, with additional emphasis on feed and manure management both of which are major areas of opportunity in sustainability. The board also voted to seek relief from program payment limitations that prevent the family farmers that produce most of the nation’s milk supply from fully using these programs.
In the Trade title:
NMPF will support policies recognizing the growing importance of trade for U.S. dairy, with exports accounting for one-sixth milk of all U.S. milk production, a share expected to grow. NMPF’s board voted to support enhancing funding for trade promotion programs like the Market Access Program and the Foreign Market Development program, which promote American-made dairy and agriculture products that compete with heavily subsidized foreign products and return well over $20 in export revenue for every dollar invested.
The NMPF board also voted to seek language to protect common food names, as embodied in the bipartisan, bicameral SAVE Act that would establish an official list of common food and beverage names and direct USDA and the U.S. Trade Representative to prioritize this issue in international trade negotiations.
In the Nutrition title:
NMPF will support policies that reflect dairy’s role as an excellent source of 13 essential nutrients, some of which are under-consumed, according to the most recent Dietary Guidelines for Americans. The Supplemental Nutrition Assistance Program is vital to linking the food we produce as farmers to families across the country facing difficult circumstances. NMPF’s board voted to support the enhancement of federal nutrition programs to provide nutritious dairy products to beneficiaries. NMPF also supports the bipartisan Dairy Nutrition Incentives Program introduced in the Senate to encourage SNAP participants to choose healthful dairy products at the grocery store.
DMC Margin Drops Below $6 in April
The April Dairy Margin Coverage (DMC) margin dropped by $0.25/cwt from a month earlier to $5.84/cwt, the first time the margin fell below $6 since August 2021. The April all-milk price was $20.70/cwt, down $0.40/cwt from March, while the DMC feed price was down for the month by $0.15/cwt, due entirely to a lower soybean meal price. The April payment for maximum Tier 1 coverage at the $9.50/cwt level will be $3.42/cwt. T
Available forecasts continue to indicate that monthly DMC margins will stubbornly remain around $6 into the summer and then slowly rise during the second half of the year, not topping $9.50/cwt until November.