Farmers bring questions to DMI chair

By Sherry Bunting, Farmshine, April 19, 2019

GORDONVILLE, Pa. — “You are hearing the negatives, not the positives,” said Marilyn Hershey about the dairy checkoff during a meeting requested by Lancaster County dairy farmers hosted here in Gordonville on Friday, April 12.

Hershey has a dairy farm with her husband Duane in neighboring Chester County, and she serves as the national chairperson of the Dairy Management Inc. (DMI) board.

Approximately 12 of the expected 30 farmers attended the meeting with a range of topics on their minds, in particular fluid milk sales and whole milk promotion.

Hershey got involved in dairy promotion eight years ago, serving first on the National Dairy Board, then becoming vice chair of DMI, the board that combines various boards, before becoming chairperson two years ago. National Dairy Board has term limits, whereas the DMI board does not.

Accompanying Hershey for the discussion was Harold Shaulis of Somerset County, who served 25 years on state, regional and national checkoff boards. Having sold his cows, he is no longer a board member, but helps with promotion.


After a Q&A session with farmers, DMI chairperson Marilyn Hershey supplied this graphic of how dairy consumption has increased while product share has changed from 1985 through 2018. The chart represents National Milk Producers Federation (NMPF) analysis of USDA commercial disappearance. According to USDA, the agency’s commercial disappearance figures include imports and most exports.

Shaulis said the bottom line in dairy promotion is to sell more milk. He said total per-capita dairy consumption has grown since the 1980s, even though fluid milk sales have declined (Fig. 1). He also talked about trade missions to China and Southeast Asia.

“We are in a global market. One out of six loads of milk a day is exported, and we want to see that grow,” he said.

In addition to exports, Hershey said consumers are eating more dairy products, overall. “The National Dairy Council has funded 20 years of research on butter to get it back in the mainstream. We got butter into McDonalds in place of margarine, and 80% of McDonalds’ sales have a dairy ingredient in them,” she explained as an example of DMI’s partnership strategy.

By email, after the meeting, Hershey furnished the previously requested list of National Dairy Council research we will explore for a future edition.

However, a perusal of the science summaries section of National Dairy Council’s own website, where a few summaries are available, each download is prefaced with these words: “Low-fat and fat-free dairy foods are part of the Dietary Guidelines for Americans (DGA) and American Heart Association (AHA) dietary recommendations. You can download our full report, which shows further support for consuming low-fat or fat-free dairy foods as recommended in the 2015 DGA.”

The website also talks about “nourishing communities,” about farm animal care and sustainability measures (FARM program) adopted and funded by checkoff dollars that tie in with the low-fat and fat-free dietary theme.


This screenshot of the landing page for the Undeniably Dairy campaign’s website (https://www.discoverundeniablydairy.com/) illustrates the nourishing communities theme that DMI chair Marilyn Hershey says targets “conflicted health seekers.” She also said: “We want Undeniably Dairy to replace the Real Seal. That is the goal.”

Undeniably Dairy replaces Real Seal

Cross-referenced to the National Dairy Council website is the Undeniably Dairy campaign. Hershey said this promotes positive messages to targeted audiences with school curriculum and through social media.

At this website, the “nourishing communities” theme continues as well as the reinforcement of low-fat and fat-free dairy.

Hershey provided a handout on Undeniably Dairy and said: “We are targeting the ‘conflicted health seeker’ with four messages: Responsibly produced, nutrient rich, locally driven, real enjoyment.”

More interesting is where DMI wants to take the campaign.

“We want Undeniably Dairy to replace the Real Seal. That is the goal,” said Hershey. “We are combining MilkPEP’s ‘Love What’s Real’ campaign with our Undeniably Dairy campaign.” 

The Real Seal was previously owned by UDIA / DMI, but it is now the property of National Milk Producers Federation (NMPF). The Real Seal can only be used on milk and dairy products that contain real dairy ingredients, no imitation dairy ingredients and are made with milk produced and processed in the USA.

This posed a problem for DMI, since importers must pay a small checkoff fee for dairy promotion, so the dairy checkoff stopped promoting the Real Seal and came up with Undeniably Dairy two years ago.

Hershey fielded questions about the requirements for using the Undeniably Dairy Seal. How might those requirements differ from the Real Seal? She did not have the specifics and promised to get back with those details.

In the schools

Fielding questions on the school breakfast carts, Hershey explained that GENYOUth is the umbrella organization, and Fuel Up to Play 60 (FUTP60) is the boots on the ground.

“We don’t just have a foot in the schools, we are IN the schools,” said Hershey. “Companies would love to have what we have in the schools.”

The Northeast program is strong because there are seven football teams here so the program can affect a large number of kids in the Northeast, according to Hershey.

Asked what is on the breakfast carts, she said: “Yogurt, cheese, milk, fruits and vegetables, and some have smoothie machines.”

She said the Grab N Go Breakfast Carts have ice packs to keep the milk cold. She also stated that every dime ADA Northeast sends in to GENYOUth is returned to the Northeast region to fund FUTP60 and breakfast carts as well as other foodservice equipment grants to schools. (See ADA Northeast 2017 Annual Report here)

Hershey confirmed that the GENYOUth Gala raises more money than it spends by getting funds from other donors to buy more carts. She explained, as previously reported in Farmshine, that PepsiCo gave $1 million to translate FUTP60 into Spanish and pay for more breakfast carts. She said PepsiCo made a large 2018 commitment to the program, and that’s why PepsiCo recognized with the Vanguard Award at the 2018 Gala.

“We buy the carts, and we have multi-year contracts with the schools to keep milk on the carts,” said Hershey.

Acknowledging that the milk provided is fat-free or 1%, she stressed that, “As independent dairy producers, we can advocate for whole milk, but DMI, FUTP60, and GENYOUth cannot influence policy,” she explained.

“You have to go to your co-ops and Farm Bureau and G.T. Thompson to get that done. We can’t do it,” said Shaulis.

What we can do is put out our research and promote research,” said Hershey.

Shalis said the FUTP60 breakfast carts “absolutely sell more milk.”

He reported that 95,000 more children participated in school breakfast in 2018 compared with 2017. “That’s 95,000 more servings of milk since they have to take a milk.”

“But do they like it?” asked one farmer.

Hershey quickly replied: “It doesn’t matter if it’s 3%, 1%, 2% or 0%, they are getting the same nutrition. Even though they are not getting the fat content, they are getting the nutrients.”

A discussion of fat-soluble nutrients and bioavailability of nutrients ensued.

When asked if DMI, yes or no, believes 1% and fat-free milk are equal to whole milk, Hershey said: “We have no control over what we serve or promote in the schools. With that carton of 1% milk, we want children to know they are getting the nutrition, we can’t address the fat.”

When asked what DMI can do about 20-plus years of having the low-fat diet-heart hypothesis “forced on us,” Hershey’s reply was that, “It took 20 years to get here and it will take a while to turn it around.”

She informed the group that the American Heart Association has already written a letter to Congress signed by 18 health organizations protesting the House Bill 832: Whole Milk for Healthy Kids Act.

“They are against the bill, so there is a battle in front of us,” Hershey said.

On the positive side, Hershey said farmers can thank Dr. Greg Miller, global chief science officer for the National Dairy Council, for his use of the research on full-fat dairy. She also said dairy farmers can thank the dairy scientists in each partnering company’s kitchen as DMI develops new products for Pizza Hut, Taco Bell, Domino’s and McDonalds.

Beyond the fat

“Lots of things with school milk need changing, not just the fat,” said Hershey as she dove into the innovations side of DMI’s strategy.

“I appreciate that the fat content is your focus, but it has to be the right temperature, delivered correctly and packaged correctly,” she said. “We are working on this with processors.”

