Dr. Mitloehner clears the air on ‘net zero,’ sees narrative changing on America’s cows

Dr. Frank Mitloehner is a foremost authority on animal science and greenhouse gas emissions. Find him on Twitter @GHGGuru and @UCDavisCLEAR (Screen capture from American Dairy Coalition webinar)

‘Climate neutrality, not net zero carbon, should be dairy’s goal.’

By Sherry Bunting

‘Net zero’ seems like a simple term, but it’s loaded, according to Dr. Frank Mitloehner, professor and air quality specialist with the Department of Animal Science at University of California-Davis. 

He firmly believes dairy can be a climate solution, but the first step is to accurately define dairy’s contribution to the climate problem. Setting the record straight is his prime focus, and he also researches ways dairy, like every industry, “can do our bit to improve.”

Presenting on what ‘net zero’ really means for dairies, Mitloehner answered questions during the American Dairy Coalition (ADC) annual business meeting in December, attended by over 150 producers from across the country via webinar.

Based in Wisconsin, ADC is a national producer-driven voice with a regionally diverse board. President Walt Moore, a Chester County, Pennsylvania dairy producer, welcomed virtual meeting attendees, and CEO Laurie Fischer shared a federal dairy policy update. 

She said the ADC board is nimble, moves quickly, and wants to hear from fellow dairy farmers. She encouraged membership to make ADC stronger and shared about the organization’s federal policy focus in 2021 — from pandemic disruptions and assistance, Federal Order pricing, depooling and negative PPDs to real dairy label integrity, whole milk choice in schools, and farmers’ questions and concerns about dairy ‘net-zero’ actions.

“Too often, farmers think they may not understand something, so they don’t speak up,” said Fischer. “But we get calls and so much great advice from our farmers. We know you get it, you know it, because it is happening to you.” 

From this farmer input, the net-zero topic became the ADC annual meeting focus.

“We are rethinking methane, and this is influencing and shaping the discussion,” Dr. Mitloehner reported. He urged producers to use the information at the CLEAR Center at https://clear.ucdavis.edu/ and to do better networking, to have a better presence on social media. 

This is necessary because the activists are well-connected, and methane is the angle they use in their quest to end animal agriculture. He said Twitter is a platform where many of these discussions are happening. His handle there is @GHGGuru and the Center is @UCDavisCLEAR.

“This is something I have told the dairy industry. They say ‘net-zero carbon’, but they shouldn’t say that because it is not possible, and it is not needed. We need to be saying ‘net-zero warming’. That’s the goal. Then, every time you reduce methane, you instantaneously have an impact that is inducing a cooling effect,” said Mitloehner.

‘Climate neutrality’ is the more accurate term he uses to describe the pathways for U.S. dairy and beef. But it requires getting accurate information into policy in a fact-based way. 

It requires arming people with the knowledge that the constant and efficient U.S. dairy and livestock herds produce no new methane, that they are climate-neutral because not only is methane continuously destroyed in the atmosphere at a rate roughly equal to what is continuously emitted by cow burps and manure, that process involves a biogenic carbon cycle in which the cow is a key part.

One of the issues is how methane from cattle is measured, he said. Current policy uses a measurement from 30 years ago that fails to acknowledge the carbon cycle and ‘sinks’ alongside the ‘emissions.’ 

Mitloehner said accurate information is beginning to change the narrative. This is critical because methane is the GHG of concern for dairy, and the narrative about it has been incomplete and inaccurate. 

As a more potent heat-trapping gas than carbon dioxide, methane becomes the ‘easy’ target to achieve the warming limits in the Paris Accord. Methane was the focal point of ‘additional warming limits’ during the UN Climate Change Summit (COP26) in Glasgow in November.

Putting together the inaccurate narrative alongside international agreements to specifically reduce methane, it becomes obvious why cattle are in the crosshairs. Producers are already in the middle of this in California as methane regulation and carbon credit systems began there several years ago.

As the narrative is beginning to change, Mitloehner sees opportunities. He described the current California ‘goldrush’ of renewable natural gas (RNG) projects where large herds both in and out of state cover lagoons to capture and convert biogas into RNG. The state’s investments and renewable fuel standard provide a 10-year guarantee with the RNG companies typically owning the offset credits that can be traded on the California exchange from anywhere.

Getting the numbers right is mission-critical

“We are far and away an outlier because of our efficiency in the U.S with all livestock and feed representing 4% of the GHG total for the U.S,” Mitloehner confirmed. “Dairy, alone, is less than 2% of the U.S. total.”

This is much smaller than the 14.5% figure that is thrown about recklessly. That is a global number that includes non-productive cattle in India as well as the increasing herds in less efficient developing countries. This number also lumps in other things, such as deforestation.

He said the true global percentage of emissions for livestock and manure is 5.8%. Unfortunately, activists and media tend to use the inflated global figure and conflate it with these other things to inaccurately describe the climate impact of U.S. dairy and livestock herds as 14.5%.

The efficiency of U.S. production and the nutrient density of animal foods must be part of the food and climate policy equation.

Methane is not GHG on steroids

“Without greenhouse gases, life on earth would not be possible because it would be too cold here,” said Mitloehner. “We need GHG, but human activity puts too much into the atmosphere, and the toll is large concentrations.” 

The way all GHGs are measured has to do with their intensity as determined 30 years ago when scientists wanted one global warming potential (GWP) unit to compare cows to cars to cement production and so forth. They came up with GWP100, which converts methane to CO2 equivalents based on its warming potential.

Methane traps 28 times more heat than CO2, but it is short-lived, Mitloehner explained.

“Looking just at the warming potential, you get this idea that methane is GHG on steroids and that we need to get rid of all of it and all of its sources,” he said.

But is this the end of the methane story? No.

Sinks and cycles must count

Mitloehner described how ‘methane budgets’ look at sources and their emissions but ignore the carbon sinks that go alongside and ignore the chemical reactions that result in atmospheric removal of methane as well.

“Plants need sunlight, water, and a source of carbon. That carbon they need comes from the atmosphere to produce oxygen and carbohydrates,” he said, explaining how cows eat the carbohydrates and convert them to nutrient dense milk and beef. In that process, the rumen produces methane.

“Is this new and additional carbon added to the atmosphere? No it is not. It is recycled carbon,” he said.

“Say you work off the farm. You drive and burn fuel, adding new CO2 in addition to the stock in the atmosphere the day before. Stock gases accumulate because they stay in the environment. Currently, agencies treat methane as if it behaves the same way. But methane is a flow gas, not a stock gas. It is not cumulative,” said Mitloehner.

If the same farm has 1000 cows belching today and 1000 belching 10 years ago, those 1000 cows are not belching new methane because in 10 years it is gone from the atmosphere. It is cyclical.

“The take-home message is the carbon that our constant livestock herds produce is not new carbon in the atmosphere. It is a constant source because similarly to it being produced, it is also destroyed. The destruction part is not finding its way into the public policy system… but it will in the future,” he predicts.

Methane drives Paris Accord and COP26

Methane targets are driving intergovernmental agreements wanting to limit the “additional warming impact” of nations and industries.

Currently, cattle are viewed as global-warmers because they constantly emit methane. However, as Mitloehner drilled numerous times, this is not new methane, it is not additive, it is not cumulative. It is recycled carbon.

“If you have constant livestock herds, like in the U.S., then you are not causing new additional warming,” said Mitloehner.

Burning fossil fuels is much different. 

“Fossilized carbon accumulated underground. Over 70 years, we have extracted half of it and burned it, so where is it now? In the atmosphere. We added new and additional CO2 that is not a short-lived gas. It is a one-way street from the ground into the air,” he explained.

The problem for dairy and beef producers is their cattle are being depicted as though their emissions are additive, cumulative, like fossil fuels, which is not true, he said.

Signs the narrative is changing

One promising sign that the message is getting through has come from Oxford researchers acknowledging the constant cattle herds in the U.S. and UK are not adding new warming.

They acknowledge the GWP100 “grossly overestimates” the warming impact of cattle and are working on a new measurement that recognizes constant cattle herds are not adding new warming, said Mitloehner.

Another promising sign is that the International Panel on Climate Change (IPCC) issued a statement recently acknowledging that the current GWP100 overblows the warming impact of cattle by a factor of four. This new information is not in current policy, but it is making its way there.

Tale of two bathtubs

Mitloehner believes it is important to visualize climate neutrality. He described two bathtubs. One has a CO2 faucet with no drain, the other a methane faucet with a drain. Open the faucets, and even at a slow and steady rate, the CO2 bathtub continues to rise, while the methane bathtub drains as it fills to remain at a constant level.

He also explained that over the past 200 years the U.S. hasn’t seen any real change in that methane bathtub because prior to settlement in America, 100 million ruminants — buffalo and other wild herds — roamed. Today, there are around 100 million large ruminants in the U.S. dairy and beef industries.

What has changed is the U.S. does have more liquid manure lagoon storage that is producing more methane than solid manure storage. “But we know of ways to further reduce that,” he said.

Mitloehner pointed out how the current GWP100 poorly estimates the warming impact three example scenarios. If, over 30 years, methane is increased 35% from a source, or reduced 10%, or reduced 35%, the GWP100 would show significant continuous addition of cow-sourced methane in CO2 equivalents for all three scenarios because the destruction of the methane – the drain that operates with the faucet – is ignored.

The proper way to look at this, if the methane increased a lot, is that it would add a lot. But if it is balanced, then there is no new or additional warming. And, in that third scenario, he said, “where we pull a lot from the atmosphere when we reduce methane, it has the same impact as growing a forest.”

