Tag: dairy prices

Affordability Remains a Dairy Strength

Posted on by Rachel Ravencraft

Regardless of how one feels about the November elections, one thing that voters said loud and clear was that they don’t like inflation. As data shows, that’s yet another reason to like dairy.

A look at Consumer Price Index data going back to the 2008 financial crisis shows that, compared to overall costs, and particularly to other food and beverages, dairy remains relatively affordable, and is becoming even more so over time. Dairy product prices this fall are roughly the same as they were two years ago, even as overall prices and food and beverage prices are both more than 6 percent higher.

This stability isn’t unusual. Dairy prices rose only 12 percent for the entire decade of the 2010s, helping household budget planning and easing price pressures felt more keenly in other areas of the economy.

Dairy isn’t immune to inflation, of course – dairy saw post-pandemic price runups like everything else, as consumers – and voters – remember well. But after that interruption, dairy products are once again anchoring grocery spending, with high quality, high nutrition, great taste and affordability.

So as holiday shopping lists are made and parties are planned, be sure not to skip the dairy aisle. For unparalleled value, in every sense, spend a little extra time in the dairy case. It’s a good place to be this year.

 

 

August DMC Margin Sets Record

Posted on by Theresa Sweeney

The Dairy Margin Coverage (DMC) monthly margin rose by $1.40/cwt from the month before to $13.72/cwt, the highest since margin protection replaced the old price support program as the basic dairy safety net program in January 2015. The August all-milk price was $23.60/cwt, up $0.80/cwt from July, and the DMC feed cost formula dropped by $0.60/cwt of milk, driven mostly by a lower corn price.

Late September dairy and grain futures indicated that the DMC margin would average around $12.20/cwt for all of calendar year 2024.

Dairy Data Delights, and Completes Your Summer Reading List

Posted on by Theresa Sweeney

Impress your friends and dazzle your pub trivia team: Did you know that the average American worker only needs to work half as long to pay for a half gallon of ice cream as in 1960? Can you say, luxurious and affordable?

It’s in the numbers. Despite hourly wages that averaged $2.09 an hour the year John F. Kennedy was elected president (and both Joe Biden and Donald Trump were teenagers), the relative changes in wages and ice cream prices have made America’s favorite frozen dessert (Happy National Ice Cream Month) twice as affordable now, according to Labor Department data. What once took nearly 25 minutes of a U.S. worker’s hourly wage to buy takes less than 12 minutes now.

Butter holds a similar ratio, and whole milk and cheese affordability has also improved significantly. And still, some people long for the good old days.

You can find this information on page 85 of Dairy Data Highlights, a compendium of historical dairy statistics compiled by the NMPF/USDEC Dairy Economics Unit. The publication features facts on the evolution of farm sizes, milk production and dairy revenues, and the emphatic growth in the prominence of trade to the U.S. dairy economy. (Commercial dairy exports, 1985: 571 million pounds of milk equivalent. Commercial dairy exports, 2022: 40,581 million pounds.)

Suffice it to say, Dairy Data Highlights makes everyone’s summer beach reading list complete. And unlike current best sellers like “The Women,” or “On Call,” Dairy Data highlights is free – just download here.

That’s why the entire dairy community needs to know of this resource. See the rise in average herd sizes! Be wowed by the growth of processed gruyere exports! But mainly, know that this is out there. And use it as you need.

April DMC Margin Little Changed from March

Posted on by Theresa Sweeney

The April Dairy Margin Coverage Program margin was $9.60/cwt, down by $0.05/cwt from March, just above the maximum $9.50/cwt maximum Tier 1 coverage level for the second month in a row.

The April All-Milk price dropped from March by $0.10/cwt to $20.50/cwt, and the April DMC feed cost calculation dropped by $0.15/cwt, on a $11/ton lower premium alfalfa hay price. Small changes in the corn and soybean meal prices offset each other on a per hundredweight of milk basis in the formula.

Available forecasts at the end of May indicate an increasingly high likelihood that the DMC margin will remain considerably above $9.50/cwt for the rest of the year.

FMMO Formulas Need to Reflect Today’s Realities

Posted on by Theresa Sweeney

Way back in the 1930s, one of the original motivations behind creating the Federal Milk Marketing Order system was to provide incentives for farmers to produce better milk. Much of the milk at the time was Grade B, which was lower quality than the Grade A milk earmarked for fluid consumption. To ensure an adequate supply of higher-quality milk, the FMMO system set up pricing that encouraged its production.