She said that giving high school teens the same packaging as kindergarteners doesn’t fly. She cited research showing that when schools switched from paper cartons to plastic bottles, milk sales grew by double-digits in the first year, and waste was down by 20% in those schools.

“Kids want to drink their milk from a bottle because that’s how they drink everything else,” said Hershey, noting that Rick Naczi, executive director of ADA Northeast, pointed this out at a fluid milk meeting DMI had in Chicago in February.

“School milk got a lot of discussion there,” Hershey reported. “But, let’s not get lost in this whole milk point. There is a huge price difference (between whole milk and 1% or fat-free), and school contracts are lost by one-quarter of a penny per carton.”

Some of the farmers in attendance said that didn’t matter unless other beverages can compete for those contracts. The bottom line would be whole milk going into the schools.

Time was also spent talking about the trend toward smaller containers and ultra-high temperature (UHT) pasteurization. “All the milk in Europe is UHT, and it tastes good,” said Shaulis.

Some of the farmers in the room disagreed, sharing their concerns that UHT leaves a less valuable product nutritionally and in flavor. To which, Hershey and Shaulis said the entire food industry is going that way, and there’s nothing they can do about that.

“What we have to try to do (in promotion) is stand by the value milk has and promote what we are able to promote,” said Hershey.

She shared figures showing that overall fluid milk sales represent 18% of total milk production: “79% of consumers are not eating meals as a family. Everything is grab and go. That’s where we need to be,” said Hershey. “We have to meet consumers where they are with our innovation and packaging.”

Citing fairlife, she explained how “that product came through our fluid milk committee, and now others are following. Darigold has a new high protein ‘fitness’ drink. DFA has a couple things coming out under the Live Real Farms label. Kroger and Shamrock are coming out with beverages – all this year. These products have a lot of milk in them,” she said.

Farmers learned that these new products are not Class I products. They are largely Class II.

“We partner on these products,” said Hershey. “We give money for research. They do the product research. We only contribute to the research to try and get the innovation out there in order to survive.”

“We gave up on selling milk. ‘Got Milk’ did nothing,” Shaulis added. “Generic milk advertising doesn’t work.”

Farmers wanted more statistics to back up this claim, and they referenced the overwhelming reaction among consumers to the 97 Milk Baleboards and campaign done voluntarily at a grassroots level, starting in Lebanon County, Pennsylvania with signs and baleboards now in five states and spreading nationwide and internationally through the website and social media.

Hershey did share the news that retail data show whole milk sales grew more in the first quarter of 2019 than the already higher whole milk sales in 2018.

She later sent an email stating that in the Northeast, retail sales data show 40% of fluid milk sales are coming from whole milk sales. She also reported that, nationally, whole milk sales as a percentage of total fluid milk sales rose from 29.7% in 2014 to 39.3% currently.

As one farmer noted, “DMI has done a good job promoting cheese, what we are asking for is more focus on fluid whole milk than we are seeing now.”

Farmers were concerned that if they continue to be forced to pay into a checkoff program that represents their market less and less, what does the future hold for them?

Hershey had explained that the national checkoff boards are represented geographically by milk volume.

Some wondered if making the checkoff voluntary would allow them to put money into promoting local whole milk, and to take on the imitations head-to-head without the restrictive oversight of USDA.

“It’s all or nothing. That’s how the whole world of checkoff programs work,” said Shaulis. “These farmers on the board look at every penny spent, and they look at what is best for the industry while regions look at what is best for their region.”

To be continued.


DMI chairperson Marilyn Hershey and former board member Harold Shaulis met with dairy farmers for a question-and-answer session in Lancaster County, Pennsylvania on Friday, April 12. Hershey explained that DMI, the board she chairs, combines the National Dairy Board and the UDIA board. In this way, DMI brings together the national 5-cent spending with the portion of the 10 regional cents that is brought into national efforts under the unified marketing plan.

Truth and thoughts: A tragedy the government won’t accept

As a mother and a grandmother, Sherry Bunting has followed childhood nutrition legislation and government guidelines for 25 years. She is pictured here recently with Bella, one of her five grandchildren.

By Sherry Bunting, Farmshine Cover Commentary, April 26, 2019

I have been following and writing about the nutrition exploits of the National School Lunch Program since 1994. At that time, my children were in school, and I served as an elected director of the Eastern Lancaster County School Board.

Today, I continue the fight because I see the effects. I am a grandmother. I have been on this soapbox whether milk prices are high or low, though some say I’m just conjuring up devisive issue because of low milk prices.

My track record on this issue is 25-years-long-and-solid.

The problem started surfacing in the mid-90s when the low-fat / high-carb nutrition dogma became firmly entrenched, and big food brands were pushing low-fat versions that contained – you guessed it – more sugar and concentrated high fructose corn syrup.

The situation became progressively worse through the 2000’s as the government began tightening its vice-grip — as one foodservice director at the time put it — “forcing us to serve the equivalent of a heart patient’s diet to growing kids.”

Foodservice directors who piloted the USDA software for the nutrient standard menu planning said it would be an obesity disaster in the making. They correctly noted that when fat is removed from diets, carbs and sweetener take its place.

There are three things that give food calories for sustaining life: Fat, carbs and protein. There are two calorie-providing elements that give food its flavor: Sugar and fat.

By excessively reducing fat, the flavor of the meals and the milk is reduced, and children are pushed toward more sugar and less feelings of fullness.

By removing whole milk, real butter, real cheese, real beef, we now have 10-year-olds with ‘hunger pangs during math class.’ Sen. Stabenow recognized this, but she doesn’t grasp why. She sees the solution as more of the same: Just find ways to get more kids enrolled to eat even less of what’s good for them.

The 2010 Healthy Hunger-Free Kids Act made “historic changes” alright. Bad ones. It dealt our nation’s dairy farmers and children the final blow. It limited the calories of the total meal, tightened the saturated fat limits, and required only fat-free and 1% milk or fat-free flavored milk be served along with offerings of fruit juice and water. It also increased the carb counts.

What our government leaders and USDA nutrition elite bureaucracy think is progress is actually regression. Sen. Stabenow says ‘don’t go backwards.’ But our children are already going backwards as nutrient dense foods are limited.

I find it amazing that our political leaders can sit in committee examining childhood nutrition programs costing $30 billion in reauthorization and talk about the nutritional crisis our nation is facing that affects our national security and yet claim that the 2010 Act brought “progress”, saying “don’t backtrack”.

In essence, our leaders believe the problem is not enough kids are enrolled in the programs that they have ruined!

Instead of hiring market research firms to find out how to get more participation, change the program. Apply some logic.

The School Lunch and later breakfast programs began when the military in the 1940s saw malnutrition as a national security issue among recruits. At that time, the biggest thing the school lunch program did was to make sure children received whole milk, real butter, real cheese, real beef, real food. And yes, we ate our vegetables, they had real butter or cheese on them!

We sailed along until Dr. Ancel Keys from the University of Minnesota, and his now heavily-challenged hypothesis, became the darling of the American Heart Association. By the 1980s, it was intrenched. Other rigorous science was bullied and buried.

By the 1990s, school lunch rules became more intrusive in reducing fat and increasing carbs.

By the 2000s, schools had to submit their menus for approval or run them through USDA software for percent-of-calories-from-fat analysis. School foodservice directors admitted to serving more dessert to replace the calories lost from nutrient-dense fats and proteins, but they used applesauce, more sugar and high fructose corn syrup — instead of butter and eggs — to make those cakes, cookies and brownies.

In 2010, the government limited the lunch calories, tightened the saturated fat limits, and outright forbade serving 2% or whole milk in schools.