Bottom line, said Mitloehner, “We can be a solution and take it to the market and get paid for that,” but current policy does not yet reflect the neutral position of the constant and efficient U.S. herd.

Bullish about the future

‘Net zero’ is a term that is not yet clearly defined, said Dr. Frank Mitloehner several times during the American Dairy Coalition annual meeting by webinar in December. He sees the real goal as “climate neutrality,” to communicate the way constant U.S. dairy herds contribute “no additional warming,” in other words “net zero warming.”

The climate neutrality of U.S. cattle must be part of public policy, he said. Only then will dairies truly be on a path to marketing their reductions as ‘cooling offsets.’

Mitloehner, a University of California animal scientist and GHG expert is bullish about the future of “turning this methane liability into an asset, so if we manage toward reducing this gas, we can take that reduction to the carbon market,” he said.

“When we hear ‘net zero’, we think about carbon, but that would mean no more GHG is being produced, and that is not possible. I have told the dairy industry this for years. Why is (zero GHG) not possible? Because cows always belch, and we can’t offset that, and furthermore, we do not need to offset that because it is not new methane,” said Mitloehner.

On the other hand, “If we replace beef and dairy made in the U.S., this does not create a GHG reduction at all. This is because we are the most productive and efficient in the world,” he said.

Just stopping beef and dairy production here in the U.S. — and picking up the slack by producing it somewhere else or producing something else in its place — creates ‘leakage.’ This leakage, he said, is where the biogenic carbon cycle becomes disrupted. In other words, the bathtub has a faucet that is out of sync with the drain.

California’s RNG ‘goldrush’

Mitloehner touched on the strict California standards that mandate a 40% reduction of methane be achieved by the state by 2030. Again, methane is targeted because of its warming potential per the Paris Accord.

The good news, he said, is California is using incentives to encourage covering manure lagoons to capture a percentage of the biogas bubble so that it doesn’t go into the atmosphere but is trapped beneath the tarp and converted into renewable natural gas (RNG) that can be sold as vehicle fleet fuel to replace diesel. 

Because this RNG comes from a captured and converted methane source, it is considered a most carbon-negative fuel in the state’s low-carbon fuel standard. 

Those credits equate to $200 per ton of CO2 replaced with a carbon-negative renewable, said Mitloehner.

“This is a huge credit. This is why dairies are flocking to get lagoons covered to trap and convert. These credits are guaranteed for 10 years in California, but the anti-agriculture activists are fuming over them,” said Mitloehner.

Of all California investments made toward achieving the 40% methane reduction goal, dairy has received just 3% of funds, but has achieved 13% of reductions so far.

This “carrot” approach has incentivized the biogas RNG projects assuming $4000 income per cow, making an estimated $1500 to $2000 per cow per year on a 10-year California fuel standard guarantee.

Mitloehner noted that the carbon intensity of the reduction is presently viewed as greater when RNG is used in vehicles vs. generating electricity, but right now there is not enough RNG suitable for vehicle use. He sees the fuel use increasing in the future and explained that dairies anywhere can sell into the California market if they capture biogas and convert it to RNG.

The state’s 10-year guarantee has stimulated companies seeking to invest in RNG projects on large dairy farms, where they then own or share the credits.

Mitloehner answered a few questions from producers about the caveats. If the bottom and top of the lagoon are covered, what happens to the sludge that accumulates? He acknowledged there is no satisfactory answer to that question presently.

Another drawback is the technology only works for larger dairies because smaller lagoons won’t have the same breakeven. Community digester models are emerging as well, he said, but they also use clusters of large farms working together.

Soil carbon sequestration

Mitloehner cited soil carbon sequestration as a way dairy farms of any size can be a solution.

It’s the process by which agriculture and forestry take carbon out of the air via the plant root systems that allow the soil microbes to take it into the soil — unless the soil is disturbed by tilling or it is released through fires. With good forest and grassland management, as well as low- and no-till farming practices, carbon can be sequestered to stay in the ground forever, according to Mitloehner.

“Agriculture and forests are the only two ways to do this,” he said, adding that USDA seeks to incentivize practices that take and keep more of the atmospheric carbon in the soil.  

Answering questions from producers, he noted that he has not yet seen a scheme that would incentivize soil carbon sequestration through marketing offsets, but the discussions are heading in that direction.

“Many of the environmental justice communities are running wild on this. They do not want farmers to get any money for it. They are putting on significant pressure and threatening lawsuits, so it’s not settled yet,” he reported.

There is also a lot of confusion around soil carbon sequestration and “regenerative” agriculture. One big problem is that producers who are doing some of these things, already, won’t get the opportunity to capitalize on those practices when offset protocols are eventually developed — if those practices are not deemed “additive.”

“If you are doing something now and are not covered by a policy of financial incentive, then four years from now, if it is developed, they’ll say you don’t qualify because you are already doing it,” said Mitloehner. 

“They are calling it ‘additionality.’ It’s about the change to doing it to qualify. That seems crazy, but it’s like if you bought an electric vehicle 10 years ago when there was no tax credit, you don’t get a tax credit now for already owning an EV because the improvement is not ‘additional,’” he explained.

What about the burps?

For farms with under 1000 cows, other technologies like feed additives can be used on any size dairy with effects realized within a week, said Mitloehner, noting one product that is commercially available and several others on the docket.

If a 10 to 15% reduction can be achieved in enteric (belching) methane reduction, then it will be marketable. Right now, these reductions are not marketable. If an offset protocol is developed for this in the future, it will be taken to the carbon market, he said.

In the meantime, incentives are being offered within supply chains, according to Mitloehner. Companies like Nestle, Starbucks and others are doing pilot projects and buying feed additives for the farmers within their supply chains to reduce their products’ GHG. He said there is some evidence these products can enhance components and feed efficiency. This is a big area of research right now.

A question was also asked during the webinar, wondering about Amish farms using horses instead of tractors. Are they contributing to cooling?

Mitloehner replied that he has not yet seen a calculation for this, and while the impact of horses would be less than the impact of burning fossil fuels, there is still an environmental impact to calculate. 

Since the international focus is on ‘additional warming impact’, methane is – like it or not — the target. Whether a dairy farm is managed conventionally or in the Amish tradition, the cows, the methane, and how governments and industry measure the ‘additional warming impact’ of cow-sourced methane, is still the crux of the issue for all dairy farms. If efficiency is reduced, then the ability to position the dairy farm as ‘cooling’ may be more complicated, or less significant, he said.

In addition to accurate definitions that acknowledge climate neutrality of constant cattle herds producing no new methane, Mitloehner’s wish is for federal policy to also take productivity (and nutrient density) into stronger consideration when evaluating emission intensity “instead of just counting heads of cattle. 

“This can be good for large or small dairies with a high or low footprint. When the relative emissions are determined by how you manage the dairy, the hope is that this is more about the how than the cow.”

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Feb. 2022 Class I ‘mover’ clocks-in at $21.64, but formula shaves 51 cents

Class I price under the new ‘average-plus’ formula vs. the previous ‘higher of’ formula and the net loss dairy farmers have missed out on over 34 months — May 2019 – Feb 2022

By Sherry Bunting

USDA announced the February Class I ‘mover’ on Jan. 20 at $21.64. The good news is this is $1.93 higher than the January mover and $6.10 higher than a year ago. The Class I mover is the base price paid for milk going to fluid beverage use before location differentials are added.

The bad news is the February Class I mover is 51 cents less under the current ‘average-plus’ formula ($21.64) than it would have been under the previous ‘higher of’ formula ($22.15).

During the Georgia Dairy Conference this week, retired co-op CEO Calvin Covington, author of the Dixie Dairy Report, gave a positive outlook for 2022. He noted the year begins globally with modest product inventories, reduced production of milk and strong demand for dairy.

When asked about risk, Covington noted that it doesn’t take much change in these factors to swing markets the other way. The higher milk prices go, the more downside risk there is for producers to protect.

When asked about federal order reform ‘consensus’ building and the Class I mover formula, Covington said the reform process was navigated in the past through a hearing process involving the USDA Dairy Division. He also said the Class I mover formula should return to the previous ‘higher of’ method because the costs of serving the Class I market continue to climb while the Class I price takes a back seat to other classes in some months under the ‘averaging’ method.

That may be the case in January and February when final prices are announced, and the possibility exists that this inversion could continue.

For February 2022, the advanced Class III skim milk pricing factor, based on cheese and whey prices in the first two weeks of January, is pegged at $10.43 while the Class IV skim pricing factor, based on butter and powder, is pegged at $12.97. That’s a spread of $2.54 per hundredweight.

This spread has been widening since November — now more than erasing the 74-cent adjuster applied under the current skim ‘averaging’ method. In the February calculation, it was the uptrending butterfat value at $2.7537/lb that softened the blow.

The entire formula figures the average of the two skim pricing factors (Classes III and IV) x 0.965 + 74 cents. It also multiplies the butterfat price by 3.5. Then the resulting numbers for skim and fat are added together to form the Class I advance base price – or as it is called, ‘the mover.’ When Class I is highest, milk is sure to ‘move’ to those fresh fluid milk needs, which is one of the main stated purposes of the Federal Milk Marketing Orders.

The February Class I price announcement is the first since June 2021 to fall below the old method using the new method. This happened every month in the second half of 2020 and first half of 2021 as well as three months in 2019. The new method was implemented by USDA in May 2019 due to a legislative change in the 2018 Farm Bill that did not go through a Federal Order hearing process.

From July through December 2021, producers gained 27 to 70 cents from the averaging method as Classes III and IV traded close together. Those brief gains netted around $100 million, which paled in comparison to the approximately $780 million in net Class I value losses to producers from May 2019 through June 2021. With January and February 2022 figured in (no benefit in January and a 51-cent loss in February), the net Class I value loss is now estimated at $687 million for the 34 months since the Class I pricing change began in May 2019.

