Covering Ag since 1981. The faces, places, markets and issues of dairy and livestock production. Hard-hitting topics, market updates and inspirational stories from the notebook of a veteran ag journalist. Contributing reporter for Farmshine since 1987; Editor of former Livestock Reporter 1981-1998; Before that I milked cows. @Agmoos on Twitter, @AgmoosInsight on FB #MilkMarketMoos
TOKYO — Commentators have likened Olympic gold medal swimmer Katie Ledecky to a Lamborghini, a powerful machine, gliding through the water in freestyle sprints and distance races. She won four gold medals for Team USA in Rio de Janeiro in 2016 and one in London in 2012.
Then, in Tokyo Tuesday, July 27, in the same 24-hour period — after winning silver in the 400-meter and missing medals altogether in the 200-meter — Ledecky came back with determination and poise to win Olympic gold by a healthy margin in the 1500-meter freestyle. Teammate Erica Sullivan secured the silver.
Ledecky was a machine Tuesday night in Tokyo. Her methodical straight line stretch of 30 laps in the 50-meter pool ended when she touched the wall at 15 minutes 37 seconds. That’s freestyle swimming of roughly one mile in just over 15 minutes – ranging 1.5 to 1.7 meters per second! She makes history as this is the first women’s 1500-meter freestyle Olympic event.
As she headed into the final four laps, NBC Sports commentators broadcast to a worldwide audience her training and nutrition regimen, how she fuels her body in the morning with oatmeal – made with milk, peanut butter and fruit — and always downs a 12-ounce bottle of chocolate milk after every race or workout.
Described as inspirational in her work ethic and a beast in her daily workout, Ledecky is one of Team USA’s Olympians who is proud to be powered by milk. Dairy farmers will be happy to know Ledecky teamed up a few years ago in the Built with Chocolate milk campaign, sponsored by the Milk Processors Education Program (MilkPEP). The campaign features athletes and the science behind low-fat chocolate milk as a recovery and refuel beverage. Low-fat chocolate milk is Ledecky’s choice, and milk and dairy are part of her dietary regimen in other ways too.
The swimmer told Fitness in 2018 that the bottle of chocolate milk 30 minutes after a workout or race has been part of her routine for more than a decade.
“This is my go-to post-workout recovery beverage since I was 13 years old,” said Ledecky in the Fitness interview. “I remember being a young swimmer when someone explained that drinking chocolate milk for recovery gives my body the nutrients it needs to refuel. Since then, I make sure to keep one in my lunchbox daily and drink it after a tough workout. Of course, it tastes great too.”
When the 2020 Olympics were postponed, Ledecky did the fun video of herself swimming 50 meters with a glass of chocolate milk on her head — without spilling a drop. That’s how steady, balanced and methodical her stroke is. Of course, at the end, she drank the milk — all smiles. The video went viral and inspired other swimmers to film themselves attempting the feat, and drinking the milk. Just a fun, feel-good moment for an accomplished Olympian who relies on and loves her chocolate milk.
As for Ledecky’s Tokyo Olympics this week, she has a few more events to go and we are rooting for her. Of her 1500-meter gold, Ledecky said in an NBC Sports interview just after the race that it “means a lot.”
With a nod to falling short of her goals in the 200- and 400-meter races just before the 1500, she said: “People may be feeling bad that I’m not winning everything, but I want people to be more concerned about other things in the world. People are truly suffering. I’m just proud to bring home a gold medal to Team USA.”
We are also rooting for the first-ever farm girl fueled to compete in the Olympics. Runner Elle Purrier St. Pierre arrived in Tokyo this week and will compete in the Olympic track events next week.
According to NBC Sports, Elle took first in the final 1500-meter race during Olympic trials, breaking a previous record and setting other track records as well, including breaking a 37-year-old record for the U.S. women’s indoor mile last year and breaking the two-mile record earlier this year.
Elle is a dairy farmer! She grew up on a 40-cow dairy farm near Montgomery, Vermont. Today she lives with her husband Jamie on his family’s Berkshire, Vermont dairy farm.
During the Covid-19 pandemic, Elle trained from the farm with her own equipment and has reported in various mainstream media interviews how working on the dairy farm has helped her own fitness.
She also explains every chance she gets how crucial dairy is to her diet. Elle’s husband studied dairy management at Cornell, and Elle studied nutrition at the University of New Hampshire. She says she could not have reached the heights of her running career without milk.
“The first thing I do when I get done running is, I chug a glass of milk, and I just know everything in there is going to help me do better,” says Elle in an interview with USA Today. “It’s got the perfect ratio of carbs and protein, when you add the chocolate, and just so many vitamins and minerals. It’s crazy what a great resource it is.”
There are also other Olympians proud to make milk and dairy part of their regimens, and to talk about it. We are rooting for Team USA and especially for Team Milk!
HARRISBURG, Pa. — In addition to the ‘DMI-led’ launch of DFA’s new ‘teen milk’ called siips, DMI is also working with processors, retailers, foodservice and technology companies to develop other ‘milk innovations’ for schools, foodservice and retail.
On a recent Center for Dairy Excellence industry call, Paul Ziemnisky, executive vice president of global innovation partnerships described DMI’s five-year-old fluid milk revitalization committee as a collaboration between the Innovation Center for U.S. Dairy, MilkPEP, NMPF and IDFA, using DMI’s insights to “make milk relevant.”
In the retail sector, Ziemniskhy talked about how plant-based beverage sales grew by a large percentage since the Coronavirus pandemic, but ‘value-added’ milk sales (such as fairlife, dairy-plus-plant-blends and other milk-based beverage innovations) grew by an even larger percentage than plant-based alternatives alone.
When asked whether dairy farmers’ are paying to fund checkoff research on non-dairy alternative products, DMI president Barb O’Brien said: “We are not doing any ‘dedicated’ research on alternatives. What we are doing has been done from a new product development standpoint,” she said.
“There has been exploration of blended products as consumers look at new flavors and options,” O’Brien defended. “Instead of letting that market walk away from dairy, we have looked at blended or ‘milk-based’ opportunities. We have looked at alternative milk-and-oats, milk-and-nuts to bring flavor and excitement to those new products.”
O’Brien stressed that all of this work has had “farmer oversight.”
“I want to assure you that 85 dairy farmers from across the country sit on the DMI board for approval of our plans,” said O’Brien.