Don’t our leaders see that we keep making a bad situation worse because we can’t admit that it’s time to backtrack?

Now our military says recruits are too obese to serve. We are facing a new national security threat. This is no joke.

When will our nation have a full airing of the science? When will we backtrack from a hypothesis disproven?

Since the 1990s — and even moreso since 2010 — our children are served increasingly less of less, and we have a USDA and a Congress that want to stay on this road and just make sure more of us travel it. In fact, while USDA representatives told Congress last week that they don’t want schools and states to have to be ‘food police’, they admitted they look at ‘competing foods’ to see that kids aren’t leaving the lunch line to eat or drink something else on campus.

Pennsylvania and other states will not allow various FFA groups to put in whole milk vending machines and manage them as a fundraiser, or they must be locked during school hours in order not to “compete” with what government is literally forcing down our children’s throats, or into the trash can.

If the federal government won’t do what’s right, then get out of the way and let our communities decide how to feed our children. Stop ruling from the ivory tower that “looks and listens” but fails to act. Change the Guidelines. Face it. Do it. Now, before it’s too late.

Child nutrition reauthorization sparked in D.C.

Military insights suggest backtracking, but disappointing answers given on school lunch and milk fat

By Sherry Bunting, Farmshine, April 26, 2019

WASHINGTON, D.C. — The last time a childhood nutrition authorization was passed by Congress was in 2010: The Healthy Hunger-Free Kids Act. A decade later, the Senate Ag Committee held a hearing last Wednesday (April 10) on perspectives in childhood nutrition. 

Chairman Pat Roberts (R-Kan.) said this is the first step in the reauthorization of the $30 billion in mandatory and discretionary childhood nutrition programs he wants examined and passed this year.

The hearing panels included representatives of federal agencies, state and community food programs, and the national childhood health program.

Most of the discussion centered on ways to streamline programs, increase enrollment that has been declining since 2010, and provide more flexibility.

There were a few eye-opening highlights and some discussion related to milk.

Chairman Roberts said in his opening statement: “One size fits all does not work for all.

Ranking Member Debbie Stabenow (D-Mich.) stated that, “Whether it’s a mother getting enough calcium to insure healthy bones for her baby, or making sure a 10-year-old isn’t fighting hunger pains in math class, child nutrition is about building a stronger future. It’s also important to our national security.”

Stabenow then revealed how and why the National School Lunch Program began 80 years ago, and what the concerns are today — two decades after the saturated fat limitations were introduced and a decade after the last reauthorization under the leadership of President Obama and Secretary Vilsack, when the screws were further tightened on milk choices and other aspects in 2009-10.

“Interestingly, the National School Lunch program was created in the 1940s because General Lewis Hershey came before Congress to explain that recruits were being rejected due to malnutrition,” said Stabenow. 

Sen. Debbie Stabenow (D-Mich.)

“Today, over 750 retired Generals, and other military leaders, are sounding alarm bells again, this time because young adults are too overweight to serve,” she stated. “With 14% of children as young as 2 showing signs of obesity, we have to address this issue early and everywhere.”

That said, Sen. Stabenow touted the “tremendous progress in the past 20 years in schools and daycares. It is vital to move forward, not backward,” she stated, while in her next breath saying that “obesity in adolescents continues to rise while over 12 million kids do not have enough to eat.”

She touted the need for greater enrollment in the National School Lunch Program so kids can have access to that “better” lunch, breakfast, after school snacks and even supper. She talked about a “veggie van” driving out into communities. She cited the Women Infant and Children (WIC) program as critical to first stages of life.

But when her opening statement was said-and-done, Sen. Stabenow again touted “the progress made in 2010” and said several times “we don’t want to backtrack while streamlining these programs.”

Sen. Bob Casey (D-Pa.)

Toward the end of the session, Senator Bob Casey (D-Pa.) brought up “the science of milk” and addressed his question specifically to Dr. Olanrewaju Falusi, a pediatrician who is director of the Children’s National Health System in Washington, D.C.

It was not surprising that the most important question of the day got the most disappointing and predictable answer. 

After hearing Dr. Falusi present her comments about how early childhood diets are responsible for critical programming of lifelong metabolism, brain development, and educational outcomes, Sen. Casey addressed Dr. Falusi as follows:

“There’s been much discussion in Pennsylvania about the ability of schools to serve whole milk to students. What does ‘the science’ say about the appropriate levels of whole milk consumption?” the Democratic Senator from Pennsylvania asked.


Dr. Olanrewaju Falusi, a pediatrician who is director of the Children’s National Health System in Washington, D.C.

Predictably, Dr. Falusi replied: “As a pediatrician, I recommend to my patients that they drink water or low-fat or fat-free milk. We know that milk has many benefits from protein and calcium and Vitamin D. We also know, though, that lower fat and lower sugar in diets are healthier for children.”

Dr. Falusi continued matter-of-factly: “What we would admonish, from the American Academy of Pediatrics, is that the standards for school nutrition programs — including the type of milk served — really be based on the science, and the science is that lower fat and lower sugar are what we should be advocating for children. And we do encourage the USDA to rely on the nutrition experts and to look at a number of studies for those guidelines.”

Senator Deb Fischer (R-Neb.) asked about students turning to competitive foods when the school lunch does not appeal or satisfy. She addressed her concern to USDA Acting Deputy Under Secretary for Food, Nutrition and Consumer Services, Brandon Lipps.

Lipps replied that the government seeks a balance between the school lunch and “competing foods” allowed on campus. He also noted they are “looking to see that kids are not leaving the school lunch line to buy competitive foods elsewhere on campus. But we’re not making the schools or states be the food police.”

Sen. Fischer asked: What are the foodservice professionals telling you? Are kids eating the school lunches?



Brandon Lipps, USDA Acting Deputy Under Secretary for Food, Nutrition and Consumer Services

Lipps replied that the “schools are very positive on the flexibilities in the final rule… It’s not a major change, just a comfort in long-term planning. Schools have to buy a long way out to plan their menus in the way that we require them to do. So they’re glad to have finality on the flexibility” (for example, they have flexibility to serve 1% flavored milk instead of only fat-free).

In response to the suggestion that the nutrition standards are “no good.” Lipps stated that, “We put in a calorie limit in 2009, and if the kids don’t eat half the food on their plate, and if they are getting half of the maximum calories that we provide them, if that’s happening, then that’s a problem.”

USDA is monitoring this, said Lipps: “As you know, the same is true, particularly with milk and the nutrients that it provides, so we are going to continue to listen and see if further flexibility is needed on that front.” 

Repeatedly, the 2010 Healthy Hunger-Free Kids Act was cited for making “historic changes” that led to “greater consumption of fruits, vegetables and whole grains as encouraged by USDA.” But at the same time, panelists repeatedly said fewer eligible families and children use the programs today compared with before 2010, and that obesity and diabetes and hunger are rising in our youth.  

When asked by Sen. Joni Ernst (R-Iowa) about school waste related to the 2010 changes, USDA Under Secretary Lipp said flexibility in the final rule on whole grains, sodium and 1% low-fat flavored milk went a long way toward changing that.

“I don’t think we have anyone telling us we need a major change in the nutrition meal pattern requirements for the school meal, but they do want flexibility,” said Lipp.

Sen. Ernst also noted the concerns about portion sizes being the same for a first-grader as an eighth-grader. “School foodservice professionals say they want the flexibility to vary it,” she said. “Right now, booster clubs are bringing in food for athletes who are not getting enough. And with mandated portions and mandated nutrition requirements, we are seeing a lot of food waste, what can USDA do?”

Lipp replied that USDA will continue to “look and listen.”