It worked. U.S. milk production is now almost entirely Grade A – even for uses in which Grade B is permissible, such as in certain manufactured dairy products. And in the past quarter century, better animal care, and better science and technology, has improved milk even more in terms of its nutrition, its quality and its premium-value components. For one example – take a look at how the percentage of protein in 100 pounds of milk has evolved since 2000.

Impressive. And just like in the 1930s, it has to do with incentives. The adoption of multiple component pricing in 2000 paid farmers for the protein content in most of their milk, just as they had long been paid for its milkfat content.

That’s the good news. But the bad news is that in many other ways, federal order pricing formulas that often haven’t changed since 2000 don’t reflect the structure of today’s dairy industry. And that disrupts those incentives, to the detriment of everyone who holds a stake in dairy’s success.

For example, Class I differentials – designed to ensure that processors receive an adequate supply of fresh milk to produce fluid milk products – haven’t been updated nationwide since 2000. Make allowances in the federal order product price formulas – which are supposed to cover the cost of converting raw milk components into finished products – have also gone a generation without adjustment, hindering processors that farmers need to thrive.

Simply put, dairy as an industry can’t thrive without adequate updates to federal formulas. So hooray for protein. But many current formulas still don’t work for farmers and the cooperatives they own. The improved quality and availability of American milk comes from farmers’ hard work. And good work should be rewarded.

Dairy Will Seize Generational FMMO Opportunity

Posted on by Alan Bjerga

USDA has moved forward on our request by announcing an “action plan,” and we at NMPF are pleased that the formal process of modernizing Federal Milk Marketing Orders is now officially underway.  The department’s plan announced last Thursday moves us toward the national federal order hearing we’re seeking, giving dairy a generational chance to update this important program to better reflect today’s market conditions and dairy producer needs.

We’re gratified that USDA recognizes the comprehensive nature of our proposal and are looking forward to it being considered in full, because the whole of our plan adds up to more than the sum of its individual parts. That’s a testament to the careful work put into this effort over two years and more than 150 meetings. But it also means that the next steps will require the same level of dedication and preparation, if not even more.

Once USDA conducts some preliminary steps (providing opportunity for additional proposals; holding a pre-hearing workshop) and sends out its hearing notice – likely late July – the stage is set for the hearing, which could begin as early as August and take 6-8 weeks. Once all the testimony is considered, USDA would be on track to put forward a final plan for a producer vote in 2024. Assuming that’s successful, implementation would begin late next year.

That’s assuming everything goes smoothly, which, in this broad and varied industry, is always a big assumption. But as dairy producers have proven throughout this process, with unity and careful attention to each other’s needs, impressive things can be done.

To work through this next stage as smoothly as possible, we plan to stick with the formula for success that’s served us well since the beginning. The principles we’ve followed include:

  • An approach grounded in thorough research and deliberation. Our meticulous, consensus-driven efforts allowed us to craft a proposal that comprehensively addresses today’s milk-pricing needs. As we prepare for a USDA hearing, that same commitment to substantive research over mere posturing will be critical. Fortunately, we’ve been working with many of the industry’s top economists and analysts to guide our approach. Their work will be key in the hearings to addressing complex issues such as Class I differential pricing, the make allowance or the return to the “higher-of.”
  • A devotion to consensus. We’ve focused on measures that unite the nation’s producers, and we will continue to advocate for solutions tailored to broad benefit rather than narrow, specialized self-interests. When disagreements have arisen, we’ve invariably worked toward, and achieved, consensus among producers. During our many meetings, if a proposal couldn’t attract a strong majority of support, we dropped it and moved on, always making sure that our members were lined up behind anything that moved forward. While this meant no one likely got exactly what they wanted, in the long run our proposal is stronger because it reflects the collective consensus of dairy producers serving markets nationwide.
  • An understanding that failure – or a focus on one single aspect of the program— is not an option. The need to comprehensively update a system built for the dairy industry of 23 years ago has always been obvious. Now that we’re moving toward a hearing, giving anything less than maximum attention and support is not an option either; nor is arriving at a final decision that producers won’t approve, a case we will make clearly and cogently in the hearing process. At this point the need for program modernization isn’t only established: a comprehensive approach to meeting it has been unanimously adopted by representatives of two-thirds of the nation’s milk supply and the added support of numerous other state, regional and national organizations with dairy producer members. This effort can’t, and won’t, be thrown into reverse. It needs to be brought to a successful conclusion, with the same spirit of consensus that brought us here.