Supply and demand shocks, supply chain disruptions and other fundamentals are creating the double-impact of rapidly rising dairy product prices and the widening spread between Classes III and IV. The combination is creating a situation where Class I is well on its way to becoming the lowest-priced class, even in some FMMOs after the location differentials are applied.

In fact, if these differences lead to a lot of de-pooling and negative producer price differentials (PPDs), those location differentials will also be shaved in the blend price to producers.

It will be interesting to see how this plays out perhaps differently now that Class IV is leading Class III by a wide margin instead of the other way around as previously.

Here’s what’s been happening since November. 

When the Class I mover was calculated for December at $19.17 based on early November pricing factors, dairy farmers benefitted from most of the 74-cent adjuster because the Class III and IV ‘advance’ pricing factors were close together with just a 12-cent spread. By the time the December class and component prices were announced on January 5, Class I mover was surpassed by Class IV at $19.88 and Class II $19.84, but Class III was still behind Class I at $18.36.

Then, when the January Class I price of $19.71 was announced four weeks ago based on the pricing factors back in the beginning of December, the factors began shaping up for the Class I mover to be dead-last by the time the January class and component prices are announced on Feb. 2. It would have been far behind II, III and IV had the block cheese price not lost 21 cents on the CME Spot market this week, pulling futures markets back $1.00 during the Jan. 19 and 20 trading sessions.

With one week of trading to go before January closes, odds are the Class I mover will be surpassed by all other class prices when the final announcement comes out on Feb. 2. Class IV will likely be highest in the mid-$22s, Class II will be close to Class IV, Class III will most likely be over $20 unless block cheddar takes another hit, and Class I will clock in at the previously announced $19.71.

In the January Class I ‘mover’ calculation of $19.71, the Class III and IV pricing factors diverged by precisely $1.48. This is the magic number because the adjuster to the average is 74 cents and 74 x 2 = $1.48. With the January Class I price spot-on equal to what it would have been under the previous ‘higher of’ method, no benefit was received by producers for that ‘adjuster’, and therefore, the issue of Class I being potentially the lowest priced class in the blend price for January is due entirely to the advanced pricing 4 to 6 weeks before the other classes.

February’s pressure on Class I relative to II, III and IV looks to be steeper and will be based on two factors – the 6-week difference in determining the values in a rising market and the widening of the spread between the Class III and IV skim pricing factors.

Looking out across the milk futures months of 2022, the spreads are much wider now than they looked a few months ago, even as the brakes were applied unevenly putting Class III and IV futures trading in reverse adjustment mode today and yesterday.

(NOTE: The USDA Pandemic Market Volatility Assistance Program, PMVAP, authorized $350 million to be paid to farmers at a rate of 80% of their July-Dec 2020 Class I value loss — on up to 5 million pounds of milk per farm via their milk co-ops and handlers and calculated only on FMMO-pooled milk value. But these payments are delayed in most cases, and will fall well short of the real value missed in the milk checks of many dairy farmers across the country as the Class I losses influenced other aspects of FMMO pooling and payment as reflected in negative PPDs.)

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2022 DMC signups and 2021 production history updates underway, retroactive feed cost payments sent

This USDA chart shows the 2021 DMC program enrollment and performance at a glance, but has not yet been updated to reflect the additional payments from the feed cost change and the supplemental production. The feed cost change to using all premium alfalfa hay prices adds a net average of 22 cents per cwt. to each month of triggered DMC payments retroactively back to January 2020. For producers covered at the $9.50 margin level, that’s a one-time payment of almost $3 per cwt, net, per production history. This feed cost change is expected to add 15 to 25 cents to monthly feed costs in the margin calculation for 2022 and 2023 DMC.

By Sherry Bunting, Farmshine, December 17, 2021

WASHINGTON, D.C. — With the announcement of the Dairy Margin Coverage (DMC) signups starting December 13, 2021 through February 18, 2022, dairy farmers saw the first glimpse of the retroactive payments passed by Congress and signed by the prior administration in December 2020. This had been followed by announcements by the current administration via Ag Secretary Tom Vilsack in August 2021.

Since that time, dairy farmers have been patiently waiting for the feed cost adjustments that are retroactive all the way back to January 2020 and waiting to update their production history for the supplemental coverage promised in 2021.

Several industry sources estimate the new alfalfa-hay price adjustment to the DMC feed cost calculation netted an average 22 cents per cwt to each payment month in 2020 and 2021 for producers enrolled at the highest margin coverage levels. Future payments will also benefit during the life of the DMC program, which is authorized by the 2018 Farm Bill through 2023. 

For example, the $8.77 margin for October 2021 was recently changed to $8.54 due to the feed cost calculation upgrade — adding 23 cents per cwt. to the October DMC payment triggered for farms enrolled at the $9 and $9.50 coverage levels.

According to USDA FSA sources, the funds were released in early December, and the automatic retroactive payments to DMC-enrolled producers for the alfalfa-hay adjustment to the feed cost side of the dairy margin calculation have been sent. Producers enrolled at the higher margin levels should have received these retroactive payments by the end of 2021, and even those enrolled at lower margin levels will receive a retroactive benefit, though smaller.

Industry sources estimate the total one-time retroactive adjustment for 2020 and the first 10 months of 2021 amounts to a one-time payment of almost $3 per cwt. at 95% of a dairy farm’s tier one production history (up to 5 mil. lbs) enrolled at the $9.50 margin coverage level.

This feed cost change, alone, yields a margin benefit that exceeds the cost of the tier one premium for DMC coverage at the highest margin level of $9.50. That level of DMC coverage costs 15 cents per cwt – up to 5 million pounds of annual production history, and farms can cover up to 95% of that. To cover pounds beyond the 5-million-pound tier-one cap, the DMC premiums are more expensive and the $8 margin is the highest margin one can cover beyond the tier one, 5 million pound production history base.

In addition to the feed cost change, the Dec. 8 USDA announcement designated Dec. 13, 2021 through Feb. 18, 2022 as the signup period for both the 2021 Supplemental DMC payments on expanded production as well as the coverage level selections for 2022. The Supplemental DMC was passed by Congress in 2020 and was supposed to go into effect for 2021 forward.

Farms that have expanded production since their 2011-13 production history average was calculated will want to verify this with their USDA FSA office using a 2019 milk statement. The application for the 2021 Supplemental DMC must be submitted before doing the 2022 DMC enrollment and coverage level selections. Any farm that has a production history on record with USDA FSA under the previous MPP program — but never enrolled in DMC — will also want to go back and update their production history before enrolling in DMC for 2022.

According to the Federal Register rule, there is a formula applied to the expanded production so it’s not a pound-for-pound update.

Once the farm’s application for the new production history is approved by USDA FSA, the producer will receive the retroactive DMC payments on a percentage of that supplemental production back to January 2021.

Because of the tier-one cap, the Supplemental DMC pertains to herds around 300 cows or less with updated total production history of 5 million pounds or less annually. This cap has not been expanded.

Also, dairy farms that went through a transfer of ownership interest after Jan. 2, 2021 must have the predecessor file and verify the supplemental production history – even if the successor is the one now enrolling in the DMC program.

The DMC program has triggered payments in every month, so far, of 2021 for producers enrolled at the highest coverage level ($9.50), and there were several months of payments for producers enrolled at the $6 level. Tier one coverage at the highest margin level ($9.50) on the first 5 million pounds of annual production costs 15 cents per cwt., and the average payout so far for 2021 at that level has ranged from 96 cents in October to over $4 per cwt in July. The November and December 2021 DMC margins have not yet been announced. In addition, during 2020, payments triggered in five months and in 2019, seven months.

Herds of all sizes can cover their first 5 million pounds at the tier-one rate of 15 cents per cwt., which comes out to $7,125 premium cost for the year. As of December 30, 2021, with both milk prices and feed costs trending higher, the net benefit is forecast at over $16,000 on the first 5 million pounds of production history. In 2021, the 10-month average payout, so far, across herd sizes is almost $60,000. Find the net benefit forecaster in the online DMC decision tool here and be sure to select the year you are looking at in the upper left hand corner.

A screenshot of the USDA FSA Dairy Margin Coverage (DMC) online decision tool at
https://dmc.dairymarkets.org/#/
Other information about DMC can be found at
https://www.fsa.usda.gov/programs-and-services/dairy-margin-coverage-program/index
Feb. 18, 2022 is the deadline to update retroactive production history and to enroll coverages for 2022. Be sure to update production history with FSA using your 2019 final milk check statement before enrolling for 2022 DMC coverage

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Milk solids seen as foundation for optimism in 2022

By Sherry Bunting, Farmshine, December 24, 2021

NEW HOLLAND, Pa. — “Milk pricing is backward, but look forward, and focus on components,” said Dr. Normand St-Pierre of Perdue Agribusiness speaking at Homestead Nutrition’s December Dairy Seminar in New Holland, Pennsylvania, where 200 dairy farmers heard from experts about the markets and the all-important goals of modifying milk price by improving components, and improving the milk margin by feeding healthy cows.

St-Pierre urged producers to be smart as they look at their costs — to not cut costs that sacrifice early lactation milk yield. He also pointed out how these higher prices for all components make feeding for components a continued area of focus to help the dairy in the face of milk check deductions related to cuts in base allotments and balancing.

Earlier in the program, Dr. Mike Van Amburgh shared Cornell University research on how to feed cows in a way that optimizes component yield by percentage, not just in total volume pounds. Total component pounds have historically been a function of total milk volume, but today, percentage counts because of per-hundredweight milk check deductions and over-base penalties.