Josh Mathismeier, Director of Nutritional Services for Kansas City public schools and Mike Halligan, CEO of God’s Pantry Food Banks, based in Lexington, Kentucky, said participation would increase if they could take the food to the people instead of forcing the people to congregate to access the food.

Some states have actually hired market research firms to do focus groups with eligible families to learn how to increase their enrollment.

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Peeling back layers of dairy checkoff report to Congress

The 2016 report touts a $5 to $1 return, but here is a deeper look. More transparency needed, sought

By Sherry Bunting, Farmshine, April 5, 2019

WASHINGTON, D.C. — USDA released the 2016 Dairy Checkoff Report to Congress on April 1, and it focuses on quantifying the return dairy farmers received for their 15 cents per hundredweight — over $320 million collected annually — in mandatory checkoff investment.

Well, not really.

The headliner is that farmers received a $5 to $1 return on their promotion dollars. But let’s look a little deeper.

The $5 to $1 return is an evaluation made by the independent analysis of Texas A&M based on the dollars spent on “demand enhancing” and “promotion” activities, not a return on investment calculated on all dollars mandatorily invested by dairy farmers.

Digging into the charts, this puts the evaluated dollars at around $250 million, and that includes the processor funds in the MilkPEP program. The total dairy farmer checkoff of 15 cents per hundredweight amounts to $320 million annually and the MilkPEP processor funds are close to $94 million annually, according to the report.

Meanwhile, a bipartisan bill was introduced in the U.S. Senate to bring transparency to checkoff programs for all farm commodities. The bill — Opportunities for Fairness in Farming (OFF) Act — was reintroduced a week ago by U.S. Senators Mike Lee (R-Utah), Cory Booker (D-N.J.), Rand Paul (R-Ky.) and Elizabeth Warren (D-Mass.).

According to an advocate of the bill — the Organization for Competitive Markets (OCM) — the OFF Act would put an end to the “most egregious abuses” committed by the boards and contractors of the federally mandated commodity checkoff programs.

OCM states that, “Checkoff programs have fallen under the control of commodity trade organizations representing global agribusiness interests,” noting that “farmers are struggling amidst increasing consolidation, low commodity prices, and excess supply. Net farm income is at a 19-year low. Along with recent trade disruptions and natural disasters, such as the flooding in the Midwest, the last thing farmers want or need is their tax dollars working against them.”

The OFF Act is intended to “rein-in conflicts of interest” and “stop anti-competitive activities” by forcing checkoff programs to publish their budgets and undergo periodic audits so that farmers and ranchers know where their mandatory checkoff dollars are going. It would also stop federally-mandated checkoff dollars from being transferred to parties that seek to influence government policies on ag issues and increase the transparency of the individual boards’ actions by shedding light on how these funds are spent and the purpose of the spending.

In light of this new bill, let’s look at the 2016 Dairy Checkoff Report to Congress released on April 1.

According to the 2016 Report’s executive summary, “… the combined effects of 2016 promotion activities on the consumption of fluid milk, cheese, butter, all dairy products, and dairy exports includes benefit cost ratios (BCRs) for dairy producers, dairy importers and fluid milk processors. For every dollar invested in demand-enhancing activities, the BCRs for producers were: 1) fluid milk $4.11, 2) cheese $4.81, and 3) butter $22.74, 4) exports $8.10. The BCR for fluid milk processors attributed to fluid milk promotion activities is $3.73. And the aggregate BCR on every ‘demand-enhancing’ dollar spent was calculated at $4.78.

Putting those BCR’s in perspective, the 2016 Report totaled the mandatory dairy promotion contributions at $415 million, of which $94 million was contributed by the Milk Processors Education and Promotion Program (MilkPEP), which are the funds paid by fluid milk processors for fluid milk promotion.

When looking at the graphs accompanying this report — since the report does not include the raw data points for 2016 — the total amount of domestic dairy demand-enhancing funds from which the BCRs (aka returns on investment) were calculated, comes out to around $250 million for the year. And a large chunk of that came from the fluid milk processors (over $80 mil).

From 1996 through 2016, the amount of money collected topped $7 billion, according to the report.

During those 20 years, the dollars spent on “demand-enhancing” activities for fluid milk have declined, and the fluid milk sales have declined also. Of the roughly $110 million spent on fluid milk demand-enhancing activities in 2016, most of those dollars came from MilkPEP generic promotion.

Also, keep in mind that the fluid milk sector is the sector held most notably to the standard of “government speech” in its “allowable” promotion i.e. the low-fat and fat-free USDA Dietary Guidelines that have precipitated the decline in fluid milk consumption.

In fact, whole milk sales rose in 2016 while the entire fluid milk category fell. But whole milk was not promoted with any of the producer or processor promotion funds overseen by USDA and evaluated in this report. Consumers chose whole milk based on external factors that are driving the discussion of fats and proteins in the diet.

The fastest growing demand-sectors in recent years include butter. The 2016 Report to Congress states that farmers received a $22 to $1 benefit cost ratio (BCR, aka return on investment) in that category.

That looks really great, right?

But again, this is based on the amount of “demand enhancing” funds actually spent on butter promotion in 2016 — right around $8 million for the year — the lowest category of all product promotion sectors to receive promotional funding, but the fastest rising in demand and value.

Put simply: Very little of the dairy farmer’s promotion funds (less than 2% of total checkoff funds) were used to promote butter, but sales have risen so fast in that category that the return on investment seems to be quite impressive. The “return” may have nothing to do with the “investment” under this scenario.

Meanwhile, Dairy Management Inc. (DMI) has continued consolidating the way it uses its national share of individual farms’ mandatory checkoff funds through business-to-business (B2B) partnerships where the goal is to influence the amount of dairy utilized by the top restaurant chains, pizza chains, and other foodservice companies in what they offer to consumers. This may become increasingly important as the government dietary guidelines and other factors pressure companies to use more plant-based options. But the drawback is that this B2B use of dollars feeds into further consolidation of the industry in terms of geographic winners and losers.

The key to looking at the 2016 Report’s BCR (returns on investment) calculations is the choices consumers are making where they actually have choices. Consumers are choosing whole milk and full-fat dairy at rising rates. Where they don’t have a choice, the low-fat and fat-free versions are enforced and offered. So while $110 million might have been spent by farmers and processors to enhance fluid milk demand, precious little, if any, has been used to promote the whole milk message due to USDA oversight of all advertising messages.

Part of the other half of checkoff funds not included in the “demand enhancing” and “promotion” BCR (return on investment) calculation is in dollars funneled toward the Innovation Center for U.S. Dairy.

What is the Innovation Center, farmers wonder?

The Innovation Center is the part of DMI that is considered “pre-competitive.” This includes new product development, like fairlife.

The Innovation Center also includes the FARM program that governs animal care standards and is increasingly seen as a methodical tool to control and cull dairy farmers by management style. Dairy producer checkoff funds have paid for the FARM program through DMI’s Innovation Center even though National Milk Producers Federation (NMPF) implements and administers FARM with DMI paying NMPF for certain services and NMPF paying DMI for other services.

The Innovation Center also includes the “sustainability” standards being set for FARM in conjunction with World Wildlife Fund (WWF) to streamline the dairy “industry” for WWF’s sustainability stamp-of-approval.

This alliance is clear when spending a little time browsing the WWF website at https://www.worldwildlife.org/industries/dairy. The DMI “partnership” with WWF through the checkoff-funded Innovation Center is also at this link https://www.worldwildlife.org/partnerships/innovation-center-for-us-dairy

Both links are housed by WWF’s website and WWF is also working in alliance with the beef checkoff to set sustainability parameters for U.S. cattlemen as well.

