Monthly Archives: March 2024

‘Bird Flu’ deemed culprit in dairy cow ‘mystery illness,’ migratory wild birds blamed

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Texas detections point to wild migratory birds as source; Public risk remains low; Cows exhibit low appetite, reduced rumination, sharply reduced milk production

Symptoms of what officials are saying are the first ever detections of bird flu in dairy cows include a sharp drop in milk production, reduced appetite, reduced rumination, and colostrum-like milk appearance. As the investigation continues in the Texas Panhandle region, incl. Kansas and New Mexico, dairy producers are implementing advanced biosecurity measures. Texas Ag Commissioner Sid Miller cited “ongoing economic impacts to facilities as herds that are greatly impacted may lose up to 40% of their milk production for 7 to 10 days until symptoms subside. There is no threat to the public,” he said. S. Bunting file photo

By Sherry Bunting, Farmshine, March 29, 2024 (updated since print edition went to press)

WASHINGTON – Federal and state officials confirmed this week that highly pathogenic avian influenza (HPAI), otherwise known as bird flu, has been detected and deemed the culprit in the mystery illness “among primarily older (mid-lactation) dairy cows in Texas, Kansas, and New Mexico that is causing decreased lactation, low appetite, and other symptoms.” 

USDA’s Animal and Plant Health Inspection Service (APHIS) believes “wild migratory birds to be the source of infection as viral testing and epidemiological efforts continue.”

In an email exchange with the APHIS press office on Wed., March 27, Farmshine asked if cow-to-cow transmission has been ruled out at this juncture.

They could not answer directly, but on background, gave this response that mirrored a portion of the March 25 APHIS press release: 

“The testing from Texas shows consistency with the strain seen in wild birds. As the release shared, based on the findings, the detections in Texas appear to have been introduced by wild birds. Federal and state agencies are moving quickly to conduct additional testing for HPAI, as well as viral genome sequencing, so that we can better understand the situation, including characterization of the HPAI strain or strains associated with these detections.”

The answer appears to be that cow-to-cow transmission is not suspected as birds are the vector in what APHIS describes as a “rapidly evolving situation” and one in which they are continuing to investigate, working closely with the Food and Drug Administration (FDA), the Centers for Disease Control and Prevention (CDC), as well as state veterinary and public health officials.

Furthermore, if migratory wild birds are the source, then this could be a seasonal anomaly that may shift or dissipate soon.

Word spread quickly on Monday, March 25 as public announcements from federal and state agencies and industry organizations were released in rapid, near simultaneous succession within minutes of the USDA APHIS press release announcing that, “Unpasteurized, clinical samples of milk from sick cattle collected from two dairy farms in Kansas and one in Texas, as well as an oropharyngeal swab from another dairy in Texas have all tested positive for HPAI. Additional testing was initiated on Friday, March 22, and over the weekend, because farms have also reported finding deceased wild birds on their properties.”

Preliminary testing by the National Veterinary Services Laboratories further confirmed that, “No changes to the virus have been found that would make it more transmissible to humans, which would indicate that the current risk to the public remains low.”

Announcements from all corners of health and industry conveyed this main message: “At this stage, there is no concern about the safety of the commercial milk supply or that this circumstance poses a risk to consumer health. The commercial milk supply remains safe due to both federal animal health requirements and pasteurization.”

Bird flu (avian influenza) is a disease caused by a family of flu viruses primarily transmitted among birds.

According to USDA, there are two classifications, and the ‘high’ or ‘low’ pathogenic acronyms are based on the genetic sequence and the severity of disease caused in poultry: HPAI (high pathogenic, meaning it causes severe disease in poultry), which is found mostly in domestic poultry and LPAI (low pathogenic, meaning it causes no signs or few signs of disease in poultry), which is often seen in wild birds.

“It is too soon to predict if all of the recent reports of unexplained illnesses in dairy cattle in the U.S. are due to HPAI. Veterinarians and the dairy industry are working collaboratively with state and federal officials during the ongoing investigation,” noted the American Association of Bovine Practitioners in a March 25 press release

AABP reports that HPAI (H5N1) is most commonly found in birds and poultry with wild waterfowl as known carriers. According to the USDA, 48 states have had cases of HPAI in poultry and wild birds since the outbreak began in 2022. Over 82 million birds have been affected. There have also been reports of over 200 mammals diagnosed with the virus.

The samples from Texas and Kansas are the first confirmed detections of HPAI (H5N1) in cattle anywhere in the U.S. and only the second mammalian detection in Texas, the first being a skunk. 

This marks the second detection in a ruminant animal in the U.S. The first was just a week prior, when HPAI was detected in a goat on a Minnesota farm where chickens and ducks had been quarantined for previous HPAI detection.

In a March 26 American Veterinary Medical Association newsletter, Dr. Brian Hoefs, Minnesota state veterinarian, noted that, “Thankfully, research to-date has shown mammals appear to be dead-end hosts, which means they’re unlikely to spread HPAI further.”

“Mammals, including cows, do not spread avian influenza — it requires birds as the vector of transmission, and it’s extremely rare for the virus to affect humans because most people will never have direct and prolonged contact with an infected bird, especially on a dairy farm,” a joint dairy industry statement by National Milk Producers Federation (NMPF), International Dairy Foods Association (IDFA), Dairy Management Inc (DMI), and U.S. Dairy Export Council (USDEC) reported on March 25. 

Since early 2022, when HPAI was first confirmed in wild waterfowl in the Atlantic flyways and the first domestic poultry flocks were affected, APHIS has been tracking wild mammal detections in the U.S. The list includes skunks, racoon, red and gray fox, coyote, several types of bears, mountain lions, bobcats, fishers, opossums, martens, and harbor seals – all having in common their known contact with wild waterfowl and/or domestic poultry and/or their eggs. 

The APHIS webpage devoted to avian influenza notes that, “Wild birds can be infected with HPAI and still show no signs of illness. They can carry the disease to new areas when migrating, potentially exposing domestic poultry to the virus.”

This is why APHIS conducts a wild bird surveillance program to provide early warning system for the introduction and distribution of avian influenza viruses of concern in the U.S., allowing APHIS and the poultry industry to take timely and rapid action to reduce the risk of spread to the poultry industry and other populations of concern.

For the U.S. poultry industry, HPAI detection in domestic flocks means implementing response programs for flock depopulation and geographic quarantine to prevent the spread because of the high mortality rate in domestic poultry and bird-to-bird transmission within a production setting. According to USDA, approximately 58 million birds were killed in such depopulations in the U.S. last year.

The current detection in cattle is different because there is no confirmation of cow-to-cow transmission, and according to AABP, “there have been no confirmed deaths in cattle due to this disease. Cattle appear to recover in two to three weeks with supportive care.”

“Unlike affected poultry, I foresee there will be no need to depopulate dairy herds. Cattle are expected to fully recover,” said Texas Agriculture Commissioner Sid Miller in a press statement March 25, noting that the Texas dairy industry contributes roughly $50 billion in state economic activity, ranking 4th in milk production nationwide in 2023, moving up to 3rd since the start of 2024.

Assuring consumers of rigorous safety measures already in place and soothing concerns about potential milk supply shortages, Commissioner Miller highlighted pasteurization and milk diversion protocols and the “limited number of affected herds.”

The required dumping of abnormal-appearing milk or milk from sick cows, as well as pasteurization as a fail-safe inactivation of bacterial and viral agents were stressed in the variety of press releases as normal public health safeguards already in place.

“There is no threat to the public, and there will be no supply shortages,” assured Commissioner Miller. “No contaminated milk is known to have entered the food chain; it has all been dumped. In the rare event that some affected milk enters the food chain, the pasteurization process will kill the virus.”

He also noted that, “Cattle impacted by HPAI exhibit flu-like symptoms including fever and a sharp reduction in milk production averaging between 10-30 pounds per cow throughout the herd.”

“On average about 10% of each affected herd appears to be impacted, with little to no associated mortality reported among the animals,” the USDA APHIS report stated, with declines in milk production described as “too limited to impact the supply and price of milk and dairy products.”

Yet in an AABP webinar March 22, before the HPAI strain was confirmed in the Texas and Kansas samples, the findings of veterinarians involved early-on over the past four to six weeks were described, and presenters were asked about the numbers of affected dairy cattle.

An effort is underway “to count them up, but the number is significant, and I’ll leave it at that,” said Dr. Brandon Treichler, DVM, who was joined by Dr. Alexis Thompson with Texas A&M Veterinary Medical Diagnostic Laboratory (TVMDL) in presenting AABP webinar information.

Treichler hails from a family dairy farm in eastern Pennsylvania and serves as a quality control veterinarian, primarily working with large dairies in West Texas and eastern New Mexico. He is active with AABP and National Mastitis Council.

Previously mentioned are the higher rates of culling in herds where an economic decision is made about affected cattle in mid-lactation, when their production is not regained after recovering to health.

Dr. Treichler talked about practitioner findings as “inclusion criteria,” and mentioned some herd to herd variations as well.

“The most consistent factors seen across herds include a decreased feed intake in the herd and at the same time less rumination… These cows are being sorted for us for changes in the milk, and (the facilities that have) conductivity available will see conductivity spike on a large number of cows, and then decreasing milk production across the herd, with individual cows seemingly more severely affected, going from a high production cow to dry or very nearly dry, very quickly. Some of those cows appear to have colostrum-like milk that is either thickened, or thickened with some discoloration,” he said.

According to Treichler, manure among the more severely affected cows is reported to range from dry or tacky to some diarrhea. Other signs that vary include fever, which is potentially attributable to the impact on the immune system from the metabolic disruption of being off-feed with reduced rumination.

In his March 25 press statement, Texas Ag Commissioner Miller cited “ongoing economic impacts to facilities as herds that are greatly impacted may lose up to 40% of their milk production for 7 to 10 days until symptoms subside. It is vital that dairy facilities nationwide practice heightened biosecurity measures to mitigate further spread.”

He advised dairies in the region “to use all standard biosecurity measures, including restricting access to essential personnel only, disinfecting all vehicles entering and leaving premises, isolating affected cattle, and destroying all contaminated milk. Additionally, it is important to clean and disinfect all livestock watering devices and isolate drinking water where it might be contaminated by waterfowl.”

No affected beef cattle have been reported, only older primarily mid-lactation dairy cows. This is interesting, considering the fact that the number of cattle on feed — mostly in open lots similar to drylot dairies that are prevalent in the Panhandle region of the No. 1 cattle feeding state of Texas and No. 3 Kansas – far outweigh milk cow numbers by 5 to 1.

The region’s milk cows are most concentrated in and around the Panhandle of the No. 3 dairy state of Texas, No. 9 New Mexico and No. 17 Kansas portions of the Central Flyway for ‘migratory wild birds.’

Also within this zone are the country’s 5th and 14th largest poultry states of Texas and Oklahoma, respectively, totaling a combined nearly 1 billion head of poultry.

Farmshine asked APHIS and the Texas Animal Health Commission (TAHC) about the status of beef cattle monitoring, to which a TAHC spokesperson responded by email noting: “TAHC and Texas A&M TVMDL have, and continue to ask for, samples from affected and unaffected dairies to gather the full scope of the situation. The feedlot and beef cattle industry are monitoring and doing similar surveillance among their producers that many dairy operations have been conducting — not specifically screening, necessarily, but many are watching for clinical signs of illness that they can identify in the operation and keeping a close eye for abnormal health events among their herds.”

On other questions about whether there are any differences or commonalities in terms of external contributing factors among affected herds, the TAHC spokesperson stated “No dairy specific information could be provided related to type of facilities or other factors where HPAI was detected.”

Dairy industry organization statements point to the National Dairy Producer FARM Program (NDPFP) as the go-to for specific biosecurity, reporting, and recordkeeping measures that are urged on all U.S. dairy farms, including much emphasis being given to the safeguard of milk pasteurization.

“Dairy farmers have begun implementing enhanced biosecurity protocols on their farms, limiting the amount of traffic into and out of their properties and restricting visits to employees and essential personnel,” the NMPF-IDFA-DMI-USDEC joint statement noted.

They cite biosecurity resources, including reference manuals, prep guides, herd health plan protocol templates, animal movement logs, and people entry logs that dairies can use “to keep their cattle and dairy businesses safe.”

USDA APHIS encourages farmers and veterinarians, nationwide, to report cattle illnesses quickly so they can “monitor potential additional cases and minimize the impact to farmers, consumers and other animals.”

Industry announcements urge dairy farmers to immediately contact their veterinarians if they observe clinical signs in their herds that are consistent with this outbreak, such as a significant loss of animal appetite and rumination or an acute drop in milk production.

In turn, veterinarians who observe these clinical signs and have ruled out other diagnoses on a client’s farm should contact the state veterinarian and plan to submit a complete set of samples to be tested at a diagnostic laboratory.

Animals may also be reported to the APHIS toll-free number at 1-866-536-7593.

In Pennsylvania, where HPAI depopulations and quarantines have occurred over the past two years in the poultry industry, there have been no reported cattle affected. However, the state is monitoring the situation, and the Center for Dairy Excellence is conducting a conference call by zoom and telephone at Noon EDT on Wed., April 3 for dairy producers and dairy industry service providers, featuring state veterinarian Dr. Alex Hamberg and Penn State extension vet Dr. Hayley Springer.

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Investigation underway on emerging dairy cattle illness in Texas Panhandle

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Here’s what we knew as of March 22, 2024

By Sherry Bunting, Farmshine, March 22, 2024

AMARILLO, Tex. — The Texas Animal Health Commission (TAHC) and USDA — in coordination with industry and veterinary medical partners — are investigating emerging cases of illness in mid-lactation dairy cows in the Texas Panhandle of as-yet undetermined cause and transmission. 

The TAHC circulated a letter March 16 to veterinarians and dairy producers concerning the emerging animal health situation in dairy cattle that is at this point limited to an undetermined number of dairies in the Texas Panhandle. No reported cases outside of the Texas Panhandle are confirmed at this time. 

A TAHC spokesperson told Farmshine Tuesday in a phone interview (March 19) they are not ready to put out a media statement, but in the interest of full transparency, would brief on what is known and being done at this time. 

“We are aware of an animal health situation affecting dairy cattle and are working with USDA and Texas A&M with Dr. Alexis Thompson at the Diagnostic Lab — and with dairy veterinarians, the industry, and other partners — to coordinate an efficient plan to monitor and evaluate affected cattle, and to develop a case definition and conduct additional diagnostics,” the TAHC spokesperson said.

In response to questions, she noted that the Texas State Veterinarian is in contact with counterparts in other states as part of this coordinated effort.

“Right now, our main message is for dairies to conduct standard biosecurity measures, and if they have enhanced biosecurity plans in place, now is a good time to implement those,” the TAHC spokesperson said. She could not say how many herds or what percentage of those herds are affected.

According to the TAHC letter to veterinarians and dairy producers, the clinical signs include decreased herd level milk production; a sudden drop in production with some severely impacted cows experiencing changes in milk appearance (thicker, concentrated, colostrum-like). Affected cows also experience a decline in feed consumption with a simultaneous drop in rumen motility, abnormal tacky or loose feces, and some fever.

“Impacted herds have reported older cows in mid-lactation may be more likely to be severely impacted than younger cows and fresh cows or heifers. Dry cows and heifers do not appear to be affected,” the letter stated. 

The TAHC spokesperson did confirm that death loss from this condition is low.

In other industry correspondence, Farmshine has learned that while cattle recover, not all affected cattle recover their milk production, which has led to some increased culling in the face of high feed costs and high prices paid for market cows for beef. 

Even though this is an emerging situation, not a regulated disease, the TAHC spokesperson observed: “There are no milk and meat concerns at this time,” due to both the Pasteurized Milk Ordinance (PMO) and the Federal Meat Inspection Act that together ensure safe and wholesome milk and meat products enter the food chain.

The PMO dictates best practice to divert from the saleable milk supply any milk that is abnormal in appearance. 

Additionally, the Federal Meat Inspection Act requires ante- and post-mortem examination of every animal presented for slaughter. 

The TAHC encourages veterinary practitioners to report affected animals, by calling Dr. Alexis Thompson with Texas A&M Veterinary Medical Diagnostic Laboratory (TVMDL) (806.651.7478) concerning questions related to case-specific diagnostic plans. Dr. Thompson can provide specific guidance on sample collection as data-driven diagnostics are key to evaluation and understanding transmission and prevention.

As this work is being done, dairy producers are advised to review biosecurity protocols for their farms, take note of declines in production, appetite and rumination, and contact their veterinarians if such are noted.

(Author’s note: The Texas Animal Health Commission, USDA, TVMDL, industry, and veterinary medical practitioners are working on this as they are committed to animal health and well being as well as food safety — and while this is happening, systems are already in place that make the U.S. food supply the safest in the world.)

To be continued

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Seeds of doubt being sown, Part III: Will it reduce butterfat supply and impact industry’s cheese-focused future?

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By Sherry Bunting, Farmshine, March 1, 2024

EAST EARL, Pa. — As seeds of doubt are being sown internally within the dairy industry about whole milk in schools, we have discussed Confusion (will it help milk prices?) and Consternation (unfounded fear about what will processors do with ‘all that skim?’)

This week, we look at the third C: ‘Competition’: If schoolchildren are offered whole milk, will it significantly impact butterfat supplies, raise butter prices, and compete with the industry’s cheap milk cheese-focused future?

Every winter conference for the past few years has had at least one speaker telling dairy farmers that fluid milk sales are declining because Americans are eating more of their milk instead of drinking it. 

Fair enough. Cheese is the future, and the industry wants to make more of it. Lots more of it. So much more cheese, in fact, that inventory is growing. Analysts at conferences put up slides with the words “Export or perish!” in large font. 

Yes, U.S. Dairy wants to export more cheese, including mozzarella. U.S. Dairy wants to export more butter and cream products. U.S. Dairy wants to export more of the higher-value products. (And we want to sell more cream to the upscale coffee houses and downscale McCafe drinks we adults get to choose while junior sips a paltry half-pint of fat-free chocolate milk, sugar water, in the back seat. What’s wrong with us?)

This map shows the over $7 billion in new processing coming online between now and 2026. “There’s a lot of cheese on this map,” said IDFA CEO Michael Dykes, presenting at the Georgia Dairy Conference. This slide has also been popping up in other industry conference speaker powerpoint decks this meeting season. IDFA data

The industry also wants to take milk down to its molecular level – to turn the jug of milk into ingredients at the start — to make new function-targeted products for the beverage space outside of Class I parameters within an increasingly Class III dominated processing infrastructure.

Toward that end, new processing capacity won’t convert milk to traditional products, leaving elements to be marketed as ingredients. Instead, these new state-of-the-art cheese and ingredient plants start by taking milk apart to the ingredients-level to be used in making health beverages, bars, and other products, as well as to make cheese. 

At the Georgia Dairy Conference in January, IDFA CEO Michael Dykes mentioned IDFA’s support for the Whole Milk for Healthy Kids Act, giving attendees a QR code to weigh-in with their Senators. 

Later in his presentation, he noted that a shift to more fat in school milk would make a 3% impact on the butter supply.

“I’m a believer that the markets work, when you take it one place, you make a difference and change it someplace else. Those are the things we can work through,” said Dykes.

So, we reached out to Calvin Covington, a former cooperative CEO who is intimately familiar with component pricing as it became part of the Federal Milk Marketing Order (FMMO) system over 20 years ago. We asked his thoughts on how increasing fat in the school milk supply would impact butter. 

“Increased Cheddar cheese production has used millions and millions of pounds of butterfat. No one complains about this. Doesn’t the dairy industry want to increase demand for all milk components?” he replied and sent forth his own calculations, providing a spreadsheet showing his estimates of milk used in schools and the additional fat that would be needed for all of that milk to go completely to 3.25% (whole) milk.

Covington ran the numbers, moving methodically through assumptions on Table 1 to conclude the impact of shifting from a school milk fat percentage of 0.5% (half fat-free and half 1%) all the way to 3.25% (whole milk) would have a small impact on the butterfat supply — raising the school milk’s usage of butterfat from 0.25% of total butterfat production at the current national average fat test of 4.11% to being 1.47% of total butterfat production at the average 4.11% fat test.

Using the identified assumptions, Table 1 shows estimates on school milk volume and use of butterfat under today’s fat-free and 1% low-fat milk requirement compared with a scenario in which all school milk pounds were at 3.25% fat as standardized whole milk. Provided by Calvin Covington

He estimates public schools use 9.72% of all fluid milk, and for the purpose of the spreadsheet exercise, he assumed that half of those school milk sales are currently fat-free and half are 1%. If that is the case, then going to 3.25% (whole) milk for all pounds of school milk sales, the additional fat that would be needed is almost 114 million pounds, he reports.

“This should be a non-issue,” Covington concludes, using estimates that are based on all of those school milk pounds moving to 3.25% fat. 

The more likely scenario, however, is that schools would implement a more gradual increase in fat percentage. If it mirrored the national average for fluid milk sales at 2% fat, the increase would be smaller initially. Using Covington’s chart and assumptions, the additional fat that would be needed if school milk fat content averaged 2% is closer to 84 million pounds, going from using 0.25% of total fat production to 0.9% of total fat production.

Not all schools will choose to offer all milk at 3.25%. Some may offer 2% milk, which has also been banned since 2010 and would be given regulatory relief under the Whole Milk for Healthy Kids Act. 

Even if 3.25% fat milk is universally offered, some schoolchildren will continue to choose low-fat milk, as they did in the Pennsylvania trial, where the preference was 3 to 1 for whole 3.25% over low-fat 1%.

While a potentially higher fat content in school milk is being scrutinized for its impact on butter and butterfat, the impact of aggressive increases in cheese production is ignored. This speaks a bit to industry priorities.

“As butter and cheese consumption increase, processors do not argue against the increase because utilizing more fat would increase the fat price,” Covington observes, wondering why anyone would be concerned about the impact on butterfat supply if children get to choose whole milk while not being concerned about the impact on butterfat supply in any other sector.

“An increase in fluid milk sales, in schools, or anywhere, benefits all dairy farmers. With all things being equal, it would shift milk from Class III and IV to Class I, which is a (normally) higher milk price,” Covington explains. “If Class III or IV need more milk to replace the loss to Class I, more money would need to be paid by Class III and IV milk buyers, again, helping dairy farmers.”

So, what is the current status of butterfat production and usage? 

The national butterfat average is 4.11%. A decade ago, it was 3.69. From 2011 to 2022, total butterfat pounds produced on farms in the U.S. grew by 2 billion pounds from 7.3 billion to 9.3 billion. That’s a butterfat volume response to a price signaling demand.

Where’s it all going? Around 20% goes to butter production, 8% to ice cream and frozen desserts, 10% in fluid milk sales, and close to 50% is used in cheese production. And then there is this growing market for cream used in coffee drinks.

Meanwhile, dairy producers out West report receiving a letter from a large cheese plant, putting in a new base program at 1.5% over base. 

Another producer in an unregulated state in the West reported receiving a letter from his cheese plant stating they will reduce the butterfat multiple in their cheese milk payment, beginning April 1. The reason, according to the letter, is the farms are making too much butterfat, and the plant is having to buy condensed solids (skim) to pair with the additional fat or sell the extra fat as excess sweet cream at a loss.

During the FMMO hearing, fluid milk bottlers complained that the higher fat and component levels in milk today are more costly for them to deal with, that they must move the excess cream at a loss, and they have to clean the separator more often because of ‘sludge’ buildup. (I kid you not, one witness called it ‘sludge.’)

Processors have petitioned USDA with multiple proposals to get regulated minimum prices down to their definition of a ‘market clearing’ level that then allows them to add market premiums to attract new milk. Read that sentence again.

Who would be paying those premiums to grow milk supply? Not the processors. It would be revenue coming out of the regulated minimum price benchmarks for all farmers, including farmers that are not growing, to then get added back in by the processors wherever they want to direct growth.

Cheap milk is the name of the game, while at the same time, dairy farmers are being challenged to grow to meet the future ‘demand gap’ to fill $7 billion in new processing investments that will become operational over the next few years.

Dairy analysts tell how milk production expansion to meet this investment will not be as easy to do and will take longer than in the past because of the shortage in replacement heifers. 

We’re at a standoff, so to speak. 

Dairy producers have bred beef-on-dairy to bring margin back to their farms after 10 years of dairy margin compression. This strategy has been a good hedge against overproduction of milk in the era of sexed-semen, and it has helped protect farm balance sheets by reinforcing the value of the cattle as collateral.

So, what tool will be used now to drive consolidation and growth in dairy? Dykes told Georgia producers that, “Sustainability will be one of the biggest drivers of consolidation we’ve seen in a generation. Why? Because it’s going to take investment, and it’s going to take scale. We need to figure it out, to measure it, verify it, account for it, not double count it. We’re going to need investments to make sure we have the infrastructure.”

He said sustainability will become the gateway for exports where countries have mandates and carbon taxes for purchased ag products.

So, here we are back at the question about milk supply, butterfat supply, skim supply and school milk. Wouldn’t whole milk sales to schools offer a much-needed tug on the demand side to help shift some milk away from this runaway, market-depressing, buildup of excess cheese production that elicits the powerpoint headline: ‘Export or perish?’ 

Just think, if the fluid milk sales to schools increased as they did in the Pennsylvania trial by 52%, or even half that, by 25% as more kids choose milk instead of refusing it, market principles could work — gaining something in one place to affect it someplace else. 

Meanwhile, the industry can do some soul-searching and adapting amid the double-speak. If more milk, fat and components are needed, then farmers need to be able to make a living milking cows and producing fat and components.

Is the problem not enough milk? Or too much milk? Not enough fat? Or too much fat? Not enough skim? Or too much skim? Or is the problem rooted in making sure milk can be bought cheap and that farmers are forced to find revenue in other ways, such as carbon monitoring?

Let’s get it straight please.

On the horizon, we see: Checkoff-funded fluid milk innovations for new beverages that identify and separate specific milk molecules for specific benefits (sleep drinks, energy drinks, immune function drinks, specific protein type drinks)? More on that in Milk Molecules Initiative Part I and Part II

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Seeds of doubt being sown, Part II: ‘What will processors do with all that skim?’ Oh my!

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By Sherry Bunting, Farmshine, Feb. 23, 2024

EAST EARL, Pa. — The status of the Whole Milk for Healthy Kids Act, S. 1957, has 17 Senate sponsors from 13 states, including 12 Republicans, 4 Democrats, and 1 Independent. 

Even though both NMPF and IDFA have shown support for the measure, a bit of resignation can be sensed — riding the overwhelming House vote as enough progress for one legislative session. After taking bows for the performance of the bill in the House, representatives of both NMPF and IDFA – while speaking at winter meetings – have indicated a prevailing view that Senate opposition to S. 1957, is a big barrier. 

They say they are working to get the science in front of the Dietary Guidelines Committee, which has been tried before – over and over.

The DGA committee operates under a USDA that does not want whole milk options in schools or SNAP or WIC. This same USDA is proposing to remove chocolate milk options from schools, except for senior high students, and is proposing to reduce WIC milk by 3 gallons per recipient per month. This same USDA projects 20 billion more pounds of milk will be produced in the U.S. by 2030, according to IDFA CEO Michael Dykes, presenting future trends at the Georgia Dairy Conference in Savannah.

Seeds of doubt about the whole milk bill are being sown among farmers. Some asked me recently if their co-ops will lose money on the deal.

Last week, we discussed ‘Confusion’ — the first of 3 C’s that are facing the whole milk bill within the dairy industry. 

This week we look at the second C: ‘Consternation’ — a fancy word for fear.

“What will they do with all of our skim?” farmers asked me at a recent event. Is this something they are hearing from a milk buyer or inspector?

Here are some facts: Whole milk sales move the skim with the fat — leaving some of the fat through standardization, but not leaving any skim. Therefore, an increase in whole milk sales does not burden the skim milk market.

Surely, the practice of holding schoolchildren hostage to drinking the byproduct skim of butter and cream product manufacturing is a poor business model if we care about childhood nutrition, health, and future milk sales. 

Furthermore, the market for skim milk powder and nonfat dry milk is running strong as inventories are at multi-year lows in the U.S. and globally.

Cheese production, on the other hand, is what is cranking up, and it has been the market dog for 18 months. Like whole milk sales, cheesemaking uses both fat and skim. But cheesemaking leaves byproduct lactose and whey, and it can leave some residual fat depending on the ratios per cheese type.

Things are pretty bad for farmers right now in cheesemilk country. Some tough discussions are being had around kitchen tables. The 2022 Ag Census released last week showed the dire straits for farmers nationwide over the last five years as the number of U.S. dairy farms declined below 25,000, down a whopping 40% since 2017.

Wouldn’t an increase in whole milk sales through the school milk channels help pull some milk away from rampant excess cheese production that is currently depressing the Class III milk price, leading to price divergence and market dysfunction?

While there is no one data source to specifically document the percentage of the milk supply that is sold to schools, the estimates run from 6 to 7% of total fluid milk sales (Jim Mulhern, NMPF, 2019), to 8% of the U.S. milk supply (Michael Dykes, IDFA, 2023), to 9.75% of total fluid milk sales (Calvin Covington, independent analysis, 2024). 

If even half of these sales became whole milk sales, it could modestly positively impact the amount of excess cheese being made even as processors say they plan to make more cheese because people eat more of their milk than are drinking it. (Fig. 1)

Meanwhile, the cheese price is under so much downward price pressure that there is a $2 to $4 divergence of Class IV over Class III causing farmers to lose money under the ‘averaging’ formula for Class I milk. In many parts of the country, farmers lose additional money when the milk that is used in Classes II and IV is depooled out of FMMOs.

Without the ‘higher of’ pricing mechanism that was in place from the year 2000 until May 2019, Class I can fall below the higher manufacturing price, removing incentive to pool, which leaves pooled producers with smaller payments for their milk and leaves the decision about what to pay depooled farmers up to the processors after they’ve succeeded in reducing the benchmark minimum by depooling.

Ultrafiltered (UF) milk represents 2.4% of fluid milk market share, having grown by more than 10% per year for four years with sales up 7.7% in 2023 vs. 2022, according to Circana-tracked market data shared by Dykes.

UF milk is also cheese-vat-ready-milk with capability to remove not just the lactose but also the whey as permeate at the front end for use in distilleries that are now funneling lactose into ethanol production in Michigan and whey into alcoholic beverages in Michigan and Minnesota.

Processors want farmers to do “a tradeoff” to decide how much revenue comes to their milk checks and how much goes to processing investments for the future. The future is being dictated by where we are in fluid milk consumption relative to cheese production.

This is one reason IDFA and Wisconsin Cheesemakers, as well as NMPF, had proposals asking USDA to increase the processor credits (make allowances) that are embedded in the dairy product price formulas. IDFA and Milk Innovation Group also put forward other proposals to further reduce regulated minimum prices.

We wonder with these new processing investments, how is it that the make allowances are too small? Only bulk butter, nonfat dry milk, dry whey, 40-lb block Cheddar and 500-lb barrel cheese (yellow not white) are surveyed for the circular class and component price formulas. Everything else that doesn’t meet CME spec for these specific product exchanges is excluded.

This means the costs to make innovative new products and even many bulk commodity-style products, such as bulk mozzarella, unsalted butter, whey protein concentrate and skim milk powder, can be passed on to consumers without being factored back into the FMMO regulated minimum prices paid to farmers.

If market principles are applied, processors wanting to encourage more milk production, to make more cheese, would pay more for the milk – not less. But when the margin can be assured with a make allowance that yields a return on investment, all bets are off. Cheese gets made for the ‘make’ not the market.

We saw processors petition USDA in the recent Federal Milk Marketing Order hearing to reduce the minimum prices in multiple ways so they can have the ability to pay market premiums to attract new milk. This would be value coming out of the regulated FMMO minimum price benchmark for all farmers to get added back in by the processors wherever they want to direct it.

Cheese is in demand globally, and the U.S. dairy industry is investing to meet this. Dykes told Georgia producers that processors want to grow and producers want to grow. He wasn’t wondering what to do with all of the skim when he asked: “Where will the milk come from for the over $7 billion in new processing investments that will be coming online in the next two to three years?”  

This is happening, said Dykes, “due to market changes from fluid milk to more cheese production (Fig. 1). There’s a lot of cheese in those plans. With over $7 billion in investment… These are going to be efficient plants. You’re going to see consolidation. If you are part of a co-op, you’re going to decide how much (revenue) comes in through your milk check and how much goes into investment in processing for the long-run, for the future. That’s the debate your boards of directors will have.” 

Even the planned new fluid milk processing capacity is largely ultra-filtered, aseptic and extended shelf life, according to Dykes.

“That’s the direction we are moving,” he said. “We are seeing that move because as we think about schools, are we still going to be able to send that truck driver 20 miles in any direction with 3 or 4 cases of milk 5 days a week? Or do we do that with aseptic so they can store it and put it in the refrigerator one night before, and get some economies of scale out of that, and maybe bring some margin back to the business?”

As the Class III milk price continues to be the market dog, we don’t see milk moving from Class III manufacturing to Class IV, perhaps because of the dairy processing shifts that have been led by reduced fluid milk consumption. 

Allowing schoolchildren to have the choice of whole milk at school is about nutrition, healthy choices, future milk consumers, and the relevance of fresh fluid milk produced by local family farms in communities across the country. Having a home for skim does not appear to be the primary factor affecting milk prices where Class III is dragging things down.

Bottomline, dairy farmers should have no consternation (fear) over what processors are going to do with “all of that skim” once they are (hopefully) allowed to offer schoolchildren milk with more fat.

Next time, we’ll address the third ‘C’ – Competition – If kids are offered whole milk in schools, will it reduce the butterfat supply and impact the industry’s cheese-centered future? 

A final note, just in case the question about ‘what to do with all that skim’ still bothers anyone… What’s wrong with animal feed markets for skim milk powder? Protein is valuable in animal health, there are livestock to feed, and people spend major bucks on their pets too. Did you know dog treats made with nonfat dry milk powder, flour and grated cheese are a thing?

That idea got a good laugh from those farmers when I suggested it.

However, Cornell dairy economist Dr. Chris Wolf noted recently how China’s purchases are what drive global skim milk powder and whey protein prices, and that much of that market for both is to feed… you guessed it… Pigs. 

Seeds of doubt being sown, Part One, Confusion: ‘Will this bill really improve milk prices?”

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By Sherry Bunting, Farmshine, Feb. 16, 2024

EAST EARL, Pa. — While decades of scientific debate in terms of childhood health and nutrition is the curtain opponents hide behind, the anti-animal agenda is the top hurdle for the Whole Milk for Healthy Kids Act in the Senate.

Senator Roger Marshall (R-Kan.) is the prime sponsor of the Senate bill, and he is a medical doctor in obstetrics and is taking a beating from billboards sponsored by Physicians Committee for Responsible Medicine (PCRM) in his home state of Kansas. PCRM is a known arm of PETA. This tells us quite a bit, doesn’t it?

Meanwhile, the top 3 C’s facing the bill within the dairy industry, itself, need to be addressed. 

1) Confusion… Will it really improve milk prices? Addressed in this article

2) Consternation (fear)… What will processors do with “all of that skim”? Addressed in Part II here

3) Competition… Will it reduce the butterfat supply and affect the ramp up in cheese manufacturing or other dairy products? Addressed in Part III here

Plus…. the Checkoff Commitments… Will it interfere with checkoff-funded Milk Molecules Initiative for new beverages that identify and separate specific milk molecules for specific benefits (sleep drinks, energy drinks, immune function drinks, specific protein type drinks)? 

All of these questions are quietly floating around and sowing seeds of doubt, leading to analysis-paralysis, while the industry focus is on innovation and exports, not on fresh milk, or a healthy next generation of U.S. milk consumers.

All of these questions will be answered one at a time over the next several weeks, starting with the first “C”: Confusion.

“Will this bill really improve our milk prices?” was the question I was asked by a few farmers at a recent farm show. My response was to ask them if they are concerned about kids having healthy milk options they enjoy and if they are concerned about seeing further erosion of fluid milk sales, and losing another generation of milk drinkers?

I reached out to Calvin Covington, former milk cooperative CEO in the fluid milk markets of the Southeast and a primary architect of pricing milk by component yield even before Order Reform during his years with American Jersey Cattle Breeders.

Covington ran the numbers using 2023 average prices, and calculating pounds of milk, fat, and skim, utilization, and values, which yield a gross value of a hundredweight of milk being used for fluid processing at different fat levels. 

“At a $3.00 Class I differential, a hundredweight of milk going for 3.25 fluid milk (whole milk as standardized), returns an additional 25 cents per hundredweight over skim milk,” Covington writes, noting that the difference will change based on different Class I differentials.

Even in the counties with small or zero location differentials on the map, the base differential of $1.60 per hundredweight is still included, which means at least a 13 cents per hundredweight difference.

Previously, Covington has noted in presentations that milk prices improve as the average fat level of total fluid milk sales increases. The current average of all sales, nationwide, stands at 2%. A few years ago, it was below 2%. A fractional change in either direction influences Federal Milk Marketing Order blend prices.

Fluid milk demand also plays a role in manufacturing class prices, affecting farmers in regions where prices are based almost exclusively on cheese. 

That’s especially true right now as cheese production has been exploding, and the Class III milk price has been imploding, creating a wide spread below Class IV and pushing FMMO blend prices lower as milk is not moving out of Class III to the higher value Class IV. But the Federal Milk Marketing Law gives Class I dibs to attract milk. So Class I demand is relevant for cheese milk pricing too.

As whole milk sales have increased year-over-year, whole milk became the largest category of fluid milk sales in 2021. It is a bright spot in the fluid milk category.

In 2023, gains in whole milk sales and in lactose-free milk sales are credited with boosting the entire fluid milk category for year-over-year gains in back-to-back months of October and November. This helped flatten the year-to-date loss-curve on total fluid milk sales that had been running 2 to 4% lower year-over-year to be just 1.5% lower cumulatively at year end compared with 2022, according to USDA’s December estimated packaged fluid milk sales report, released in mid-February.

Still, there is ground to make up, as fluid milk sales volume in 2023 is 7.8% lower than pre-Covid 2019, when volume totaled 46.24 billion pounds, down 1.8% from 2018. Then, during pandemic lockdowns, milk sales stabilized, putting the total at 46.2 billion pounds for 2020, virtually unchanged from 2019. In 2021, fluid milk sales volume declined 4.1% to 44.3 billion pounds, followed by a 2.4% decrease in 2022 to 43.3 billion pounds, and now a 1.5% decline in 2023 at 42.6 billion pounds.

NMPF chart, Circana Inc. full-year 2023 data

Meanwhile, the big news reported recently is that plant-based fake-milk beverages saw sales decline by 6.6% in 2023, the second straight year of declines and the smallest sales since 2019, according to data from Circana Inc reported recently. 

Real dairy milk sales volume of 42.6 billion pounds in 2023 is not only a much larger category than the lookalikes at 337.7 million pounds, real dairy milk outperformed lookalikes on a trend basis in 2023 — down just 1.5% vs. plant-based being down 6.6%.

By comparison, plant-based beverage sales volume in 2023 was a fraction of 1% (0.8%) the size of real milk sales volume.

Whole milk education and awareness have helped drive this result. Consumers are paying attention to food science, even if the Dietary Guidelines Advisory Committee, USDA (and FDA on labeling) continue to ignore it. Still, more education and freedom for children to enjoy milk is needed. The concern is that even though it is a smaller percentage loss, the 1.5% sales volume loss in the real milk category in 2023 represented 644 million pounds; whereas a 6.6% sales volume loss in plant-based beverages in 2023 represented 24 million pounds.

Speaking with a local milk bottler and ice cream maker recently – a producer handler – I learned he focuses on how his cows are fed to maintain their rolling average 5% butterfat during the summertime to make ice cream and satisfy consumer demand for whole milk. Their whole milk sales have skyrocketed, and this in turn, to the delight of the grocery store they are in, has helped boost sales of all fluid milk as a category in that store.

This has him thinking of doing a 5% butterfat, non-standardized, maybe even cream top, full-fat milk in glass bottles for the store. The store displays a 97 Milk banner at the entrance and 97milk.com website stickers at the dairy case.

Speaking with a manager at a different grocery store chain with stores in Pennsylvania and surrounding states, I learned their sales of whole milk have also increased by leaps and bounds in the past several years, boosting the entire fluid milk category by 14% at their stores throughout the region. They include the 97milk.com website and information in their sales circulars to their shoppers.

As for the schools — If even half of the schools offered a mix of milkfat choices as the Whole Milk for Healthy Kids Act would allow them to do, the amount of butterfat sold as Class I would increase. This would improve the fat side of the fat/skim pricing in the three Southeast Orders and Arizona. It would also help the Federal Order pool dollars reach after actual components are paid first in Multiple Component Pricing Orders everywhere else.

Total Class I fluid milk sales have dropped like a rock since Congress passed the Healthy Hunger Free Kids Act in 2010, which removed whole and 2% milk options from school meals, followed by USDA in 2012 further banning whole and 2% milk as a la carte or vending machine ‘competing beverage’ options in the Department’s Smart Snacks regulations.

Look at the graph above. It was shared as part of Dr. Mark Stephenson’s testimony in the recent USDA FMMO milk pricing hearing.

Improved total sales of school milk hold potential to increase total Class I fluid milk sales. A Pennsylvania school trial in 2019 showed a 52% increase in milk sales when whole and 2% milk options were offered. Students showed a 3 to 1 preference for whole milk over the 1% milk option.

When their options were expanded, more students chose milk instead of refusing it. Students were able to choose, and some of them continued to choose low-fat, and that’s okay! The Whole Milk for Healthy Kids Act is about choice.

A conservative estimate of a 25% increase in school milk sales can be anticipated if Whole Milk for Healthy Kids gets over the finish line in the Senate after its overwhelming passage in December in the House. That is half of the increase seen in the Pennsylvania school trial. If realized, a 25% increase in school milk sales equates to a little over one billion pounds of additional annual milk sales, which could raise the entire Class I fluid milk category by a little more than 2%.

This is based on the fact that kids aren’t just throwing away milk at school. Some are refusing to take the milk they are offered with school meals. This means sales are being lost.

Fluid milk sales declines will only get worse if USDA implements one of two draft proposals the Department announced a year ago. One would eliminate flavored milk from elementary and middle schools altogether. The other would require added sugar levels to be reduced dramatically in flavored milk at school. It’s widely known that when milkfat is retained in making chocolate milk, less added sugar is needed! 

Demand for whole milk is beneficial on both the milk fat and skim sides of the equation because whole milk sales move the nearly-complete product – the skim with the fat — leaving some of the fat through standardization, but not leaving any skim.

The result of these options in schools could be even better depending on how many schools choose to exercise these options.

If the industry doesn’t supply what consumers demand, sales are lost. Schoolchildren are already the dairy industry’s consumers, and they will hold the purse strings in the future.

Just as the Dietary Guidelines Committee and USDA continue to ignore science on milkfat, we are all ignoring our nation’s schoolchildren and what they are telling us about why they are turning away from nutrient-dense milk at a time when the nutrients milk delivers – that we may think they are receiving — have never been more important.

When the Pennsylvania school trial ended after one school year, a 95% reduction in the average daily volume of discarded milk was recorded. The school Student Council did an environmental project to measure this by measuring the volume of milk thrown away in unopened and partly consumed half-pint containers.

Shouldn’t we be listening to what the young people are telling us? They are our future, after all.

In the next part of this series, we’ll address the question: “What are the processors going to do with all of that skim?” Oh my!

In the meantime, consider this: Fresh fluid milk is the most notably locally-produced dairy product maintaining dairy farm relevance in regions and communities across America. What will the dairy industry look like five years from now, even one year from now? Maybe we should be asking the schoolchildren to answer that question.

As of Feb. 14, 2024, the Whole Milk for Healthy Kids Act, S. 1957, has 15 sponsors from 12 states as illustrated on this map. Graphic by Sherry Bunting