On fluid milk, for example, she said the “dedicated fluid milk committee includes 10 farmers. They were asked to go deep and monitor the specifics of the work and the investments. They see the confidential, proprietary information from investors and make recommendations to the board.”
Ziemnisky did admit that whole milk sales — on a volume basis – topped the growth volume of other beverages in the dairy case, but he and O’Brien both focused on the value-added side of the equation. They revealed how DMI’s focus is to prove to retailers that they will reap sales growth by devoting more space to dairy innovations.
“Our partners have made capital investments of over $1 billion to help us win in retail, foodservice and school channels,” said Ziemnisky, explaining that the large and expanding dairy cases at retail are now confined to a 4 x 6 phone screen because more consumers today are choosing to shop for groceries online. “We are making sure milk is front and center in their media programs. As a result, online sales of fluid milk products are up $500 million year-to-date.”
O’Brien said DMI works “to ensure we keep dairy products moving into markets.”
“Our work covers the spectrum from consumer research to retail marketing and education of dairy case managers,” she said. “When the fluid milk revitalization alliance was formed, we learned brands do a better job of advertising. We built up the category with facts that prove to retailers how the value-added section in milk is growing more than the plant-based alternatives.
“We help them see that we’re the future, that they are getting more growth from us, and we show them: here’s how to grow the category,” O’Brien explained. “Retailers are now activating and using this knowledge to build-out additional space for new milk-based product launches.”
Case in point — the Dairy Plus/Milk Blends made by DFA’s Live Real Farms — is touted as ‘a new taste experience’ (in which the first listed ingredient is lowfat milk, second ingredient is water…)
The line of 50% lowfat, lactose-free milk and 50% almond or oat drink was launched over a year ago in Minnesota and is expected to hit the Northeast in January. Ziemnisky said the milk plus oat and milk plus almond beverages are examples of ‘relevant’ innovation, based on DMI insights.
“The urban and suburban consumer today is trying to get into shape. They are making smoothies. They are flavor explorers. They are putting habanero on cheese. They don’t want basics. We have to bring on the flavor and the innovation,” he said.
“Millennial moms are leaking out of dairy in the low-fat and nutrition space,” Ziemnisky explained. “We did a test of ‘real dairy’ with new flavor blends like oat. We thought, let’s add (oat beverage) to dairy and test it. This added to the retail basket, creating new usage occasions for dairy and grew the overall dairy sales compared to the stores that did not have the new (DFA Dairy Plus/Milk Blends) product.”
Retail sales growth on a dollar basis is very much the focus as Ziemnisky and O’Brien said they are showing retailers that adding these innovations to their offerings will drive category growth and sales revenue.
“We want consumers to experiment with new flavors that are occurring,” Ziemnisky said, using cheese as an example that applies to the fluid milk sector. “Think about cheese, of adding wine and nuts to cheese. You see that massive flavor blending. On a global landscape, we see this flavor thing as an international trend.”
Ziemnisky mentioned Kroger’s new cherry milk and the new ‘cereal milk’ launched recently by Nestle. He said there are “some other things that will launch that we can’t talk about, but think of what ice cream does (with flavor). That’s a hint.”
“To keep consumers from running to plants, we have to add some plants to dairy,” said Ziemnisky, citing this as an example of innovation he said is needed to compete.
“Our piece of that investment is very small,” he added. “Our partners are drawing on our expertise and investing ten times our investment, ultimately, in packaging and marketing at the end day.”
A dairy farmer submitted a question wondering, ‘What percentage of the total DMI budget comes from farmer funds and what portion comes from corporate partners?’
O’Brien replied that, “100% of DMI’s budget comes from America’s dairy farmers.”
(Technically, that’s not entirely accurate because importers pay a 7.5-cent checkoff per hundredweight equivalent. Importers are not dairy farmers, except when the importers are farmer-owned cooperatives.)
As regards DMI’s corporate partnerships, their funds are not mixed into one budget.
“What this plan has been designed to do is to bring partners of all types — foodservice, manufacturing, foundations, government grants — to align other people’s money with and execute against the shared values and shared priorities,” said O’Brien.
She noted earlier that the shift to a partnership planning model occurred in 2008-09, at the same time that the Innovation Center for U.S. Dairy was formed (and a year or so after the importers were required to start paying a 7.5 cent checkoff).
“We have calculated the value of corporate dollars — what I like to call ‘other people’s money’ — to combine with our dollars to become $3 billion for the execution of ‘in market’ plans,” said O’Brien. “This takes into account partners like Taco Bell, McDonald’s, and others. In marketing, they spend 10 to 20 times what we spend in the years we do that.”
O’Brien stated that this partnership plan is a “critical multiplier of farmers’ investments to make a greater impact on farmers’ behalf.”
When asked if DMI considers itself a top-down or bottom-up organization, O’Brien said the fundamental philosophy is “the most powerful partnership I have ever seen. It starts at the farmer level with national and local boards aligning behind shared values and priorities and a plan. That translates to staff sitting nationally and planning and driving strategies, building relationships and implementing the science.”
According to O’Brien, the annual planning process of DMI involves staff leadership and farmer leadership from national and local levels. It is a 9-month process that starts with the consumer insights DMI provides on how the marketplace is changing. Out of those insights, the strategies are brought forward. Then there is agreement on the strategies and tactics. Then the plans are ultimately implemented together.
“The marriage makes it a system that works for farmers,” O’Brien opined.
AUTHOR’S NOTE: Without checkoff-funded promotion, regular whole milk sales grew by 14% on a volume basis year-to-date, according to USDA. Paul Ziemnisky confirmed that whole milk sales are 41% of total dairy case sales on a volume basis, so the gains continue to make whole milk the volume growth leader in the dairy case. Meanwhile DMI fluid milk revitalization is aimed at ‘relevance’ and showing retailers and other partners the sales growth (in dollars) that dairy innovation can deliver.
In that same June 2019 hearing, animal scientist and greenhouse gas emissions expert Dr. Frank Mitloehner of University of California-Davis explained the methane / CO2 ‘biogenic’ cycle of cows.
He said that no new methane is produced when cow numbers are “constant” in an area because methane is short-lived and converts to CO2 in 10 years time, which is then used by plants, cows eat the plants, and the cycle repeats.
Dr. Mitloehner also said that this cycle changes when cattle concentrations move from one area to another.
The milk produced and bottled in the Northeast and Southeast milksheds is not just carbon neutral, it’s already carbon negative, producing not just no new methane, but less than prior-decades’ methane.