Meanwhile, HSUS is among the proponents of the OFF legislation introduced by Senators a week ago. This is the counter we here, how farm organizations seeking competitive markets are working on the same side with HSUS.

For the record, Dairy Checkoff and Beef Checkoff are working with WWF, and WWF is barely one step away from HSUS in terms of having an anti-animal-use agenda.

Both organizations seek to greatly decrease, or end, the use of animals for food, work, etc., and they seek the re-wilding of lands where farmers and ranchers have gone out of business to accumulate massive sanctuaries for wild animal proliferation while working in close partnership with EAT Lancet-supporting companies to shift the U.S. diet away from animal products to plant-and-laboratory-based-imitations.

What is missing in the “sustainability” discussion that farmers are helping to pay for with their checkoff dollars through their dairy and beef boards is the truth that the plants need the animals and the animals need the plants and we humans need them both for healthy bodies and a healthy planet.

What is also missing is the food security and regional economics of the food industry consolidation that is occurring in the name of “sustainability” through the very checkoff-funded “sustainability” programs that are being developed to appease groups like WWF.

If companies want to consolidate and streamline this way, that’s free market enterprise. They are free to do so. But should farmer checkoff funds be helping to pay for it?

For example, dairy farmer checkoff funds were used — according to the 2016 Report to Congress — to develop a variety of programs aimed at transforming the industry. This has been going on since 2009, according to the Report.

This means a portion of the dairy farmer checkoff funds collected from all dairy farmers on all milk from 2009 through 2016 has gone into developing programs that are not considered demand-enhancing and that are — in effect — picking winners and losers within the dairy farming sector.

These funds have been used to implement aspects of FARM in animal care and environmental sustainability.

These funds have been used to launch programs to reduce greenhouse gas emissions across the dairy supply chain, including a “fleet smart” program that touts its ability to help processors and cooperatives transform their trucking and distribution.

Read that sentence again. What does it mean?

Dairy farmers have funded — through mandatory checkoff — the development of the very programs that are streamlining and consolidating their industry in the name of so-called “sustainability.” As proprietary and co-op processors adapt the transportation and distribution ‘fleet smart’ modules, farmers are, in essence, paying for that with checkoff funds and other assessments put on them by their cooperatives, and in turn, those transformations make some farms desirable and others undesirable simply by size or location.

The invisible hand of the free market picks winners and losers. But in this case, should mandatory dairy farmer checkoff funds be the helping hand to pay for that? To pay for their own demise, in some cases?

It is interesting also to know that USDA is paid for its extensive time and costs to do all of this oversight – paid by these funds to keep the troops in line on toting government speech, among other things.

Here is how the 2016 Report to Congress describes USDA oversight:

“USDA has oversight responsibility for the dairy and fluid milk promotion programs. The oversight objectives ensure the boards and qualifying partners (QPs) properly account for all program funds and administer the programs in accordance with the respective acts and orders and USDA guidelines and policies. USDA reviewed and approved all board budgets, contracts, and advertising materials. USDA employees attended all board and committee meetings, monitored all board activities, and were responsible for obtaining an independent evaluation of the programs. Additional USDA responsibilities include nominating and appointing board members, amending the orders, conducting referenda, assisting with noncompliance cases, and conducting periodic program management reviews. The boards reimbursed the U.S. Secretary of Agriculture, as required by the acts, for all of USDA’s costs of program oversight and for the independent analysis.”

To be continued.

Is mandatory dairy checkoff funding real milk’s demise?

Through futuristic lens: Is it time to end USDA control of dairy promotion?

No matter what innovations they come up with in the future, real dairy milk will always be the completely natural, minimally-processed, clean-label product with the superior combination of complete protein, healthy fat, and long list of essential natural nutrients, not additives. Treating real dairy milk like a cheap commodity must end. Innovative marketing may be more important in today’s times than innovative manufacturing processes. Government rules make it difficult to truly promote real dairy milk. It’s time to re-think the government oversight of the mandatorily farmer-funded milk promotion business so that truly competitive promotion can happen. (Istock photo).

By Sherry Bunting, Farmshine, March 29, 2019

“It’s not that the bad guy came and took it (fluid milk sales), it’s that us, the dairy industry collectively, did not keep growing and innovating and doing what we should do. Instead of getting in a lather about plant-based food companies, let’s do what we are supposed to be doing as an industry. Let’s do marketing. Let’s do innovation. Let’s have dairy-based protein in 3-D printers and whatever comes next. That’s where we need to be.”

These were the words of Tom Gallagher, CEO of Dairy Management Inc. (DMI) to his dairy checkoff board recently as shared here, and in the March 20, 2019 edition of Farmshine from a video of his comments.

A glimpse into what that might mean was revealed at the IDFA (International Dairy Foods Association) convention in January, where DMI’s vice president of global innovation partnerships, Paul Ziemnisky told attendees that 95% of households have milk and buy milk, but that these households engage in “fewer consumption occasions”, according to a recent convention report in Dairy Foods magazine.

To increase ‘consumption occasions’, DMI has been investing checkoff dollars toward innovations in “milk-based” beverage growth, he said.

Through its Innovation Center for U.S. Dairy, DMI has invested checkoff dollars in these types of “pre-competitive” innovations in the past — an example being fairlife.

It is interesting that in both Gallagher’s comments to the DMI board and in the presentation by DMI’s Ziemnisky’s to processors, the term dairy-based or milk-based is used.

As we’ve reported previously, the direction of dairy innovation over the past 10 to 20 years has not been lacking in its drive to pull out the components of milk for inclusion in a variety of products — taking milk apart and putting it back together again — in a way that is new and different or in a way that presents milk and dairy as a new product.

Expect to see this type of innovation increase via these investments of dairy checkoff dollars into developing combination beverages that include pieces of milk in entirely new beverages.

This is what is meant by innovation.

At the IDFA convention, DMI gave processors a glimpse into some of the innovations they are working on to address four consumer targets that DMI has identified:

1)      A milk- and nut-based combination beverage,

2)      A milk with lavender and melatonin to promote sleep,

3)      A yo-fir product (kefir plus yogurt) beverage,

4)      A milk beverage that provides just a hint of flavor,

5)      More concepts in high-protein milk-based beverages,

6)      A ‘plosh’ blend of tea, coffee and milk, and

7)      An all-natural concept of milk blended with fruit.

As the overall beverage sector is exploding with new beverages of all kinds every year — some winners and some losers — DMI is looking to do more in the re-creation of dairy in the beverage space with new combination beverages that include milk, or components of milk, but are not identified as milk. These beverages will compete with non-dairy beverages, but in a sense, this track would further compress real dairy milk into its age-old commodity posture. Of course, those who are engaged in promotion of real dairy milk can position it as the wholly natural choice in a beverage sector of further processed combinations and concoctions.

Something to watch and be aware of is that PepsiCo – a company the dairy checkoff organizations are forming stronger bonds with — is on the frontier of turning drink dispensing machines into a hybrid of 3-D printing and multi-source create-your-own beverage dispensers. On the CNBC’s early-morning Squawk Box business news a few months ago, this concept was discussed showing a prototype where consumers can create their own unique beverage by pushing buttons for a little of this and a little of that. Millennials look for unique and “personalized” foods and beverages — we are told. And we see this trend in the “craft beer” category, for example.

A caveat to follow in this trend is the importance of labeling by USDA and FDA as the new gene-edited cell-cultured animal-based proteins and genetically-altered vat-grown yeast-produced dairy-based proteins move from the lab to the market in the next 12 to 24 months via partnerships between the billionaire-funded food technology startup companies and the world’s largest agricultural supply-chain companies. 