With these principles in mind, we are about to embark on the next phase. This has been a heavy lift, and it’s far from complete. But we’re excited for the formal hearing process to begin. Deep thanks and appreciation to everyone who has contributed to and supported this journey so far. Additional opportunities to advance this effort and successfully see it through will be plentiful in the months ahead.

 

Jim Mulhern

President & CEO, NMPF

 

Falling Prices, Rising Opportunities on Tap for 2023

Posted on by Theresa Sweeney

Record milk prices seen in 2022 likely won’t repeat themselves, as production increases and consumers grapple with an economic slowdown, according to members of the NMPF and U.S. Dairy Export Council’s joint economics unit, in a Dairy Defined Podcast released today. But exports are on track to increase, and demand will likely be resilient as dairy remains must-have for buyers.

“Consumers around the world still gravitate towards dairy, even when they’re experiencing tighter economic situations,” said Will Loux, head of the team Vice President for Global Economic Affairs with NMPF and USDEC. “They ultimately view dairy as an essential item and will continue to consume it.”

Loux discusses the global and domestic dairy outlook with NMPF’s Chief Economist, Peter Vitaliano; Economic Research and Analysis Director, Stephen Cain; and the joint economic team’s newest member, Economic Policy and Global Analysis Coordinator, Allison Wilton. The full podcast is here. You can also find the podcast on Apple Podcasts, Spotify and Google Podcasts. Broadcast outlets may use the MP3 file below. Please attribute information to NMPF.

Dairy Farmer Reinforces Value of Safety Net, Calls for FMMO Update During Farm Bill Hearing

Posted on by Theresa Sweeney

Seventh-generation Pennsylvania dairy farmer Lolly Lesher emphasized the importance of the farm bill safety net program and called for milk pricing improvements today during a House Agriculture Committee hearing. Lesher, a member-owner of Dairy Farmers of America, testified on behalf of the cooperative and the National Milk Producers Federation (NMPF) during a congressional review of dairy provisions in the Farm Bill.

The Farm Bill, a twice-a-decade reauthorization of USDA programs, encompasses a variety of provisions important to dairy farmers including risk management, pricing policy and support, conservation, trade promotion, nutrition and rural development programs.

Lesher thanked Ranking Member G.T. Thompson (R-PA) for his years of advocacy on behalf of dairy farmers in Pennsylvania and beyond, and for his key role in overhauling the dairy safety net during the last farm bill. She also expressed her gratitude to Chairman David Scott (D-GA) for his work and for convening today’s hearing.

Revised at the urging of NMPF in the 2018 Farm Bill, USDA’s Dairy Margin Coverage program offers effective margin protection for small and mid-sized farms and affordable catastrophic coverage for large farms. Lesher, whose family milks 240 cows in southeastern Pennsylvania, said in her written testimony that the program “has provided important security to [her] family’s farm.” She urged the committee to make additional updates to reflect current production, so the program remains a viable safety net.

Lesher also highlighted the need for improvements to the Federal Milk Marketing Order (FMMO) system, as evidenced by the heavy revenue losses incurred by dairy farmers nationwide from a milk pricing change made in the previous farm bill.  “The change made to the Class I mover combined with the government’s heavy cheese purchases cost dairy farmers over $750 million in revenue in the last six months of 2020 alone,” she said.

The dairy industry, under NMPF’s leadership, is seeking consensus on a range of FMMO improvements, including the Class I mover, that can be taken to USDA for consideration in a federal order hearing. “We recognize that for our efforts to succeed, we must all work together, giving a bit to get a bit. It’s just too important for our future,” Lesher added.

“We appreciate the opportunity to share what has worked well—and what needs to be modernized—to meet the needs of dairy farmers in the 2023 Farm Bill,” said Jim Mulhern, president and CEO of NMPF.  “As outlined by Lolly Lesher during today’s hearing, dairy producers need continued access to an effective safety net, flexible risk management tools that protect all farmers, and an update to the FMMO system that addresses the unequal risk dairy farmers bear compared to processors during unusual market volatility. We look forward to our continued work with the House Agriculture Committee and USDA on these and other farm bill priorities in the coming months.”