Bear in mind, these new dairy-‘based’ — blended — beverages are NOT Class I products. I have been informed that the 50/50 blends, for example, do not meet the standard of identity for milk, nor do they meet the milk solids profile that requires Class I pricing. This means that even though milk is part of a fluid dairy-‘based’ beverage, it is not priced as Class I.
The milk used in these emerging products that combine ultrafiltered solids with water, additives and maybe an almond or two, fall into Class IV, some are Class III if whey protein is used. Examples include products like DFA’s Live Real Farms ‘Purely Perfect Blend‘ that arrived recently in Pennsylvania and the greater Northeast after its first test-market in Minnesota.
Think about it. Unity is great on many levels, and is to be encouraged in an industry such as dairy, but when it comes to marketing, who is calling the shots for future viability within the DMI integration strategy, otherwise known as unity?
Pre-competitive alliances and ‘proprietary partnerships’ working on food safety are wonderful because all companies should work together on food safety. But animal care? Environment? Climate? Why not just offer quality assurance resources and pay farmers certain premiums for investing as companies would like to see and pay them for providing the consumer trust commodity — instead of implementing one-size-fits-all branches in programs like F.A.R.M.?
These so-called voluntary programs have the power to negate contracts between milk producers and their milk buyers even though consumer trust is a marketable commodity that producers already own and are in fact giving to milk buyers, and their brands, without being compensated.
Instead, producers are controlled by arbitrary definitions of the consumer trust commodity that the producers themselves originate. This goes for Animal Care, Worker Care, Environment, and Climate.
The pre-competitive model used in food safety is applied to all four of the above areas today. This is exactly the supply-chain model World Wildlife Fund (WWF) — DMI’s ‘sustainability partner’ — set in 2010 to “move the choices of consumers and producers” where they want them to go.
In the 2019 Senate hearing referenced at the beginning of the above op-ed, Dr. Mitloehner stated that the mere fact there are 9 million dairy cattle today compared with 24 million in 1960 and producing three times more milk shows that dairy producers are collectively not only emitting zero new methane, they are reducing total methane as old methane and carbon are eradicated by the carbon cycle and less new replacement methane is emitted.
The problem may be this: Year-over-year cow numbers for the U.S. are creeping higher. While still much lower than four to five decades ago, the issue emerging for DMI’s Innovation Center for U.S. Dairy is how to accommodate growth of the new and consolidating dairy structures to attain the checkoff’s expanded global export goal and to accommodate massive new dual-purpose plants if dairy farms in other areas remain virtually constant in size, grow modestly, or decline at a rate slower than the ‘designated’ growth areas are growing.
DMI is at the core of this, you see, to reach it’s new collective net-zero goal, cow numbers would have to decline in one area in order to be added in another area, or they will all have to have their methane buttons turned off or the methane captured because now the emissions are being tracked in order to meet one collective “U.S. Dairy” unit goal under the DMI Innovation Center and F.A.R.M.
At that 2019 Senate hearing,Dr. Frank Mitloehner testified that dairies already create zero new methane but this can be tricky when cattle move from one area to another (as we see in the industry’s consolidation).Then we have DMI’s Dairy Scale 4 Good claiming the dairies over 3000 cows can be net-zero in 5 years and ‘spread their achievement’ over the entire milk footprint. Do we see where this is going?
Will all dairy farms have to meet criteria — set by organizations under the very umbrella of the checkoff program they must fund — to get to a ‘collective’ net-zero using the GHG calculator developed by the checkoff-funded Innovation Center in conjunction with its partner WWF (12 year MOU)? This GHG calculator has been added to the FARM program. These are the big questions.
By Sherry Bunting, both parts of a two-part series in Farmshine, July 2021
The dairy industry continues to wait for USDA to provide details on three areas of dairy assistance already approved by Congress or mentioned as “on the way” by Ag Secretary Tom Vilsack.
The fly in the ointment, however, is the record-high 2021 milk production (Table 1) and accelerated growth in cow numbers (Table 2) at a pace the recent USDA World Agriculture Supply and Demand Estimates (WASDE) expect to continue into 2022.
USDA is reportedly looking at production reports — up vs. year ago by 1.9% in March, 3.5% in April, 4.6% in May — to determine how to assist without adding fuel to expansion that could threaten late 2021 milk prices in the face of rising feed costs and a worsening western drought. (The latter two challenges could temper those forecasts in future WASDEs.)
May milk production a stunner
U.S. milk production totaled 19.9 billion pounds in May. This is a whopping 4.6% increase above 2020 and 2018 and a 4.1% increase over May 2019.
Let’s look at year-to-date. For the first five months of 2021, milk totaled 96 billion pounds, up 2.3% vs. the 93.8 billion pounds for Jan-May of 2020, and it is 4.4% greater than the 91.9 billion pounds of Jan-May milk produced in pre-pandemic 2018 and 2019. Of the four years, only 2020 had the extra production day as a Leap Year.
Milk per cow was up 3% over year ago in May. Compared with 2019, output per cow is up 2.2%, according to USDA.
Cow numbers vs. 2018 tell the story
Milk cows on U.S. dairies in May 2021 totaled 9.5 million head, up 145,000 from May 2020’s 9.36 million, up 172,000 from 2019’s 9.33 million, and up 83,000 head from 2018’s 9.42 million.
Counter to the national trend, Pennsylvania had 48,000 fewer milk cows than May 2018 — dropping 30,000 into 2019; 10,000 into 2020, and 8,000 into 2021.
Elsewhere in the Northeast and Southeast milksheds, among the 24 major monthly-reported states, New York had 4000 more milk cows in May 2021 than 2018, Vermont 8000 fewer. Georgia dropped 1000, Florida 12,000, and Virginia 11,000. In the Central states, Illinois was down 10,000 head.
The total decline in cow numbers for the 24 lesser quarterly-reported states, the collective loss in cow numbers is 59,000 head from May 2018 to May 2021
Accelerated growth is coming from three key areas where major new processing assets have been built or expanded.
In the Mideast, where the new Glanbia-DFA-Select plant became fully operational in Michigan this spring, there is a net gain of 32,000 cows for 2021 vs. 2018, Ohio’s cow numbers that had been declining 2018-19, began recovering in 2020-21. Indiana had 18 months of substantial growth, and Michigan returned to its growth pattern in 2020. Taken together, the Indiana-Ohio-Michigan region had a loss of 8,000 cows heading into 2020, but gained a whopping 40,000 cows over the past year.