While everyone is watching what happens in the cell-cultured fake-meat category and the partnerships there with Cargill, most of us do not realize how close the dairy versions are to scaling-for-market — since Perfect Day company partnered last fall with ADM (Archer Daniels Midland). That partnership is predicated on ADM providing the facilities and mechanisms to ramp up the production of ‘cow-less’ so-called dairy proteins, and USDA research labs do the gene-altering to provide the seed-source of yeast for the process.

As these other proteins are introduced into the food supply, it is yet unclear how – exactly – they will be identified and differentiated in the marketplace. While the dairy and livestock sectors pushed hard to soften the distinctions of proteins in food from animals that have been fed GMO crops, the downside of USDA’s new Bio-Engineered (BE) food labels is that these fake proteins that are on the horizon may not be labeled or differentiated when they are a part of the final food or beverage product.

On the bio-engineering side of animal-based cell-cultured fake-meat protein production (cell-blobs grown in bioreactors), USDA and FDA are still working out the details of their combined food safety requirements.

But on the bio-engineering side of the yeast that have been genetically-altered to possess bovine DNA snips to exude ‘milk’ protein and perhaps other components (grown to exude dairy protein and components in fermentation vats), there is far less discussion of inspection or oversight.

As for the labeling of both types of bio-engineered protein, there is little discussion of how foods containing them will be labeled.

Just three months ago, U.S. Agriculture Secretary Sonny Perdue announced the new National Bio-Engineered Food Disclosure Standard that will be implemented in January of 2020. It is the result of the July 2016 law passed by Congress that directed USDA to establish one national mandatory standard for disclosing foods that are – or may be – bio-engineered.

USDA Agricultural Marketing Service (AMS) has developed the List of Bio-Engineered Foods to identify the crops – and foods – that are available in a bio-engineered form throughout the world and for which regulated entities must maintain records that inform whether or not they must make this bio-engineered food disclosure.

Some are voluntarily complying already, as I have seen this BE statement in very small print on small containers of some Kraft ‘cheese’ spreads.

The bottom line in this mandatory BE labeling requirement is that it only pertains to the main ingredient of the further-processed food or beverage and only if there is “detectable” genetically-altered material in that food. This means that the BE labeling may not apply to fake meat or fake dairy. In the case of the fake meat, the bio-engineering is the editing of DNA to grow muscle (boneless beef for example). In the case of fake dairy, the bio-engineering is yeast altered to include specific bovine DNA, but the resulting cow-less ‘dairy’ protein would have no detectable difference, its creators say.  

All animal protein checkoff programs have a tough road ahead. If farmers and ranchers continue to fund promotion of the foods and beverages that come from dairy and livestock farms, these fake iterations of the real thing will benefit unless promotion can be targeted to the real thing and consumers see the difference on a label in order to make a choice for the real thing.

This all sounds so futuristic and like science-fiction, but in foods today, this is where we are headed and our checkoff programs should be aware and should be able to stand up for the real thing. They should be allowed to lobby regulators for fair treatment and distinct labeling because the government requires farmers to pay these checkoff deductions to promote their products. Thus, if the government does not provide a clear path to distinguish fake from real, then the fairness of requiring a checkoff should no longer be considered valid.

As for dairy farmer checkoff funds, specifically, the future is here and DMI is already moving down that road to innovate dairy-based or milk-based products that dilute the meaning of dairy and milk in the marketplace – in effect paving the way to new innovations and products in which real dairy-farm-produced milk components can be replaced by fake-dairy components from genetically-altered yeast grown in ADM fermentation vats.

Perhaps checkoff funding should be directed in these difficult and changing times toward true promotion of what is real. We see that starting to happen with the “love what’s real” campaign, launched by the Milk Processors Promotion and Education Program (MilkPEP) and supported by DMI’s Undeniably Dairy social media campaign.

More than ever, the future of our dairy farms will rely upon promotion of what is REAL – moreso than using dairy farmer checkoff funds to find ways to put pieces of milk into other products or into 3-D Printers. Profile those components. Provide the benefits of real dairy components for the manufacturers that are moving into 3-D printing of personalized foods and beverages, but keep the powder dry for a full-out real dairy campaign. If USDA does not allow real dairy farmer checkoff funds to talk about why they are so much better than the fake stuff that is here and that is coming… then it is time to get the government out of the promotion business and return these funds to dairy farmers so they can voluntarily use them to promote their real products, their true dairy brands.

In a future of murky food sources – farmers must be able to stand up for what they produce. They must be able to promote Real Milk that is unfooled-around-with, that is from the cow they have fed and cared for.

With the food revolution here, dairy promotion will need a marketing revolution to welcome people back to what’s Real — especially as more household decisions are made by people growing up without knowing what Real Whole Milk tastes like.There’s an idea. Real Whole Milk is tastier, healthier, with a truly cleaner label than about anything else that is here or that is coming to compete with it in the beverage sector.

Ditto for Real Yogurt and Real Cheese, etc. in the food sector. Undeniably Dairy – the dairy checkoff program – has a nice ring to it. Love what’s Real has a great message to it. But if dairy farmers can’t use their mandatory funds to take the fake stuff head-on, then it’s time to stop taking mandatory checkoffs and allow farmers to use their money to promote their product – no holds barred.

When the competition is funded by Silicon Valley billionaires, has the backing of major food and agriculture supply-chain companies, is sourcing genetically-altered material from USDA, and does not have government requiring distinctive labeling – then dairy farmers need a level playing field to use their hard earned $350 million plus to put a stake in the ground to promote why Real is better. Checkoff staff often say the competition is doing brand advertising and “we can’t.”

That being the case, perhaps give the money back to the farmers so they can form voluntary promotion groups or voluntarily give the funds to the brand that receives their milk to get in the game of head-to-head advertising instead of, in essence, funding a path to their own substitution and demise.

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DMI CEO on fluid milk

‘Let’s have dairy-based protein in 3-D printers and whatever comes next.’

Schools represent more consumer touch-points for milk than all other sectors, combined

By Sherry Bunting, Farmshine, Friday, March 22, 2019

CHICAGO, Ill. — The fluid milk category is receiving much attention after a decade of rapid declines in sales. What does the CEO of the national dairy checkoff organization DMI have to say on the topic?

For starters, he says the dairy industry should stop blaming the alternative beverages and start looking at its own failures.

In his CEO’s Report, delivered at the February DMI board meeting, DMI CEO Tom Gallagher addressed the fluid milk question. While no press release or public statement or copy of the CEO’s Report was provided to Farmshine, a video was posted to the private Dairy Checkoff facebook page and was subsequently provided to Farmshine by a dairy farmer participant.

Since Gallagher states while giving his “CEO’s Report” that this information is ‘public’ and that “we want you to take pictures of it and share it, do what you want with it, it’s yours.” So we are sharing with Farmshine readers what was shared with us by dairy farmers what was shared with dairy farmers via the closed facebook group.

Gallagher began his report talking about farmer engagement. 

“The power of the industry is within the industry, it’s the farmer,” he said. “We can commit to activating the dairy farmer at the local and national levels, then we can have a big voice, especially, on what it is that your checkoff really does.”

He talked about the changing world of consumer influence, saying that, “When you think about the things we need to do, more and more they are moving away from the things we are familiar with.”

From there, he referenced a presenter for the following day who would be talking about the future, about 3-D printing of food.

“Well, it’s not the future because you can go on Amazon today, and for $2000, buy a 3-D printer that will print dessert for you,” said Gallagher. “We think, why would people eat that? They don’t like processed foods. But the people who make those and the food production people — and hopefully dairy protein will be in that, not plant protein — they don’t need the 90% of people consuming your product. They just need 5 or 10 or 4% to have a very successful business. If that’s what people are going to be doing, we need to be there.”

Gallagher announced that DMI will be buying a 3-D printer, a few of them. “We’ll buy one, and we’re going to figure it out and we’ll figure out how to approach these 3-D printing companies with dairy-based proteins in foods to be used in them,” he said. “We can’t afford to be nickeled and dimed with 4% of consumers here and 5% there.”

He went on to observe that just 4% of consumers identify as vegan and that vegetarians are also a small number. “What is really driving plant-based foods and beverages is not predominantly the vegan movement, it’s because these companies are investing  hundreds of millions of dollars and are getting really good at taste, are phenomenal at marketing and great at innovation.”

He referenced diets that promote being vegan or vegetarian before 6:00 and other consumer trends.

“I think our goal is it is not either-or, it can be both… We have to be honest with ourselves, there will be plant-based beverages out there, and people will buy them, and they will gain share, not because people are vegan or concerned about sustainability… it’s because the food and beverage companies are doing a great job at what they do,” Gallagher said.

“If we do the same job in the dairy industry, we will be just fine. But if we sit back like we did with fluid milk, we will be where we are with fluid milk,” he added.

Referencing a report in the 1980s before the checkoff was authorized by Congress, Gallagher said: “That report laid out everything that needed to be done for fluid milk, and that same report would be valid today because none of it was done — not until fairlife and a few other things.”

“It’s not that the bad guy came and took it (fluid milk sales), it’s that us, the dairy industry collectively, did not keep growing and innovating and doing what we should do,” said Gallagher from a marketing, not policy, standpoint. “Instead of getting in a lather about plant-based food companies, let’s do what we are supposed to be doing as an industry.

“Let’s do marketing. Let’s do innovation. Let’s have dairy-based protein in 3-D printers and whatever comes next. That’s were we need to be,” said Gallagher. When it comes to policy, nutritional values and sustainability discussions, that’s another discussion we need to enter into.” 

In the breakdown on sales, he said foodservice milk is up slightly even though retail and other sectors are down. The data was by servings, and he explained how sales figures are pieced together and how program evaluations fit into those.

He also talked about a meeting DMI had with the top persons from the five top coops for packaged fluid milk salesn — DFA, Select, Prairie Farms, Darigold and Maryland-Virginia — along with Jim Mulhern of NMPF, Tom Vilsack of USDEC, Rick Naczi of ADANE, Marilyn Hershey, president of DMI, along with a former CEO of fairlife with some insights. 

“We came out of that meeting as positive about fluid milk as ever on how the industry can work together to change the trajectory,” said Gallagher, explaining that they looked at how much of fluid consumption is really pushed down into Class II, and to see if getting and including that number, what that would do to the per-capita fluid milk consumption numbers. 

“The group focused on kids. Kids is the deal — at 6 billion containers a year, when everything else is 5.3 billion,” said Gallagher. “So while schools only represent 7.7% of consumption, it represents more touch-points with consumers than everything else combined. So, they, on their own, quickly came to the conclusion that we have got to deal with the kids for a variety of reasons — sales and trust. And they asked DMI to put together a portfolio of products for kids inside of schools and outside of schools. What are the niches that need to be filled? What’s the right packaging? What needs to be in the bottle? And we can do that,” he said.

Depending on the results of the next meeting, the circle could be expanded. And regulatory, legislative and standards of identity issues were brought up that DMI can’t be involved in, but NMPF can. 

Author’s note: Meanwhile, all of those kids in school, those 6 billion touch-points for milk every year that surpass all other touch-points for milk, combined, are forced to consume (or discard) fat-free or 1% milk. The simple answer would be to give them whole milk that tastes good so they know what milk is vs. trying to re-invent the wheel. As an industry, we can’t know what the per-capita fluid milk consumption figures would look like today if the 60 billion touch-points over the past 10 years had been permitted by the government to consume whole milk. Before reinventing some pre-competitive proprietary wheel, shouldn’t those touch-points (schoolkids) have an opportunity to try real whole milk?

To be continued

Dairy data show shifting sands

Pa. production, cow numbers plunge into 2019

By Sherry Bunting, Farmshine, Friday, March 15, 2019

WASHINGTON, D.C. — The U.S. produced 1% more milk in 2018 compared with 2017 and did so with roughly the same “average” number of cows for the year. But there were 2,731 fewer U.S. dairy farms (-6.8%) selling milk during 2018 as the average number for the year fell to 37,468 according to USDA.

USDA is still catching up on its delayed milk production reporting after the government shut down earlier this year, the January 2019 figures were released Tuesday (March 12) along with the 2018 annual totals for production, cow numbers and licensed dairies. The data show shifting sands in the dairy industry even as producers, states and regions fight for their place in a consolidating pipeline.

The January portion of the report did show milk production up 1.3% over year ago after being only 0.8% higher in December. January cow numbers were down by 52,000 head, nationally, from a year ago, but up 2000 head from December.

Like a shot between the eyes, Pennsylvania came into 2019 with a whopping 25,000 fewer milk cows (-4.8%) producing 5.5% less milk in January compared with a year ago.

Licensed dairies, other 2018 data

In the 2018 portion of Tuesday’s report, it’s important to note that USDA describes its licensed dairy numbers as the “average number of dairy farms licensed to sell milk during the year, based on counts collected from State and other regulatory agencies.” This means the number of 2018 dairy farms nationally and by state is more along the lines of a rolling average for the year, not a tally of farms in operation at the end of the year for a tracking comparison.

Changes in cow numbers and production for fourth quarter 2018 vs. fourth quarter 2017 is more telling in terms of what it suggests about the rate of exits, consolidation and geographic shifts in the dairy industry. The figures continue to reflect big milk production and cow number gains with a stable number of farms in growing western states, stable production in the face of dairy farm exits and cow losses in some midwestern states, and falling milk production that directly mirrors farm and cow losses in most eastern states.

PA numbers concerning

For Pennsylvania, the figures are quite concerning as the state falls into this last category – right along with the Southeast. In fact, New York was the exception in the East, as the Empire State had stable production in the face of significant farm and cow losses.

Just 11 years ago, Pennsylvania was the fourth largest dairy production state. It then hung on to fifth place until 2016-17 when Michigan — and then Texas — pushed Pennsylvania to seventh.

USDA reports the average number of licensed dairy herds in Pennsylvania fell from 6,570 in 2017 to 6,200 in 2018. Again, this is an average number of dairy farms selling reported milk during the year, not an end-of-year number of remaining operations.

In July (2018), we asked the Center for Dairy Excellence for a handle on the number of licensed herds operating in Pennsylvania at that point in time. What we learned was that the state does not have a good tracking system for licensed herd numbers and that the state is working with the Pennsylvania Milk Marketing Board to get a better handle on these numbers.

The number we were given by the Center in July 2018 was 5,787 licensed dairy farms, but we were told that we “cannot compare this number to the USDA numbers because it is not the same data set.”

Still, the USDA notes in its report that it relies on state agencies for the numbers it uses to find the “average” number of licensed dairy farms state by state, for the year.

The difference between the number of dairy farms that exited the business in 2018 and the net number of dairies selling milk throughout the year is unknown in Pennsylvania.

Did Pennsylvania lose 370 dairy farms as the year over year “average” reported by USDA suggests? Or is that number closer to 700 if the state could provide end-of-year numbers for comparison?

End-of-year comparisons would be more helpful for policymakers to track the health of the dairy industry, whereas the average numbers reflect the type of information the industry wants to use in “sustainability” or “carbon footprint” claims because a certain level of milk production for the year would be produced by an average number of farms and cows during the year — not by just the number remaining at the end of the year.

Even using the USDA average for the year, Pennsylvania dairy farm numbers were down by 370 (-5.6%) and the average number of cows for the year was down by 6,000 head (-1%). Total annual milk production was 10.6 bil lbs (-2.1%) for 2018.

However, fourth quarter production in Pennsylvania was 4.6% lower than Q4 2017. This shows a deeper rate of decline, which was confirmed by the steep loss in cow numbers and production recorded for January 2019 in which USDA reported 25,000 fewer cows were milked in Pennsylvania, making 5.5% less total milk production for the state.

To put this into perspective, Wisconsin state officials estimate that over 700 dairy farms were lost in 2018, but the USDA report pegs the average number of dairy farms in the Dairyland State at 8500, down 590 (-6.5%) from 2017.

Production in Wisconsin, on the other hand, moved higher, reaching 30.5 billion pounds (+0.8%) for the year. The average number of milk cows in Wisconsin fell by 4,000 head (-0.3%).

With Wisconsin and Pennsylvania being the number one and two states for the number of dairy farms, the data differences are illustrative. While communities sustained high dairy farm exits in Wisconsin affecting community-wide dairy infrastructure, the state is still maintaining national average milk production growth and smaller losses in the number of cows relative to the losses in the number of farms.

This suggests that as farms exit the dairy business in Wisconsin, others have growth making up for it. In fact, January’s production in Wisconsin was up 2.9%, according to USDA, despite 5,000 fewer cows reported. That one is a bit of a head-scratcher.

In Pennsylvania, the situation is much different. As the Keystone State loses farms, the cows and production are leaving also. Those losses are not being replaced with in-state growth.

This means Pennsylvania’s entire dairy infrastructure is at risk, and we are seeing more dairy herd liquidations slated for this spring – just like last spring – both nationally and in Pennsylvania. The question is, will Pennsylvania’s ranking in the top 23 milk-producing states continue to decline or can it be stabilized?

Case in point, 2018 annual milk production for Texas was 12.8 bil lbs (+6.1%). That’s 21% more milk than the 10.6 bil lbs produced by Pennsylvania in 2018. Not quite two years ago, Pennsylvania was producing more milk than Texas.

Another comparison to be made here is with Minnesota. Ranked eighth and nipping at the heels of Pennsylvania. Minnesota saw the average number of licensed dairy farms fall by 230 to 2,980 (-7.16%) in 2018, and cow numbers fell by 5,000 (-1.1%). However, Minnesota’s annual milk production in 2018 was unchanged from 2017 at 9.87 bil lbs. Minnesota came into January with 1.6% more production, still down by 5,000 cows.

Northeast milkshed mixed

Back to the Northeast Milkshed, the USDA figures for New York show a similar pattern to Wisconsin and Minnesota as the average number of farms selling milk in 2018 was down by 280 (-6.3%) at 4,190 while cow numbers were down just 2000-head (-0.3%) and production for the year was stable at 14.88 bil lbs (-0.3%). Milk production in New York came into 2019 at levels 3.4% higher in January with 2000 added milk cows compared with a year ago.

Vermont followed a pattern more like Pennsylvania, with the average number of dairy farms selling milk in 2018 down by 90 farms (-10%) while the average number of cows was down by 2000 head (-1.6%), and annual milk production was 2.68 bil lbs (-1.8%). Vermont’s production stabilized a bit into the new year, with January’s production just 0.8% below year ago.

In Virginia, USDA reported 565 dairy farms (-3.1%) sold milk during 2018 with annual milk production down by 5.4% from 4,000 fewer cows (-4.5%). Virginia came into 2019 with a whopping 9,000 fewer cows producing 11.5% less milk in January compared with a year ago.

These data illustrate a couple of things. First, some cooperatives, including national footprint cooperatives like Land O’Lakes and DFA, are enforcing some type of base/excess or seasonal base penalties. In the case of Land O’Lakes, farmers in the East, namely Pennsylvania, have had three to four months out of each of the last three years where milk was penalized for being over base, and the base the company gives the entire eastern region as its individual base trigger has been reduced over those three years. Meanwhile, the members in Minnesota report they have not been penalized to-date.

The data also illustrate that as fluid milk sales decline in the East where Class I sales have been historically more relevant to milk handling, pooling and pricing, the “balancing” costs are reportedly increasing, and those costs are passed back to the farm level through more milk check deductions.

In some ways, the fluid milk market is diminishing to the point where it could be seen as a balancer for manufactured dairy products — even though that’s not the way the USDA Federal Order pricing works.

Coinciding with these market shifts is the rise in documented incidence of supermarkets being randomly short or depleted of available whole milk and cream products throughout the East and Mideast at intervals during all of the past 12 months.

Meanwhile, tolling agreements with cream separation facilities in the East, especially through Land O’Lakes, bring milk from as far away as west Texas to states like Pennsylvania, where the cream can go into butter and the skim is often what pushes the Federal Order One skim dumping requests. There are a number of methane digesters dotting the Northeast and Midatlantic landscape, and this dumped skim milk can put another drag on the Class I sales pool for the region.

Mideast dynamics interesting

Interesting dynamics are also occurring in the Mideast states of Michigan, Ohio and Indiana, where farm losses as a percentage of total farms were also steep in 2018, but milk production was comparatively stable.

Michigan had grown rapidly in 2014 through 2017. For 2018, however, USDA reported 230 fewer farms (-13%) selling milk while annual production was off by just a fraction of one percent (-0.6%) at 11.17 bil lbs. Michigan milked an average number of cows that was down by 3000-head (-0.7%) in 2018. And yet, Michigan came into 2019 with 6,000 fewer cows but 1.1% more milk in January compared with a year ago. Another head-scratcher.

Ohio lost 180 dairy farms on average in 2018, according to USDA, declining to 2200 dairy farms (-7.5%) while average cow numbers for the year fell by 6,000 head (-1.9%) and production fell to 5.5 bil lbs. (-1.5%). When comparing fourth quarter cow numbers in Ohio, 2018’s total was 10,000 head less than Q-4 2017. January 2019 production in Ohio was 3.8% below year ago.

Indiana’s production was 4.16 bil lbs in 2018 (-2.2%) with 95 (-10%) fewer dairy farms selling milk during the year and 3,000 (-1.6%) fewer cows. Indiana came into 2019 with 6,000 fewer cows and 3% less milk production in Jan. 2019 compared with a year ago.

Southeast slide continues

In the Southeast, Florida had 15 fewer dairy farms in 2018 and Georgia was down by 20. Annual production was down 4.6% and 4%, respectively, in 2018 with an average of 4,000 fewer cows milked in Florida and 2,000 fewer cows in Georgia during the year.

Kentucky had 60 fewer dairy farms selling milk (-10%), an average of 1,000 fewer cows being milked (-1.8%), and annual production fell by 3.2% in 2018, according to USDA.

In Tennessee, the picture was especially tough, but consistent across all categories of figures. Annual milk production in the Volunteer State was down by a whopping 8.5% in 2018, while the average number of cows was off by 3,000 head (-7.5%) and 20 fewer farms sold milk (-7.5%) during the year, according to USDA.

Western gainers gain big

On the growth side of the ledger, Colorado stayed unchanged in the number of dairy farms at 100, milked 14,000 more cows and produced 8.8% more milk during 2018. By January 2019, production was up by 6.7% over year ago. Kansas lost 10 farms but produced 6% more milk with 10,000 more cows in 2018. Kansas also came into 2019 with 6.2% more milk in January.

Texas came into 2019 with 18,000 more cows than a year ago in January, producing 7.3% more milk and South Dakota had 4,000 more cows producing 6.3% more milk.

Look for more milkshed milk math analysis when pricing and other data become available in April and May.

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