“Milk volume is being discouraged in many regions of the country,” said Van Amburgh. “So the opportunity for producers here is to enhance their milk components, to make components a primary strategy, while still making your milk volume.”

St-Pierre noted that the next six months will be better than the last six months with a better milk price, and the futures markets certainly confirm this — moving even higher over the past four weeks. Global milk production is down 1% year-to-date, global skim milk powder stocks are low, butter production has been down for three months, stocks are low, and the world is getting short on butterfat, he said.

He observed that the Class III price was averaging over $19 and Class IV over $20 looking out six to 12 months in the futures markets. (That was the case on December 8, and now Class III is averaging over $20 and Class IV over $21.)

He sees the milk check butterfat price averaging $2.30 over the next six months; however, he said he believes this average could actually go higher, while protein should average $2.80. 

Another positive he mentioned is the ‘solids nonfat’ are being priced higher, and the ‘other solids’ are priced at almost double the historical average, driven by robust whey sales.

Even the USDA World Supply and Demand Estimates (WASDE) report the day after this meeting (Dec. 9, 2021) revised forecasts higher for butter, cheese and whey with NFDM forecasted at steady prices in 2022. As pointed out by St-Pierre, the current trends suggest this report could revise upward again in January, although much hinges on consumer responses to inflationary pressure in their buying habits.

The 2021 All Milk price average was increased in the WASDE report to $18.60, buoyed by yearend strength, and the 2022 All-Milk price forecast was revised upward to $20.75.

If current futures market levels are realized, these higher trending milk prices should help dairies keep pace with rising input costs, although experts calculate feed costs to be up by around $2.50/cwt for 2022 vs. 2021 and all costs combined could be up by almost $3.50/cwt for 2022 vs. 2021.

St-Pierre dug into this from a milk pricing standpoint, and he shared the good news that negative producer price differentials (PPD) from 2020 and the first half of 2021 have “quieted down.” 

Negative PPDs eat into location adjustments and change the way components are ultimately valued when massive de-pooling of milk occurs in Federal Milk Marketing Orders.

“We have positive PPDs right now because Class III and IV are trading closer together,” he said, noting that the new Class I formula averages the two manufacturing classes and adds 74 cents, so when they trade farther apart, the producer sees the hit in Class I also, dragging down the blend price and leaving smaller or negative producer price differentials (PPD).

The Class I pricing change and negative PPDs are issues St-Pierre has written about.

“Now they are asking the people who made the mess to fix it. That escapes me,” he said, noting the Federal Milk Marketing Orders (FMMO) were created in the 1930s and designed at a time when there were hundreds of cooperatives and milk did not move all over the country and the world.

St-Pierre said FMMOs exist for “orderly marketing,” but the government made a ‘fix’ that is like fixing an old horse. “He’s fixed but not running very fast and may be at the point where the horse has had enough.”

FMMOs were also created at a time when people drank more milk. Today, he said, they eat more cheese.

Showing a graph of per-capita fluid milk sales from 1980 (234 pounds per capita annually) to 2018 (146 pounds per capita annually), St-Pierre asked: “Does that look to you like an area of growth? If that marketer worked for Coca-Cola, he would have long been unemployed.”

While he acknowledged fluid milk has been disadvantaged by “lazy marketing,” he also said promoting milk is very hard because “we are not in the same world as in 1980. We are competing against water — with food in a bottle that we have to keep refrigerated. Cheese is easier to sell.”

The per-capita rise in cheese consumption since 1980 reflects this.

In the past, said St-Pierre, the FMMOs were designed to put the highest price in the bottle because that was the most perishable product. Today, as for the past 20 years, the prices are still based on the surveys of four products at wholesale – cheddar, butter, nonfat dry milk, and whey.

It was designed to have those prices for Classes 1 through 4 go in that order, he explained. “But it doesn’t work that way anymore.”

“As the butter price goes up, just make more butter, right?” he asks. “But it’s hard to make butter in a cheese plant and vice versa.”

“If I’m a processor, and I built a big cheese plant, and it cost me $150 million, I make a lot of cheese,” St-Pierre quipped.

Plus the built-in make allowances encourage single-product, single-class production plants running at full capacity, regardless of what the market is doing.

“It will take a while to change that dynamic,” he said.

“All milk is paid on components, but handlers don’t pay for components in the same way in the (FMMO) pool,” said St-Pierre. He explained that milk handlers pay for components according to how the milk is used, what “class” of products the milk was utilized in.

Class I price is based on butterfat and skim, Class II on butterfat and nonfat solids. Class III, which is 55% of the milk utilization, pays mainly on protein and other solids with an adjustment for butterfat because cheese production also uses a lot of fat. Class IV pays on butterfat and nonfat solids.

“We price things backward. Tell me one thing that you can go out and buy and drive out of the store and a month later tell that store what you will pay for it,” St-Pierre said, noting this is essentially what milk buyers do through the FMMO system, month after month, year after year.

He encouraged producers to be looking ahead three months, which he admitted is hard to do when the pricing for their product is so far behind the transaction. Still, he said following the markets gives a good indication, and there is more reliability in the 3-month window than 6 to 12 months out in the futures markets. 

The Class III price is normally higher than Class IV, but for the next few months, even through the next year, it looks to be flip-flopped.

Using an ‘imaginary’ FMMO, he divided all four classes as 25% utilization, which in reality is not too far off what the Northeast Order can come close to. In that four-class FMMO, the different ways different classes pay for components cause the books to be out of balance after producers are paid their advance check based on protein. Knowing each class pays differently, the class price differences and utilization become the key to how that PPD is either positive, flat or negative.

When Class IV was $6 below Class III, cooperatives and processors de-pooled a lot of milk, St-Pierre observed: “They could just pay 20 cents over that $13.80 price to get the milk and then sell it back at the $20 (Class III) price. That makes the co-op look good but the producer gets shafted,” said St-Pierre.

In FMMO 30, where most of the utilization is already Class III, processors made a lot of cheese in 2020-21, but they didn’t pool a lot of that milk, and they got it cheaper, he explained.

Bottom line, said St-Pierre, the Federal Orders were never designed to operate this way. Then along came the “little change” in the Class I price. In the past, the FMMOs used the ‘higher of’ Class III or IV as the way to set the Class I base.

“If I am a bottler, I don’t like that (higher of) because I don’t know how to hedge it,” said St-Pierre. “I know my price ahead of time anyway (through advance Class I pricing), but I still don’t like the ‘higher of’ so I go and tell Congress to average it and add 74 cents. Then Covid-19 hits, and producers lose over $750 million.”

St-Pierre notes that the industry is trying to fix the system, backwards.

He confirmed that where the negative PPDs kick Northeast producers is in the location adjustments. A smaller than normal positive PPD is a loss, and when it goes negative, it eats into the location adjustment, which is also supposed to be positive.

Working through all of these thoughts about pricing and consumption pattern, St-Pierre left dairy farmers with the good news that for the foreseeable future, the PPDs should be positive, although smaller than normal in some months, and Class III and IV prices are both on the rise. 

Production has slowed, and demand is good, including for milk powders and whey. These positive supply and demand factors are confirmed in the dairy product production and cold storage reports.

With the very reasonable expectation of good prices for milk components, in the face of base penalties, balancing assessments, and other milk check deductions that a dairy producer encounters, the best way to navigate is focusing on component yield because the deductions are a flat amount per hundredweight of total volume, whereas component yield becomes a percentage increase in the value of those milk hundredweights.

Look for more on other interesting nutrition topics and milk quality award winners as this article continues in a future Farmshine.

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2022 milk futures rally continues as butter leads the spot market gains

Updated Market Moos, by Sherry Bunting, a weekly feature in Farmshine

2022 Class III futures avg. $20.10, Class IV $21.10

Milk futures surged to levels not seen since 2014 this week on the heels of previous weeks’ gains, and the Class III milk futures contracts for 2022 now average over $20 with Class IV over $21 as of Dec. 29, 2021.

Class III milk futures first broke into the $20s last week, hitting new contract highs daily since Wed., Dec. 22 on all 2022 contracts. The closeup contracts for Dec. 2021 and Jan. 2022 were flat in pre-Christmas trading, but see-sawed toward gains in post-Christmas trading.

On the milk futures close Wed., Dec. 29, Class III contracts for the next 12 months (Dec. 2021 – Nov. 2022) averaged $20.01, up $1.35 from a month ago, with January through October 2022 contracts all at or above $20.00.

Class IV futures broke the $21 mark for the Feb. 2022 contract last week, and then continued marching higher after Christmas with January through October 2022 contracts all at or above $21. At the close of trade Wed., Dec. 29, the next 12 months (Dec. 2021 through Nov. 2022) averaged $21.05, which is $1.89 higher than a month ago.

Excluding the lower and expiring current month contract, the 12-month average of 2022 futures contracts averaged at $20.10 for Class III and $21.10 for Class IV.

Class IV continues to dominate the board, and the average spread between the two widened to $1.00 this week with December’s contract pegged at a Class IV over III differential of $1.45; January’s $1.29.

Butter’s impressive gains lead the spot-market

Butter is leading the charge as CME spot dairy products moved mostly higher in pre- and post-Christmas trade. Cheese prices had weakened in pre-holiday trade while butter, nonfat dry milk and whey all made solid or impressive gains. In the post-Christmas spot calls, impressive gains were made on both cheese and butter while whey held firm and milk powder weakened.

On Class III dairy product spot markets at the CME Wed., Dec. 29, the 40 lb block Cheddar price was pegged at $1.95/lb — recovering all of the pre-holiday loss and then some. A single load traded at $1.94 and a spot bid to purchase at $1.95 was left on the table by sellers. Barrels have seesawed almost daily but moved decidedly higher on a nickel upswing Wed., Dec. 29, when 500-lb barrel Cheddar was pegged at $1.69/lb and 5 loads changed hands.