In the Central Plains, where new plant capacity is starting up this spring and summer — Minnesota, South Dakota and Iowa, combined, added 40,000 cows May 2018 to May 2021.
In the Southern Plains, where joint-venture processing capacity continues to grow, Texas has continued full-steam-ahead, gaining 87,000 cows from 2018 to 2021, along with 29,000 added in Colorado and 17,000 in Kansas. New Mexico regained earlier losses to be 2000-head shy of 2018.
The growth patterns in these regions somewhat mirrored dairy exits from other areas — until Jan. 2020 (Table 2). The past 17 consecutive months of year-over-year increases in cow numbers leave the U.S. herd at its largest number in 26 years (1995).
However, the assumption that ‘dairy producers are okay because the industry is expanding’ ignores several essential factors. The playing field has become more complicated and inequitable. There are four main factors at play. We’ll look at them one at a time.
Factor #1 — Milk dumping and base programs
A year ago in April and May 2020 — at the height of the Coronavirus pandemic disruptions — the dairy industry saw dumping of milk, stricter base programs and bigger milk check deductions. Producers culled cows, dried cows off early, changed their feeding programs, even fed milk in dairy rations.
But milk production still grew, according to the USDA data.
Some cooperatives and milk buyers, like Land O’Lakes, had base programs already in place and triggered them. Others made changes to prior programs or implemented new ones.
Dairy Farmers of America — the nation’s largest milk cooperative, largest North American dairy processor and third-ranked globally by Rabobank — quickly implemented a new base program in May 2020, seeking 10 to 15% in production cuts from members, varying by region, with overage priced on ‘market conditions.’
It is difficult to assess the ‘equity’ in these base programs and the cross-layers among producers between and within regions, or to know how these ‘bases’ are being handled presently. When questioned, spokespersons say base decisions are set by regional boards.
Meanwhile, product inventory and pricing schemes affect all regions, and milk rides between FMMOs in tankers and packages — with ease.
According to USDA, the 11 FMMOs dumped and diverted 541 million pounds of milk pooled as ‘other use’, priced at Class IV, during the first five months of 2020, of which 350 million pounds were in April alone. This is more than three times the ‘other use’ milk reported by FMMOs during the first five months of pre-pandemic 2019 (171.4 million pounds). By June, the amounts were double previous years.
Of this, the largest amount, by far, was the 181 million pounds of ‘other use’ milk in the Northeast FMMO 1 during Jan-May 2020, comprising one-third of all the dumped and diverted milk pooled across all 11 FMMOs in that 5-month period.
In the Southeast milkshed, the Appalachian, Florida and Southeast FMMOs 5, 6 and 7, together pooled 88 million pounds of ‘other use’ milk in the first five months of 2020. The Southwest FMMO 126 had 106.2 million pounds of ‘other use’ milk; Upper Midwest FMMO 30 had 46.1 million pounds; Central FMMO 32 had 36.7 million pounds; Mideast FMMO 33 had 30.7 million pounds; California FMMO 51 had 28.9 million pounds; Arizona FMMO 131 had 21.7 million pounds; and Pacific Northwest FMMO 124 had 1.3 million pounds.
The dumping had begun the last week of March 2020 and was heaviest in the month of April. Producers also saw deductions as high as $2/cwt. for balancing costs, lost quality premiums, and increased milk hauling costs. Unaccounted for, were the pounds of milk that had reportedly been dumped on farms without being pooled on FMMOs.
All of this against a backdrop of pandemic bottlenecks and record-high March-through-August imports of butter, butteroil, milkfat powder, and blends — adding to record-high U.S. butter inventories and contributing to the plunging Class IV, II and I prices vs. Class III (PPD).
Meanwhile, not only did production growth in key areas move ahead, so did strategic global partnerships. Just one puzzling example in October 2020, after eight months of deflated producer milk checks, depressed butterfat value, burdensome butter inventory, record butterfat imports, and a plunging Class IV milk price that contributed to negative producer price differential (PPD) losses, Land O’Lakes inked a deal to market and distribute cooking creams and cream cheeses — Class II and IV products that use butterfat — from New Zealand’s Fonterra into United States foodservice accounts.
The New Zealand press reports were gleeful, citing this as a big breakthrough that could be followed by other of their cheeses entering the “huge” U.S. foodservice market through the Land O’Lakes distribution.
Factor #2 — Class price wars and de-pooling
As reported in Farmshine last summer, dairy farmers found themselves in uncharted waters. As Class IV prices tumbled from the get-go with all of the ‘other use’ dumping and diverting, butter inventory building as butter/powder plants tried to keep up with diverted loads at a disruptive time, the USDA Food Box program started drawing products in the second half of May, and really got going by July 2020.
Cheese, a Class III product, was a big Food Box winner. The cheese-driven Class III milk price rallied $7 to $10 above Class IV, and massive volumes of milk were de-pooled by Class III handlers, which has continued through May 2021.
Reviewing the class utilization reports, an estimated 80 billion pounds of Class III milk normally associated with FMMOs has been de-pooled over the past 26 months.
At the start of this ‘inequitable’ situation, academic webinars sought to explain it.
“We’re seeing milk class wars,” said economist Dan Basse of AgResource Company, a domestic and international ag research firm in Chicago, during a PDPW Dairy Signal webinar a year ago.
He noted that under the current four-class pricing system, and the new way of calculating the Class I Mover, dairy farmers found themselves “living on the edge, not knowing what the PPD (Producer Price Differential) will be” (and wondering where that market revenue goes).
“A $7.00 per hundredweight discount is a lot of capital, a lot of income and a lot of margin to lose with no way to hedge for it, no way to protect it, when the losses are not being made up at home as reflected in the PPD,” Basse said in that summer 2020 webinar.
What does this have to do with year-over-year milk production comparisons?
Two words: Winners. Losers.
Some handlers, and producers won, others lost — between and within regions.
Here’s why all of this matters from a production comparison standpoint: Dairy economists — Dr. Mark Stephenson, University of Wisconsin, and Dr. Marin Bozic, University of Minnesota — are both on record acknowledging that USDA NASS uses FMMO settlement data, along with producer surveys, to benchmark monthly milk production.
So, on the one hand: How accurate are these data for comparison over the past 26 months, given the inconsistent FMMO data from dumping, diverting and de-pooling?
On the other hand: Did the negative PPDs and de-pooling, resulting in part from the 2018 Farm Bill change in the Class I Mover, allow Class III handlers to capture all of that additional market value and use it to fuel the 2020-21 accelerated milk growth for regions and entities connected to the new Class III processing assets?
Factor #3 — New dual-processing concentrates growth
Accelerated growth in cow numbers is fueling record production in 2021. It is patterned around ‘waves’ of major new processing investments in some areas, while other areas — largely fluid milk regions — are withering on the vine or growing by smaller margins with fewer cows.
In the 24 major milk states, production growth was even greater than the All-U.S. total — up 4.9% vs. year ago. In part one, the breakdown was shown vs. 2018.
Here’s the breakdown for just the 12 months from May 2020 to May 2021 — a time in which the industry dealt divergences that created steep losses for some and big gains for others, while FMMOs became dysfunctional.
In just one year, over 40,000 cows were added in Indiana, Ohio, and Michigan, combined, and milk production was up in May 2021 by 12.6, 3.2 and 5.1%, respectively. The draw is the massive new Glanbia-DFA-Select joint-venture cheese and ingredient plant that began operations late last year in St. Johns, Michigan. Sources indicate it reached full capacity this spring. Add to this the 2018 Walmart fluid milk plant in Fort Wayne, Indiana and other expansions in Ohio and Michigan.
Ditto for the Central Plains, where new cheese and ingredient line capacity became operational this spring and summer. Supplying these investments, Minnesota grew production 6%, South Dakota 14.6%, and Iowa 6.2% over year ago.
Number two Wisconsin grew by 5.6% in May 2021 vs. year ago.
Milk production was up 5% in number one California, even though cow numbers were down by 1000 head, and dairy farmers in a referendum voted recently by a slim margin to keep their quota system. They are also dealing with a devastating drought that news reports indicate is now impacting both the dairies and the almond growers.
Then there’s Texas, where growth continues to be a double-digit steamroller, up 10.8% in May 2021 vs. 2020 — pushing New York (up 4.2%) to fifth rank.
The Southern Plains has had several strategic investments, starting in Texas and New Mexico (up 6% vs. year ago).
In Colorado, where production was up 5.3% in May, DFA’s joint ventures and strategic partnerships with Leprino, Kroger and others have fueled growth.
Kansas grew milk production 7.3% vs. year ago. In 2018, a state-of-the-art whole milk powder and ingredient plant became fully operational in Garden City, Kansas. The plant was to be a joint-venture between DFA and the Chinese company Yili but ended up as a joint-venture between DFA and 12 of its member farms that are among the 21 Kansas dairies shipping milk to it.
DFA’s Ed Gallagher gave some insights on this during a May 2021 Hoards webinar. He said, “We went through a period of investing in powder plants in the U.S. It seems like there is a follow-the-leader approach when deciding on investments, and it goes in waves. The industry just completed a wave of a lot of investment in Class IV manufacturing plants, and now… it’s flipping to Class III.”
Looking back on the Class IV ‘wave’ 2013 through 2018, there were several times in those years that Class IV beat Class III, leading to FMMO de-pooling, but not to the extreme extent seen in the past 12 months as Class III now beats all other classes, including Class I, leading to negative producer price differentials (PPDs).
Gallagher sees Class III and IV prices “coming together” in the “next period of years” because the ‘wave’ of capacity investment has flipped from Class IV to III. He predicted more Class III capacity will be added.
Are these past 26 months of PPD net losses for producers the industry’s answer to, in effect, increasing processor ‘make allowances’ without a hearing?
The average PPD value loss (see chart) across the seven multiple component pricing FMMOs was $2.57 per hundredweight for 26 months, which began with implementation of the new Class I pricing method May 2019 through the most recent uniform price announcements for June 2021 milk.
Applying a conservative 5-year average PPD (prior to Class I change) for each FMMO, only the few gray blocks on the chart represent ‘normal.’
This means even positive-PPDs show margin loss for farm milk pooled on FMMOs. In fact, the CME futures markets as of July 14 show August through December divergence between Class III and IV above the $1.48 mark, indicating Class I value loss and negative PPDs or smaller positive PPDs could return after barely a two-month reprieve.
Many handlers that don’t pool on FMMOs also use the uniform prices as a benchmark.
This $2.57 net loss for seven MCP FMMOs across 26 months represents almost a doubling of the current make allowance levels.
Current USDA make allowances and yield factors add up to a processor credit of $3.17 per hundredweight on Class III and $2.17 on Class IV. This already represents 11 to 25% of farm milk value, according to 2018 analysis by John Newton, when he was Farm Bureau’s chief economist.
Why is this important? Because we are already seeing additional margin transfer from Class I to Class IV as the industry moves to blended beverages that mostly use ultrafiltered (UF) milk solids. Blends using whey would fall under Class III.
Looking ahead, DFA now owns most of the former Dean Foods’ Class I fluid milk plants since May 2020. New manufacturing synergies are undeniable, considering the direction of dairy checkoff’s fluid milk revitalization plan emphasizing these dairy-based-and-blended beverages and ‘dual-purpose’ processing facilities.
As low-fat UF milk solids are blended with other ingredients in a manufacturing process to make new combined beverages, the result is a competing beverage, and the milk in the beverage drops from Class I to Class IV.
Meanwhile, these beverages cost more at the grocery store, and the ingredients are not part of the USDA end-product pricing ‘circle’. Therefore, no new make allowances should be requested because processors are already getting a reduced class value, and a higher margin.
DMI’ vice president of global innovation partnerships, Paul Ziemnisky, gave some insights into this “future of dairy beverages” — and how it ties into new processing plants investments during the virtual Pennsylvania Dairy Summit in February.
Ziemnisky went so far as to say new processing facilities will “need to be built as beverage plants able to handle all kinds of ingredients” for the blended products of the future. In essence, he said, the future of fluid milk is “dual purpose” processing plants.
While 11 of the top 24 states had milk production increases of 5% or more in May, the 13 states with increases below 5%, or negative, are mainly located within traditional Class I fluid milk marketing areas: Florida, up 0.5%, Georgia up 2%, Virginia down 2.3%, Illinois up 1.9%, Arizona, down 0.5%, Washington, down 0.9%, Pennsylvania and Vermont both up 1.8%, and New York up 4.2%.
Idaho and Utah, up 2% and unchanged, are outliers and largely unregulated by FMMOs. Some beverage assets are coming to that region in the form of ultra-filtration and aseptic packaging, including a plant renovation to make Darigold’s FIT beverage. Additionally, a new Fairlife filtration membrane plant was opened near Phoenix, Arizona in March, and Kroger is doing filtration and aseptic packaging in Colorado.
Meanwhile, Pennsylvania is often described as a ‘fluid milk state’ with a Milk Marketing Board setting minimum prices for fluid milk, and a string of independent milk bottlers that figure prominently in their communities.
Ranked fourth in milk production in 2006, Pennsylvania was passed by Idaho in 2007. By 2016, Michigan had pushed Pennsylvania to sixth. The very next year, in 2017, Texas leapfrogged both Pennsylvania and Michigan. Now, Minnesota has pushed the Keystone State to eighth.
How does the future of dairy affect traditionally ‘fluid milk’ states like Pennsylvania, or the Southeast for that matter?
New dairy-‘based’ beverage innovations can be made anywhere and delivered anywhere, often as shelf-stable products. Most are not Class I products unless they meet the strict FMMO definition which was last spelled out in the USDA AMS 2010 final rule.
For now, this also includes the Pa. Milk Marketing Board. Executive secretary Carol Hardbarger confirms that the 50/50 drinks are not regulated under PMMB, which generally uses federal classification, but that a legal interpretation of the Milk Marketing Law with regard to blends may be in order.
The 50/50 blends are already in some Pennsylvania stores and elsewhere in the Northeast, which is the second phase of the ‘undeniably, purely perfect’ marketing plan for fluid milk revitalization.
Factor #4 — USDA, industry coalesce around climate
Ag Secretary Tom Vilsack has been outspoken from the outset about using and aiming every available USDA program dollar in a way that also addresses the Biden administration’s strategies for equity, supply chain resiliency, and climate action.
Speculating a bit as to why USDA is taking so long to announce details about already funded dairy assistance, it could be that Sec. Vilsack is looking at the fit for ‘climate impact.’
Paid around a million a year in dairy checkoff funds to serve 4 four years as CEO of the U.S. Dairy Export Council — between prior and current Ag Secretary posts — Vilsack understands the future plans of the dairy industry’s checkoff-funded proprietary precompetitive alliances on a global scale.
Vilsack has been privy to the DMI Innovation Center’s discussions of fluid milk revitalization through ‘dual purpose’ plants and blended beverages. He is no doubt looking at the accelerating growth in milk production that is occurring right now for ways to tie dairy assistance to measured climate impacts in the net-zero file.
Producers on the coasts and fringes of identified growth areas have a target — fresh fluid milk and other dairy products produced in regional food systems for consumers who have a renewed zeal for ‘local.’ Fresh fluid milk will have to find a path outside of the consolidating system and cut through the global climate-marketing to directly communicate fresh, local, sustainable messages about a region’s farms, animals, environments, businesses, economies, jobs and community fabric.
It was a deep dive into the impacts of the federal prohibition of whole milk in schools, and positive momentum chipped away at the federal log-jam. The June 16th hearing by the Pennsylvania Senate Majority Policy Committee was livestreamed. A recording as well as written testimony can be viewed at https://policy.pasenategop.com/mp-061621/
Even though senators came and went in person and by zoom — due to a busy morning of meetings and votes — they were engaged with good questions and insights.
By the end of the rapid-fire 90-minutes featuring 11 testifiers in three panels, Chairman Mario Scavello (R-40th) had several actionable pathways.
It was a big day for the 97 Milk effort as several volunteers were invited to testify, and Chairman Scavello (above) read — not once but twice — from a 97 Milk handout, saying he wanted to make sure it gets into the hearing record.
“All of this in an 8-ounce cup of milk is what we are taking away from kids (when they discard or don’t take the fat-free or low-fat milk served). What are they thinking out there?” Scavello declared after reading the 6×6 card Nelson Troutman (below), had given him prior to the start of the hearing.
All 11 testifiers that morning supported whole milk as a choice in schools, bringing various farm, school, organization and consumer perspectives to help state senators understand the federal stumbling blocks. Chairman Scavello complimented “the breadth and depth” of what was learned.
These actions were identified by the Chairman:
— Develop and send a Resolution from Pennsylvania to the Federal Government, and if no results, begin to look at the cost and what would be involved to do something at the state level “on our own” to position Pennsylvania schools to be able to offer fuller fat milk.
— Conduct statewide pilot trials — a school district in every county — like the 2019-20 trial at Union City Area School District, to obtain widespread data and create more awareness. Foodservice director Krista Byler had shared her milk choice trial results, and Sen. Cris Dush (R-25th) noted a similar trial was done at a school in his district.
— Make other states aware of this federal issue and work on getting something done through National Conference of State Legislatures.
— Reach out to federal lawmakers to gain additional support and co-sponsors for H.R. 1861 Whole Milk for Healthy Kids Act, introduced by Representatives Glenn “G.T.” Thompson (R-PA) and Antonio Delgado (D-NY) in the House and to surface a companion bill in the U.S. Senate.
Layers of the onion were peeled.
The issues for students boil down to nutrition and taste.
The issues for dairy farmers are losing a generation of milk drinkers, giving up market share to global beverage brands, and the resulting economics that are driving farms out of business at a rapid rate.
The issues for schools are lack of awareness, a decade of outright federal restrictions, years of fat-free/low-fat indoctrination among school foodservice personnel — some of this “conditioning” performed by the national dairy checkoff’s school wellness program via the MOU with USDA — and the 2 to 5 cent extra cost of whole milk in tight school budgets.
(Author’s note: currently, students aren’t even permitted to purchase whole milk on school grounds as an a la carte or vending machine or fundraiser option. It seems we could start by legalizing it there.)
Lost generation of milk drinkers cited.
“We lost a generation of milk drinkers since whole milk was taken out of the schools,” said Nelson Troutman. The Berks County dairy farmer painted the first round bale Drink Whole Milk 97% Fat Free. He testified that people don’t know much about milk.
“They also don’t know schools are only allowed to offer fat-free and 1% low-fat milk, that the kids don’t like it and throw it away,” he said. “We had to do something to let consumers know whole milk is not 50% fat or 10% fat or 100% fat, it’s 3.25% fat.”
Jayne Sebright, an Adams county dairy producer, mother, and executive director of the Center for Dairy Excellence said the situation is “not only scary for dairy farmers, but also for our children and our future society.
“The truth is that fuller fat milk in schools could mean the difference between a child developing a life-long milk drinking habit, or not. It’s that simple,” said Sebright. “If they don’t like milk in school, they’re less likely to drink it at home, and if they don’t drink it at home, they’re less likely to drink it as an adult, and if they don’t drink it as an adult, they are less likely to give it to their children. So not only are we losing this generation, we’re losing generations to come.”
Rob Barley, a farmer in Lancaster and York counties and chairman of the PMMB (Pa. Milk Marketing Board) encouraged state senators to help influence a change at the federal level and among other states to “fight for future milk drinkers and the farmers that produce this nutritious product.”
Mike Eby, a Lancaster County farmer, talked about how government policies and industry organizations stand between farmers and the public. Eby serves as chairman of National Dairy Producers Organization and executive director of Organization for Competitive Markets. He also represents the southeast district on the Pennsylvania Farmers Union board.
“I see the divide that keeps farmers and consumers apart — on knowledge, markets, fairness and choice. The issue of allowing children to choose whole milk at school is one that seems to escape the application of logic, freedom and fairness,” said Eby.
The state’s interest was made clear.
Troutman said the issue directly affects Pennsylvania.
“This is a fluid milk state. Pennsylvania does not have 10,000-cow dairies or huge cheese factories. We are communities of small and medium-sized farms owned by families that support their communities,” said Troutman. “We have the land, the water, and the people who want to do the work in Pennsylvania. Dairy is 37% of our number one industry: agriculture. Our dairies are struggling. Without them, we lose other businesses, jobs, support for other parts of agriculture and the economy. Tourism, we lose our tourism.”
Barley also pointed out the state’s interest.
“Fluid milk consumption is vital to the survival of the dairy industry, but even more vital to the Pennsylvania dairy producers. The premium provided by the fluid milk market and the additional premium from the Pa. Milk Marketing Board, have helped to keep Pa. dairy farmers in business,” said Barley. “If milk consumption continues to decrease, there will be a continued exit of PA dairy producers.”
Pennsylvania Farm Bureau president Rick Ebert, a Westmoreland County dairy farmer, noted that, “Providing school children with healthy milk choices is one of our organization’s leading concerns when it comes to strengthening the dairy industry. We have supported several legislative efforts in Congress to repeal current standards and give school districts the flexibility to offer whole milk and flavored whole milk if they so choose.”
Eby highlighted the “significant stake in the impact on farms, allied businesses, jobs and revenue,” he said. “Our state also has an interest in children being able to choose milk they will drink, to actually receive the nutrition, considering they eat one or two meals a day at school.”
“Former Senator Scott Wagner told me I should go along on the garbage truck to schools and see how much milk is thrown away unopened,” said Troutman. “I would want our Governor and Secretaries of Agriculture and Education to go to a school at lunch time and see for themselves how much milk is thrown out. They can ask the students why, and they might be surprised by their answers because kids are brutally honest. Be sure to take the TV cameras along.”
Restoring choice would have positive impacts.
Sebright noted potential shifts in sales from nonfat milk to fuller fat milk would help stimulate overall demand for milk. She said that according to the U.S. Dairy Export Council, 16% of milk produced is exported, and most of that is skim solids, not fat. She said the U.S. dairy industry presently uses 97% of the milk fat produced. More whole milk sales in Pennsylvania would mean more demand for Pennsylvania milk.
On the other side of that equation, in a milk pricing system that can be inequitable, lack price-discovery and transparency, Eby noted: “When milk fat is treated as a byproduct, it can be undervalued as a component. If school children had the choice of whole milk, future generations of milk drinkers would not be lost, and new market and processing opportunities could result for dairy farms right here in Pennsylvania.”
Eby also reminded senators that fresh whole milk is the most locally-produced product in the dairy sector, and it is the class that brings a higher value to farmers in their blend price.
“The overall despair that I am seeing among dairy farmers, is the feeling they’ve got nowhere to turn legislatively or through their cooperatives for any hope of speaking up on their behalf. Being heard on an issue as simple as whole milk choice in schools — and seeing progress on this issue — would give a lot of dairy farmers hope,” he said.
Speaking for Farm Bureau, Ebert gave details about Pennsylvania’s dairy processing infrastructure, pricing mechanisms and proximity to population. “The bottom line is our dairy industry has relied heavily on fresh milk consumption. While our farm families are accustomed to market forces, and are adapting their small businesses to these changing conditions, an increase in fresh milk consumption would be an immediate boost,” said Ebert. “Our organization believes that giving schools the ability to offer whole and 2% milk could lead to a new generation appreciating the taste and nutritional benefits of milk.”
Better health, more revenue, but where’s Dept. of Agriculture?
Referring to the Pennsylvania Farm Bill, Troutman said: “$400,000 in grants are given by the Department to modernize dairy farms, but these farmers, technically, could get a termination letter at any time from their processor… They give $400,000 in grants for farm to school education, but dairy is not even mentioned because milk is already in the lunch – but it’s not whole milk that the kids like and need,” he said.
Troutman said further that, “Putting whole milk as a drink choice back in schools would cost the state’s taxpayers a lot less money than other things we do. The benefits of whole milk sales would be huge — better health, more revenue — and we could save our Pennsylvania dairy farms. It’s a win-win.”
Chairman Scavello agreed. “We grew up drinking whole milk, and I think we did okay,” he said.
School nurse gives ‘striking’ data
Speaking of the health aspects, Christine Ebersole RN, BSN, CSN, a school nurse in the Williamsburg School District, with 24 years previously working in a hospital. She also mentioned in her testimony the amount of milk she sees thrown away in the cafeteria.
“In 2008, the Federal Government began prohibiting public schools from serving whole milk to students, presumably to decrease obesity in children. Whole milk has 3.25 % milk fat that’s 97% fat free,” said Ebersole.
She explained that each year school nurses are required to record height and weights on students.
“These are called BMI’s or Body Mass Index which measures body fat based on height and weight. A BMI of 85- 95 % is considered overweight and 95-100% is obese. I thought it would be interesting to compare screenings when whole milk was served in schools with the recent screening where students have been served skim, 1% and 1.5% flavored milk through out their years in school. Our graduating seniors would have been served reduced fat milk during their entire school experience.”
Calling the results “striking,” Ebersole said: “The overweight and obese categories for students in grades 7-12 in 2007-2008 school year was 39% with 60% in the proper BMI scale. In the year 2020-2021, after being served reduced fat milk during school hours, the overweight and obese categories were increased to 52% while the proper range was decreased to 46%. That is a 13% increase over the past 13 years! While one cannot assume that the low fat milk alternatives are the only determining factors, they certainly did not have the intended outcome of reducing obesity in school age children.”
Ebersole suggested that in addition to putting the choice of whole milk back in schools, senators could look at bringing back the afternoon “milk break.”
“The miniscule fat content (in whole milk) is more than offset by the fact that students will actually drink their whole milk instead of sugary drinks with empty calories,” said Ebersole. On the ‘milk break’ suggestion, she explained that many students need an energy boost in the afternoon.
“This would help with meeting their nutritional needs as well as giving then the energy needed to complete their school work,” she explained. “Many junior and senior high school students participate in after school activities, practices and sporting events. The milk would be a nutrient rich drink, that contains 9 essential nutrients to strengthen their mind and bodies.”
Krista Byler, food service director for Union City Area School District in northwest Pennsylvania deviated from her written testimony to address questions raised by senators about the challenges facing school foodservice directors in getting whole milk to ‘fit’ in their federally-regulated lunch tray, not to mention extreme fat restrictions for a la carte beverages.
She said education is needed for school foodservice directors to understand the benefits of milkfat and the impact current policies have on children and farms. The other area to look at will be pricing, she said. Right now, milk is not seen as a priority by most foodservice directors when it comes to using tight budgets to get meals on the tray.
“Food service directors have been conditioned to think in the past 10 to 12 years that anything but skim milk and 1% milk has any place in the schools,” said Byler. “A lot of our directors are still behind on the science. They truly believe that the fat is too much for our students. They’re still on the bandwagon that this is going to solve the obesity epidemic.”
Byler is starting to see some movement from her peers seeing the milkfat avoidance as outdated information.
Sebright also highlighted the multi-faceted issues, having spent her early career working with school foodservice directors. “If there is a way that we can help those school foodservice directors balance that tray, balance their budget and still include that fuller fat milk that is so critical to their kids needs, that would be amazing,” she said.
One way to do that is to make milk a standalone component of the school lunch, like it used to be, so it’s not part of the meal calculation, said Byler. She went over the results of her milk choice trial.
School trial is an eye-opener
Senators were impressed by the school milk choice trial, so much so that one key action they discussed was for the state to support schools that want to set up a similar trial in every county. This step would create widespread awareness and gather statewide consumption, waste and student response data at the same time.
“The students had no idea we were doing the trial, and they had no idea we were restricted from giving them a choice,” said Byler, noting they were “very vocal” when the trial ended, and the 2% and whole milk options were removed from school coolers.
In post-trial student surveys, 64% reported choosing milk more often. On waste, 60% of students said they had thrown milk away before the trial, but after the trial, only 30% of students said they had thrown milk away.
Over half the students said the trial changed their a la carte beverage purchase habits and another 26% of students said the milk choice may have changed their purchase habits. That’s more than 75% impact.
A whopping 85% of the students said they drink whole milk at home.
Statewide trials would help with the education component identified by Byler in her testimony.
“One of the stumbling points we have is getting the schools on board, getting the foodservice directors on board, getting the management companies to come on board and say ‘yes, this is a win-win. This benefits our students. This benefits our Pennsylvania dairy,’” said Byler.
Federal Guidelines drive the school bus
Eby mentioned the Dietary Guidelines for Americans (DGAs) as the umbrella driving the school bus. The most recent 2020-25 DGA cycle was covered extensively in Farmshine over the past two years, drawing tens of thousands of comments, questioning why scientific studies on dietary fat were left out of the process.
“After the 2015 DGA cycle, Congress asked the Academy of Sciences, Engineering and Medicine to review the process. In 2017, their report cited the need for enhanced transparency and stronger scientific rigor,” said Eby.
“Dairy checkoff promotions that farmers must pay into are affected by these guidelines that the industry heartily applauds when they are released,” said Eby. “Checkoff funding of fat-free and low-fat promotion includes innovations that are now blending low-fat milk with almond beverage and ultrafiltration that allows milk solids to move anywhere and be reconstituted in beverages — Coca Cola-style. Meanwhile, the low-fat milk rules at schools turn children away from milk to other drinks in a beverage market dominated by huge global companies. These drinks do not come close to providing the nutrition of whole milk.”
As important to parents as to dairy farmers
Sebright hit the nail on the head when she said: “I think the issue related to whole milk in schools is as important to parents as it is to dairy farmers because really, it’s all about taste.”
In fact, she said, “whole milk builds lifelong consumers.”
Mentioning research about the benefits of whole milk, Sebright noted that there are “nutrients in whole milk that are not found in skim and non-fat that are important for brain development.”
Her testimony also included the benefits of milk, in general, and how critical it is to make sure the children get that nutrition. Sebright talked about her youngest son, who never liked milk in school. She would pay for the milk, and he would throw it away. He did a 7th grade science project, a chocolate milk taste test.
“He had 27 friends blindly taste the two milks, and all of them chose the whole chocolate milk,” Sebright related. “That’s very telling. A processor would tell you it’s because making a good tasting nonfat chocolate milk is very difficult. The fat in milk adds to the flavor appeal, and when that’s not there, it leaves the cocoa tasting bitter.”
In fact when more fat is removed, more sugar is often added in making chocolate milk to make up for losing the pleasing flavor profile contributed by the fat.
Senator David Argall commented on Sebright’s son’s taste test showing 27 to zero preferred whole over low-fat. “(Businesses) are usually happy with 51-49 or 52-48. But 27 to zero, that’s very strong and really rings out to me,” said Argall.
Speaking for the children
Bringing it back to the kids, Tricia Adams of Hoffman Farms, Potter County testified: “I want to talk to you about the good stuff. The good stuff is a phrase I have heard many times throughout the years from my daughters and countless school children I have had the privilege of seeing on our farm tours,” said Adams, testifying as a dairy producer and school-involved mother of three teenage daughters, making it clear she was speaking for the children.
“The good stuff is what they all refer to as whole milk, which is standardized at 3.25% fat. Every day since 2010, our children have been denied milk choice in school,” said Adams. “Why are we allowing a wholesome natural food product to be attacked and denied and substituting it with more heavily processed drinks?”
As a dairy farmer, she said: “This is personal. I have seen our industry weather many storms over the years. I have seen many farms shut their doors, and I have seen our future generations turning away from milk because of this no fat/low fat push. As a farmer, I want the product I proudly produce every day of my life to be enjoyed and provided in its naturally best version. Whole milk is known as nature’s most perfect food. Why change it, especially for growing kids? