Dairy checkoff is ‘negotiating’ your future: Train wreck ahead. Stop the train. Correct the track. (DMI Net Zero – Part One)

By Sherry Bunting, Farmshine, Sept. 16, 2022

Dairy farmers are being used without regard. Their future ability to operate is right now being negotiated, and they are paying those negotiators through their 15-cents-per-hundredweight mandatory checkoff with no idea how the negotiations will ultimately affect their businesses and way of life.

Inflated baselines and an inflated methane CO2 equivalent assigned to cows is setting the stage for a head-on collision, a train wreck on the misaligned track laid by DMI’s Innovation Center for U.S. Dairy.

In fact, the Net Zero Initiative has been designed to help everyone but the dairy farmer. It sets up a methane money game for carbon traders at the expense of those dairy farms that have long been environmentally conscious with no-till, cover crops, grazing, and other practices already on their farms.

Such farms will be of no use in what is shaping up to be a focus on harvesting reductions, not attaining neutrality, in DMI’s Net Zero Initiative (NZI).

Small and mid-sized dairy farms that are already at or near carbon-neutral could show smaller reductions for the industry to harvest. 

Conversely, the largest dairies installing the newest biogas systems are realizing even this route could become a dead-end because the credits are signed over and sold for big bucks, a few bucks get kicked back to the dairy, but the methane capture becomes the property of other industries outside of the dairy supply chain.

If the industry does not act now to stop the NZI train for a period of re-examination, adjustment and correction, then the current trajectory may actually move food companies clamoring for reductions ever closer to alternatives and analogs that boast their climate claims solely on the fact that they are produced without cows.

This is a big money game that is operating off the backs of our cows, and the checkoff has been at best complicit as a driver.

RNG (renewable natural gas) operators are signing up large (3000+ cows) dairies left and right for digesters and covered lagoons to capture methane piped to clustered scrubbing facilities to be turned into renewable fuel for vehicles or electricity generation. Meanwhile dairy protein analogs are being created without cows by ‘precision fermentation’ startups partnering with the largest global dairy companies.

In turn, millions if not billions of dollars in carbon credits are generated while farmers and their milk buyers will be left figuring out how to show their reductions when they are left holding the inflated methane bag.

Six organizations, four of them non-profits under the DMI umbrella, officially launched the Net Zero Intitiative (NZI) in the fall of 2019, five months after Ag Secretary Tom Vilsack made headlines talking about it in a Senate hearing while he was pulling down a million-dollar salary as a DMI executive in 2018.

NZI is the proclaimed vehicle for negotiating the terms for U.S. Dairy to continue, terms based on showing carbon reductions that many family farms may find difficult to meet — especially if the farm is already at or close to carbon neutral.

As DMI’s sustainability negotiators data-collect all previous reductions into farm-by-farm comprehensive baseline estimates, where will those farms find new reductions? 

According to DMI staff, over 2000 dairy farms have already gone through their environmental stewardship review via the FARM program to establish their “comprehensive estimates.”

The six organizations, four of them filing IRS 990s under the national dairy checkoff, that launched NZI are: Dairy Management Inc. (DMI), Innovation Center for U.S. Dairy, U.S. Dairy Export Council (USDEC) and Newtrient, along with the other two organizations being National Milk Producers Federation (NMPF), and International Dairy Foods Association (IDFA).

They have collectively bought-into the global definition that inflates the CO2 equivalent used for methane, effectively committing the cow to perpetual GHG purgatory. 

Because the NZI structure is based on continually showing GHG reductions, no farm is insulated with a get-out-of-jail-free-key — not even the largest farms with the most advanced biogas systems.

Why haven’t checkoff funds been used to defend the cow – to get the numbers right, to get the current practices farmers have invested in counted toward reductions not baselines, and to get the methane CO2 equivalent correct — instead of giving in to this notion that feels an awful lot like ‘cows are bad and we are committed to making them better?’

Perhaps it was ignored or embraced because this inflated methane CO2 equivalent gives the suite of tech tools being assembled by DMI’s Newtrient a bigger runway to show reductions — a money maker for the RNG biogas companies and others that will in many cases end up owning the carbon credits after paying the farmer a nominal fee. 

Carbon trading rose 164% last year to $851 billion, according to a Reuters January 2022 report. A big chunk of this is coming from the methane capture and fossil fuel replacement of RNG biogas projects, mostly in California but popping up elsewhere at a rapid rate and mostly traded on the California exchange.

Farmers are getting some money for these projects, but they don’t own the carbon credits once they are sold or signed over. When they are sold outside of the dairy supply chain, this reduction becomes someone else’s property, so it is no longer part of the dairy farm’s footprint nor the footprint of their milk buyer. 

Likewise, this inflated methane equivalent — along with the emphasis on reductions, not neutrality — has some processors wondering if they’ll be able to come up with the Scope 3 reductions they need in ESG scoring.

They are facing upstream pressure from retailers and consumer packaged goods (CPG) companies as well as asset managers to show reductions, and they have counted on big numbers from their Scope 3 suppliers, the dairy farms.

The problem for dairy processors and dairy farmers comes down to the central definitions of methane equivalent and carbon asset ownership — the rights of farmers to own their past, present and future reductions, whether or not they’ve signed them over as offsets to a milk buyer or a project investor and whether or not they’ve sold the resulting credits on a carbon exchange, and whether or not they’ve installed new practices that are now part of a baseline but represent a new investment every year as they operate their businesses.

Back in June, the American Dairy Coalition added this concern to their list of federal milk pricing priorities because of the impact this climate and carbon tracking will have on milk buying and selling relationships and contracts — and the lack of clarity or fairness in this deal for essential food producers at the origination point that is closest to nature, the farm. 

ADC worded their “carbon asset ownership” priority this way: “No matter where a dairy farm’s milk is processed, that farm should be able to retain 100% ownership at all times of its earned and achieved carbon assets, even if this information is shared with milk buyers to describe the resulting products that are made from the milk.”

For its part, IDFA took a swing last Friday, going one step farther to recommend global accounting methods that would allow the dairy supply chain (farmers and processors) to retain carbon credits even if they are sold on a carbon exchange or signed over to an asset company that invested in an on-farm technology. 

IDFA executives penned the Sept. 9 opinion piece in Agri-Pulse laying out the concerns of their members who are starting to realize the future consequences of the rapid and inflated monetization of methane — and the race to sell carbon credits — leaving dairy processors unable to get those credits they were counting on from the farms that supply them with milk, while at the same time being stuck facing the cow’s inflated methane CO2 equivalent in their downstream Scope 3 even while they try to get reductions in their own controlled areas of Scopes 1 and 2.

When dairy farms no longer own their reduction or cannot show a large reduction because they are already virtually neutral, processors become concerned about how they will gain the Scope 3 reductions that are part of the ESG scoring the large retailers and global food companies are pushing. 

All of this has come down through the non-governmental organizations like World Wildlife Fund (WWF), investment and asset management sector via the World Economic Forum (WEF), the global corporate structures through the Sustainability Roundtable and through government entities via the United Nations Agenda 2030. DMI has been at those tables for at least 14 years.

“It is becoming clearer every day that the global accounting standards underpinning GHG measurement and reporting are biased against the very people making the (GHG) reductions,” the IDFA executives wrote in their opinion.

In other words, while some farmers are beginning to profit from GHG-reducing practices that are turned into offsets and traded on the carbon markets, the system is tilted against them because it leaves them without the offsets they traded and leaves them in a position of having to continually reduce in order to secure a position in the value chain.

IDFA points out that under the current rules, once the offset is sold outside of the value chain as a carbon credit – it is gone. The current GHG accounting system says only the buyer of that reduction can claim ownership.

Those farms can no longer claim their own reduction, and it means the company buying milk or other commodities from a producer cannot integrate the reduction into the description of their final product.

This weakens U.S. Dairy, the IDFA opinion states, and it makes dairy farmers less competitive sources of pledge-meeting carbon reductions for retailers and manufacturers – setting real dairy up for fake dairy dilution with the inclusion of whey proteins and other pieces of milk that are being produced in fermentation vats by genetically modified yeast, fungi and bacteria, as well as other analogs.

A bigger problem not mentioned in the IDFA opinion may be the inflated baselines that leave farms that have implemented best practices years ago positioned to show smaller reductions.

While the American Farm Bureau earlier this year lobbied against proposed SEC accounting intrusions for quantifying ESG scoring, it has been silent on the issue of carbon asset ownership for food producers. AFBF has also said little about the recently signed climate bill (Inflation Reduction Act).

National Milk Producers Federation, on the other hand, as reported last week, sang its praises for being right in line with where the industry’s Net Zero Initiative is going.

DMI voices its pride to have been leading the way, positioning its Innovation Center as founded by dairy farmers. They have conceded that dairy farms impact the environment and launched NZI as a collective pledge to reduce that impact.

In other words, DMI submitted to the idea that cows impact the environment, but never fear, through NZI, the Innovation Center and Newtrient, farmers will make them better, and turn them into a climate solution.

This is a fool’s errand given the inflated methane equivalent and the movement of carbon reductions to entities outside of the dairy supply chain such as paper mills, bitcoin miners, and the fossil fuel industry.

Did dairy farmers have a say in any of this? Not really. They were kept in the dark as this was developed over the past decade or more, and the boards representing them on the six organizations that launched NZI (four of them under the checkoff umbrella) have been duped.

Farmers are largely unaware of the NZI train, and their silence as it runs down the track becomes a further signal to the industry and to the government that they approve of the track they are on.

As the industry sits at this crossing, the Net Zero train full of dairy farmer passengers is barreling high speed down the track DMI has laid.

This train must be stopped because the future-bound track needs to be re-examined, adjusted and re-aligned so that the passengers are not ejected by the train wreck – the accelerated consolidator — that lies ahead.

Fundamentals must be vigorously revisited. Every passenger on that train, every dairy farm, must be recognized as an essential food producer, get credit for their prior investment in current practices, and be able to retain ownership of their carbon assets as part of their farm’s footprint — even if these assets have been provided, sold or signed over as offsets to milk buyers or project investors or traders on an exchange.

Furthermore, this train – built with farmer dollars – should protect the so-called founding farmers from being denied a market based on the size of their GHG reductions. If a carbon neutral farm can’t show reductions to its milk buyer, will that buyer look for other downstream vendors who can fulfill their Scope 3 reduction needs?

Will those vendors be other farms with larger perceived GHG reductions or will they be alternative analogs created without cows?

Nestle announced this week it is partnering with Perfect Day toward that end. In fact, the proliferation of plant-based, cell cultured, DNA-altered microbe excrement analogs for dairy protein and other elements are entering the market on big GHG reduction claims based on being made without the cow and the inflated methane CO2 equivalent she has been assigned!

The current standard for methane CO2 equivalency is inflated by orders of magnitude. Dr. Frank Mitloehner has addressed this repeatedly and other researchers back his view with efforts to change it.

As Mitloehner and others point out, climate neutrality should be the goal, not net-zero. Furthermore, the current methane CO2 equivalent is calculated based only on the much greater warming effect of methane vs. CO2. However, the current calculation does not account for the fact that methane is short-lived in Earth’s atmosphere — about 10 years compared with 100 to 100 years for CO2 and other GHG. It also does not account for the cow’s role in the biogenic carbon cycle.

Remember, DMI and company have ignored or embraced this definition. At the same time, the Innovation Center’s data collection of progressive accomplishments are included in the baselines from which new reductions (opportunities) must be found.

These two trains run in opposite directions for a future head-on collision on a mis-aligned track. 

The bigger the perceived GHG problem, the bigger the reduction through technology, and the bigger the monetization of that reduction outside of the dairy supply chain. At the same time, this creates an even bigger problem for farms that are unable to participate in biogas projects, farms that don’t fit the Innovation Center’s 3500-cow-dairy-as-solution template, farms that may be carbon neutral or close to it already.

DMI and company have played fast and loose with the truth. 

Farmshine readers will recall the glaring error reported more than a year ago in the white paper written by WWF for DMI. It showcased these biogas projects and the 3500-cow dairy template it proclaimed could be Net Zero in five years, not 30. 

That paper inflated U.S. Dairy’s total GHG footprint by an order of magnitude! A Pennsylvania dairy farmer brought the error to Farmshine’s attention. In turn, the magnitude of the error was confirmed by Dr. Mitloehner who then contacted DMI. A corrected copy of the white paper magically replaced all internet files with no discussion from DMI or WWF. That number was changed, but all of the assumptions in the paper were left as-is.

Put simply: DMI does not appear to be concerned about inflating the size of dairy’s perceived GHG problem. The bigger the perceived problem, the bigger the reduction that can be monetized, but that is now happening outside of the dairy supply chain. 

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Vilsack is de facto architect as Climate Bill dovetails with DMI Net Zero

Methane tax exempts agriculture, for now… Meanwhile the energy sector impact will affect farm cost of production

By Sherry Bunting, Farmshine, Sept. 9, 2022

WASHINGTON — Make no mistake about it, the dairy industry via DMI’s Innovation Center for U.S. Dairy — is and has been moving toward a future that rank-and-file dairy farmers have had no real voice in and in many cases are just waking up to.

From the annual World Economic Forum (WEF) meetings at Davos to the UN COP26, high-ranking DMI staff have been at the table

In fact, the current U.S. Ag Secretary Tom Vilsack, who President Biden credited for writing the agricultural piece of his Build Back Better campaign platform (same tagline used by the WEF), was the first to announce a Net Zero Initiative during a Senate climate hearing in June of 2019 while he was at the time the highest paid dairy checkoff executive at DMI before round-two as Ag Secretary.

When news of DMI’s Net Zero Initiative spread, farmers were told this would be voluntary, and that DMI was making sure companies understood that it has to be profitable for the farms.

But it is rapidly becoming apparent that requests for on-farm data from milk buyers and co-ops, guidelines for environmental practices under the FARM program are voluntarily mandatory through the member co-ops of National Milk Producers Federation (NMPF) and the privately owned plants that join the alliance and pledge get on board the Net Zero train.

All of this dovetails neatly with the Inflation Reduction Act (IRA) passed by Congress and signed by President Biden in August. Loosely referred to as ‘the climate bill’, NMPF is “thumbs up” on the deal, calling it “a milestone for dairy” as the industry “moves forward.”

(Others in-the-know who wish to remain anonymous call these billions a ‘slush fund’ for Secretary Vilsack.)

During the past 12 to 14 years, DMI has portrayed itself as representing U.S. dairy farmers (because after all, every U.S. dairy farmer pays into DMI, mandatorily by law of course). All the while plotting, planning, partnering and aligning with World Wildlife Fund using the middle of the supply chain as the leverage point to move consumers and farmers to where they want them to go.

They are proud to be working to “get you money” for what you are doing for the environment.

What we hear now is the manure technology and sustainability that checkoff dollars are used to promote brings new income streams to the dairy farm so they are less reliant on the volatile milk price. 

We are told that dairy farmers will make money from manure, from farming the carbon markets, perhaps even farming new climate-related USDA programs some of the $20 billion “for agriculture” will be spent on. 

According to NMPF, this is right in line with where the dairy industry is moving and “supports” the industry’s Net Zero Initiative and “other pledges.”

What pledges?

Did you, Mr. and Mrs. Dairy Producer pledge to do something or agree on the value and cost?

The government is making these pledges in global treaties. The industry as a collective whole through this DMI Innovation Center is making pledges to the investment bankers and global companies who are driving the monetization of climate through ESG — Environmental, Social and Governmental benchmarks.

This all has a very “contractual” feel to it – something that must be measured and recorded and monitored and reported, something that includes various scopes from the center point of one’s business to all of its downstream vendors.

There has been little if any open discussion of parameters, of value, of costs and of consequences. 

There has been little if any democratic process to determine pledge participation. This ESG-driven change is happening at a quickening pace all while most of us don’t know what the acronym stands for, what it means, what it entails, how it is measured, what is its value, who will profit from it, what it will truly accomplish, and how much consolidation it will create of the already consolidating market power in food and energy.

Control of carbon is what we are talking about here, and that means control of life itself.

University of Minnesota economist Marin Bozic mentioned this concern when questioned by members of the House Ag Committee at the farm bill dairy hearing in June.

Processors talked about the ESGs and the downstream impacts of businesses dealing with “Scope 3”. Members of Congress wanted to understand the impact on family farms, and Bozic was asked for his observations.

“In solving the climate, we should not allow the pace of consolidation to pick up in the dairy industry,” he responded.

“Congress should look to the industry for advice on how to make sure smaller family farms are not left behind in implementing the (sustainability) requirements they will need to meet to remain in business. Some of these technologies work better when you have more animals to spread fixed costs over more (cattle),” Bozic observed.

When this question came up a third time in Bozic’s direction, he took another swing, encouraging the House Ag Committee to “help the smaller farms meet these standards that the processors will require over the next 5 to 7 years as far as sustainability. It may be more difficult for some of them to meet that, and I would hate to see increased consolidation pace because of the sustainability standards.”

Does the IRA package do that? A deeper dive is required to fully answer that question. So far, there hasn’t been much open discussion about how these ‘standards’ will affect the farms and how much of these funds go to support vs. monitoring.

Industry insiders from processing to marketing have complained anonymously that they are concerned about what the retailers are expecting, what the largest processors are moving toward.

Some of it seems illogical and counter-productive, they say. All of it is being decided in boardrooms and back hallways – not in an open forum, not in a democracy.

Take for example NMPF’s proclamation that the IRA (climate bill) now signed into law is good for the industry, that the methane tax it includes is harmless and will not affect farmers.

Really? What parallel universe are industry executives living in?

Farms – especially dairy farms – are some of the biggest downstream users of fuel and fertilizer producing nutrient-dense food. If those companies are taxed for methane emissions, with graduated scales based on meeting pledges, farmers downstream from that will be incorporated into these pledged targets.

Who among us believes this won’t affect fuel and energy costs on the dairy farm? How will this impact decisions made about milk transportation, even though farmers pay for the hauling of their milk, ultimately. What are the downstream impacts of this tax? 

Congressional staffers admit the downstream impacts have yet to be calculated, but it has been passed into law.

There’s an even bigger question lurking in the smoke from that backroom where deals are made.

Reading through the Congressional Research Service explanation of the IRA package it’s clear that whether the methane tax does or does not pertain to agriculture is – well – unclear, and highly subjective.

There is zero language to ‘carve out’ an exemption for agriculture and food production. What the language does say is that the methane tax applies to fuel and energy sourced methane emissions because these industries are already required to be monitored for these emissions, and to report them.

Surprise.

Some of the $20 billion in the IRA “for agriculture” will go to EPA and USDA to ‘support’ methane reducing practices – but also to monitor them and develop reporting consistency.

Once measuring, monitoring and reporting of methane emissions occurs consistently in agriculture, it is a small step by a future President or EPA head to slip agricultural methane emissions into the scope of the now passed-into-law methane tax.

Again, no carve-out language in that bill, no specifically mentioned exemption for agriculture or for cattle.

However, interest is growing as a hearing in the Senate Committee on Environment and Public Works Sept. 7 dug into this a bit.

Scott VanderHal, American Farm Bureau Federation vice president was among those testifying Wednesday. The hearing pertained to a series of ‘protective’ bills for everything from livestock to motorsports in terms of the Clean Air Act through which emissions monitoring and reporting falls.

Interest is now even higher for bills like S. 1475 to protect livestock operations from permits being granted based on emissions. This now takes on a whole new meaning when contemplating a methane tax in the IRA package that is – for now – limited to industries that are monitored and required to report.

Expect to see stepped up interest from Farm Bureau as the methane tax falls into EPA’s warm embrace.

In conversations with congressional staffers, it’s also clear that new leadership in Washington, a new Congress, a new President, can make some changes to executive orders that have come to pass under the current administration, but changing the laws that have passed in this Congress will be more difficult.

However, the scope of the implementation process for the IRA funding (2023-26) will be greatly influenced by the 2023 Farm Bill reauthorization. Those funds will not have been spent yet, and can be rescinded or reallocated by Congress to other areas within the 2023 Farm Bill.

These laws are open to interpretation, so the executive branch has the power to take things in a positive or negative direction where agriculture is concerned.

What does all of this mean for dairy farmers?

First, it is possible that a portion of the $20 billion for agriculture and the environment will fund good programs that are positive for farmers and the environment. But at the same time, look at where the emphasis has been on the part of NMPF and the Innovation Center for U.S. Dairy under DMI’s umbrella. 

The emphasis is on revenue streams for dairy farms from something other than milk. The emphasis is on digesters and renewable energy. The emphasis can also be on regenerative agriculture, but this is an area that doesn’t produce much profit for others, so will it gain traction?

What happens when these government billions and industry / checkoff pledges become embedded at the farm level? What happens to the farms of the small to mid-sized scale under 3000 cows that are not going to be able to capitalize on the California goldrush to RNG fuels from methane digesters?

As good as digester technology can be in the situations where it provides positives – it is not the panacea, and it leaves most of today’s dairy producers on the sidelines from a revenue standpoint, while setting a standards bar that they may or may not be able to reached by other means – and should they have to honor these pledges they did not make?

In many cases, obtaining a milk market may rely upon participation in these pledges, which means small to mid-sized processors outside of the 800-lb gorilla are beginning to sit up and take notice too.

Yes. This most definitely impacts dairy. The industry via DMI and NMPF and their partners say dairy is moving forward to embrace the Vilsack ‘slush fund’ the Congress and President Biden have made available. They call it a partnership.

Instead of government rules, you, Mr. and Mrs. Dairy Producer are getting government help, support and partnership. You are getting a government that sees the value in what you are doing and will pay you for it. 

That’s what we are being told, but we aren’t being told about the monitoring and reporting and the consequences thereafter.

NMPF says the $20 billion for agriculture in the IRA will assist and support and partner with farmers to value their sustainability. That is all well and good until the carrot transforms into a stick. It all depends on where the drivers of the pledges are going.

Can we please have an open discussion of the pledges before making them?

My advice for farmers? Do what is good and right for your farm, for your community, your animals, the environment around you, within your means, and yes, government programs that help cost-share a beneficial practice are a good thing, a win-win.

But when the talk turns into pledges and deadlines and terms that sound contractual, beware. 

When asked for proprietary information about your farm, ask the asker how it will be used and what its value is. Ask for this in writing. Don’t sign anything without taking time to understand it or have an attorney perhaps review it.

When you are asked tough questions about your farm, ask the questioner tough questions about why they want to know.

Be polite, engage in a discussion, and make them explain it. Then tell them you’ll want to think it over. 

President Ronald Reagan said it best. “The top nine most terrifying words in the English Language are: I’m from the government, and I’m here to help.”

As much as we may want to believe the collective “they” are here to help, take nothing for granted.

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Despite frustrations, G.T. is not giving up on ending federal prohibition of whole milk in schools

After his whole milk in schools amendment failed on a committee-level party-line vote in August, G.T. Thompson said he’s not giving up, but that a change in leadership is needed to get this done. “Current leadership has an anti-kid, anti-dairy bias. This has become all politics with no logic,” he said.
Bills that would end federal prohibition of whole milk in schools are before the United States Congress and in the Pennsylvania and New York state legislatures. In the U.S. House there are 95 cosponsors. In the Pennsylvania House, it was passed almost unanimously, but the PA Senate refuses to run it because of lunch money scare tactics. Proponents of the various whole milk bills say Democrat party leaders oppose this common sense measure. Some Democrat lawmakers have signed on along with the Republicans as cosponsors; however, as the fight to include it as an amendment in childhood nutrition reauthorization proved — the Democratic leadership has another agenda for America’s foods and beverages and has therefore halted any movement of this measure to end federal prohibition of whole milk in schools and in daycares and in WIC. This bill is simply about allowing a choice that would be healthy for America’s children and rural economy. The evidence is overwhelming that the Dietary Guidelines and Healthy Hunger Free Kids Act got it wrong. Our children and farmers are paying the price for this mistake. Those in charge don’t seem to care about science, freedom of choice, nor petitions signed by tens of thousands of people.

By Sherry Bunting, Farmshine, August 5, 2022

WASHINGTON, D.C. — An attempt by Congressman Glenn “G.T.” Thompson (R-Pa.) to get his Whole Milk for Healthy Kids bill attached as part of an amendment to the Childhood Nutrition Reauthorization package failed last week despite the bill having nearly 100 cosponsors, including both Republicans and Democrats.

Joining him in introducing the amendment during the Committee’s markup of the Democrat’s child nutrition reauthorization were Representatives Elise Stefanik (R-N.Y.), Fred Keller (R-Pa.) and Russ Fulcher (R-Idaho).

“Unfortunately, the Democrats folded on us, and the amendment was defeated,” said Thompson in a Farmshine phone interview Tuesday (Aug. 2). The amendment also included language that would have allowed whole milk for mothers and children over age 2 enrolled in the WIC program.

“The current leadership has an anti-kid, anti-dairy bias, that’s my interpretation,” Thompson said. “Our whole milk provisions are good for youth and their physical and cognitive well-being. It’s also good for rural America.”

Thompson said his effort as a member of the House Committee on Education and Labor was to include the substance of two bills related to whole milk in the huge reauthorization package. Child nutrition reauthorization is normally a five-year cycle, but it has not been updated in over a decade since the Healthy Hunger Free Kids Act passed under a Democrat majority in 2010 to double-down on anti-fat policies in all government feeding programs, including schools.

“We wanted moms and children to get access to the best milk, but this has become all politics with no logic,” he said.

The Committee moved the child nutrition package forward last week without the whole milk provisions. That package will now go to the full House for a vote.

Thompson said its fate is uncertain, that it is likely to pass the House, although the margins are tighter there, he explained. 

However, he believes the child nutrition package will be “dead on arrival” in the Senate where it likely will not receive the 60 votes needed to pass.

If that happens, then the task of writing it would begin again in the next legislative session (2023-24).

“Our best hope (of getting the whole milk provisions for schools and WIC) is for Republicans to take back the majority in November,” said Thompson, explaining that he is already working with Ranking Member Virginia Foxx, a Republican from North Carolina. “She understands the issue and knows this is one of my top priorities.”

If Republicans gain a House majority in the midterm elections, Foxx is a likely candidate for chair of Education and Workforce, and Thompson would be a senior member of that committee as well as being a likely candidate for chair of the House Agriculture Committee, where he is currently the Ranking Member.

In fact, he said he is “very positive” about being successful getting Whole Milk for Healthy Kids out of committee under Republican leadership and is already working hard to ensure its success out of the full House, pending who is in leadership after the midterms.

Thompson said he is also working on allies in the Senate.

Up until now, it has been the outgoing Senator from Pennsylvania – Pat Toomey – who has “carried the milk” on this issue with companion legislation in the Senate.

“His bill impressed me in how he and his team thought through the issue on fat limits that are imposed on our nutrition professionals in schools,” said Thompson, taking note for future reintroductions of his bill.

On the House side, the Childhood Nutrition Reauthorization originates in the Education and Workforce Committee, but in the Senate the package originates in the Agriculture Committee.

Thompson notes that if the Republicans have a majority in the Senate, the current Ranking Member of the Ag Committee, John Boozman of Arkansas, is a likely candidate for chair. Boozman, who previously served in the U.S. House and was a mentor to Thompson. Today, they are the Ag Ranking Members in the two chambers and work closely on issues important to farmers and ranchers.

Back in 2018, when Thompson was asked at a farm meeting why his first introduction of the Whole Milk for Healthy Kids did not pass when Republicans did have a majority in the House and Senate in the 2017-18 legislative session, Thompson noted that National Milk Producers Federation, at that particular time, supported a more gradual shift to first codify the permission for 1% flavored milk then work up to the whole milk provision. 

When asked the question again after his amendment failed, he reflected, noting that in the 2017-18 legislative session, the school milk issue was not well-understood in either chamber of Congress. Then Secretary of Agriculture had made an executive decision to provide flexibility for schools to serve 1% flavored milk instead of limiting it to fat-free. But a bill to codify that change into law has also failed to pass in its three attempts as well. 

It’s not hard to believe that members of Congress do not understand this issue — given the fact that it has taken many years and much grassroots education effort to open even the eyes of parents to the school milk issue. Today, many parents are still unaware that their children over age two at 75% of daycares and 95% of schools (any that receive any federal dollars) do not have the option of drinking whole and 2% milk. Their only milk options by federal prohibition are 1% and fat-free. People just don’t believe it to be true and figure the problem kids have with milk at school is because it’s not chilled enough or comes in a hard to open carton.

In the current effort to get whole milk provisions into the child nutrition reauthorization, however, Thompson confirmed that in addition to the Grassroots PA Dairy Advisory Committee and 97 Milk effort —  “all major dairy organizations were working on this.”

Put simply, said Thompson, if the Republicans gain a majority in November, they are likely to be the ones who will write the next child nutrition package. As the one written recently by the Democrats is headed to the full House and has a tough-go in the Senate, Thompson said even if it does pass, targeted legislative fixes could be achieved in the next legislative session, pending a change in leadership.

“My goal is to work hard. The package that is going to the House now under the Democrats not only does not include whole milk provisions, it continues to micromanage school nutrition professionals who are the ones who know the kids the best and are in the best position to know how to help them eat in a healthy way,” said Thompson.

“Under the current (Healthy Hunger Free Kids Act of 2010) and this update — if it passes — kids aren’t eating the lunches. If they are not eating the meals (or drinking the milk), then it is not nutritious,” he added.-30-

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Bishop family starts new chapter at Bishcroft Farm, large herd dispersal of 1500 head Sept. 1 and 2

With mixed emotions as they transition away from dairy at Bishcroft Farm are Herman and Marianne Bishop flanked on the left by Tim and Anne and their children (from left) Thomas, Esther, Jim and Elizabeth and on the right by Rich and Nikki and their children (from left) Peter, George, and Bethany (not pictured).

By Sherry Bunting, Farmshine, August 19, 2022

ROARING BRANCH, Pa. — It is likely to be the largest dairy herd dispersal in the Commonwealth of Pennsylvania when the Bishop family has their two-day auction of 1500 head on September 1st and 2nd at Bishcroft Farm here in Roaring Branch, Tioga County.

The sale is managed by Fraley Auction Company, Muncy.

The Bishops have been dairying 83 years across three generations. Herman and Marianne are in their 75th year of membership with Land O’Lakes and were recently recognized for that milestone. They operate the farm in partnership with sons Tim and his wife Anne and Rich and his wife Nikki and are transitioning toward a more flexible future, while leaving open the option that another generation may want to milk cows on a smaller scale someday.

The closed commercial herd of sire-identified, AI-bred Holsteins is attracting interest with 580 first and second lactation out of the 750 total milking and dry cows selling Thursday (Sept. 1) and the 750 heifers selling Friday (Sept. 2), ranging 4 months old to springing, with 100 heifers due from sale time through December.

The herd makes an RHA of 26,146M 1021F 797P with somatic cell count averaging 138,000 on the sale cattle.

The sale list will note whether cows are bred to beef or sexed semen Holstein.

They started with Angus beef-on-dairy three to four years ago, primarily on the cows that weren’t settling — resulting in those genetics leaving the herd, Rich explains.

They use Holstein sires on the cows that are daughters from higher net merit bulls, and all bred heifers are due to Holstein sires with 90% to sexed semen, the Bishops confirm. Two-year-olds are also bred first service to sexed semen with a high percentage due to sexed-semen.

The Bishops are keeping all crossbred cattle and all calves under four months of age to raise and sell at breeding age, as they have forage to use up.

“We’re also keeping the bottom end of the cows to continue milking 100 to 150 head for a while,” Rich explains. That is until their valuable production base with Land O’Lakes is sold. 

“Our base is listed on the Land O’Lakes website and must transfer through their system, but they don’t set the prices,” he explains. “The buyer and seller negotiate the price and quantity with a 1000-pound daily base minimum transaction.”

Bishcroft currently ships a trailer load of milk every 21 hours. They have worked hard to manage their production to their daily base of 64,352 pounds of milk, which can only be sold to existing Land O’Lakes members.

During a recent Farmshine visit, Rich’s son Peter, 13, was the one to say he’ll really miss the dairy cows.

“He’s never known anything different,” says Nikki. “He fed the calves with me since he was a toddler.”

At the time of the sale, the Bishops are milking 750 cows 3x, having peaked in January milking 820. They have always milked 3x, even experimenting with 4x, seeing 7 to 8 pounds of additional milk per cow, but finding it unsustainable in terms of labor.

The Bishops observe that smaller dairies and more diversified farms have more flexibility to navigate changes in weather patterns, markets, labor and policies.

“I don’t see ever going back to milking a large herd here,” says Rich. “Maybe a small herd. Maybe Peter will want to do something like that with direct-to-consumer sales. But I don’t see going back to what we have today.”

At Ag Progress Days last week, a panel of experts said Pennsylvania is the state with the second largest volume of direct-to-consumer sales of farm products. A relationship with consumers holds some appeal for the Bishops as they transition into cash cropping with some beef on the side and a limited amount of pork as well.

The Bishops have always strived to be near the top of the dairy pack. Progressive and forward-thinking, the brothers participated in industry conferences and geared decisions toward cow comfort, productivity, quality and efficiency.

In fact, that’s something they’ll miss most — the friends they would regularly see at dairy industry meetings. 

“Things aren’t what they used to be,” says Tim.

“We see this developing to where larger herds like ours have to be in the top 10 to 20% or we are going backward,” Rich observes. “Dad is almost 77, and he’s doing the majority of the feeding. Tim and I want to spend more time with our families off the farm, and it’s getting harder to attract and keep employees that are willing to work these hours or to make enough money in dairy here to pay the wages and overtime competing with what is happening in New York State.”

The milk price jump of 50% this year was welcome relief after six years of tight margins and uncertainty. That’s when the Bishops really took stock of their position and decided to invest differently.

When asked how it feels to see the herd being sold, Herman, the patriarch, replied: “This is no different than what I did in 1970 when I increased my dad’s herd.

“It’s the way it goes. We made a change in 2004 and 2005 for another generation, not for me. I had a registered herd of 150 cows. We did a lot of research. The boys went and looked at 60 farms. They built this and expanded the herd (from 150 to 350 and from 350 to 650 and from 650 to 800). We changed things for the times, and that’s what’s happening now, a change for another generation,” Herman explains.

Rumors have run rampant, but the simple truth is this: The families are transitioning to options they see as more flexible and less stressful. 

They began transitioning their cropping this spring, knowing they wouldn’t need the same mix of crops and forages. They had already been doing trial work for Syngenta. They started looking into utilizing the freestall facilities for beef to some extent, maybe converting to a bedded pack. They’ll still make some hay, but their investments now are in equipment for cash cropping the 1450 acres of land they own and rent.

They planted soybeans for the first time and handled the cover crops differently, harvesting some as small grains, and burning a lot of it down as ‘green manure’ fertilizer to minimize their need for purchased fertilizer.

This will also be their first year combining corn, Tim explains, noting that on-farm grain storage is something they are looking at as they planned to go to Empire Farm Days the day after our visit.

In fact, the brothers note the higher milk price this year allowed them to make some crop equipment investments from cash flow.

As the Bishops raise and feed-out their beef-on-dairy crossbreds, they realize they have a learning curve ahead of them if they move further into beef production.

“We hope to do some direct-to-consumer sales,” says Tim, “feed some of these cattle and bring in a few pigs, even look at doing a truck patch (garden).”

Nikki says the family has always taken time to educate and advocate with the community of consumers around them. Tim’s youngest daughter is a Little Miss U.S. Agriculture, and Nikki fields questions constantly from her colleagues where she works at a local hospital. They want to know where their food comes from.

“People are curious. I have explained cattle rations, comparing it to the ‘ages and stages’ diets we have for kids (at the hospital). The response I would get is ‘that sounds like complicated hard work, why don’t you just buy milk at the store like everyone else?’” Nikki relates.

“These are educated people, and they didn’t quite get it until I explained that if they went to Weis Markets, the milk they were buying might be ours!”

She also tells the story from a few years back when fellow nurses saw the rBST-free pledge on the little milk chugs in the hospital cafeteria and started asking what it was because they thought they were going to win a ‘free rBST.’

While young Peter said several times that he’ll miss the cows, others in the family said they’ll miss the fresh milk.

“We might have to keep a few to milk for ourselves and to have milk to feed to the pigs,” says Tim.

“Excited and nervous” were the two words he used to describe the transition ahead.

“It is nerve-wracking but also feels a little like seeing a bit of light at the end of the tunnel,” Rich adds, noting the stress that comes with price volatility and labor issues will now flip to adjusting to managing cash flow without the regularity of a milk check.

The children are still adjusting to the news, having learned of the decision just a few weeks before our visit.

Some have favorite cows they’ve grown and shown that will have to stay, but Rich also notes none of the kids were “dying to milk cows,” and if they decide they want to do that, some assets are here they can put to use on a smaller scale.

“We have ideas and thoughts about how to utilize what we have differently, but we want to walk before we run,” he says.

Toward that end, the brothers are participating in seminars and looking at beef programs that are coming along. Their main focus will be low input, feeding the current beef-on-dairy crossbreds, raising the 120 heifer calves under 4 months of age they are retaining to breeding age, seeing how the sale goes, maybe looking at buying some feeder cattle… Time will tell as they look and learn and adjust.

“When you realize what a huge world God has created and we’re out here trying to feed the world, you realize how fortunate you are to live here and to be farming,” says Tim.As Herman affirms, this is another chapter in the story:

“The farm and the family are here. As for the future, we never know what it brings.”

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Why did PMMB go after raw milk farms for Milk Dealer licenses? Small farm bottlers push back, PMMB puts further licensing ‘on hold’

When Lone Oak shared their public post to customers on facebook that their raw milk and chocolate milk would no longer be available at Back to Nature, they encouraged their customers in Indiana, Pennsylvania to come the extra 20 miles to the farm in Marion Center. The response was overwhelming. They chose to only sell their milk at the farm after being notified by PMMB about needing an intrusive Milk Dealer’s license on top of the PDA permit, inspections and testing they already do. Small processors are pushing back, and PMMB has put licensing of small processors on hold as it evaluates what to do. Facebook photo

By Sherry Bunting, Farmshine, August 19, 2022

HARRISBURG, Pa. — Calls and mailings from the Pennsylvania Milk Marketing Board to small dairy farms processing and selling their very own milk — including those that are permitted by the Pennsylvania Department of Agriculture to sell raw milk — are stirring up a hornet’s nest .

The context of the communications was to get these very small processors to fill out the intrusive applications for Milk Dealer’s licenses, to pay the flat fee, and to do the ongoing monthly milk accountant reporting and calculate and further pay their 6 cents per hundredweight on sales.

To most, this made no sense, given these farms do not purchase milk from other farmers. They do their own pricing based on their expenses — always well above the state-mandated retail minimum — and many are selling raw milk, which is not a general or interstate commerce item.

In the case of raw milk, these producers operate outside of the Federal Milk Marketing Orders, so why is the Pennsylvania Milk Marketing Board (PMMB) coming after them for a Milk Dealer’s license? And why now? Could it have something to do with the bill seeking to collect over-order premium and pool it and pay it to producers directly so that the big players can’t continue to strand some of that premium?

Think about it. The PMMB doesn’t license entities doing cross-border sales of packaged milk whether it was produced in-state or out-of-state to follow the money, but they want small raw milk farms to be licensed Milk Dealers? Something isn’t right.

To their credit, however, the pushback from raw milk producers and citizens has resulted in PMMB putting this licensing effort “on hold”… for now.

Lone Oak Farm, Marion Center, Pennsylvania was one of the small producers to get a voice mail from an attorney identifying himself as a “special investigator for the Milk Marketing Board” wanting to know the name and address to send a packet to fill out.

The packet came. It was the same packet they had received two years earlier — a month before the Covid pandemic — but at that time they were only selling their raw milk and chocolate milk at the farm. They had stated in 2020 that the Milk Dealer’s license did not apply to them and never heard back from the PMMB.

That was the end of it, until August 2022.

This time, the packet included the same letter, along with an intrusive form requiring them to list all of their assets, liabilities — a complete financial statement of personal information — as part of a Milk Dealer’s License application along with monthly forms for calculating their 6 cents/cwt monthly licensing fee and the lesser fee for milk sold through products on which PMMB does not fix a price.

“There was no flow chart to determine if we needed to do this (like is shown below at PMMB website: https://www.mmb.pa.gov/Licensing/Dealer/Documents/License%20Flowchart%202020.pdf). My wife emailed back wanting to know why this pertained to us,” said Aaron Simpson of Lone Oak Farm in an Aug. 17 phone interview with Farmshine. “We were told it pertains to us because we were selling a small amount of milk off site at Back to Nature,” a health store in Indiana, Pennsylvania.

“Someone tipped them off,” he guesses. “We didn’t fill anything out (in the packet), and my wife responded that we would pull our small wholesale account out of Back to Nature rather than jump through these hoops.”

For Lone Oak and other small producers voicing concern, it isn’t even the 6 cents/cwt licensing fee that is the biggest problem, though they believe it is unnecessary. The real problem is the onerous and intrusive forms and the logistics and time it takes to fill out monthly milk accounting to the PMMB. Farms like Lone Oak already applied for and were granted raw milk permits by the Pennsylvania Department of Agriculture (PDA), which inspects them.

Furthermore, as a small producer, with several entities from produce to bakery to milk and more under one umbrella on the farm, the financial statement that the PMMB was requiring was information Lone Oak was not comfortable providing. Why should they? Why is it the PMMB’s business to know their personal business?

“They asked for our entire financial rundown of the farm — as a whole — right down to every asset we own, some of it not even related to the dairy. We are not willing to give that up for a (Milk Dealer’s license),” said Simpson. “This is not how it should be. The only reason we exist is because selling all of our milk conventionally has not been feasible. We are one of three dairy farms left in our township. We are down to the bits and pieces of who makes it and who doesn’t, and that’s been a failure of the dairy industry.”

Most farmers wouldn’t really choose to do customer service as they would rather focus just on farming and taking care of the cows, not running a store. Many have turned to this to preserve their livelihoods, their dairy farms.

“The whole reason we are doing this is because the Milk Marketing Board has failed the farmers, the dairy industry has failed the farmers. How many farms has Pennsylvania lost since 2015?” Simpson pondered aloud. “Within five miles of us, we have lost five or six farms since 2015, so we started selling our own milk with a permit from PDA in 2016.”

Simpson is part of the fourth generation at Lone Oak Farms, milking 40 cows in the same 1960s barn, and diversifying over the years instead of expanding the dairy herd. Now he gets calls from other farmers with all herd sizes wondering how they got started, including large farms wanting to scale back their herd size and get closer to consumers.

When Lone Oak shared their public post to customers on facebook that their raw milk and chocolate milk would no longer be available at Back to Nature, and encouraged their customers in Indiana, Pennsylvania to come the extra 20 miles to the farm in Marion Center, the response was overwhelming.

As the post was shared multiple times, PMMB executive secretary Carol Hardbarger commented that the PMMB staff was looking into what could be done, but that they had to “follow the law.”

The law, according to the flow chart found at the PMMB website (above), stipulates that any dairy farmer selling more than 1500 pounds of milk per month (less than 6 gallons per day) direct to consumers, would have to be a licensed Milk Dealer if they sold any of that milk at a site off the farm or if they sold more than two gallons per day to one customer.

This week, an official response from PMMB executive secretary Hardbarger notes that, “we have officially put licensing of small processors on hold until we decide what to do, sending a letter from me to each not licensed yet, to the ag committees with an explanation, and to PDA.”

But how did this come about and what will happen going forward?

If this requirement is truly part of the law, and if it requires small producers selling their very own milk privately in small amounts must be licensed as Milk Dealers, why have we not heard about it before?

In fact, a Penn State extension educator preparing for a value-added dairy seminar reached out to Farmshine for clarification after reading about the issue in Market Moos last week. She wanted to know why this was never brought to her attention when she asked state agencies for all of the things a small value-added dairy producer needed to know and do to sell milk and dairy products made on the farm. She wanted clarification.

According to Hardbarger, small producers, and those with raw milk permits have received packets and calls in the past, but that a list of raw milk permits was made available to PMMB recently through the online data-sharing that was set up this year between PDA and PMMB now that the weigh-sampler certification work PMMB used to help with has transferred exclusively to PDA. This put the list of raw milk permits directly into the PMMB’s hands.

This PDA list of raw milk permits has always been publicly available and updated online. So why was the action to get small producers to become licensed Milk Dealers started in earnest at this particular time? No clear answer has been given, except that the PMMB is now looking at the situation and putting it ‘on hold.’

Perhaps the biggest players in the industry — that have a stake in preserving the price-regulating and milk-accounting functions of the PMMB — are concerned about the increasing number of Pennsylvania producers going this route outside the system with some or all of their milk. Some dairy farmers are making and selling pasteurized milk and dairy products, others are selling raw milk.

In fact, at Ag Progress Days recently, a panel talked about farm transitions and how important value-added direct-to-consumer sales are for Pennsylvania’s agricultural industry. The Commonwealth has the second largest volume of direct-to-consumer sales of farm products in the U.S., and this is growing as farms are also becoming more diversified, the experts shared.

“As farmers, we don’t need another irritant to yield a pearl for PMMB. This (Milk Dealer’s license) is more administrative paperwork and a check we would need to send every month. It’s one more thing,” Simpson explained, listing all of the things they already do to sell milk through their permit with PDA and in general as dairy farmers.

“Fluid milk is breakeven across the spectrum,” he said. “We have enough irritants in a year’s time, and just that statement about irritants and pearls shows the disconnect between farmers and the PMMB.”

Farmers and dairy professionals around the state are questioning the very low 1500-pounds per month threshold on private sales of milk from farms that pushes these small producers into the category of a Milk Dealer — if any of that milk is sold at a store off the farm.

For example, Lone Oak milks just 40 cows and markets about one-third of that as direct-to-consumer sales of milk, chocolate milk, ice cream and yogurt. The rest goes to United Dairy. They are inspected four times a year for the raw milk permit and twice a year for the conventional bulk sales and federal inspection every 18 months as well. The milk tests are done twice every time they pull milk from the tank – once for the private sales and once for the conventional sales. There will also be new types of inspections coming as well, farmers are told.

Yes, small on-farm processors do not need ‘one more thing.’

“The limit for the number of gallons sold privately off the farm needs to be set drastically higher for this (Milk Dealer license),” said Simpson. “We are not even a blip on the radar, so there needs to be very large exemptions if we are to keep small farms in Pennsylvania.”

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Net loss to farmers now $824 mil. over 41 months as change to Class I formula costs farmers $132 mil. so far in 2022

By Sherry Bunting, Farmshine, August 26, 2022

WASHINGTON —  Against the backdrop of declining fluid milk sales, declining Federal Milk Marketing Order (FMMO) participation, coinciding with the accelerated pace of plant mergers, acquisitions and closures in the fluid milk sector, farm bill milk pricing reform discussions are bubbling up.

The two main issues are the negative impact from the Class I price formula change in the last farm bill, and how to ‘fix it,’ as well as how to handle or update processor ‘make allowances’ that are embedded within the Class III and IV price formulas. 

Other issues are also surfacing regarding the pricing, marketing, and contracting of milk within and outside of FMMOs as historical pricing relationships become more dysfunctional — in part because of the Class I change. 

The change in the Class I price mover formula was made in the 2018 farm bill and implemented in May 2019. It has cost dairy farmers an estimated $132 million in lost revenue so far in 2022 — increasing the accumulated net loss to $824 million over these 41 months that the new average-plus-74-cents method has replaced 19 years of using the vetted ‘higher of’ formula. 

The change was made by Congress in the last farm bill in the belief that this averaging method would allow processors, retailers and non-traditional milk beverage companies to manage their price risk through hedging while expecting the change to be revenue-neutral to farmers. No hearings or referendums were conducted for this change.

Instead of being revenue-neutral for farmers, the new method has significantly shaved off the tops of the price peaks (graph) and only minimally softened the depth of the price valleys, while returning net lower proceeds to farmers and disrupting pricing relationships to cause further farm mailbox milk check losses in reduced or negative producer price differentials (PPD), reduced FMMO participation (de-pooling) as well as disruption in the way purchased price risk management tools perform against these losses.

In 2022, we are seeing this Class I ‘averaging’ method produce even more concerning results. It is now undervaluing Class I in a way that increases the depth of the valley the milk markets have entered in the past few months (graph), and as the Class IV milk price turned substantially higher this week against a flat-to-lower Class III price, the extent of the market improvement will be shaved in the blend price by the impact on Class I from what is now a $2 to $5 gap between Class III and Class IV milk futures through at least November.

During the height of the Covid pandemic in 2020, the most glaring flaw in the Class I formula change was revealed. Tracking the gains and losses over these 41 months, it’s easy to see the problem. This new formula puts a 74-cents-per-cwt ceiling on how much farmers can benefit from the change, but it fails to put a floor on how much farmers can lose from the change.

The bottomless pit was sorely tested in the second half of 2020, when the Class III and IV prices diverged by as much as $10, creating Class I value losses under the new formula as high as $5.00/cwt.

The bottomless pit is being tested again in 2022. The most recent Class I mover announcements for August and September are undervalued by $1.04 and $1.69, respectively, as Class IV and III have diverged by as much as $4 this year.

In fact, 6 of the first 9 months of 2022 have had a lower Class I milk price as compared to the previous formula. The September 2022 advance Class I mover announced at $23.82 last week would have been $25.31 under the previous ‘higher of’ formula. 

This is the largest loss in value between the two methods since December 2020, when pandemic disruptions and government cheese purchases were blamed for the poor functionality of the new Class I formula.

No such blame can be attributed for the 2022 mover price failure that will have cost farmers $132 million in the first 9 months of 2022 on Class I value, alone, as well as leading to further impacts from reduced or negative PPDs and de-pooling.

The graph tells the story. The pandemic was blamed for 2020’s largest annual formula-based loss of $733 million. This came out to an average loss of $1.68/cwt on all Class I milk shipped in 2020.

These losses continued into the first half of 2021, followed by six months of gains. In 2021, the net gain for the year was $35 million, or 8 cents/cwt., making only a small dent in recovering those prior losses.

Gains from the averaging formula were expected to continue into 2022, but instead, Class IV diverged higher than Class III in most months by more than the $1.48 threshold. Only 2 months in 2022 have shown modest Class I mover gains under the new formula, with the other 7 months racking up increasingly significant value losses – a situation that is expected to continue at least until November, based on current futures markets.

Bottomline, the months of limited gains are not capable of making up for the months of limitless loss, and now the hole is being dug deeper. 

True, USDA made pandemic volatility payments to account for some of the 2020 FMMO class price relationship losses. Those payments were calculated by AMS staff working with milk co-ops and handlers using FMMO payment data.

However, USDA only intended to cover up to $350 million of what are now $824 million in cumulative losses attributed directly to the formula change.

Furthermore, USDA capped the amount of compensation an individual farm could receive, even though there was no cap on the amount the new formula may have cost that farm, especially if it led to reduced or negative PPDs, de-pooling, and as a result, negatively impacted the performance price risk management tools the farm may have purchased.

The estimated $824 million net loss over 41 months equates to an estimated average of 58 cents/cwt loss on every hundredweight of Class I milk shipped in those 41 months.

Using the national average FMMO Class I utilization of 28%, this value loss translates to an average loss to the blend price of 16 cents/cwt for all milk shipped over the 41 months, but some FMMOs have seen steeper impacts where Class I utilization is greater.

This 16-cent average impact on blend price may not sound like much, but over a 41-month period it has hit mailbox milk prices in large chunks of losses and smaller pieces of gains, which impact cash flow and performance of risk management in a domino effect.

The 2022 divergence has been different from 2020 because this year it is Class IV that has been higher than Class III. During the pandemic, it was the other way around.

Because cheese milk is such a driver of dairy sales nationwide, the FMMO class and component pricing is set up so that protein is paid to farmers in the first advance check based on the higher method for valuation of protein in Class III. Meanwhile, other class processors pay into the pool using a lower protein valuation method, so the differences are adjusted based on utilization in the second monthly milk check.

This means when Class III is substantially higher than Class IV, as was the case in 2020-21, there is even more incentive for manufacturers to de-pool milk out of FMMOs compared to when Class IV is higher than Class III.

The PPD, in fact, is defined mathematically as Class III price minus the FMMO statistical uniform blend. Usually that number is positive. In the last half of 2020 and first half of 2021, it was negative for all 7 multiple component pricing FMMOs, while the 4 fat/skim Orders saw skim price eroded by the variance.

Now, the situation is different because Class III has been the lowest priced class in all but one month so far in 2022. The milk being de-pooled — significantly in some orders and less so in others — is the higher-priced Class II and IV milk. The Class II price has surpassed the Class I mover in every settled month of 2022 so far — January through July — and the Class IV price also surpassed the Class I mover in 2 of those 7 months. 

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Are we moving toward cow islands and milk deserts?

Opinion/Analysis

By Sherry Bunting, Farmshine (combined 2 part series Aug. 12 and 19, 2022)

In Class I utilization markets, the landscape is rapidly shifting, and we should pay attention, lest we end up with ‘cow islands’ and ‘milk deserts.’

Farmshine readers may recall in November 2019, I wrote in the Market Moos column about comments made Nov. 5 by Randy Mooney, chairman of both the DFA and NMPF boards during the annual convention in New Orleans of National Milk Producers Federation together with the two checkoff boards — National Dairy Board and United Dairy Industry Association. 

Mooney gave a glimpse of the future in his speech that was podcast. (Listen here at 13:37 minutes). He said he had been “looking at a map,” seeing “plants on top of plants,” and he urged the dairy industry to “collectively consolidate,” to target limited resources “toward those plants that are capable of making the new and innovative products.”

One week later, Dean Foods (Southern Foods Group LLC) filed for bankruptcy as talks between Dean and DFA about a DFA purchase were already underway. It was the first domino right on the heels of Mooney’s comments, followed by Borden filing Chapter 11 two months later in January, and followed by three-years of fresh fluid milk plant closings and changes in ownership against the backdrop of declining fluid milk sales and an influx of new dairy-based beverage innovations, ultrafiltered and shelf-stable milk, as well as lookalike alternatives and blends.

The map today looks a lot different from the one described by Mooney in November 2019 when he urged the industry to “collectively consolidate.” The simultaneous investments in extended shelf-life (ESL) and aseptic packaging are also a sign of the direction of ‘innovation’ Mooney may have been referring to.

Two months prior to Mooney issuing that challenge, I was covering a September 2019 industry meeting in Harrisburg, Pennsylvania, where dairy checkoff presenters made it clear that the emphasis of the future is on launching innovative new beverages and dairy-‘based’ products.

Here is an excerpt from my opinion/analysis of the discussion at that time:

“While we are told that consumers are ditching the gallon jug (although it is still by far the largest sector of sales), and we are told consumers are looking for these new products; at the same time, we are also told that it is the dairy checkoff’s innovation and revitalization strategy to ‘work with industry partners to move consumers away from the habit of reaching for the jug and toward looking for these new and innovative products’ that checkoff dollars are launching.”

These strategy revelations foreshadowed where the fluid milk markets appear to be heading today, and this is also obvious from recent Farmshine articles showing the shifting landscape in cow, farm, and milk production numbers.

When viewing the picture of the map that is emerging, big questions come to mind:

Are today’s Class I milk markets under threat of becoming ‘milk deserts’ as the dairy industry consolidates into ‘cow islands’?

Would dairy farmers benefit from less regulation of Class I pricing in the future so producers outside of the “collectively consolidating” major-player-complex are freer to seek strategies and alliances of their own, to carve out market spaces with consumers desiring and rediscovering fresh and local, to put their checkoff dollars toward promotion that helps their farms remain viable and keeps their regions from becoming milk deserts? 

What role is the industry’s Net Zero Initiative playing behind the scenes, the monitoring, scoring, tracking of carbon, the way energy intensity may be viewed for transportation and refrigeration and other factors in Scope 1, 2 and 3 ESG (Environment, Social, Governance) scores? 

Shelf-stable milk may provide solutions for some emerging (or are they self-inflicted?) milk access and distribution dilemmas, and maybe one view of ESG scoring favors it? But ultimately it also means milk can come from cow islands to milk deserts — from anywhere, to anywhere.

It also becomes clearer why the whole milk bill is having so much trouble moving forward. The industry machine gives lip-service support to the notion of whole milk in schools, but the reality is, the industry is chasing other lanes on this highway to ‘improve’ the school milk ‘experience’ and ensure milk ‘access’ through innovations that at the same time pave the road from the ‘cow islands’ to the ‘milk deserts.’ 

It is now clearer — to me — why the Class I mover formula is such a hotly debated topic. 

If major industry-driving consolidators are looking to transition away from turning over cow to consumer fresh, local/regional milk supplies by turning toward beverage stockpiles that can sit in a warehouse ‘Coca-Cola-style’ at ambient temperatures for six to 12 months, it’s no wonder the consolidators want the ‘higher of’ formula to stay buried. What a subversion that was in the 2018 Farm Bill.

In fact, if the industry is pursuing a transition from fresh, fluid milk to a more emphasis on shelf-stable aseptic milk, such a transition would, in effect, turn the federal milk marketing orders’ purpose and structure — that is tied to Class I fresh fluid milk — completely upside down.

Landscape change has been in motion for years, but let’s look at the past 6 years — Dean had already closed multiple plants and cut producers in the face of Walmart opening it’s own milk bottling plant in Spring 2018. The Class I ‘mover’ formula for pricing fluid milk — the only milk class required to participate in Federal Milk Marketing Orders — was changed in the 2018 Farm Bill that went into effect Sept. 2018. The new Class I mover formula was implemented by USDA in May 2019, resulting in net losses to dairy farmers on their payments for Class I of well over $750 million across 43 months since then.

(Side note: Under the formula change, $436 million of Class I value stayed in processor pockets from May 2019 through October 2019, alone. DFA purchased 44 Dean Foods plants in May 2019 and became by far the largest Class I processor at that time.)

These and other landscape changes were already in motion when Mooney spoke on Nov. 5, 2019 at the convention of NMPF, NDB and UDIA describing the milk map and seeing plants on top of plants and issuing the challenge to “collectively consolidate” to target resources to those plants that can make the innovative new products. 

One week later, Nov. 12, 2019, Dean Foods filed for bankruptcy protection to reorganize and sell assets (mainly to DFA).

Since 2019, this and other major changes have occurred as consolidation of Class I milk markets tightens substantially around high population swaths, leaving in wake the new concerns about milk access that spur the movement toward ESL and aseptic milk. A chain reaction.

What does Mooney’s map look like today after his 2019 call for “collective consolidation” and the targeting of investments to plants that can make the innovative products, the plants that DMI fluid milk revitalization head Paul Ziemnisky told farmers in a 2021 conference call were going to need to be “dual-purpose” — taking in all sorts of ingredients, making all sorts of beverages and products, blending, ultrafiltering, and, we see it now, aseptically packaging?

In addition to the base of Class I processing it already owned a decade ago, the string of DFA mergers has been massive. The most recent acquisitions, along with exits by competitors, essentially funnel even more of the market around key population centers to DFA with its collective consolidation strategy and investments in ESL and aseptic packaging.

The South —

The 14 Southeast states (Maryland to Florida and west to Arkansas) have 29% of the U.S. population. If you include Texas and Missouri crossover milk flows, we are talking about 37% of the U.S. population. 

The major players in the greater Southeast fluid milk market include DFA enlarged by its Dean purchases, Kroger supplied by Select and DFA, Prairie Farms with its own plants, DFA and Prairie Farms with joint ownership of Hiland Dairy plants, Publix supermarkets with its own plants, an uncertain future for four remaining Borden plants in the region as Borden has exited even the retail market in some of these states, and a handful of other fluid milk processors. 

In Texas, alone, DFA now owns or jointly owns a huge swath of the fluid milk processing plants, having purchased all Dean assets in the Lone Star State in the May 2020 bankruptcy sale and now positioned to gain joint ownership of all Borden Texas holdings through the announced sale to Hiland Dairy

The Midwest — 

Just looking at the greater Chicago, Milwaukee, Green Bay metropolis, the population totals are a lake-clustered 6% of U.S. population. Given the recent closure by Borden of the former Dean plants in Chemung, Illinois and De Pere, Wisconsin, this market is in flux with DFA owning various supply plants including a former Dean plant in Illinois and one in Iowa with Prairie Farms having purchased several of the Dean plants serving the region.

In the Mideast, there is Coca Cola with fairlife, Walmart and Kroger among the supermarkets with their own processing, and DFA owning two former Dean plants in Ohio, two in Indiana, two in Michigan, and a handful of other bottlers. 

In the West: DFA owns a former Dean plant in New Mexico, two in Colorado, two in Montana, one in Idaho, two in Utah, one in Nevada and one in California, as well as other plants, of course. 

The Northeast —

This brings us to the Northeast from Pennsylvania to Maine, where 18% of the U.S. population lives, and where consolidation of Class I markets, especially around the major Boston-NYC-Philadelphia metropolis have consolidated rapidly against the backdrop of declining fluid milk sales and a big push by non-dairy alternative beverage launches from former and current dairy processors.

DFA owns two former Dean plants in Massachusetts, one in New York, all four in Pennsylvania, one in New Jersey. The 2019 merger with St. Alban’s solidified additional New England fluid milk market under DFA. In 2013, DFA had purchased the Dairy Maid plant from the Rona family in Maryland; in 2014, the prominent Oakhurst plant in Maine; and in 2017, the Cumberland Dairy plant in South Jersey.

More recently, DFA struck a 2021 deal with Wakefern Foods to supply their Bowl and Basket and other milk, dairy, and non-dairy brands for the various supermarket chains and convenience stores under the Wakefern umbrella covering the greater New York City metropolis into New Jersey and eastern Pennsylvania. This milk had previously been supplied by independent farms, processed at Wakefern’s own iconic Readington Farms plant in North Jersey, which Wakefern subsequently closed in January 2022.

The long and twisted tale begs additional questions:

As Borden has dwindled in short order from 14 plants to five serving the most populous region of the U.S. – the Southland — what will happen with the remaining five plants in Ohio, Kentucky, Georgia, Louisiana, and Florida? What will become of Elsie the Cow and Borden’s iconic brands and new products?

What percentage of the “collectively consolidated” U.S. fluid milk market does DFA now completely or partially own and/or control?

Will the “collective consolidation” in the form of closures, sales and mergers continue to push shelf-stable ESL and aseptic milk into Class I retail markets and especially schools… and will consumers, especially kids, like this milk and drink it?

What role are rising energy prices, climate ESG-scoring and net-zero pledges and proclamations playing in the plant closures and shifts toward fewer school and retail milk deliveries, less refrigeration, more forward thrust for shelf-stable and lactose-free milk, as well as innovations into evermore non-dairy launches and so-called flexitarian blending and pairing?

Looking ahead at how not only governments around the world, but also corporations, creditors and investors are positioning for climate/carbon tracking, ESG scoring and the so-called Great Reset, the Net Zero economy, there’s little doubt that these factors are driving the direction of fluid milk “innovation” over the 12 years that DMI’s Innovation Center has coordinated the so-called ‘fluid milk revitalization’ initiative — at the same time developing the FARM program and the Net Zero Initiative.

The unloading of nine Borden plants in five months under Gregg Engles, the CEO of “New Borden” and former CEO of “Old Dean” is also not surprising. Engles is referred to in chronicles of dairy history not only as “the great consolidator” but also as “industry transformer.”

In addition to being CEO of Borden, Engles is chairman and managing partner of one of the two private equity investment firms that purchased the Borden assets in bankruptcy in June 2020. Investment firms fancy themselves at the forefront of ESG scoring.

Engles is also one of only two U.S. members of the Danone board of directors. Danone, owner of former Dean’s WhiteWave, including Silk plant-based and Horizon Organic milk, has positioned itself in the forefront on 2030 ESG goals, according to its 2019 ‘one planet, one health’ template that has also driven consolidation and market loss in the Northeast. 

Not only is Danone dumping clusters of its Horizon milk-supplying organic family dairy farms, it continues to heavily invest in non-dairy processing, branding, launching and marketing of alternative lookalike dairy products and beverages, including Next Milk, Not Milk and Wondermilk. 

There is plenty of food-for-thought to chew on here from the positives to the negatives of innovation, consolidation, and climate ESGs hitting full-throttle in tandem. These issues require forward-looking discussion so dairy farmers in areas with substantial reliance on Class I fluid milk sales can navigate the road ahead and examine all lanes on this highway that appears to be leading to cow islands and milk deserts.

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More Borden plants close under ‘great consolidator’ Gregg Engles

Checkoff cites ‘uncontrollable circumstances’  bringing shelf-stable milk to schools

With an uncertain future for five remaining Borden plants after five plant closures, one partial closure (Class I) and three sell-offs since April, what does the future hold for fluid milk markets in the South and the iconic Elsie? Screen capture, bordendairy.com

By Sherry Bunting, Farmshine, Aug. 12, 2022

DALLAS, Tex. — Last week, yet another round of plant closures was announced by Borden, well-timed as a factor said to be driving shelf-stable milk into schools and other venues in affected regions like the Southeast; however, an industry “innovation” shift to the convenience, “experience ” and reduced deliveries (carbon/energy cost and intensity) said to be associated with lactose-free extended shelf-life and aseptically-packaged milk has been gradually in the making for months, if not years.

The Dallas-based Borden, owned by two private equity firms, will close fluid milk plants in Dothan, Alabama and Hattiesburg, Mississippi “no later than Sept. 30, 2022, and will no longer produce in these states,” the company said.

The Aug. 3 announcement represents Borden’s fifth and sixth plant closures in as many months.

A string of sell-offs and closings since April have occurred under “the great consolidator” — former Dean Foods CEO Gregg Engles. Engles has been CEO of ‘new Borden’ since June 2020, when his Capital Peak Partners, along with Borden bankruptcy creditor KKR & Co., together purchased substantially all assets to form New Dairy OpCo, doing business as Borden Dairy.

“While the decision was difficult, the company has determined that it could no longer support continued production at those locations,” Borden said in the Aug. 3 statement that was virtually identical to the statement released April 4 announcing previous closures of its Miami, Florida and Charleston, South Carolina plants by May 31, including a stated withdrawal from the South Carolina retail market as well.

In addition to ending fluid milk processing at six of its 14 plants — four in the Southeast, two in the Midwest — Borden announced in late June its plans to sell all Texas holdings to Hiland Dairy, including three plants in Austin, Conroe and Dallas, associated branches and other assets.

Hiland Dairy, headquartered in Kansas City, Missouri, is jointly owned by the nation’s largest milk cooperative Dairy Farmers of America (DFA), headquartered in Kansas City, Kansas, and Prairie Farms Dairy, a milk cooperative headquartered in Edwardsville, Illinois that includes the former Wisconsin-based Swiss Valley co-op.

DFA already separately owns the Borden brand license for cheese.

Also in June, Borden announced an end to fluid milk operations in Illinois and Wisconsin at two former Dean plants the company purchased jointly with Select Milk Producers in June 2021 after a U.S. District Court required DFA to divest them.

Borden closed the Harvard (Chemung Township), Illinois plant in July, and local newspaper accounts note the community is hopeful a food processing company other than dairy will purchase the FDA-approved facilities. Borden also ceased bottling at De Pere, Wisconsin on July 9, but continues to make sour cream products at that location.

The combined plant closures and sales by Borden now stand at nine of the 14 plants, leaving an uncertain future for the remaining five plants in Cleveland, Ohio; London, Kentucky; Decatur, Georgia; Lafayette, Louisiana; and Winter Haven, Florida. The sales and closures, including announced withdrawals from some markets, having combined effects of funneling more market share to DFA and to some degree Prairie Farms and others against a backdrop of additional Class I milk plant closures and reorganizations during the 24 months since assets from number one Dean and number two Borden were sold in separate bankruptcy filings.

“Borden products have a distribution area which covers a wide swath of the lower Southeast, including the Gulf’s coastal tourist areas. The Dutch Chocolate is a favorite of milk connoisseurs, and their recent introductions of flavored milks have received great reviews,” an Aug. 6 Milksheds Blog post by AgriVoice stated. A number of Georgia, Tennessee, Alabama and Mississippi farms may be affected by the most recent closures.

Meanwhile, the closures are affecting milk access for schools and at retail. According to its website, Borden serves 9,000 schools in the U.S.  

A random sampling of the many Facebook-posted photos by individuals from northern Illinois to Green Bay, Wisconsin from July 15 to the present after Borden and Select closed two former Dean plants in Illinois and Wisconsin that they jointly purchased from DFA in June 2021. Screen capture, Facebook

In recent weeks, photos have been circulating of empty dairy cases in the Green Bay, Milwaukee and greater Chicago region with signs stating: “Due to milk plant closures, we are currently out of stock on one gallon and half gallons of milk.”

School milk contracts in that region are also reportedly impacted.

However, most notable is the impact on school milk contracts in the Southeast as students begin returning to classrooms.

According to the Aug. 5 online Dairy Alliance newsletter to Southeast dairy farmers, the regional checkoff organization confirmed the latest round of Borden closures are plants that “currently provide milk to 494 school districts… and use around 95 million units a school year.”

The Dairy Alliance reported it is working with schools “to keep milk the top choice for students… We do not want schools to apply for an emergency waiver that would exempt them from USDA requirements of serving milk until they find a supplier.

“These uncontrollable circumstances will lead to more aseptic milk in the region, but this is better than losing milk completely in school districts that have little or no options,” the newsletter stated.

Southeast dairy farmers report their mailed copy of a Dairy Alliance newsletter in July had already forecast more shelf-stable milk coming to schools as part of the strategic plan to protect and grow milk sales by ensuring milk accessibility and improving the school milk experience. In addition to the Borden plant closures, the report cited school milk “hurdles” such as inadequate refrigerated space requiring multiple frequent deliveries amid rising fuel and energy costs and labor shortages.

Southeast dairy farmers were informed that the Dairy Alliance School Wellness Team was already working to mitigate bidding issues with shelf-stable milk for school districts in Alabama, Georgia, South Carolina and Virginia.

Diversified Foods Inc. (DFI), headquartered in New Orleans, was identified as the main supplier of this shelf-stable milk to schools in the region, reportedly sourcing milk through Maryland-Virginia, DFA and Borden.

In addition, DFI is a main sponsor of the Feeding America conference taking place in Philadelphia this week (Aug 9-11), where it is previewing for nutrition program attendees their new lactose-free shelf-stable chocolate milk. DFI also sponsored the School Nutrition Association national conference in Orlando earlier this summer, and social media photos of the booth show the shelf-stable, aseptically packaged versions of brands like DairyPure, TruMoo, Borden and Prairie Farms, along with DFI’s own ‘Pantry Fresh’ shelf-stable milk in supermarket and school sizes.

Coinciding with the flurry of Borden closings and shelf-stable milk hookups for schools, DFA announced last week (Aug. 1) that it will acquire two extended shelf-life (ESL) plants from the Orrville, Ohio based Smith Dairy. The SmithFoods plants will operate under DFA Dairy Brands as Richmond Beverage Solutions, Richmond, Indiana and Pacific Dairy Solutions, Pacific, Missouri. A SmithFoods statement noted the transfer would not affect the farms or employees associated with these plants.

This acquisition aligns with DFA’s similar strategy to “increase investment and expand ownership in this (shelf-stable) space… and create synergies between our other extended shelf-life and aseptic facilities,” the DFA statement noted.

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Lancaster County ranked 11th as dairy industry consolidates to 54 counties shipping 50% of FMMO milk

By Sherry Bunting, Farmshine, July 2022

LENEXA, Kan. — Milk marketings through Federal Milk Marketing Orders (FMMO) accounted for 60.5% of total U.S. milk production in 2021, according to USDA FMMO statistics.

Last week, the Market Administrator for the Central FMMO 32 released its semi-annual report painting a picture of these marketings in the form of milk totals and FMMO-marketed percentages at the county-level across the U.S. — using the month of December 2021 as the “snapshot.”

Ranked 11th in the nation, Lancaster County, Pennsylvania remains the only county east of the Mississippi River that is among the top 13 counties accounting for 25% of the milk marketed through FMMOs. Seven of those top 13 counties are in California, two in Arizona, and one each in Texas, Washington and Colorado.

Of the top 54 counties accounting for 50% of the milk marketed through the FMMO system in December, Franklin County, Pennsylvania is included, along with four counties in New York (St. Lawrence, Genessee, Wyoming and Cayuga counties), four in Michigan, 12 in Wisconsin, two in Minnesota, six in Texas, four in New Mexico, two in California, and one each in Indiana, Iowa, Colorado, Kansas, Washington and Oregon.

According to the Central FMMO Market Administrator’s report, “the origin of milk marketings (through FMMOs) remains highly concentrated.”

In fact, it became more concentrated as the 54 counties that accounted for 50% of FMMO milk marketings in December 2021 was 59 counties in December 2016.

Those 54 counties represent just 3.9% of the total 1395 counties that had any FMMO milk marketings.

The report tallied more than 67 million pounds of milk marketed in the month of December 2021 by each of those 54 largest FMMO counties. By contrast, 624 of the 1395 counties marketed less than one million pounds each in December 2021.

Of the 1395 counties marketing milk through FMMOs, 57 increased their FMMO-marketed milk pounds while 1139 counties decreased in December 2021.

Twice a year, the Central FMMO 32 collects this data from all FMMOs to create these maps depicting milk production by county across the U.S. These maps illustrate the concentration of milk marketed through FMMOs within the 11 FMMOs for December 2021. 

Thus the accompanying charts and maps are monthly totals based on December 2021 FMMO milk marketings and are a ‘snapshot’ of milk production based on one month and based on milk marketed through FMMOs, not including the 39.5% of total U.S. milk production that was marketed outside of the FMMO system in 2021.

A protest everyone should care about — Dutch government: ‘Not all farmers can continue’; Dutch farmers: ‘We Stay’

Ad Baltus milks 130 cows on roughly 170 acres in North Holland, where the government announced a new nitrogen (emissions) policy in June that has farmers rising up in protest.

By Sherry Bunting, Farmshine, July 22, 2022

SCHERMERHORN, Netherlands — “The honest message is not all farmers can continue their business.” These brutal words were part of the Dutch government’s announcement in June to cut in half the emissions of nitrous oxide and ammonia in a detailed farm nitrogen map of the Netherlands. They’ve given provincial authorities one year to figure out how they will meet their aggressive provincial targets by 2027 as depicted in mapped zones.

This means both livestock numbers and use of fertilizers will be slashed, with the most drastic reductions of 70 to 90% on farms that are close to nature areas, especially those deemed part of Natura 2000, the legally protected habitats across EU member nations.

Ad Baltus is just one of the 40,000 Dutch farmers protesting the plan since mid-June with tractor formations, blockades and other activities in The Hague (capitol) and in towns and rural lands beyond. 

They are concerned for their futures, for their farms, families, communities and country. 

Baltus and his tractor have been to countless protests throughout the country, accompanied by his faithful dog Knoester. Sharing aerial photos of a formation he helped organize in his own neighborhood, he explains the hashtag in Dutch means #WeStay.

“We are letting our government know we are not going anywhere.”

A tractor-formation spelling out Dutch farmers’ message to The Hague: ‘NH #WijBlijven!’ It means “We Stay. We are not going anywhere,” says Ad Baltus, a dairy farmer who co-organized the June protest near his farm in Schermerhorn before the group traveled to Stroe the next day where an estimated 30,000 farmers protested the Dutch government’s nitrogen policy. 

Baltus farms 70 hectares (170 acres) in the North Holland village of Schermerhorn with his wife and 7-year-old daughter, milking 130 dairy cows. In summers the cows graze, and he also grows corn and collects both fresh grass and dry hay from fields.

“On our farm, we have to reduce the amount of nitrogen or sell cows. That’s a possibility. Or we have to do something with technology to reduce the nitrogen. We have been given only five years from now,” Baltus explains in a Farmshine phone interview Wednesday.

His farm is among the ‘luckier’ ones, in a zone to reduce 10 to 15%. 

No future for some

“It depends where they are situated, whether farms are near to nature terrain. Some must reduce between 50 and 70%, and some have to reduce 90%,” Baltus confirms. “In a zone between 70 and 90%, there is no possibility to have an income from your farm. That has a big impact in our farming industry.”

The calculation of nitrogen emissions is made “from what the cows produce inside the stable, and what is being produced when manure is spread over fields and then (from that calculation) is what farms have to reduce,” he says. The use of chemical fertilizers is also part of the calculation.

This is in addition to what the EU is trying to impose in the European Green Deal and Farm to Fork agenda that includes many other manure regulations.

Furthermore, every farm in the Netherlands must have a permit and every farm animal on that farm must be accounted for on that permit, including the horses.

The Dutch government backed up the nitrogen policy with an additional 24.3 billion euro ($25 billion USD) for the transition. 

One Dutch news source says the environmental planning agency is recommending payment of 130% of the land and asset value of farmers who stop farming, while other sources point out the base valuation will plummet where the ability to earn income on the assets is now virtually eliminated.

Expecting 30% to sell

By the government’s own estimates, 30% of farmers are expected to sell out or cease livestock and dairy operations, but others see a greater loss coming. Farmers who retire by selling to the government do make space for other farms in their zones to continue with slightly smaller reductions.

For perspective, the Netherlands encompasses a land base a bit larger than the state of Maryland, with 54% of this land reported as agricultural land. There are more than 17 million people with around 40,000 farmers, 3.8 million total cattle, including 1.5 million dairy cows, 11.4 million pigs, 850,000 sheep, 480,000 dairy goats and just about 100 million chickens.

In touting the plan, officials point to the country’s dense population of livestock and its ability to produce more food than is needed within its borders, suggesting that farm exits are not a food security concern. The Netherlands ranks second in the world in agricultural exports worth 94.5 billion euro ($96.8 billion USD) in 2019.

Dutch farmers, however, see this as short-sighted at a time when the Russian invasion of Ukraine and other global disruptions are putting pressure on global food supplies. They are vowing to continue their protests. 

Bale art in the Netherlands has a message also. Displays like this are a ‘public-friendly’ way to protest the nitrogen policy without undue impact on the public. The red handkerchief has become the sign of support.

After weeks of tractor parades obstructing traffic and supermarket food deliveries, Baltus reports ‘public-friendly’ methods are being used to keep the farmers’ concerns visible. For example, wrapped round bales are painted with sad and angry faces with the red handkerchief, the sign of solidarity for the farmer resistance.

He shares a local newscast where another dairy farmer, Sophie Ruiter, 29, from Grootschermer explains the drastic consequences for her farm — that only 60 of her 200 cows could remain.

Turned upside down

“We think it’s really crazy that we are being punished, but a company like Tata (Steel) is given all the time to meet the targets. For us, it means that we have no future,” she says, speaking to the newscaster from behind the wheel of a mobile platform while her friend Robin Groot, holding a bag of Dutch flags, hangs them upside down on lamp posts along a provincial roadway.

Groot describes this as a “public-friendly action. We want to show that all those nitrogen measures have turned the Netherlands upside down.”

“The inverted flag used to be used in shipping as a distress signal, and we now also do that as farmers, because something is really going on,” adds Ruiter.

Removing farms doesn’t solve the problem of pollution, as other industrial complexes produce nitrous and other emissions, and those industries are not being targeted the same way. At the root is concern that “green nitrogen will be replaced by grey nitrogen,” another farmer explains during a tractor formation near a business park where unfair treatment of farmers vs. other industries was highlighted.

Solutions vs. sell-outs

Farm groups say that even though an intermediary has been named for “negotiations,” there are no real negotiations occurring. They say the rapid timeline and high level of reductions signal the government’s unwillingness to look at other solutions, that they just want to cut livestock numbers and buy farms.

“They believe that farms near nature are harming it, but we don’t see it,” says Baltus, sharing comparative photos and discussion.

What kind of nature?

“In Holland there is no nature like in Alaska or Siberia. All of the nature we have is nature that is made by people. The question we ask is what kind of nature do you want? Nature as it was in Holland from 10 years ago, or 100 years ago or 1000 years ago? They don’t give a good explanation for what they want,” he relates. 

“In some areas, they want plants and animals that never lived here – not even 10,000 years ago,” he reports. “In Holland, there are nature areas where they got rid of the topsoil to create a kind of nature (or semi-natural ungrazed grassland).”

The NGOs (non-governmental organizations) want to create it with their goal that is very different from the nature that exists, he explains.

Grasslands without grazing?

“The nature near my farm is a nature where cows and grasslands have been for 500 years, and now they say ‘no cows are needed in that area?’ We don’t understand that. Cows and farmers make that terrain, and it is because of farmers and cows that the nature is in there.”

Emissions have been discussed for 10 years. In fact, when milk quotas were lifted and dairy herds grew modestly, phosphate limits were used in 2016 to force herd reductions (see chart). Dairy cow numbers have been relatively stable over the past decade, and on the downswing since 2017. At the same time Dutch agriculture is progressive in technology and farming practices. Many farmers have already made investments in their management of nitrogen.

“We reduced in the past 40 years already 70%, but every time, the government wants more. We have a goal, and they always want more. It is never enough,” Baltus observes.

Like other Dutch farmers, he is proud of the environmental record and productivity of his country’s farms, and the substantial economic benefits they generate for their communities.

A different road

“The farmers are on a different road from the government. On the farmer side, we are thinking solutions, but on the government side, they don’t want to do anything with that. We think in the long run we can reduce more than what’s ahead now, but we need technical solutions, and there are companies in Holland developing technology to separate urine from feces so the nitrogen can be managed even better,” he explains.

A few farms are piloting such innovations, “but it is 2 to 3 years from being ready for practices,” he adds. “We need more time, and the amount of the reduction is much too high, but the government is not taking the innovation as a solution. They want to reduce livestock.”

For its part, the Dutch government maintains it has been “forced” to take this action as court rulings — brought on by activist NGOs — cite the country’s pledges on emissions, and those rulings now block infrastructure and construction projects with no future reductions to offset the emissions these projects would generate. The offsets now come first.

This train has been on the track for a while now, with many countries (as well as cities, corporations and investors) on board.

Cutting nitrogen emissions in half by 2030 is on the targets of at least 30 UN member nations with policy bubbling up in other EU nations. In keeping with the 2019 intergovernmental adoption of a UN resolution on Sustainable Nitrogen Management (Columbo Declaration), such legally binding pledges are now part of UN Sustainable Development Goals (SDGs) that also affect a nation’s ESG (Environment, Social, Governance) score. 

Meanwhile, farmers fear Holland will be the next test-country. They point to what is happening in the first test — Sri Lanka, a small nation off the coast of India that set itself up to be global nitrogen management leader with policies ending use of chemical fertilizers and other measures to meet targets and achieve its high 98.1 ESG score.

This high score mattered little when the reality hit the people in crop failures, farm economic collapse, new levels of food insecurity, which along with economic policies have thrown the country into its worst economic crisis in decades. In recent weeks, Sri Lanken citizens stormed the capitol, the current president fled, and the country is in chaos.

Holland’s plan, according to government documents, is described by officials to bring order and clarity about “whether and how farmers can continue with their business. The (nitrogen) minister sees three options for farmers: become (more) sustainable, relocate or stop.”

This reasoning fuels tensions with farmers who say they are being told to achieve what is unattainable in a short time with few options and no future for their children. In the case of retiring farmers without a next generation, the pathway is clearer, even as the larger concerns remain.

Asked if this feels like a ‘land grab’, if it’s more about land than nitrogen, Baltus was fair-minded and clear.

“Is this about getting the land? Possibly. But we need evidence for that. Thinking in theories or plots is difficult for me as a farmer. Yes, they need land for housing and building, and they want to do nature areas. When the government comes to a farmer, it is like a farmer buying a piece of land from another farmer, you negotiate, but the government is doing it now in a way to get it for a cheaper price,” he relates.

“Yes, the government wants to buy farms to reduce livestock,” he adds. “That is why farmers are angry. The government wants to spend about 25 billion euro to buy-out farmers, while the farmers are asking them to spend 5 billion euro to reduce the same amount of nitrogen with the technology that is coming.’”

Baltus is quick to point out that when farming stops, others are also affected.

“The whole rural area depends on all the farmers, and when there is 20, 30 or 50% of farmers stopping farming, this has an effect on the dairy industry, the feeding industry, all of the rural people who do work on farms, electrician, plumber, contractor… the whole system has big effects.”

Sun sets on a mid-July tractor formation as Dutch farmers continue to protest the nitrogen policy announced in mid-June, two weeks before the parliament’s 6-week summer recess began. 

Public generally supportive

In general, Baltus sees the public as supportive of the farmers, but he observes a “thin line” of weariness.

“When we protest and people have trouble with that, by waiting in traffic or there is no food distribution, it is difficult to hold the support of the population,” he explains. “We see that the protest is now softening a bit with ‘public-friendly’ actions. But I don’t think protests will stop until the government hears the farmers. If the government doesn’t hear the farmers, then the protests will go on, and not always in a friendly way.”

He sees this issue attracting voters to a relatively new political party, the BoerBurgerBeweging (Farmers and Citizens Movement), which has some representation in parliament.

Expressing little hope for negotiation at this point, farmers say their hope may be a future election landslide depending on how this problem turns out, especially in light of the government’s statements that it has not ruled out the possibility of “expropriating land (forcibly) from farmers who don’t comply.”

Dutch farmers have already complied with many environmental regulations and changes. Farmers want to continue to do more on environmental issues, Baltus affirms: “We have done that for hundreds of years.

My father 50 years ago fed cows differently than I do now, but we need time for changing more, and we need some support to change. Selling out doesn’t help us. It’s the wrong way for the money to flow. We say spend that money for innovation – for more effect with less money.”

Cows on this North Holland dairy farm graze in the summer, with fresh grass and dry hay collected from fields for feeding in the barn. Dutch farms face a new policy requiring 10 to 90% reductions in nitrogen compound emissions as the government prepares to buy farms and assets.

Worldwide problem

“I think the problem in Holland with the farmers and the government, you will see this worldwide,” he suggests. “Just see what is happening in Sri Lanka right now, and in India last year there were big farmer protests.”

He observes farmers in Germany, Belgium, Poland and Italy are protesting in solidarity, with signs “no farmers, no food”, and banners reading “Stop the Great Reset.

“It is a worldwide problem that we think food is something that is growing in the supermarket. The government, they take it for (granted), but it is a lot of work to make food, and farmers are at the end of the rope when it comes to getting a price for their product. Farming is not so profitable at the moment, but at the same time,” says Baltus, identifying with farmers around the world:

“Many consumers cannot pay more for their food. Between the farmer and the consumer, there are many steps for money to stay in. The very big problem we forget is we live on planet earth with billions of people more than 50 years ago, and every mouth has to have food. We can’t feed everyone with just biological farming or by losing farms.”

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