Covering Ag since 1981: The faces, places, markets and issues of dairy and livestock production. Hard-hitting topics, market updates and inspirational stories from the notebook of a veteran ag journalist. @Agmoos #MilkMarketMoos #WeLoveCattle #GrowingTheLand
I am a journalist writing primarily about agriculture for various newspapers over the past 30 years...and before that, I milked cows and tended calves and heifers. I am also a mother and grandmother with three grown children: A teacher, restaurateur and homemaker. Our two sons and one daughter all like to cook and they are food conscious... not paranoid. My "foodographic" Agmoos blog is a place to find stories and photos of the people and places behind the food we eat and for commentary and analysis on food, farm and marketing issues facing producers and consumers.
By Sherry Bunting, published Sept. 14, 2020 in Farmshine
BROWNSTOWN, Pa. — The negative Producer Price Differentials (PPDs) persisted in final payments for August milk received by dairy farmers in mid-Sept., according to uniform prices announced by USDA Federal Milk Marketing Orders September 11 and 12.
This pushed uniform prices lower in some Federal Orders, while others were higher. (See chart above).
The bottom line is a cumulative loss impact of $1.48 billion in UNPAID market value of milk components across the seven Multiple Component Pricing Federal Milk Marketing Orders (FMMOs) — not to mention unquantified losses in the 4 fat/skim pricing FMMOs — after three months of significantly negative PPDs for June, July and August milk as paid in July, August and September 2020.
Losses incurred by the four Fat/Skim Pricing Orders, but are not easily quantified on the FMMO pool balance sheet and were most pronounced in June for those FMMOs.
More losses will be added for September milk, paid in October, and the CME futures indicate loss impacts could continue through yearend.
This unpaid component market value — represented by negative PPDs (the difference between the uniform price and the announced Class III price) — has cost dairy producers using risk management tools even more as such tools utilize primarily the Class III price as a market indicator. When the Class III price rallies, but the milk check doesn’t mirror that, a producer can be left without the higher price in the milk check and without the coverage through the risk management at the same time.
This would be like having a fire and having the adjuster look at a neighbor’s intact house to determine no claim, instead of looking at the house that burned. When the market says ‘no fire here’ but the house burned down just the same, it’s a double-whammy.
Remember, fluid milk does not have a ‘market’ because the Class I price is both regulated at varying degrees by state and federal marketing orders, and at the same time, fluid milk is used as a loss-leader by the nation’s largest supermarkets. Thus, it is impossible to determine the “market value” of fluid milk.
Add to this the restriction of fat content in schools and other institutional feeding by the federal government, and market value of fluid milk – especially whole milk – is further impinged by non-market factors.
This means the value of the components in fluid milk can only be assigned by the value of dairy products made with milk. When that market rallied on Class III, while plummeting on Class IV, the “market” value was pulled instead of pooled.
Several factors are creating the problem.
First, Covid-19 caused disruption in markets that are now heavier on the retail side and lighter on the foodservice side. The industry is adjusting to this.
Second, a ‘band aid’ approach to milk pricing reform in the 2018 Farm Bill changed the Class I relationship to an uptrending manufacturing class market by using an averaging method instead of the “higher of” Class III or IV. This is just one reason a national hearing on milk pricing with report to Congress is long overdue.
Third, the spread between Class III and IV milk futures persists, so even when Class I and Class III were close in price for August, Class IV and II were so far behind that negative PPDs and de-pooling occurred. Current levels show a $4 to $5 spread for September and October and $2 to $3 for November and December.
Fourth, government purchases and import-export factors are affecting storage of Class III and IV products differently, which in turn affects the markets differently.
As mentioned previously in Farmshine, the most recent USDA Cold Storage Report showed butter stocks at the end of July were up 3% compared with June and 13% above year ago. On the other hand, total natural cheese stocks were 2% less than June and up only 2% from a year ago.
On the import side, the difference between cheese and butter is stark. Cheese imports are down 10% below year ago, but the U.S. imported 14% more butter and butterfat in the first seven months of 2020 compared with a year ago.
Is it any wonder butter stocks are accumulating in cold storage to levels 13% above year ago at the end of July — putting a big damper on butter prices and therefore Class IV?
Butter demand is up. Butter imports are up. But the PRICE of butter is at the lowest level since 2013.
Analysts suggest that butter and butterfat imports are higher because U.S. consumer demand for butterfat is higher. But that reasoning doesn’t make sense because the Class IV price and butterfat value is depressed because of “burdensome inventory of butter” in cold storage, holding back butter prices and amplifying the Class III and IV divergence that is at the root of the negative PPDs.
Again, a national hearing on milk pricing is long overdue. Even the risk management tools touted by USDA do not perform as expected due to inverted and divergent price relationships and reduced ability to transfer market value.
Second checks under CFAP 1 delayed by enrollment extensions
By Sherry Bunting, Farmshine, Sept. 25, 2020
WASHINGTON, D.C. — President Donald Trump and U.S. Secretary of Agriculture Sonny Perdue announced an expansion of the Coronavirus Food Assistance Program (CFAP) on Sept. 17, which means a second round of $14 billion in additional CFAP payments will be made to a new list of eligible commodities, including dairy cow’s milk as a price-trigger calculation and even goat’s milk as a sales-triggered calculation.
Sign up for this second round of assistance – CFAP 2 — runs from Sept. 21 through Dec. 11, 2020.
CFAP 2 payments for dairy calculate to a little over $2.00 per hundredweight on the equivalent of April through August milk marketings. However, the calculation boils down to $1.20/cwt on actual April through August milk marketings, plus another $1.20/cwt on the estimated September through December milk marketings – a 4-month period – using the average daily milk production from the prior 5-month’s actual marketings.
Specifically, the announcement describes the CFAP 2 dairy payments as follows:
Payments for cow milk under CFAP 2 will be equal to the sum of the following:
1) The producer’s total actual milk production from April 1, 2020, to August 31, 2020, multiplied by the payment of $1.20 per hundredweight, and
2) The producer’s estimated milk production from September 1, 2020, to December 31, 2020, based on the daily average production from April 1, 2020, through August 31, 2020, multiplied by 122, multiplied by a payment rate of $1.20 per hundredweight.
This round of farm assistance, known as CFAP 2, follows in addition to CFAP 1.
The CFAP 1 payments were to be made in two stages, with enrolled producers having received most of their eligible payment in their first check. However, the second portion or balance of payments under CFAP 1 won’t be received until after all enrolled producers receive their first checks.
Producers have not yet received their second checks from CFAP 1 because the enrollment period for CFAP 1 was extended through Sept. 11.
Further complicating payment of second checks under CFAP 1 is USDA’s extension of signups for certain counties in Louisiana, Oregon and Texas that were impacted by natural disasters (fires and hurricanes). Producers in those areas have until Oct. 9, 2020 to enroll in CFAP 1.
Once all enrollments in CFAP 1 are completed by Oct. 9, and once all enrolled farms receive their first checks for all eligible commodities under CFAP 1, then the remaining funds from CFAP 1 will be disbursed in the second checks to enrolled producers for eligible commodities, including milk.
CFAP 2, on the other hand, represents a totally separate second source of funding and assistance — and a second enrollment period — to cover market disruptions and additional marketing costs for the nine months period of April through December, whereas CFAP 1 covered mainly the disruptions for the first part of the year. There is some overlap in the time period, but these are two separate enrollments and calculations under CFAP.
To-date, according to USDA, nearly $1.75 billion has been paid to dairy farmers for milk under CFAP 1. The total paid or approved for payment to-date for all commodities under CFAP 1 is $10.2 billion.
Funds for CFAP 1 and 2 are from a combination of the CARES Act and the CCC. USDA used public feedback to make improvements under CFAP 2, according to Secretary Perdue.
CFAP 2 divides commodities into three categories for compensation as 1) Price Trigger Commodities, 2) Flat-rate Crops, and 3) Sales Commodities. Each category has a different method for calculating a payment.
Eligible livestock, including beef cattle and dairy cattle destined for beef, will be based on maximum owned inventory on a date selected by the producer between April 16 and August 31, 2020. USDA FSA personnel report that it’s okay if the date selected by a producer is within the same window as the date selected for CFAP 1 livestock payments as long as the animals in inventory on that date were destined for market as meat animals, not for dairy purposes.
USDA FSA personnel indicate that cull dairy cows are not eligible livestock under CFAP 2, but bull calves and any heifers identified as market animals for beef or veal can be claimed as inventory for market impact payments under CFAP 2.
Corn silage and other forages grown as feed for dairy cattle are also eligible under the corresponding flat rate acreage crops portion of CFAP 2
A complete list of farm commodities covered under CFAP 2 is available at farmers.gov/cfap
As with CFAP 1, there is a payment limitation of $250,000 per person or entity for all commodities combined. Applicants that are corporations, LLCs and partnerships may qualify for additional payment limits when members actively provide personal labor or management to the operation.
In addition, USDA reports that this special payment limitation provision has been expanded to include trusts and estates for both CFAP 1 and 2.
Producers will also have to certify they meet the adjusted gross income limitation of $900,000 unless at least 75% or more of their income is derived from farming, ranching or forestry-related activities. Producers must also be in compliance with Highly Erodible Land and Wetland Conservation provisions to receive payments.
USDA reports that Farm Service Agency staff at local USDA Service Centers will work with producers to file CFAP 2 applications. Producers interested in one-on-one support with the CFAP 2 application can also call 877-508-8364 to speak directly with a USDA employee ready to offer assistance at the call center.
Huge new cheese processing capacity is negative, a somewhat ‘balanced’ global powder inventory is positive
By Sherry Bunting
HARRISBURG, Pa. — Back in December of 2019, “No one thought 2020 would be a bad year. What wallops you over the head are the unknowns,” said Matt Gould, president of Dairy & Food Analyst Inc. last Wednesday during the Center for Dairy Excellence Risk Management Conference held virtually. The list of over 100 attendees was a v‘who’s who’ of dairy market analysts, brokers, cooperative marketers, consultants and lenders with a sprinkling of farmers.
As for the 2021 outlook sitting here in September with so many unknowns, Gould said the consensus is next year will be a “mediocre” year for dairy markets.
“We can only talk about the known-knowns, with plenty of room for surprises,” he said, focusing on four long-term trends through forecasting models.
From a high level view, Gould said the conflict between indicators that are price-supportive and indicators that are price-negative will temper each other to be more-or-less “a wash in terms of market direction” – except for the influence of surprises one way or the other.
He discussed these trends within the context of how a producer’s milk check is figured, looking at cheese and whey setting the Class III price and butter and nonfat dry milk setting Class IV.
Putting some emphasis on the huge new cheese production facilities coming into operation at the end of 2020 and first quarter of 2021 in both the U.S. and Europe, Gould’s forecast for product prices included low cheese prices next year, stable butter prices, and the highest skim milk powder prices the world has seen in a long time.
The 3-year cycle
The 3-year cycle is still one of the four patterns that most people are familiar with. Historically, it has done a good job of reliably nailing the highs and lows, but not how high or how low, said Gould.
It is also the simplest of the four major patterns. If 2018 was the low in a 3-year cycle, then 2021 will be the next low – 2006, 2009, 2012, 2015, 2018…. 2021.
The global milk supply cycle
The second cycle Gould talked about was the global milk supply cycle, and this cycle is “neutral-ish” for 2021.
Globally, there is milk production growth, but it is not surging, said Gould.
“That’s the good news. We don’t have this wall of milk coming at us, but the flip side is that we don’t have a big contraction either to set us up for really good milk prices like in 2014,” he explained.
Globally, farmers have grown milk production through June, but only by 1 billion pounds per month. “When we cross that 1.5 to 2 billion pounds per month threshold, that’s the guard rail. That would be excessive over-supply territory,” said Gould. “We want some growth to keep balance with demand. There is rising dairy demand as the population grows and the middle class rises, but if we get over that guard rail, then growth becomes inventory.”
So, on global supply as a cycle, 2021 is neutral because global production is growing, but at a pace that should mirror demand growth.
The inventory cycle
On the global dairy inventory side, Gould said the set up into 2021 is “more price supportive.” Mainly because the global supply of the world’s balancing product – milk powder – is on the tight side of adequate.
“When we have big powder inventory, it overhangs the market and prices tend to be lower. Spikes happen when the trade is drawing down supply or when there is no overhang,” said Gould.
Heading into 2021, he said the dairy market with respect to global milk powder inventory “is in a price inflationary zone. We don’t have big inventory and we’re not setting up to build big inventories, so the risk of a good year for milk prices is still in there within this inventory cycle.”
The inventory cycle is setting up to be a price supportive one for 2021.
The trade cycle
Over the past 20 years, the world has gone through a period of booking trade agreements rapidly and aggressively. “We got new customers, grew exports, saw new opportunities and new demand,” said Gould. “The bad news is we have not booked any new WTO-style agreements in a long time.”
Gould explained that WTO-style agreements are the kind that give dairy access to new markets that grow quickly as opposed to more sales within existing markets that grow slowly.
Those WTO-style agreements of the past presented a “trade tailwind” fueling rapid market growth. “This lack of a trade tail wind is price negative for 2021,” said Gould. “The long-term view shows a lack of new global demand growth, which will hurt us.”
Gould acknowledged that the U.S. is getting a new style of trade agreement. “We have trade negotiations ongoing with several countries and we have taken existing agreements and negotiated new ones with the same customers. So, we are seeing new market access but not the advantages of WTO-style access.”
Gould sees the change from rapid growth to steady access in this trade cycle as setting up to be price negative.
Taken together, these four cycles show 2021 setting up with two neutrals, one negative and one positive.
Class III and IV expected to flip
As the indicators will be mixed, so will dairy product markets.
Gould’s cheese forecast is for an average $1.62/lb and his forecast for nonfat dry milk is that prices could reach $1.23/lb.
In farm milk checks, said Gould, it’s no simple task how milk prices get determined. “We use end products so it’s not a question of what the milk is worth, but what these products are worth, and it subtracts-out the cost of making the products and a yield factor too.”
Ostensibly, the Class II prices uses Class IV and the Class I price uses all the classes.
With Class III so much higher presently than the other classes, Gould noted the switch is setting up to flip for 2021.
Milk powder prices are expected to rise into and through 2021 because the big surpluses are gone and 2019 production kept pace with demand, which ended up drawing down on global powder supplies even further, with 2020 being more in balance heading into the first half of 2021.
While a penny change in nonfat dry milk price brings 8 cents to Class IV price a penny change in butter equates to 4 cents change in the Class IV price. Powder will be the more positive side of the 2021 setup compared with butter, according to Gould.
“The global butter market in 2020 saw big destruction of food service demand, which affected cheese, so processors (globally) made more butter, and foodservice is not using as much butter,” said Gould.
“In the short-term, there is an overhang of butter inventory, especially in the U.S., where we had big destruction of demand and the lowest butter price since 2013,” said Gould. “But people call me and say they can’t find butter on the shelf at the store, so how can this be?”
How can we have the lowest wholesale butter price and not be keeping up with retail demand?”
Gould explains that 55% of U.S. butter consumption pre-Covid was foodservice – going out to eat. In this pandemic environment, the foodservice industry has been devastated. Open Table, a company that books restaurant reservations estimates foodservice is still down by half and full-service restaurants are decimated.
“On the flipside, retail butter sales have been extraordinary at times, with some weeks more than doubled over year ago,” said Gould. But plants in the U.S. are specialized moreso than in Europe where dairy plants are more flexible making more different products instead of specialized for high volume and efficiency.
“Where we have the bottleneck in the U.S. is turning bulk butter into quarter pound sticks for retail,” he said, adding that in the past21 days, retail butter sales have slowed to show smaller growth rates over year ago.
In short, while holiday sales will help boost fourth quarter, it won’t make much difference in the overall butter picture because “we’ve already gone through the demand destruction and the inventory is already built. We have more butter in stock than we have domestic sales so we are in surplus,” said Gould.
Gould did not specifically mention the large imports of butter and butterfat into the U.S. from March through July, but he did reference the bottleneck in turning enough bulk butter into sticks for retail. As this pushed retail butter prices higher, Gould noted that importing was incentivized.
Cheese is where some “known surprises” come into play.
The U.S. will see significant new cheese production capacity becoming operational in November (Michigan) and the beginning of 2021 (Minnesota).
“Every one penny in cheese price change is 10 cents of change on the milk check,” Gould pointed out. “As a globe, we are in relatively balanced to tight supply on cheese in the second half of 2020, but the forecast heading into 2021 is driven by the factories and capacity being built.”
He said the long-term export trend for cheese is positive. It has been a “winner” during Covid because the big cheese purveyors are pizza companies that were the first to adopt low and no-contact delivery and saw their sales surge 20% higher.
But new cheese processing capacity in the U.S. and in Europe will present short-term concerns.
“We will see huge growth in cheese processing,” said Gould. The plant in St. John’s Michigan as a joint venture of DFA, Select and Glanbia will be the sixth largest in the country.
“We have never opened a plant in the U.S. that big – that fast – in history. This is a first, and these types of plants have to be run full, or you will lose your tail,” he said, noting these types of plants in the American cheese business operate on margins of 0.5% (one half of one percent). “They’ll make a penny on a $2/lb cheddar price. That’s why they fill full and build to scale and magnitude to make volume.
“The consequence of that is a shock increase in supply,” said Gould. “Demand doesn’t grow that same way. We don’t wake up and see new demand present itself as a shock-increase like that.”
Some wild cards do exist, including government intervention. What we’ve seen already this year in dairy purchases is greater than dairy has seen in a long time.
“Government purchases (CFAP) are using 2.5 to 3% of the U.S. milk supply,” said Gould. “Normally we forecast within 1% to say a year will be good or bad, but when those purchases end, we are talking about 2.5 to 3%. That’s a huge number. That’s a price negative thing if all of a sudden there’s 2% more milk on the market without government purchases.”
The flip side, he said, is “We are going through a crisis, and people are hungry. When you have hungry people, the prescription is to get them food.”
In this way, government purchase could be a positive wild card if they continue under circumstances where economic slowdown impacts domestic demand.
Other wild cards of course include the progress on a vaccine for Covid, and the status of the economy and foodservice. Positives in those areas could unleash demand for products that can be made quickly in bulk without the bottlenecks of serving retail demand.
— Previously published in Farmshine, Sept. 25, 2020
Producers share priorities, experiences during risk management conference
HARRISBURG, Pa. — How are dairy producers navigating the rapidly changing dairy markets? A panel of Pennsylvania producers shared during the 11th annual Center for Dairy Excellence Risk Management and Financial Conference, conducted ‘virtually’ by Zoom in September with an audience each day of over 100 people, most of them dairy lenders and consultants.
“Risk management is important, but it takes planning,” said Mike Hosterman of AgChoice Farm Credit, moderating the panel comprised of Mark Mosemann, who farms with his father and brother milking 450 cows at Misty Mountain Dairy, Fulton County; Glenn Kline, who farms with his two sons milking 600 cows at Y-Run Farms in Bradford County; and Rod Hissong, who farms with his brother milking 1600 cows at Mercer Vu Farms in Franklin County, Pa. and 1200 cows at their satellite dairy 65 miles south in Whitepost, Virginia.
Polling the audience, Hosterman revealed a low percentage of lenders see a risk management or marketing plan from clients.
All three producers put a big emphasis on the input side of the margin since 2012. Some common themes and priorities emerged.
Stabilize feed costs
The 2012 margin squeeze caught many producers by surprise as milk prices skyrocketed and feed prices went wild.
After that happened, all three panelists aimed to expand their land base through ownership and especially rented ground to produce all of their own forages and a portion of energy and protein.
They also increased inventory capacity to buy and store feed commodities and do risk management with local feed mills.
By stabilizing feed costs – the largest input cost on the dairy – they are positioned to operate the business, plan for the future and think about risk management opportunities on the milk side.
Hissong noted that their expansion with a satellite farm in Virginia was also a hedge on the future in terms of the next generation. The brothers will be able to downsize or upsize depending on how the future shapes up for sons, daughters, nieces and nephews because they invested in two sites, not expanding into one larger site.
Value of networking
“Don’t underestimate your networking capability,” said Mosemann, who described how this enabled his family to acquire rented ground and work with others in custom harvesting and feed inventory.
For Hissong, relationships on buying forage changed to relationships in acquiring ground.
They also brought more pieces under their own management, now raising their own dairy replacements and hauling their own milk.
The satellite dairy allows the Hissongs to manage weather risk on the feed side and to set up their cow flows to gain labor efficiencies in operating the dairy. Baby calves are raised at the home farm and go to the Virginia site when bred. They stay there through gestation and calving and for milking through first, sometimes second, lactation.
Kline and Mosemann both purchase some inputs collectively with other farms, which is a risk management strategy more producers are using to stabilize costs today. They also work with other farms in custom harvesting and trucking.
Relationships with feed mills offer additional opportunities to manage risk, and relationships with the nutritionists, veterinarians, and financial advisors bring ideas to the farm.
Two ways to breakeven
All three producers use their farm accountants to do both a cost of production analysis as well as cash flow analysis to come up with a Class III price that meets their farm’s breakeven price in both scenarios, including the cost of the risk management.
That’s essential because producers can’t afford to pay for risk management that doesn’t secure breakeven or better.
“We take the COP analysis and come up with a gross milk price. We calculate our basis into that and look at the Class III price that is required for us to break even,” said Mosemann, explaining that a separate cash flow analysis, with net income offsets, calculates a final Class III price target. “That’s what we use to measure against when deciding what to buy, and our goal is to come out of it with a net price above the net breakeven.”
Even armed with this knowledge, relying on the Class III breakeven method has become a challenge today with the inverted basis from negative PPDs.
While the basis on milk in the East has declined rapidly along with the declining Class I milk utilization over the past decade, at least it has been relatively stable and could be plugged into a Class III breakeven strategy at an approximate level.
However, in the current market, a “Class III breakeven” is much more difficult to calculate because the basis is all over the place and mostly negative. Looking out at risk management for the next six to 12 months is frustrating even for those who have been doing this for a while.
Hissong observed that their strategy changes with conditions, but a key to making it work is to keep their variable costs “fairly flat” from one quarter to the next.
“We are not trying to ‘guess the market,’” he explained. “We are trying to gather information and make an educated decision. We are trying to protect the breakeven.”
Watching it daily allows him to adjust using other tools through the cooperative. Forward contracting through the cooperative means no margin calls, but Hissong noted that, “Once you take a position, you are locked into that position.”
Having both Class III and IV contracts helped because where they lost on Class III because it went higher, they gained on Class IV because it went lower.
All three producers use a layered approach. They don’t put all their milk in one basket and they don’t necessarily cover all of their milk.
They start by using the Dairy Margin Coverage (DMC) on the first 5 million pounds of annual production.
Each farm on the panel also forward contracts with their respective cooperatives, and they use more than one tool offered by the cooperative. They have also used Dairy Revenue Protection (DRP) on a portion of their milk in a few quarters where it made sense.
It is essential to have someone within the farm ownership core who manages the strategy and is looking at it every day, the panelists said. This is not something they do and then forget about, or hand off to someone else.
“You’ve got to be passionate about it. It takes a lot of time, and you’ve got to look at it every day. So that means someone has to have the time to do it, and enjoy doing it,” said Kline, who does the risk management at Y-Run.
For Mercer Vu, that person is Rod, and at Misty Mountain, it is Mark’s father.
Kline says he is able to do it because his two sons are doing the other things in the operation. “This gives me another perspective in the operation of the business to work on,” he explained.
“This is such an important part of our bottom line, so we believe we have to be more involved in it,” Hissong said. “The first thing to know is COP, so we know what price to protect. We have to know what is a profit. We do cash flows and budgets with Mike Hosterman and work with Acuity to do quarterly accrual-based accounting so we can calculate-back our breakeven through Class III and basis.”
“Risk management is not always successful,” Mosemann acknowledged. “But our strategy is to get base-hits, not a grand-slam homerun. If we can get on base and stabilize things, then we can plan. Risk management is now a cost of doing business for us to protect against the volatility we see.”
All three producers said they tap other resources for information in addition to those they work with on risk management.
The current market environment is a difficult one in which to execute a risk management plan.
These producers do their homework, develop their strategies, layer their tools, know their breakevens, know their goals, watch the markets, work with their team — but still find it difficult to know over the next six to 12 months when to pull the trigger at what looks like a breakeven forward contract or price floor due to the unknown and negative basis relative to Class III.
Each producer said they would participate in more risk management right now, but it’s difficult to assess a breakeven level because the tools based on CME futures do not match up with how their farms could ultimately be paid for the milk in those future months.
Without knowing how their cash price will perform in relation to the futures price, it’s hard to commit to a strategy that worked in the past, so new thinking is needed. The producer needs to have a handle on what to do about basis. Will the farm’s cash price move in the same direction as the futures, and by what margin of premium or discount will the cash price move? This is part of the decision making when working through a plan.
All three producers mentioned working with their farm and financial advisors as a key to risk management. They see lenders starting to require some level of risk management and foresee this being part of lending packages in the future.
A little bit of everything
From renting more ground and networking with others, to contracting feed, creating inventory, running cost of production, budget and cash flow analyses and using multiple tools from DMC and DRP to forward contracting, these dairy producers say a little bit of everything adds up to some base-hits to keep margins in a zone where they can operate the business and plan for the future.
“With the way the last four to five years have been, and seeing how politics and a global pandemic can turn everything on its head, if we are looking to purchase land or expand for the next generation, we better have risk management in place even if the lender doesn’t require it,” said Kline.
Hissong added that, “We continue to see our industry change. For those actively wanting to be in it and see a future in it, or if they have to work with someone to make a go of it, risk management will almost become mandatory.”
At the same time, he observed that the government CFAP payments and dairy product purchases add another ripple.
“The CFAP payments changed the balance sheet for us, and they were definitely needed from the perspective of our dairies coming out of a rough spot and scary time,” said Mosemann.
At the same time, noted Hissong, the government involvement has an effect on the market “when trying to figure out market signals and trying to figure out what to do in 2021.”
With milk class and component pricing relationships in turmoil from pandemic disruptions and government intervention, risk management is more difficult to do right now.
Even so, these producers would encourage others to take this time to learn more about it, to work through their numbers and work through some scenarios to be prepared to implement risk management at some level in the future.
EPHRATA, Pa. — It’s campaign season, and here’s a campaign everyone should be able to get behind: “Vote WHOLE MILK — School Lunch Choice — Citizens for Immune Boosting Nutrition.”
The Grassroots PA Dairy Advisory Committee and 97 Milk LLC are urging citizens to contact their local school boards and other community leaders about adopting resolutions to show federal and state governments they support the right to offer the simple choice of whole milk at school.
Campaign-style yard signs are now available to help communities show their support for the immune-boosting nutrition children love.
Retired agribusinessman Bernie Morrissey of Morrissey Insurance, Ephrata, Pa. and Nelson Troutman, the Berks County dairy farmer who painted the first “Drink Whole Milk 97% Fat Free” round bale, are working together to print yard signs (pictured with this article) and gain sponsorships from additional agribusinesses to make them available to customers and the public.
The first print-run of 300 were supported by and are available from these PA businesses: Wenger’s Equipment of Myerstown, Sensenig’s Feed Mill of New Holland, K&K Feeds of Richland, Triple M Feeds of Lebanon, and Morrissey Insurance of Ephrata and Troy.
“We are continuing to work on this issue of whole milk choice in schools and are concerned about children having this choice. The signs are professional campaign-style 24-inch by 18-inch yard signs, and it is important that we get them placed as soon as possible,” said Morrissey. “We are looking for others to join us as concerned citizens for children’s immune boosting nutrition, to get a sign, or several signs, and get them placed. They catch attention and show support.”
Morrissey just ordered a second round of 300 signs, so there will be more available shortly for more businesses to get involved in sponsorship and distribution. Companies that want a supply to give out to customers and/or the public can call Bernie at 610.693.6471 to acquire them at cost.
These yard signs include the 97milk.com website where people can go for information about the issue and the effort to bring whole milk choice back to schools.
A “Take Action” tab at the 97milk.com website provides online visitors with information about the issue and how school boards can adopt supportive resolutions. There, they also learn about the Dietary Guidelines process, as well as two bills in Congress and how to send a message to Senators and Representatives asking them to cosponsor and support the bills that would simply allow schools to offer a choice of milks, including whole milk (3.25%) and reduced-fat milk (2%), which are currently banned.
In January 2019, Rep. Glenn G.T. Thompson of Pennsylvania introduced the bipartisan House Bill 832 Whole Milk for Healthy Kids with co-sponsor Rep. Collin Peterson of Minnesota. Today, it has 42 cosponsors but has not been considered by the House Education and Labor Committee. Senate Bill 1810 Milk in Lunches for Kids was introduced by Pennsylvania Senator Pat Toomey and Wisconsin Senator Ron Johnson in June 2019 and has only 3 cosponsors.
Having publicized the “Vote Whole Milk – School Lunch Choice” effort on social media, 97 Milk received hundreds of shares, likes and comments and a few emails with additional questions. After one school asked for a sample resolution, such a template was developed.
To-date, one school in Wisconsin reports formally adopting the resolution, while two other schools report they are looking at it.
Asking school boards to show support for whole milk choice is one way to help the legislative efforts that are currently stalled in Congress. As schools adopt resolutions, this sends a message to USDA.
An earlier effort consisted of submitting a 30,000-plus-signature petition to members of Congress, USDA Food and Nutrition Service, USDA Secretary of Agriculture Sonny Perdue, legislative committee chairs, the Dietary Guidelines Advisory Committee, the DGA Federal Register Docket for Comment, and others.
The petition brought awareness but failed to increase the number of cosponsors for the two bills. This means members of Congress are un-moved on this issue despite over 30,000 signatures from across the country requesting the choice of whole milk in schools.
Over the past year, a few representatives of dairy checkoff, dairy industry organizations and a couple dairy processors have indicated in conversation that schools do not support whole milk choice because they can’t afford whole milk.
The idea behind the “Vote Whole Milk — School Lunch Choice” yard signs — and the sample school board resolutions — is to get parents and communities involved and to give schools the opportunity to show their tangible support for children’s immune boosting nutrition. This is a way for schools and communities to send a signal to state and federal policymakers that they want children to simply have the right to choose whole milk at school instead of being restricted to fat-free and 1% low-fat milk. Enough is enough.
This effort also seeks to make more parents aware that the federal government indeed currently restricts school milk offerings to be only fat-free or 1% low-fat milk. This is something many parents, teachers and even individual school board members are not fully aware of.
School Boards and other groups adopting resolutions are urged to contact their representatives in Congress and their state agriculture and education departments, as well as USDA Food Nutrition Services Deputy Undersecretary Brandon Lipp to let them know of their action.
They are also urged to email firstname.lastname@example.org in order to be added to a public list of resolution adopters.
Those who are interested in talking with their school boards about adopting a resolution can use the sample, which can then be customized by their board. This sample is also great for state legislatures, town boards, county commissioners, even civic, educational, health, nutrition, agricultural, and parent-teacher organizations to consider adopting. The more the merrier!
Even in this uncertain time of Covid-19, when schools are doing a combination of on-site and virtual learning, the breakfasts and lunches provided to students learning from home must also align to the same USDA Food Nutrition Services regulations that are dominated by the Dietary Guidelines.
Even the school meal “flexibilities” announced by USDA for bulk meal pickups during the pandemic require schools to obtain waivers and fill out paperwork explaining why low-fat and fat-free are not available — before they can offer the whole milk (3.25% fat) or reduced-fat (2%) milk.
With supermarket sales of whole milk rising 6.5% January through July, and fat-free milk sales falling 22% compared with a year ago, it’s obvious more parents choose whole milk for their families at home. Therefore, children should be able to choose the milk they love – the milk they have shown they will drink and not discard – at school.
It’s time to remove the federal government’s heavy hand on school meals and allow schools to simply offer the choice of whole milk for children’s immune boosting nutrition.
Congress and USDA and the Dietary Guidelines process are all dragging heels on this simple change despite the overwhelming evidence of the benefits.
Our schools and community leaders can help get Washington’s attention by adopting resolutions.
Our citizens can help show community support by placing yard signs and talking to their school boards.
And our businesses can help by sponsoring and distributing more yard signs and even talking with the civic and community organizations they may belong to.
Potential settlement details undisclosed; Case had revealing ‘wins’ over four years, but FMMO 1 map limitations posed problems
By Sherry Bunting, Farmshine, October 2, 2020
BURLINGTON, Vt. – In an unexpected twist this week, the civil antitrust case Sitts et. al. vs. Dairy Farmers of America / Dairy Marketing Services was dismissed on the eve of the jury trial that had been set to begin Sept. 30 in the U.S. District Court of Vermont with Judge Christina Reiss presiding.
A Stipulation of Dismissal with Prejudice was accepted by attorneys for defendant DFA / DMS and the 116 dairy farmer plaintiffs that had opted out of the previously settled Northeast Class Action Antitrust lawsuit to file the civil suit.
The Stipulation of Dismissal with Prejudice docket simply states: “The parties hereby stipulate to the dismissal of the above-captioned action with prejudice,with all rights of appeal waived, and each party to bear their own costs and attorney’s fees.”
A ‘stipulation of dismissal with prejudice’ is a legal term meaning that the case is over and done with and can’t be brought back.
We have learned that the stipulation requires parties to not discuss the terms of the “dismissal”, which means that settlement details will not be disclosed as public information.
Over the four years since the civil antitrust case was filed in October of 2016, some of the 116 plaintiff dairy farmers have since exited dairy farming.
Dairy farmers who looked forward to “a day in court” with a jury hearing evidence about the increasingly concentrated and anti-competitive milk marketing environment they live every day are likely disappointed by this outcome.
But even though this case is over, some ‘wins’ happened over the four years that could accomplish transparency in smaller case filings in the future.
Throughout the four years, information about the alleged antitrust monopsony actions of defendant DFA, and the position of the plaintiffs as dairy farmers, was revealed at intervals during the proceedings.
Judge Reiss’s Opinion and Order exactly a year ago on Sept. 27, 2019 is one example.
Her Opinion and Order on this case in denying in part DFA’s request for summary judgment stated that, “Plaintiffs’ identify evidence that several of Defendants’ agreements violate a 1977 Consent Decree and Defendants’ own Antitrust Policy and Guidelines. A rational jury could find this evidence demonstrates that Defendants’ ‘acquisition of [ monopsony] power’ was through ‘predatory means.’”
In fact, this 58-page Opinion and Order, along with the amicus brief filed by the U.S. Department of Justice as a Statement of Interest in July, have provided support for others to move forward in smaller cases seeking vital financial information about the workings of DFA, the cooperative of which they are members. (More on that in the future.)
The DOJ statement filed in the Vermont antitrust case in July stated that the alleged activities fall outside of Capper-Volstead protections and that the allegations in the case “do not appear to have involved efforts to increase farmers’ bargaining power but rather efforts at monopsonization.”
The DOJ’s 15-page statement filed in July 2020 represents the first time the DOJ has really weighed-in on the monopsonization of milk markets to basically say the “heartland protections” of the Capper-Volstead Act do not apply to the activities alleged.
In fact, DOJ stated in the brief that the claims at issue fell outside the Capper-Volstead protection because “they do not involve claims that farmer cooperatives acted anticompetitively against processors and other middlemen, but rather that these were claims that farmer cooperatives through agreements with processors, middlemen and other cooperatives, acted anticompetitively against other farmers.”
Part of the issue for the plaintiffs in the Vermont antitrust case — throughout the procedural elements of four years — was that exhibits, testimony, depositions about activities just outside of the Northeast Milk Marketing Federal Order One lines on an arbitrary map were deemed outside the jurisdiction of the case.
It is interesting to note that even evidentiary exhibits at the case docket about activities in central Pennsylvania was scratched from use in the trial simply because central Pennsylvania is one of several geographies in the Northeast that are technically “unregulated” by FMMO 1 and thus not included in the FMMO 1 “map” — even though central Pennsylvania is surrounded on one side by FMMO 1’s map and on the other side by FMMO 33’s map, and the milk from these farms moves through these FMMO marketing channels, plants and cooperatives.
So many moving parts to assemble and so many challenges to use information subject to exclusion based on FMMO maps, it boggles the mind.
Similarly, ‘collaborations’ of one sort or another — revealed through exhibits, testimony, depositions and the like — that occurred in other FMMOs linked to how milk markets function in FMMO 1, or showing a pattern of behavior, were also deemed outside the jurisdiction of this case.
This, despite defendant DFA / DMS being a national footprint milk cooperative that interestingly draws its own area council maps in ways that blend geographies between FMMOs. This, despite defendant DFA / DMS in testimony before the Pa. Milk Marketing Board or in requests made to FMMO 1 market administrators often positions itself as the all-knowing one on milk flow from its birdseye view of the national, even global, dairy grid.
A basic tenet of the case was plaintiff’s claim that DFA is ’empire-building’ not bargaining on behalf of farmer members. During the four years of process on this case, information has been revealed, but DFA has continued to boldly forge its dairy dominance by aggressively bringing the Northeast regional cooperatives and independents that had been market-managed by DMS into the milk supply membership structure of DFA-proper 2017 through 2019, and then acquiring 44 of Dean Foods’ 57 fluid milk plants across the country in 2020.
DFA was listed by Rabobank last month as the largest dairy processor in the United States and third-largest dairy processor globally behind Nestle and Lactalis.
Through additional partnerships, joint ventures and marketing alliances, DFA has a hand in every pie, and no one, not even its members, really knows how the milk (and revenue) really flows.
By Sherry Bunting (Updated as published in Farmshine, Oct. 1, 2020)
Most of us don’t even know what’s being planned for our futures. Big tech, big finance, big billionaires, big NGO’s, big food, all the biggest global players are planning the Great Re-set (complete with land grab and animal product imitation game) in which globalization is the key, and climate change and ‘sustainability’ — now cleverly linked to pandemic fears — will turn the lock.
The mandatory farmer-funded dairy and beef checkoffs — and their overseer USDA and sustainability partner World Wildlife Fund (WWF) — have been at this global food system transformation table since at least 2008 when DMI’s Innovation Center for U.S. Dairy was formed and put together the Sustainability Alliance for U.S. Dairy.
DMI says there is a difference between WWF-US and WWF-EU, but it’s really one big thing connected to these same global corporations that are driving the emerging government policies of the Great Re-set — like the Green Deal in Europe and the Green New Deal in the U.S.
DMI leaders say WWF is ‘helping’ farmers by providing a seat at the table to be sure sustainability will be profitable.
More light was shed on the ‘we will pay you’ carrot-before-club concept of ‘land banks’ in the U.S., when listening to former Vice President Joe Biden answer a farmer’s question about environmental regulations during CNN’s Town Hall in Moosic, Pennsylvania Sept. 18.
More illuminating yet is the flurry of global food company press announcements in recent days as they position themselves ahead of the Sept. 30 United Nations Biodiversity Summit in New York City. That’s where global leaders and the global business community will adopt targets to “restore” (re-wild) 30% of the earth’s land as Protected Areas by 2030 and 50% by 2050.
That’s half the world’s land by mid-Century, and leading this charge is WWF, along with companies like Walmart, Amazon, Nestle, Danone, Unilever and others involved in checkoff-funded pre-competitive collaboration through DMI’s Innovation Center for U.S. Dairy.
According to Survival International, an organization defending indigenous people and smallholder farms, these 2030 and 2050 sustainability targets of the Great Re-set “will be the biggest land grab in world history and will reduce hundreds of millions of people to landless poverty.”
The new narrative is that this massive target of land transfer is needed not just to “restore a trillion trees” as carbon sinks to cool the earth, but to end the Covid-19 pandemic and prevent future pandemics by creating more separation between humans and animals to avoid zoonotic disease transfer. These land targets call for a “critical overhaul of the food production system,” according to the summit agenda.
Even as California wildfires burn out of control — collectively emitting more GHG than tens of millions of cars annually and largely influenced by environmental policies that have led to neglect of the forests in terms of land management — re-wilding of more land is big on the Great Re-set agenda.
Meanwhile, as consumers prioritize health and economics over the ‘planetary diets’ hatched by the Silicon Valley billionaires funding fake meat and fake dairy, the ‘biodiversity’ angle on these land targets is the new hook linking pandemic fears to climate action and the UN Sustainable Development Goals (SDGs) through diet.
Some of the themes are familiar in dairy industry discussions about DMI’s Sustainability Framework and Net Zero Initiative — both rooted in the Great Re-set they have been participating in planning for over a decade through alliances with WWF and its World Resources Institute doing the benchmarking for the global corporations driving it.
(Remember Starbucks’ announcement earlier this year? They are a DMI partner, and so is WWF, but after their WRI benchmarking, they announced ‘moving consumers away from dairy and toward plant-based options’ in their coffee beverages as the biggest of four areas of action! They even borrowed the ‘flat white’ name reserved for their lattes made with whole milk instead of default reduced fat milk to launch a new signature almond-‘milk’ latte. Talk about confusing the customer into making a choice desired by the diet-and-sustainability-elite-ruling-class.)
During a recent DMI ‘open mic’ call, CEO Tom Gallagher stated that these are the rules today and globalization is the world we live in. On the same call, president Barb O’Brien revealed dairy checkoff’s 13-year alliance with Walmart, a two-year partnership with Amazon, and on the Net Zero Initiative, she frequently mentioned Nestle, Unilever, Danone and Starbucks.
What do they all have in common?
They are the key global brands ramping up into plant-based and cell-based dairy and meat alternatives, and they are among the top global corporations that have set goals to ‘move consumers to planetary diets’ and to change the way food is produced.
“What we are talking about is massive transformation of societal systems — financial services, retail consumer goods, the things we bring into our home to eat or to wear or to decorate our homes with. Changing the way all of that gets produced is a massive systemic undertaking that will take business action. It will take philanthropy. It will take government action,” she said.
McLaughlin cited Danone, Nestle and Unilever as the suppliers “in the lead” on this.
“This is total ecosystem transformation,” said McLaughlin. “Our suppliers have stakeholders wanting this, and if there isn’t alignment among their stakeholders (for instance dairy), they are glad to be able to say: ‘Hey, Walmart wants us to do this so we have to do it.’ We help them figure out what to do and how to go faster on some of these things.”
She referenced Walmart’s Sept. 18 announcement that it will be net-zero by 2040 and will become a “regenerative” company “restoring” land to meet 2030 and 2050 targets.
“We will work at the landscape level with suppliers and philanthropy to restore 50 million acres of land — to change the way it gets managed, to decarbonize the supply chains, and change the way consumer products work in retail, as an industry, with traceability and transparency tools,” said McLaughlin.
She talked about Walmart having projects already for all three scopes of the Environmental, Social and Governance reporting (ESGs) that are being mainstreamed into financial markets in 2021. This is how the flow of capital will go to companies progressing toward these global targets.
McLaughlin talked about working with WWF to implement more standards and more certifications for suppliers and to move away from “segregated commodities” to “blended approaches” that use global traceability and transparency systems and document ESG reporting and progress on the SDGs each step of the way.
“It is clear we are exceeding boundaries of the planet, and as a company that sells food and apparel made of cotton, the business case is clear for the SDGs, said McLaughlin.
Asked what is Walmart’s ‘why’? McLaughlin revealed: “The benefits are clear: cost reductions, supply security, risk management, so that’s why we’re doing it.”
Speaker after speaker and company after company throughout the WEF Forum talked about how all business sectors will be collaborating on these global ESGs (capital) and SDGs (land).
Kristina Kloberdanz, Chief Sustainability Officer for MasterCard even talked about using their platform of over 3 billion customers interacting with retailers and merchants to “inform, inspire and enable consumers to take action, themselves, against their own carbon footprint.”
What is clear is that consumers will be led to where global companies want them to go. These global business leaders stated that “moving consumers” (not just suppliers) toward these goals is what they are working on.
Bank of America’s CEO Brian Moynihan (top, center), who is also chair of the International Business Council, sat with heads of the four big accounting firms in one of the WEF livestream sessions about the launch of Stakeholder Capitalism Metrics, which they affectionately refer to as “accountant as activist” or “warrior accountants.”
Moynihan said that financial accounting for the investment sector — even lending — will be predicated on progress toward carbon-neutral and carbon-negative goals.
A glimpse of how land targets would be set in the U.S. was seen in former Vice President Biden’s response to a farmer’s question at the CNN Town Hall in Pennsylvania about environmental regulation, referencing the Obama-era WOTUS rules and the Green New Deal.
“We will have land banks,” said Biden. “You will be paid to put your land in land banks to create open space and be in a position where you will be paid to grow certain crops we want you to grow to sequester carbon from the air.”
He talked about his home state of Delaware with a $4 billion poultry industry and stated that, “manure is a consequence of chickens and it is polluting the bay. But we recently found out we can pelletize the manure and remove the methane,” said Biden.
Though Biden states that his climate policy is not the Green New Deal, the overlaps are there. The Green New Deal includes such references to “land banks”, where government will purchase land from “retiring farmers” and make it available “affordably to new farmers and cooperatives that pledge certain sustainability practices.”
Analyses of the Green New Deal’s land policies suggest rented ground — which comprises up to 40% of agricultural land — would be targeted first because environmentalists assume the active farmers renting this ground don’t care as much about its stewardship because they don’t own it.
Landlords who rent ground to active farmers and ranchers for cropping and grazing are easy targets for such a plan.
However, on the production side, rented ground is incredibly important to active farmers in many dairy states, like Pennsylvania and Wisconsin, for example, and it is how new and beginning farmers get a start.
The Great Re-set driven by climate goals and sustainability linked to pandemic fears and the Covid-19 impact on the global economy holds significant impacts for food and agriculture production. The “solutions” we see discussed are things former Secretary of Agriculture and current DMI executive Tom Vilsack has worked on for at least 13 years, maybe longer.
DMI leaders tell farmers that they are the reason farmers have a voice at the table to keep regulations from coming in that are unprofitable. But more apparently, DMI leaders are at the table helping to shape the dairy re-set that mirrors the global Great Re-set as pursued by WWF and global corporations like Walmart, Amazon, Nestle, Unilever, Danone. They are driving food system transformation in the Great Re-set — a one-world-order clothed in climate goals.
DMI has longstanding alliances with these partners, including WWF. But whose interests are counted at the table where the food system transformation game is being played? The global companies that partner with checkoff through DMI’s Innovation Center for U.S. Dairy and its Sustainability Alliance? Or the farmers mandatorily funding DMI’s existence?
Are farmers and ranchers really at the table? Their powerful integrator (checkoff) and buyers (global processors) most certainly are.
Who will stand for farmers and consumers at the grassroots level? What happens when food production is fully integrated and digitized under globalized control by fewer entities? The role of USDA’s Dietary Guidelines is just the tip of the iceberg, facilitating dietary control of the masses through institutional feeding — working to move us all to the pre-ordained ‘planetary diets.’
The public at large has no idea what’s coming and how their food choices are being manipulated.
Given DMI’s alliances with the big players in food system transformation, the answers should be clear.
But that’s okay, according to Gallagher, DMI is a supply chain expander.
We keep hearing this theme that consumers will deal with fewer players, shop at fewer stores, become less brand-loyal, learn to accept pre-planned food categories and assortments, realize ‘generics’ are just as good as brands, and will focus more on how diets affect the planet, while spending more for new innovative products… We have to stop a minute and wonder:
What does all of THAT mean?
First off, the math is not adding up.
More than one report or webinar has hit on the indicators showing consumers are focused on food purchases that address their concerns about health and economic value, and they are finding comfort in traditional choices – like real milk and dairy products.
Furthermore, the food disruptions of the pandemic have created more interest among consumers in where their food comes from – is it local, regional, produced in the U.S.? They are more in touch with the importance of local and regional food systems, and less keen on global supply chains nor globalization — not just of food, but also medicine and other necessities.
While rank-and-file consumers and farmers find opportunity and security in building localized or regional food systems, that is the last thing the big players want to see happen. So what do they do? They mine consumer data, something DMI will help with, to twist consumers’ health- and value-focused concerns to fit a ‘planetary’ values system that steers consumers straight into the jaws of the global suppliers that have checked all their pre-planned criteria boxes.
They want consumers to prioritize planetary diets so supply chains can be centralized and globalized — pure and simple — and our own industry checkoff organizations are participating at best, helping them accomplish it, at worst.
In fact, the “good for the planet” mantra — as defined by World Wildlife Fund (WWF) and its World Resources Institute (WRI) is what global corporations and Silicon Valley tech food investors are all about. They are creating the boxes, checking them off, and then trying to convince consumers that this is what is important to them when making decisions about their food.
Data clouds, omnichannel marketing, digitized food, personalized experiences, purpose-driven marketing, planetary diets – these are but a few of the buzz terms and technologies driving future of food transformation.
Through GENYOUth, the dairy checkoff is actually facilitating transformation, grooming schoolchildren to make choices that will eventually pad the wallets of billionaire tech-sector food investors and give them control under the guise of planetary diets and climate change. The future-of-food players need a global ‘value-driver’. It was climate change.
Then came Covid, and people were forced home and began to turn inward to the health and economic needs of themselves and their families. They began to see the importance of communities and began to recognize that farmers are connected to their communities.
To bring them back “on-task”, WWF recently launched a campaign to link Covid-19 to the already set goals. In fact, according to its website, WWF explains that, “A big possible casualty of COVID-19 are the world’s Sustainable Development Goals (SDGs).
In a July 22 report on the pandemic and planetary health, WWF scientist Robin Naidoo states that, “In 2015, the United Nations adopted (Sustainable Development) goals to improve people’s lives and the natural world by 2030.The success of these SDGs depends on two big assumptions: sustained economic growth and globalization.
“COVID-19 has now torn both assumptions to shreds,” the WWF report states. “This has fundamental implications for how we conceive of and prioritize sustainability in a post-pandemic world.”
The report then goes on to twist the narrative on these UN SDGs (that are also part of DMI’s Net Zero Initiative) to say 30 of the targets “would help to lessen the likelihood of another global pandemic.”
Like a chameleon, the big players adapt the plan by changing the picture to shift consumer focus back onto the planetary diets and by honing in on post-Covid concerns about health and economics from a different angle. Easier to do this when people do not know much about milk and dairy.
Yes, there is a tug of war emerging from the pandemic in which consumers seek and grassroots farmers can deliver real, whole, healthful foods in regional, national and international food systems that are in direct competition with centralized global supply chains that want to streamline, limit options and control diets.
While DMI leaders are busy convincing dairy farmers to get with the program of unified marketing in order to compete – as one — in a big marketplace, what is DMI actually doing with their empowerment?
— DMI has a close working relationship with WWF to write the rules of the ‘sustainability’ and ‘net-zero GHG’ playbook – the driver.
— DMI’s marketing and public relations contractor Edelman has close ties to WWF, the EAT Lancet forums, and is developing new terms for brands in the plant-based alternative milk sectors.
— DMI partners with DFA to help launch a 50% milk 50% oat or almond juice beverage with pretty packaging and marketing that make it appear superior to the milk produced and bottled from dairy farms.
— DMI’s GENYOUth program facilitates access to schoolchildren so global corporations and other partners can groom schoolchildren into future decision-making consumers focused on “planetary diets” – their global value system.
— DMI recently hired a digital food and cellular ag proponent as its vice president of Dairy Scale for Good. Caleb Harper’s hiring has brought many questions but is merely one more cog in the supply chain wheel being built with dairy farmer checkoff money. His focus will be large dairies. His background is controlled environment horticulture through computerized plant boxes that several science publications, and even public radio, pointed out were “smoke and mirrors.” His father has ties to the early rendition of fairlife through Mike McCloskey, and both Harper and McCloskey are part of WWF’s thought leadership group
Innovation is normally something to be enthusiastic about. Technology is progressive and something farmers embrace. Competition is healthy and provides entrepreneurial opportunities.
But when it comes to mandatory promotion dollars, gone are the days of managing content that everyone can see, as it all goes digitally underground to meet proprietary consumer targets of partners. Gone are the days of education to promote the benefits of dairy to meet the needs and questions of consumers.
When farmers are forced to fund an entity with the power to set parameters on how they do business, an entity that is overseen by USDA and yet is partnered with activist groups, large multinational companies and global supply chain consolidators, and an entity that can pay for research that then becomes proprietary and could involve diluted dairy products such as butter that is mostly water, and an entity that begins to see its role as the expander of the supply chain… yes, transparency and vigilance are most definitely needed.
By Sherry Bunting, Farmshine, Sept. 11, 2020 and preview Sept. 18, 2020
Whole milk sales up 6.5% Jan through May, total milk sales flat
While consumer packaged goods (CPG) reports indicate fluid milk sales being up 4 to 5% through the Coronavirus pandemic — and flattening as of the end of August back to year ago levels — the other side of that coin is the loss of institutional, foodservice and coffee house demand. Thus, the extra CPG sales at supermarkets slightly more than covered the lost usage in foodservice and the net wholesale volume of fluid milk sales reported by milk handlers January through May 2020 was virtually unchanged (up 0.2%) compared with a year ago, according to USDA.
Within that volume are some important shifts. Conventional fluid milk sales to all uses were down 0.5% vs. year ago in the first 5 months of 2020 while organic fluid milk sales were 14% higher than a year ago.
Within the conventional milk sales, whole milk was up 6.5% and reduced fat (2%) milk was up 3.3%. Also gaining in sales January through May 2020 were “other” fluid milk sales, which includes ultrafiltered milk such as Fairlife, up 10.5% vs. year ago.
The big losers were fat free milk down 12% from year ago and flavored fat reduced milk down 22%.
These numbers were reported in the most recent USDA product sales report. Given that this included the mid-March through early May period when shortages and purchase limits were put on fluid milk in many stores throughout the country, it will be interesting to see June and July data when they are reported in the next 30 to 60 days.
Clearly, consumers are shifting even more strongly to whole and 2% milk and away from 1% and fat-free milk. With organic sales also experiencing sales increases, it is a sign that consumers are looking at health indicators, and a sense for wanting what’s real, natural and perceived to be most local when choosing milk for home. At the same time, overall sales of conventional milk are negatively impacted by the steep drop in institutional, foodservice and coffee house demand.
Class I milk markets get demand push from gov. purchases
At the wholesale milk handler level, USDA reports tightening milk supplies in the eastern U.S. relative to Class I usage. Specifically, the USDA Eastern Fluid Milk and Cream Report Wednesday, Sept. 9 indicated Class I sales picking up this week in the Northeast with balancing operations receiving steady to lighter milk volumes compared with recent weeks.
In the Mid-Atlantic region, milk reported to be adequate for Class I needs, and loads traveled to the Southeast for immediate needs as USDA reports Southeast milk production is tight and output is down with most milk loads clearing only to Class I plants and no loads to manufacturing.
USDA reports production of seasonal milk beverages such as pumpkin spiced flavored milk and eggnog have begun to pick up.
USDA reports that the steady to higher Class I demand is due to some schools returning to session along with government programs purchasing extra loads from manufacturers this week. In fact, reports USDA, bottlers in eastern markets are receiving milk from other regions, which is loosening up the previously tighter cream availability.
Block cheese rallies past $2/lb, but futures rally is short-lived
Cheese markets made significant gains for the third week in row, fueled in part by the third round of USDA CFAP food box purchases for delivery October through December 2020.
On Wed., Sept. 9th, 40-lb block Cheddar was pegged at $2.1575/lb — up 25 cents from a week ago with a single load trading. The 500-lb barrel cheese price was pegged 10 cents higher than a week ago at $1.67/lb, with zero loads traded. The barrel price had reached $1.70 earlier in the week before backing down Wednesday, taking early week futures market gains along with it.
The block to barrel spread is at its widest level of 48 cents per pound, an indicator of cheese market vulnerability and volatility for the longer term. Butter loses cent, powder gains cent
Spot butter lost a penny with a significant 13 loads trading Wednesday on the CME spot market, pegging the price at $1.50/lb. Nonfat dry milk gained a penny at $1.0425/lb with 3 loads trading.
Negative PPDs persist, unpaid component value across 7 MCP Orders totals $1.47 billion for June through August milk
Look for more on this in the 9/18 Market Moos in Farmshine, but for now, here’s a chart I’ve compiled showing relevant information for August, July and June 2020 vs. same month year ago in 2019.
The bottom line is three months of significantly negative PPDs resulted in $1.47 billion in total unpaid component market value across the 7 Multiple Component Pricing Federal Milk Marketing Orders.
Losses were also incurred by the 4 Fat/Skim Pricing Orders but are not easily quantified on the FMMO pool balance sheet.
This has cost dairy producers even more who have paid to manage risk through a variety of tools because those tools only work when the milk check follows the market higher to provide the protected margin. When the market says ‘no fire here’ but the house burned down just the same, it’s a double-whammy.
Remember, fluid milk does not have a ‘market’ because it is regulated or used as a loss-leader by the nation’s largest supermarkets. Thus, the value of the components in fluid milk can only be market-valued in the other products made with milk that “sort of” have a market. When that market rallied, the value was pulled instead of pooled.
Instead of ‘band aid’ approaches to milk pricing reform, given the Class I change made in the 2018 Farm Bill has been a disaster, it’s long past time for a national hearing on milk pricing with report to Congress.
Read on, to see how other factors such as imports vs. exports affect storage anc contribute to unprecedented market misalignment.
Close-up Cl. III / IV spread widens, average for next 12 months narrows
The spread between Class III and IV milk futures widened to a $4 to $5 spread for September and October, $2 to $3 for November and December. But the average over the next 12 months for both classes in CME futures trading has narrowed this week.
The Class III futures contract for September traded at $16.62/cwt Wednesday, Sept. 9 — fully steady with a week ago while Class IV traded 15 cents lower than a week ago at $12.83.
October’s Class III futures contract traded at $18.48 Wednesday, down 54 cents from a week ago, while Class IV traded at $13.64, down 40 cents.
The next 12 months of Class III milk futures closed the Sept. 9 trading session at an average $16.68 — down 24 cents from a week ago.
The next 12 months of Class IV futures averaged $15.03 — down 4 cents from a week ago. At these midweek trading averages, the spread between Class III and IV over the next 12 months averages at $1.65/cwt — 20 cents tighter than the previous Wednesday.
Import-Export factors affect storage, which in turn affects markets
As mentioned previously, the most recent USDA Cold Storage Report showed butter stocks at the end of July were up 3% compared with June and 13% above year ago. Total natural cheese stocks were 2% less than June and up only 2% from a year ago. Bear these numbers in mind as we look at exports and imports.
According to the U.S. Dairy Export Council (USDEC), total export volume is up 16% over year ago year-to-date – January through July. For July, alone, total export volume was up 22% over year ago. Half of the 7-month export volume was skim milk powder to Southeast Asia. January through July export value is 14% above year ago.
However, butterfat export volume averaged 5% lower than a year ago year-to-date. The big butter export number for July was not enough to make up for the cumulative decline over the previous 6 months.
On the import side, the difference between cheese and butter is stark. Cheese imports are down 10% below year ago, but the U.S. imported 14% more butter and butterfat in the first 7 months of 2020 compared with a year ago.
The largest increase in butter and butterfat imports occurred in the March through June period at the height of the pandemic when retail butter sales were 46% greater than year ago.
Looking at these butter imports another way, is it any wonder butter stocks are accumulating in cold storage to levels 13% above year ago at the end of July — putting a big damper on butter prices and therefore Class IV?
The U.S. imported 14% more butter and butterfat and exported 5% less butter and butterfat year to date while storage has been running double-digits higher, up 13% at the end of July.
As accumulating supplies pressured butter prices lower, the U.S. became the low price producer and exported a whopping 80% more butter in July compared with a year ago. This was the first year over year increase in butter exports in 17 months. But the record is clear, year-to-date butter exports remain 30% below year ago and total butterfat exports are down 5% year-to-date.
Analysts suggest that butter and butterfat imports are higher because U.S. consumer demand for butterfat has been consistently higher — even before the impact of the Coronavirus pandemic stimulated butter demand for at-home cooking and baking.
This reasoning is difficult to justify — given there is 13% more butter currently stockpiled in cold storage vs. year ago keeping a lid on the wholesale prices (while retail prices rise) and undervaluing butterfat and Class IV milk price in the divergent milk pricing formula. If 14% more butter and butterfat are being imported, does this mean we need to import to serve consumer retail demand and keep larger inventory at the ready to serve that retail demand?
If so, why is the inventory considered so bearish as to hold prices back and thus amplify the Class III and IV divergence?
Does month to month cold storage inventory represent excess? Or does it simply represent a difference in how inventory is managed in today’s times, where companies are not as willing to do “just in time” and “hand to mouth” — after they dealt with empty butter cases and limits on consumer purchases at the height of the pandemic shut down this spring.
The trade has not sorted out the answers to these questions.
Meanwhile, these export, import, and government purchase factors impact the inventory levels of Class III and IV products very differently — and we see as a result the wide divergence between Class III and IV prices and between fat and protein component value.
Interestingly, USDA Dairy Programs in an email response about negative PPDs that have contributed to the wide range in “All-Milk” prices, says the higher value of components “is still in the marketplace” even if All-Milk and mailbox price calculations do not fully reflect it across more than half of the country.
Rep. Thompson and Keller want Whole Milk choice for WIC
The American Dairy Coalition, a national organization headquartered in Wisconsin, applauded Congressmen Fred Keller and G.T. Thompson, representing districts in Pennsylvania, for recently introducing a bill designed to offer an expanded variety of dairy products, including 2% and Whole fat milk, to participants of the Special Supplemental Nutrition Program for Women, Infants and Children (WIC). The bill, officially titled, “Giving Increased Variety to Ensure Milk into the Lives of Kids (GIVE MILK) Act,” would expand WIC offerings.
The Grassroots Pa. Dairy Advisory Committee joins the American Dairy Coalition in thanking Congressmen G.T. Thompson and Fred Keller for their dedication to trying to help nutritionally at-risk Americans have the ability to choose what dairy products fit the taste preferences of their families. Thompson is prime sponsor and Keller a co-sponsor along with 39 other members of Congress on another bill — the Whole Milk for Healthy Kids Act, H.R. 832 — aimed at allowing whole milk choice in schools too.
Current Dietary Guidelines have stifled Whole milk choice by recommending 1% and fat-free milk for children over 2 years of age even though Whole milk provides a nutritionally dense, affordable and accessible complete source of protein that children love.
Science shows consumption of these products promote a healthy weight in both children and adults and fends of chronic diseases.
“More initiatives such as the GIVE MILK Act are necessary to change the antiquated and unscientifically based notion that saturated fats are dangerous to public health,” states a press release from the American Dairy Coalition. “We encourage all members of the dairy industry to not only support the GIVE MILK Act, but also encourage their legislators to urge the Dietary Guidelines for Americans also be updated to remove caps on saturated fats, allowing once more the choice of whole milk in public schools. Children deserve the best — let’s give them whole milk!”
Look for more next week on what the Grassroots Pa. Dairy Advisory Committee and 97 Milk are working on to get the word out to “Vote WHOLE MILK choice in schools — Citizens for children’s immune-boosting nutrition.”
DMI leaders give Net Zero, ‘sustainability’ overview
By Sherry Bunting, Farmshine, September 11, 2020
CHICAGO, Ill. – A month ago, after Farmshine revealed the background of DMI’s new Vice President of Dairy Scale for Good, questions and concerns voiced by dairy farmers led DMI to announce it would have one of its monthly “open mic” calls specifically on the topic of Sustainability and Net Zero Initiative (NZI).
That was Sept. 2, but unlike previous calls, Farmshine was not included among trade media.
This is not surprising because Farmshine has obtained a copy of a communication sent to dairy checkoff board members stating in print that the DMI board has agreed not to engage with Farmshine, stating that Farmshine articles misrepresent their facts.
This position came after two well-sourced articles were published in Farmshine about Caleb Harper, of Vice President Dairy Scale for Good, who was hired by DMI to work with large farms to scale sustainability practices as part of the Net Zero Initiative. The articles revealed concerns about his background in science, funding and future of food philosophy.
Farmshine has obtained a link to the recording of the Sept. 2 open mic call on sustainability that was part of a DMI e-newsletter. However, only 35 minutes of the hour-long call were shared with farmers. The recording was cut at the end of presentations by DMI CEO Tom Gallagher, President Barb O’Brien and Vice President of Sustainability Karen Scanlon.
Thus the recording excluded the 25 minutes of questions and answers, despite Gallagher’s assertion that he would “make sure to get this information into the trade media to communicate with producers and clear up misperceptions that have been perpetrated.”
During the recorded presentations, Gallagher stated that, “The industry — as an industry — has recently made commitments to be carbon-neutral by 2050.”
While he did not get into specifics, he said he wanted dairy farmers to understand the big picture.
He said the dairy checkoff has been involved in this effort 13 years in the role of science, research, and outreach to the supply chain.
Gallagher sought to assure farmers that the first order of business is to “recognize and promote how dairy farmers have been and continue to be stewards of the environment.”
He said the next thing is to make sure consumers and thought leaders understand that sustainability must be profitable for farmers.
He said that the NZI does not mean every dairy plant or every dairy farm will achieve carbon-neutrality. “We want to say that as an industry we are carbon-neutral. That’s our perch,” said Gallagher.
Lastly, he said, “We want to avoid having farms and companies and co-ops use sustainability as a marketing advantage (in competition with each other).
“We should stick together on this, because our competition is others — cell based ag and plant-based beverages — so let’s not beat each other up on this,” said Gallagher.
(Yet DMI hired a key Net Zero employee with ties to cellular agriculture and digital agriculture and funded a new product “innovation” that is half milk and half almond or oat beverage made by DFA in pretty cardboard cartons using buzz terms like “purely perfect blend.”)
“When we went into this 12 to 13 years ago, it was still emerging what sustainability is — and it is still sometimes vague — but from a consumer standpoint, they are focused on sustainability,” said Gallagher.
Later in the call, he stressed the importance of sustainability saying 80% of consumers are focused on it, but then confirmed a bit to the contrary what various consumer surveys show for actual decision-making factors: Number One is still ‘taste,’ followed by number two ‘price,’ and even Gallagher states that nutrition and sustainability are “tied for third.”
He was vague on that nutrition and sustainability distinction and took issue with anyone claiming consumers need more education on dairy nutrition.
“We have these two great components to our story: nutrition and sustainability,” he said, “I don’t care what others are telling you, we have the data and people already do understand the nutritional value of dairy. Sure, we can remind them, but they know it.
“The piece they are not aware of is the sustainable nature of the dairy industry and dairy farming. They don’t get it, and they’ll buy into the notion that plant-based is more environmentally sound because the consumer – especially millennials and Gen-Z – have made their decision… 80% of them expect companies to invest in sustainability in the next year.”
(Or are 80% of consumers being pushed in this direction by top-down supply chain transformation?)
In fact, even though DMI’s sustainability partner World Wildlife Fund (WWF) has been scrambling to come up with new ways to tie the globalized ‘sustainability’ agenda to pandemic prevention as a hook that gets to the “health” and “economic” concerns consumers really have…. Gallagher went so far as to say: “Covid has had an interesting impact on millennials, Gen-Z and the next generation because the majority feel that Covid is an example of why we need global, big-picture solutions with companies leading the way.
“Covid is not distracting consumers, it is heightening the stakes,” said Gallagher, right out of the most recent WWF and global re-set playbook seeking to get everything back on their track.
O’Brien mentioned the dynamics that are more at play: large global companies like Nestle, Unilever, Danone and Starbucks making sustainability even more important as a priority.
“We at checkoff are positioning U.S. Dairy as a solution to drive a unified approach,” she said. “The good news is we know dairy is and can be a solution with the growing body of research and practice-based proof and an industry-wide plan. We are ready to re-set what people think they know about dairy.”
O’Brien painted a picture of the global landscape in which U.S. dairy will have less access if it is not unified to show industry-wide measurements of sustainable impacts.
Then it became clear. O’Brien said “This is not just about consumers, but also investor groups. They are setting the criteria for measuring sustainable impacts, and they expect companies to more fully disclose impacts that are tied to their businesses.”
She said trillions of dollars are being invested in businesses that can do that, and she said many countries are making legally-binding country-wide commitments to accelerate, and they emphasize the need for the U.S. to voluntarily report its impacts.
“We see our dairy customers like Unilever, Danone, Nestle and Starbucks working to meet these global goals on carbon neutrality, water use, zero waste and hunger initiatives,” said O’Brien. “They need to know where we are at to help them meet their goals against these sustainability metrics.”
(The World Resources Institute, which is inextricably linked to WWF, along with UN benchmarks, are formulating these metrics – a work in progress since 2009 when DMI’s Innovation Center for U.S. Dairy first established its sustainability partnership with WWF, according to the WWF website.)
Gallagher said farmers have been at the table on this, and he presented an overview of the “the plan.” He took issue with dairy farmers who are “against globalization” and with strong words, stated: “My answer to that is we did not create globalization, but those are the rules, and it’s the world we are living in… with very powerful forces that are very much against dairy at play here in the U.S.”
(There is a difference between international trade and ‘globalization.’ Globalization is a more centralized order of things affecting aspects of life, health, resources and economies at an international scale.)
Gallagher confirmed that companies will drive this, and he said that consumers want corporations to drive this. He and O’Brien both talked about DMI’s sustainability partnerships began with Walmart in 2007.
Where the plan meets the farm, Gallagher said the Net Zero Initiative has three categories: Large farms, medium sized farms, and small farms.
“We’re doing something for each of those. Some staff (Caleb Harper) are focused solely on large farms looking at technologies to see if they are financially sustainable,” said Gallagher. “And we have folks working on mid-sized and small farms too. Our focus is the research, and some of our efforts will be foundational to support all farms.”
He introduced Karen Scanlon, DMI’s vice president of sustainability who said dairy’s diversity is a key in the Net Zero Initiative.
“There is no one right way, no prescription on how to achieve our environmental outcomes along with profitability,” said Scanlon. “We are focusing right now on learning what farmers are already doing, and helping to share that with more farmers, so farmers can learn from each other.
“We also want to work with farmers and supply chain partners on demonstration projects to highlight successful technologies, practices and approaches,” said Scanlon.
She mentioned two examples – one in Wisconsin and one in southeastern Pennsylvania as well as talks with producer organizations in Idaho and the Pacific Northwest – where farmers and their cooperatives and other supply chain partners are already doing things that DMI can come in and be part of to find ways to cost-share the ideas to increase adoption among more farms.
“Founded by dairy farmers 12 years ago through checkoff, the Innovation Center for U.S. Dairy put us at the table and we find common ground and set a common set of principles that is a difference maker in the supply chain,” said O’Brien.
She went back to a summit with Walmart in 2007, which led to a deepening of the relationship over time. More recently, in 2018, DMI had a similar ‘summit’ with Amazon and that partnership is underway with DMI as category captain.
“Today Walmart proactively uses the FARM program’s animal care and environmental modules. They are using our programs with farms they contract directly,” said O’Brien, adding that DMI starts with relationships and brings in other companies to align with that. She and Gallagher stressed that dairy checkoff now has a “unified Net Zero plan in place and is coordinating with other industry organizations.”
“There is one plan marching forward with each industry organization playing their own unique role,” said O’Brien. She explained that DMI is engaged in science and outreach to the supply chain and telling the dairy story; NMPF is focused on legislative and regulatory as well as on-farm environmental stewardship; Newtrient is focused on viable technologies and practices to produce new revenue streams; and US Dairy Export Council is focused on export markets and aligning targets with DMI’s thinking on measurement and progress.
“What we have created for dairy farmers over the last decade is ready as sustainability increasingly becomes a requirement for doing business,” said O’Brien. “We must continue to lead in this.”
Before opening it up to questions for the last 25 minutes of the call – which were not shared in the DMI newsletter recording – Gallagher told everyone on the open mic call that this was a 30,000-foot view and if they want more details, DMI could do another open mic call on the topic or find other ways to communicate.