Dry whey gained 6 cents last week and held firm at that 75-cent level Dec. 27, 28 and 29, although zero product changed hands.

In the Class IV products, the spot butter market was very active, and the spot price was pegged at $2.43/lb on Wed., Dec. 29, up a whopping 24 cents from the previous Wednesday and 33 cents higher than two weeks ago. On Mon., Dec. 27, a whopping 10 loads of butter traded with the price pegged at $2.30. On Tues., Dec. 28, another big round of 12 loads traded with the price pegged at $2.40/lb. Then on Wed., Dec. 29, another rally resulted in 3 loads trading with the spot price reaching $2.43/lb with sellers on the sidelines holding their offers at $2.45.

Grade A nonfat dry milk had added a penny last week but lost two pennies this week. On Wed., Dec. 29, the NFDM spot price was pegged at $1.6475/lb with 5 loads changing hands.

November milk production fell 0.4% vs. year ago amid increasingly obvious geographic patterns

U.S. milk production was 0.4% lower than a year ago in November, but for the major milk states, the decline was 0.1%.

Cow numbers dropped 10,000 head nationally in the month of November, alone. Almost one-third of them (3000 head) left the count in Pennsylvania between October and November. Compared with a year ago, cow numbers across the U.S. were down 47,000 head.

In Pennsylvania, cow numbers at 472,000 head were down 10,000 vs. year ago with production off 3.5%. Elsewhere in the Northeast milkshed, New York’s production was down 0.2%, but cow numbers were up 2000 head. In Vermont, milk production fell 1.4% while cow numbers were stable compared with a year ago.

(Producers in Pennsylvania and through most of the Northeast and Midatlantic region report continued penalties on overbase milk, continuance of the 12% cuts in Northeast/Midatlantic producer base allotments instituted by the largest national footprint cooperative during the height of the pandemic. This, despite USDA Dairy Market News reports confirming very tight milk and cream supplies in the eastern markets, and increasing evidence of store shortages based on consumers facebooking their photos of empty dairy and milk shelves at prominent regional supermarket chains throughout the Northeast and Midatlantic states. The recent revelation that the iconic Readington Farms in New Jersey — that supplies ShopRites and other stores in the Wakefern Foods retail group throughout New England, New York, Pennsylvania and the Delmarva — will begin procuring milk for these stores from former Dean plants now owned by Dairy Farmers of America (DFA) also sent shockwaves throughout the Northeast last week)

In the Southeast, Florida dropped 6000 cows with production down 3.4% from a year ago. Georgia gained 1000 cows and 1.4% in production.

In the Mideast region, Ohio, Indiana and Michigan collectively lost 14.000 cows and were down 1.6% in milk vs. year ago.

Growth in the Central Plains continued. States that gained both cows and production vs. year ago include South Dakota, up 22,000 head and 16.7% in milk; Minnesota up 6000 cows and 1.9% in milk; Iowa up 6000 cows and 2.7% in milk; Wisconsin up 18,000 cows and 2.2% in milk; and Texas up 17,000 cows and 2.8% in milk.

California produced 1% more milk than a year ago but lost 1000 cows.

January Class I mover $19.71, Class IV pricing factor tops Class III by $1.48 per cwt.

The Class I mover for January 2022 was announced Dec. 22 at $19.71. That’s 54 cents higher than December’s mover and $4.57 higher than January a year ago.

By the hair of its chinny-chin-chin, the January Class I base price is identical under the new formula as it would have been under the old. Based on USDA AMS prices for cheddar, butter, nonfat dry milk and whey in the first two weeks of December, the January 2022 Class IV advance pricing factor was calculated by USDA to be 12.21 while Class III figured at $10.73.

Averaging the two advance pricing factors together and adding 74 cents is how we get to that $19.71 Class advance base price for January 2022 — under the new Class I formula. This is also the price it would be using the previous ‘higher of’ Class I formula because the $1.48 spread between the Class III and Class IV advance pricing factors (74 cents x 2) is the magic number that keeps the new method from calculating a Class I base price that is lower under the new method than it would have been under the old method. Any wider than $1.48, and the difference becomes negative.

Class IV is projected to be higher than Class III throughout 2022, if the current futures markets and market fundamentals hold out. This means the ideas circulating to change the Class I formula to a Class III-plus would be negative over the duration of time that Class IV beats Class III.

In volatile markets, where the dairy industry is vulnerable to market shocks, the use of the ‘higher of’ formula for Class I did help prevent further disparities that lead to de-pooling and negative PPDs, which affect not only producer milk checks but also their risk management.

Secretary Vilsack says bring me consensus, first

Last week during a farm visit in Wisconsin, Secretary of Agriculture Tom Vilsack told dairy producers he wants to see the dairy industry come together with a consensus on Federal Milk Marketing Order changes before holding USDA hearings.

Three weeks ago, Senators Kirsten Gillibrand (D-NY), Patrick Leahy (D-Vt.) and Susan Collins (R-Me) introduced the Dairy Pricing Opportunity Act of 2021, a bipartisan bill in the U.S. Senate that would direct the Secretary of Agriculture to provide notice of, and initiate, national hearings to review Federal milk marketing orders … “which shall include review and consideration of views and proposals of producers and the dairy industry on the Class I skim milk price, including the ‘‘higher of’’ Class I skim milk formula…”

In the past, whenever USDA has initiated administrative hearings to make specific FMMO changes, a consensus was typically sought before such hearings.

On the other hand, if the Senate bill becomes law, a more open process appears to be described that could make national hearings a review of the system, consideration of proposals, and specifically a look at the Class I formula change, which had been made legislatively without hearings, comment or a producer referendum in the 2018 Farm Bill.

Perhaps national FMMO hearings could open a consensus-building process.

PMVAP payments delayed

The Pandemic Market Volatility Assistance Program (PMVAP) payments related to the Class I formula losses from July through December 2020 will be delayed until late January or into February or March, according to Erin Taylor, USDA AMS. She told dairy farmers in a Dairy Industry Call hosted by the Center for Dairy Excellence this week that eligible producers should have been contacted by their milk cooperative or handler by now requesting proof they meet the Adjusted Gross Income limits of USDA payment programs.

USDA is in the process of finalizing agreements with each eligible handler that had any milk pooled on any FMMO during that time period and is providing workbooks with methodology on how the payments should be made to their producers based on how they were paid during the July-Dec 2020 period. Look for more information in the Jan. 7 edition of Farmshine and click here.

Whole Milk for Healthy Kids Update

There are 84 Congressional cosponsors from 30 states (including the prime sponsor, G.T. Thompson of Pennsylvania) who are now supporting the Whole Milk for Healthy Kids Act, H.R. 1861. However, for those readers who live in the New England states as well as Maryland, Delaware, South Carolina, West Virginia and several western states, representation is absent.

To-date, there are no cosponsors yet from the following states: Colorado, Connecticut, Delaware, Hawaii, Maine, Maryland, Massachusetts, Montana, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Carolina, Utah, Vermont, West Virginia, and Wyoming.

This bipartisan bill was introduced in March by Congressmen G.T. Thompson (R-PA) and Antonio Delgado (D-NY), to end the federal prohibition of whole milk in schools. It gained 18 new cosponsors over the past two weeks to reach 84 from 30 states, but needs at least 100 cosponsors representing all 50 states to get moving in committee toward the goal line.

Consider contacting your Representative with thanks or a request to cosponsor this bill that simply allows school children the healthy milk choice they love and will drink. To find your Representative, enter your address at https://www.govtrack.us/congress/members


What’s up with the $350 mil. in PMVAP payments to dairy farms announced last August?

Just some of the criteria for PMVAP are listed on this slide. There is no generally-applied formula per-cow or per-cwt for how producers will receive these USDA program funds via their handlers or cooperatives. The PMVAP payments are milk handler-specific. Criteria were explained in a USDA webinar and during a recent Center for Dairy Excellence industry call.

Producer payments will vary by handler eligibility, specific Federal Order data, how producers were paid during the covered time period, and are delayed to Q1 2022. Only those handlers and cooperatives that pooled any portion of their milk on a Federal Milk Marketing Order at any point during the July-Dec. 2020 time period are eligible.

By Sherry Bunting

WASHINGTON, D.C. – Dairy farmers are wondering about the PMVAP payments. They were expecting to see roughly $350 million in Pandemic Market Volatility Assistance Program funds disbursed by USDA through eligible milk handlers by the end of 2021.

According to Erin Taylor at USDA AMS Dairy Programs, those payments will be delayed until the end of January or into February or even March because of the unique and complicated handler-specific internal clearing process being used.

During a recent Center for Dairy Excellence dairy industry call, Taylor said USDA has been working diligently with eligible handlers and cooperatives since the program was announced on August 19, 2021.

It is a complex process of USDA AMS dairy program staff meeting with milk handlers and cooperatives that pooled any milk on any Federal Milk Marketing Order at any point from July through December 2020 to formulate specific payment agreements on an individual handler basis that include the calculated lump sum to the handler and specify how the producers affiliated with that handler are to be paid.

“We have started sending out these agreements and expect to get them all out to handlers for signing and returning by early January,” said Taylor. “Once approved, we will distribute payment dollars to those handlers. Then, they have 30 days to disburse the funds to their eligible producers.”

In short, she said, USDA is striving to get the money sent to handlers in early 2022. Later this spring, she said, USDA will audit handlers to verify these payments were made correctly, in full, to their producers.

It is important to know that not all handlers and cooperatives are eligible to participate, not all eligible handlers will choose to participate, and therefore, not all producers will receive PMVAP payments.

Who is eligible for PMVAP payments?

Only those milk handlers and cooperatives that participated in a Federal Order system during some or all of the July through December 2020 time period are eligible, according to Taylor.

Eligible handlers must also obtain from each producer the verification of meeting the Adjusted Gross Income (AGI) limits USDA has for its farm programs.

“You should have been contacted by your handler by now, if you are eligible, because they need to verify that you meet the AGI requirements,” said Taylor, noting that any producer who has not been contacted by their handler but thinks they are eligible for PMVAP can contact their handler and directly ask if they are participating.

“If that doesn’t work, or if you would rather ask USDA, then email pmvap@usda.gov or call 202.384.3417. Tell us who your handler is, and we can look it up,” she added. These email and phone contacts can also be used by producers who have other questions about the PMVAP.

During the Center for Dairy Excellence call, producers asked if there was a formula for how they can expect to be paid per cow or per hundredweight. Taylor explained there is no general formula for many reasons.

First, she said, there are requirements in this program that will be met differently by different handlers according to their Federal Milk Marketing Order data.

Also, payments to producers are limited to payment of 80% of losses on up to 5 million pounds of production and only on milk that was pooled or in cases of non-pooled producers who were paid by their handlers based on the pooled volume – together with the pooled producers.

“Each factor is different for every handler,” said Taylor. “We are working with handlers to ensure the milk pounds to be paid on and the methodology for payment are correct according to the program.”

She said doing it this way was deemed “the easiest way to do it through handlers that have this payment relationship with (dairy farmers), to get the money out quickly and with USDA oversight.”

In short, these are targeted payments based on Federal Order pooling fund losses as reflected by a much lower Class I base price under the new average-plus formula compared with the old ‘higher of’ formula for the July through December 2020 time period.

“A lot of these factors differ by handler in terms of how producers were paid in aggregate,” she said. “In the FMMOs, handlers don’t have to pool all of their milk. Some don’t pool any, and those that didn’t pool any milk are not eligible.”

For other handlers, the payments are based on the pooled portion, but if they paid all their producers the same way (pooled and non-pooled), then their payments to their producers will be done in the same way over all the milk in aggregate, not just the pooled milk.

“Otherwise, it would be the luck of the draw because a producer is not the one who decides on what milk is pooled and what milk is not pooled,” Taylor explained. “We compute the payment rate (for each handler) in a way that ensures fairness and equity in how the payments are distributed (based on how the producers were originally paid) for those months.”

Taylor said each eligible handler will have received workbooks pre-done by USDA with their approved data for covered milk pounds and the payment methodology so they can simply do the calculations and distribute the payments to their producers accordingly.

FMMO staff will audit and verify with handlers after these payments are made, according to Taylor.

The eligible and participating milk handlers will be reimbursed to administer these payments, which includes providing an educational component for their producers. These funds do not come out of the producer payments but are calculated separately.

She noted that handlers do not receive their administration reimbursement until after USDA verifies producers have been paid in full and the educational component is met.

When asked what percentage of U.S. milk production will be covered by PMVAP payments, Taylor said it depends on the percentage of handlers pooling milk and choosing to participate in the PMVAP. Normally, she said, about 70% of U.S. milk production is pooled on Federal Orders, but in 2020 this percentage was lower (due to massive de-pooling of milk in many Federal Orders in the face of severely negative PPDs).

Producers also asked if there is any chance that a Class III producer that was not paid that higher Class III price during the July-Dec 2020 period may be able to receive PMVAP payments.

“This program pays on pooled milk and depending on if the handler pooled any milk at all will determine if that handler’s producers get a payment,” Taylor replied. “Those that didn’t pool any milk during those months are not eligible under the current program rules.”

While these PMVAP payments are meant to assist against the losses influenced by pandemic volatility in 2020 exacerbating issues with the Class I formula change, the payments will be received by producers in 2022, and it will be considered earned income for that tax year, according to Taylor. Handlers will be sending 2022 Form 1099 Misc. Income statements to producers receiving these payments.

The educational component of the PMVAP requires handlers to outline their plans and to verify they have met them. USDA AMS has provided links at the special website with educational resources on an array of federal dairy policy topics that meet the requirement. Handlers can also choose to use other resources to provide education on one or more areas that include dairy markets, risk management, how FMMOs work, how marketwide pooling works, Dairy Margin Coverage and other topics via a variety of methods, including in-person meetings, webinars, newsletters, emails distributions and mailers.

USDA has a special website devoted to the PMVAP program that includes explanations, webinars, resources and contacts at https://www.ams.usda.gov/services/pandemic-market-volatility-assistance-program

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Iconic Readington Farms prepares to transition to procuring milk from DFA plants for ShopRite, other stores


By Sherry Bunting

WHITEHOUSE STATION, N.J. — The iconic Readington Farms plant bottling milk brands for ShopRite and other stores — both subsidiaries of Wakefern Foods Corp. — is “concluding negotiations to procure its milk and other beverages from Dairy Farmers of America (DFA),” according to an email response today (Dec. 23, 2021) from Karen O’Shea, Wakefern corporate communications. (The communication came after Farmshine’s press deadline, and this updates the brief mention in this week’s Milk Market Moos.)

“The transition from Readington to DFA is expected to begin sometime in January 2022 and continue until all our stores are serviced by our new provider. We are also working with DFA on a path to offer cooperative membership to the dedicated direct shippers who currently supply Readington, if they so choose,” O’Shea stated.

According to its website, Readington Farms is currently served by over 150 independent dairy farms and the Whitehouse, New Jersey plant processes 15,000 gallons of milk per hour.

DFA is a national cooperative with 7000 members and seven fluid milk and beverage plants in the Northeast/Midatlantic trading region, many of them purchased during the Dean Foods bankruptcy sale in May 2020. DFA purchased the Cumberland Dairy in Bridgeton, N.J. in November 2017.

In 2019, Readington Farms was authorized a $2.5 million RACP grant from the Pennsylvania Redevelopment Authority to build a new milk plant and headquarters in the Lehigh Valley. Pre-design plan review was to be part of the Upper Macungie Township Planning Commission’s August 2021 meeting, but this review was postponed to October and again postponed to January 2022, according to township agendas and minutes.

According to Wakefern, this new facility will not be pursued and no public funds were received or accepted. The company will withdraw its grant application for a facility in Lehigh Valley, Pennsylvania.

“Readington and Wakefern considered a number of locations in the region as potential sites for a new fluid processing dairy. After an extensive search and exploration of all possibilities and costs, Wakefern decided not to pursue a new facility and instead procure its milk and other beverages from a third-party provider,” O’Shea reported.

“Currently, Wakefern is concluding negotiations with Dairy Farmers of America (DFA) to provide its fluid milk and other beverages. In addition to their network of 7,000 dairy farmers, DFA also has seven fluid milk processing facilities located in our trading area that will serve Wakefern’s needs,” she said.

Markets on the mooove as next 12 months of Class III futures average above $19.50, Class IV over $20.

By Sherry Bunting, Farmshine Milk Market Moos

“The next six months will be better than the last six months with a better milk price,” said Dr. Normand St-Pierre of Perdue Agribusiness speaking at a meeting of dairy farmers this week. Global milk production is down 1% year-to-date, global skim milk powder stocks are low, and the world in general is short on butterfat, he said.

In fact, milk and dairy products are experiencing spot shortages in U.S. retail and foodservice channels. Kraft-Heinz, for example, is reporting sustained demand for cream cheese with sales up 35%. Reduced butter production vs. year ago has met increased drawdowns to bring cold storage stocks well below year ago.

On the CME spot market on Dec. 14, butter was pegged at $2.06, with high sales on two loads at $2.10. Nonfat dry milk crossed the $1.60 mark and stood at $1.64/lb, pushing Class IV milk futures solidly into the $20’s with a 12-month average of $20.21 as of Mon., Dec. 13.

Class III milk futures moved well into the $19s across the 12-month board with December and January topping the $20 mark Monday (Dec 13) fueled by the strength of a rising block-Cheddar price, pegged at $1.94/lb Tuesday, Dec. 14 and steadily rising whey prices pegged at 71 cents/lb. The caveat is the 500-pound barrel cheese price is moving more slowly, pegged at $1.67/lb Tuesday — 27 cents behind the 40-lb block price.

St-Pierre sees the milk check butterfat price averaging $2.30 over the next six months, and he thinks it could actually go higher, while protein should average $2.80. Mid-December milk checks will price November butterfat at $2.15 and protein at $2.75. Nonfat solids are also higher, and other solids are almost double the historical average, driven by the robust whey sales.

A more conservative USDA World Supply and Demand Estimates (WASDE) report on Dec. 9 forecast higher prices for butter, cheese and whey with NFDM unchanged in 2022, but current trends suggest this report could revise upward in January, although much hinges on consumer responses to inflationary pressure in their buying habits. The report did nudge the 2021 All Milk price average to $18.60, buoyed by yearend strength. The WASDE report forecasts a 2022 All-Milk price of $20.75, which some analysts believe to be a low-end projection given current market indicators.

If current futures market levels are realized, these higher trending milk prices should help dairies keep pace with rising input costs. In addition, risk management tools and margin coverage options will help sync both sides of the milk price / feed cost equation in this inflationary environment.

Overall, domestic demand is strong but challenged by spot shortages and higher retail prices. As global prices are also rising, U.S. exports have continued strong even in light of overseas transportation disruptions.

Risk management will be important, despite uptrending dairy product and milk prices because costs for feed and other inputs are also rising, and the effect on demand down the road from inflationary pressures and global uncertainties is difficult to forecast. One caveat that is mentioned by market analysts is China’s large purchases of whole and skim milk powder on global markets over the past six months have accumulated a stockpile that could reduce China’s purchases in the coming year.

Still, the Global Dairy Trade (GDT) biweekly internet auction on Tues., Dec. 7 moved higher on all products with the GDT index up 1.4% from November 30 to its highest level since January 2014. The GDT butter price jumped 4.6% over the two week period to the highest levels since February, and most of that increase was in the nearest term delivery months. Skim milk powder (SMP) was up 1.3% to levels not seen in more than five years, with the strongest increase (+3%) seen on global SMP for delivery six months ahead in May 2022.

Dairy Margin Coverage Note: USDA announced last week that the Dairy Margin Coverage signups for 2022 enrollments began Dec. 13, 2021 through Feb. 18, 2022. Dairy producers wanting to update production history (up to 5 million annual pounds) by verifying 2019 milk marketings will receive supplemental coverage retroactive to January 2021 and ahead through 2023. This updated production history must be done first the local FSA office before enrolling 2022 DMC coverages. The new feed cost calculation using higher quality alfalfa prices is estimated to add 15 to 22 cents per hundredweight to previous DMC payments retroactive all the way back to Jan. 2020. FSA offices confirm receiving funds this week to finally do these retroactive feed-cost-adjusted DMC payments — automatically — very soon for all producers who were enrolled in the program for 2020 and/or 2021.

Supply and demand are the real story behind chaos in cream markets

istock photo purchased and used with permission
As shortages of cream products become more obvious in retail and foodservice channels, USDA’s Dec. 8 fluid milk and cream report acknowledged raw milk cream supplies are “tight to extremely tight” in the eastern U.S. at the same time that processors nationwide are trying to ramp up production of cream cheese, butter and seasonal products to meet sustained strong demand. In the midwestern markets, USDA notes Class I bottling needs have risen instead of declining like they normally do in December, and in the eastern markets, Class I bottlers are taking in more milk for steady to strong sales. istock photo

By Sherry Bunting, Farmshine

BROWNSTOWN, Pa. — What’s the real story with the availability of cream products and whole milk, especially in the population centers of the eastern U.S., and why the continued base penalties, base reductions, warnings of greater deductions on future milk checks — even for the base-obedient producers? Why the talk of overproduction of milk — especially in the Northeast and Mid-Atlantic region — when headlines are noticing a crimp in supplies?

A paradox, for sure.

One clue that makes this a true supply and demand situation — as opposed to purely a sign of supply chain disruptions — is the most recent USDA dairy products report showing 1.6% less butter was produced in October compared with a year ago, attributable to increased demand for cream and declining milk production.

The U.S. also exported more fat in the product mix than prior years.

In relation to this, October butter stocks, according to USDA NASS, are down 13% from September and 6% lower than a year ago after being double-digit percentage points higher than year earlier for the previous two to three years. The seasonal increase of 11.2% more butter produced in October than September was not as robust as previous years and it met an increased drawdown that has left cold storage stocks short heading into the holiday baking season in competition with cream product-making season.

While processor leaders from IDFA did a second Washington D.C. fly-in last week, talking with members of Congress about the trade disruptions, exports have continued strong and domestic shortages of milk and cream products are popping up all over the place – especially in the Northeast and Mid-Atlantic region.

It’s clear that trucking and worker shortages contribute, but it’s also clear the issues go beyond the frequently-cited packaging shortages, given the fact that bulk product is also becoming limited in foodservice channels.

So much so that the Dec.4 New York Times covered what has become a worsening cream cheese shortage in New York City. This pertains to the bulk cream cheese base that bagel shops purchase to tailor-make their own schmears. Consumers report retail packs of cream cheese in short supply at chain stores in New York while the bulk cream cheese base is tenuous for foodservice.

In both New York and Pennsylvania, shoppers confirm scarcity of cream cheese and other cream products while stores are placing limits on purchases. Reports from Boston indicate stores are “screaming” for half and half. Others observe that eggnog production is exacerbating already tight cream supplies, but acknowledge the issues are bigger than just the seasonal beverage production.

Fox News picked up the story Dec. 6 and 7. They interviewed NYC bagel shop owners to learn how they are navigating the problem. One owner talked about begging his vendors for product, then locating some cream cheese in North Jersey and driving 90 minutes in his own truck three times to transport a total of 2000 pounds of the schmear.

The Fox and Friends morning hosts checked with Kraft-Heinz, the parent company of Philadelphia Cream Cheese, conveying the company’s statement that they are seeing a 35% spike in demand for the product, which they then blamed on panicking restaurateurs stockpiling it.

“We continue to see elevated and sustained demand across a number of categories where we compete. As more people continue to eat breakfast at home and use cream cheese as an ingredient in easy desserts, we expect to see this trend continue,” Kraft-Heinz spokesperson Jenna Thornton told Fox News in a written statement.

Fox and Friends host Steve Doocy, who does a lot of cooking, chimed in that he can’t find cream products, and they all wondered out loud, what’s the deal with no whole milk in the stores?

Facebook responses to queries about what’s happening in different areas confirm many are having trouble finding half and half, heavy cream, cream cheese, even butter, and some reported spot depletion of whole milk or all milk.

A Pennsylvania store owner texted a note claiming he simply can’t get whole or 2% milk for his store.

A ‘Lunch Ladies’ group on facebook discussed numerous incidents of milk order shortings, delays and non-deliveries lasting more than a week, in some cases several weeks.

In both eastern and western Pennsylvania, shoppers are reporting purchase limits and limited or non-existent supplies of whole milk and cream products at major supermarket chains. (In my own shopping over the weekend, a Weis location just outside of Lancaster had a decent supply of milk, but only a few off-brand unsalted butter packages in the case. I was lucky to pick up the very last Land O’Lakes butter pack lingering way back in the corner. In the baking aisle, the canned evaporated milk shelf was bare.)

A reader from Virginia reached out to say her local Walmart was full with milk Saturday, but not a jug to be found Sunday.

An anecdotal report from a shopper in Florida, after stopping at two stores, found no half and half, no heavy cream, limited fluid milk, a buying limit on cream cheese – but “lots and lots of non-milk ‘milk.’”

Coffee houses are also randomly affected, with reports out of New York and New England. in the Twitterverse noting both real-milk and oat-milk shortages as people tell of stopping at multiple locations for morning lattes. Mothers were also tweeting frustration this week over limited supplies of infant formula in some areas.

Perhaps complicating the issue – waiting in the wings — is the foray of DNA-altered yeast-excrement protein analogs being tested in the supply chains of large global corporations – like Starbucks. A headline from three weeks ago read “Perfect Day’s Dairy-identical Alt Milk lands at Starbucks.”

Starbucks is among the multinationals testing Perfect Day’s DNA-altered yeast-excrement deemed as dairy analogs in select West Coast locations. The Perfect Day company claims to be “on a roll” with the brand valued at over $1.6 billion and recently raising $350 million in its admitted efforts to “remove cows from the dairy industry, without losing the dairy.”

One aspect of the Perfect Day ramp up is the company works B2B with processors, not making their own consumer-facing products. If other companies are experimenting with the goal stated by Perfect Day last year of 2 to 5% augmentation of dairy processing with the yeast-excrement protein analog by 2022, there’s a scenario in this to think about: These protein analogs may be deemed “identical” to whey and casein in processor application, but they do not bring along the healthy fats, minerals, vitamins and other components of real milk.

Could current chaos in cream markets and product availability be a glimpse of future disruptions by protein analogs as the B2B model seeks to dilute real dairy under the guise of cow climate action? That’s a story for another day, but it bears watching in the context of the current paradoxical supply and demand situation right now.

For its part, USDA Dairy Market News reported Dec. 1 that milk output was rising in the East, but demand was still beating it. Then the Dec. 8 report said Northeast milk production had flattened under the pressure of rising input costs and penalties on overbase production.

Specifically, USDA DMN cites steady to higher bottling demand and active cheese production schedules soaking up supplies.

“Cream demand is strong throughout the East,” the Dec. 1st report said. “Some market participants have noted that widespread logistical issues – including driver shortages and delivery delays – pose a greater hindrance to cream-based operations than the tighter cream availability, itself, at this point.”

By December 8th, USDA DMN reported that eastern handlers were working to secure milk spot loads from other areas as local supplies are tight, noting that eastern cream supplies are “tight to extremely tight,” and some dairy processors reported very limited spot load availability.

The report also sought to explain the cream cheese shortage in retail and foodservice channels, noting multiple factors, including “logistics bottlenecks, labor issues and supply shortages at manufacturing facilities.”

While the report indicated stepped up butter production this week, one Pennsylvania milk hauler observed two empty silos and no trucks to be seen at the Carlisle butter/powder plant at the start of this week, which is unusual.

Related to cream cheese production in Northern New York, producers there say they were told plant worker shortages this fall meant less processing of their milk. This resulted in multiple occasions of having to dump milk that could not be processed, but the incidents were deemed “overproduction” with producers footing the bill.

Meanwhile, USDA DMN indicated more outside milk coming East to meet processing needs.

At the same time, dairy producers from multiple cooperatives in the Northeast and Mid-Atlantic region confirm they are still incurring stiff penalties on over-base milk. While some of the penalty levels have softened a bit from earlier highs, most are still being held to their base levels, or in the case of DFA, the Northeast and Mid-Atlantic producers are still being penalized for milk that is above 88% of their base.

This means in the face of reduced supply vs. strong demand, DFA continues its 12% reduction in base allotments that became prevalent, especially in the Northeast and Mid-Atlantic region, at the start of the pandemic. 

Furthermore, producers with other cooperatives report they have been warned to expect further deductions on their milk checks this winter – even if they did not exceed their bases — because there is still “too much milk,” they are told.

Attempts to gain further insights on the situation from major milk cooperatives and USDA went unanswered at this writing, so stay tuned for updates.

U.S. Senate nutrition hearing seeks new national strategy

50-year crisis cited, but no mention of 50-year low-fat regime’s role

By Sherry Bunting, Farmshine, November 5, 2021

WASHINGTON, D.C. – “Half of the U.S. population is pre-diabetic or has type II diabetes, and one out of almost every three dollars in the federal budget goes to healthcare, with 80% of that spending on treatment of preventable chronic diseases,” said Senator Cory Booker (D-N.J.), chairman of Senate Ag’s nutrition subcommittee as he and ranking member Mike Braun (R-Ind.) began the hearing on the state of nutrition in America Tuesday, Nov. 2. 

Calling the situation a crisis, senators and witnesses cited statistics that have worsened over the past 50 years.

“Our healthcare costs today are 20% of GDP. In the 1960s, it was 7%. It has tripled in 50 years,” said Sen. Braun. In 1960, he said, 3% of the population was obese. Today it’s over 40%, with more than 70% of the population either obese or overweight.

“More shocking,” said Booker, “is that 25% of teenagers are pre-diabetic or have type II diabetes, and 70% are disqualified from military service” — with the number one medical reason being overweight or diabetic.

Witnesses and senators blamed the “epidemic” on a food system designed to solve 20th century problems of ending hunger by investing in cheap calories – especially carbohydrates. They indicated that 21st century goals should be focused on designing a food system that delivers nutrition and makes the nation healthier.

“We want to rethink the way we approach food and nutrition policy. Our lives literally depend on it,” said Sen. Booker, “This nutrition crisis we face is a threat — the greatest threat to the health and well-being of our country and a threat to our economic security and our national security.”

That’s why Senators Booker and Braun recently introduced bipartisan legislation to convene public and private stakeholders in what would be the second White House conference ever to be held on food and nutrition. The first was convened in the late 1960s, when then Senators George McGovern and Bob Dole formed a select nutrition committee in a time of food shortages and high prices.

That time-period was also when the precursor to the Dietary Guidelines was established, which by the 1980s had become the official and now notorious Dietary Guidelines cycle.

While Tuesday’s hearing continually hit this notion that 52 years later we have all of these devastating statistics, it was interesting that there was zero mention of the Dietary Guidelines. Those words were not uttered by any senator or any witness at any point in the over two-hour-long hearing.

Another item that did not pass through any lips Tuesday was the acknowledgment that 52 years of the low-fat dietary regime has prevailed and has progressively tightened its hold over school diets even as these statistics, especially on youth, have worsened into crisis-mode. 

The closest anyone got to mentioning dietary fat was when Senator Roger Marshall (R-Kan.), a doctor by profession, asked witnesses if they thought the CDC missed an opportunity to do public service announcements about “nutrition and building up our own immune systems” during the COVID-19 pandemic.

He talked about volunteering in the ICU and ER of a south Kansas hospital in the spring of 2020 when COVID was sweeping the land.

“There were eight ICU beds and 11 patients, all in their 50s, and all had diabetes or pre-diabetes. Immediately, I called the CDC and said, ‘this virus is going to assault this country.’” He observed that our rates of morbidity and mortality are higher with this virus than some other countries because almost half of the population is diabetic or pre-diabetic.

Sen. Marshall voiced his frustration: “We’ve had a year and a half of this virus, and I thought this might be an awakening for this country, that if we had a better, healthier immune system, that’s how you fight viruses.”

One of the five witnesses — Dr. Dariush Mozaffarian of the Tufts University Friedman School of Food and Nutrition Policy – responded to say that alongside developing vaccines, treatments and guidelines for social distancing, “the huge additional foundational effort should have been to improve our overall metabolic health through better nutrition. So, every time we talk about vaccines, social distancing, mask wearing, why aren’t we talking about nutrition?”

“Everything we need to know about nutrition I learned from my mother and my grandmother,” said Sen. Marshall. “We need to be using our medical assets for nutrition education. Doctors need to understand that Vitamins D, A, E and K are fat-soluble vitamins, so we need to be drinking our whole milk and looking at these general concepts.”

This was the hearing’s only – and subtle — reference to dietary fat. It was the only, but quiet, nod to any suggestion of the impact of federal government restrictions on the diets of children during school hours while their rates of obesity and type II diabetes continue to rise to epidemic proportions. Not one witness or senator delved into this topic in any substantial way.

Throughout the hearing, that seemed to focus on a new paradigm in food and nutrition, there were also strong references to a key part of the problem — the food industry is controlled by a handful of large multinational corporations providing nutrient-poor, addictive and ultra-processed foods.

“Farmers answered the call of a growing population and issues with malnutrition 50 years ago. Through innovation, agriculture makes more from less and works to protect our soils along the way. We’ve made progress but are still geared to address caloric intake, not the content of the calories,” said Sen. Braun. 

He focused his comments on the healthcare industry being the place to make new investments in nutrition as a preventive solution and indicated SNAP purchase restrictions are in order.

Dr. Angela Rachidi, doing poverty studies at the American Enterprise Institute said putting SNAP program restrictions on sugary beverages and incentives for purchasing fruits and vegetables would be positive steps to show SNAP is serious about nutrition. She referenced studies showing that three of the five largest purchase categories with SNAP dollars are sweetened beverages, frozen prepared meals, and dessert items.

Mozaffarian was the first of the five witnesses. He did not mention his Tufts University “Food Compass” project by name, which was published three weeks ago, nor did he mention the $10 million grant received three weeks ago from USDA to develop a “cultivated meat industry,” including assessment of consumer attitudes and development of K-12 education on cell-cultured meat.

“We are on a path to disaster,” he said, calling type II diabetes America’s “canary in the coal mine,” on which the U.S. spends $160 billion annually.

Describing current food and nutrition policy as “fragmented and inefficient,” Mozaffarian said: “Nutrition has no home, no body for focus or leadership across the federal government.”

Mozaffarian’s six recommended government actions paint a picture of a centralized national structure and authority for food and nutrition policy with emphasis on integration of research, the healthcare system, programs like school lunch, and ramping up new innovation startups entering the food system.

He stressed his belief that a “real national strategy” is needed, one that “reimagines the future food system.” He said the science and tools are already available to do this, to integrate into existing programs and make changes – fast.

Perhaps the “tools” Mozaffarian was referring to are within the new Tufts Food Compass he helped create, which ranked “almondmilk” and “soymilk” ahead of skim milk and far ahead of whole milk. It also puts chocolate milk and some types of cheeses near the bottom of the ‘minimize’ category, along with unprocessed beef. 

In fact, the only high-scoring dairy product found in the ‘encouraged’ category was whole Greek yogurt. Cheerios and sweet potato chips ranked higher than dairy products, including the whole Greek yogurt.

Also testifying was Dr. Patrick Stover of Texas A&M’s Agri-Life Center. He noted the public’s “lack of trust” in nutrition science. 

He stressed that the nation’s land grant universities are “a network of extraordinary resources, a national treasure” that benefits from having public trust but lost federal investment levels over the years. 

Stover said Texas A&M is now launching an institute for advancing health through agriculture as well as an agriculture, nutrition and food science center for non-biased research on the human, environmental and economic success of proposed changes.

He supports a “systemic approach to connect people to food and health,” an approach that involves everyone from farm to consumer. He said Agri-Life is positioned to lead such an effort through the land grant university system. 

Stover noted scientists involved in the precision nutrition initiative at the National Institutes of Health are starting to understand how individuals interact with food in relation to these chronic diseases.

“One size does not fit all,” he said.

Witnesses Dr. Angela Odoms-Young, director of Food and Nutrition Education in Communities at Cornell, as well as Dr. Donald Warne, director of public health programs at the University of North Dakota School of Medicine, both talked about the cultural aspects of food. They referenced differing experiences of populations separated from lands and cultures where food was accessible and how certain demographic populations are being targeted by fast-food advertising that is leading to higher rates of chronic diet-related diseases among native Americans and people of color.

Poverty and reliance on cheap highly processed foods was part of that discussion.

“Poor diets and overconsumption of calories are a major crisis,” Dr. Rachidi stressed as a former deputy commissioner of New York City social services overseeing the SNAP program. “Nutrition assistance programs have mixed success” providing food security but also contributing to the problem of poor nutrition.

She said current nutrition policies lack a cohesive strategy. On the one hand harsh restrictions in some programs and no restrictions in others.

“We have to acknowledge the reality, the billions we spend to improve food security are used in a way that is a major contributor to poor health,” said Rachidi.

At the conclusion, chairman Booker stressed his belief that there is a misalignment of government.

“The farmer’s share of the consumer dollar from beef to broccoli has gone down 50% in a food system where everyone is losing,” said Booker. “We are losing the health of our country, seeing the challenges with farmers and the disappearance of family farms, the issues of food workers, what’s happening with animals and the environment. Let’s not be fooled. This is not a free market right now.”

He noted that farmers are “stuck in mono-cropping” without incentives to move to more regenerative agriculture. “We love farmers. They aren’t the problem. We have to figure out a way to align incentives with policy decisions because it is out of whack.”

Asked by Booker to give a ‘business perspective,’ ranking member Braun concluded that the best place to implement a solution is to do it where the most money is being spent on the problem and that is the healthcare system. Food is a bargain, which addresses hunger, “but we need to reconstitute the quality of the calories,” he said, putting the emphasis on the nutrient density of foods.

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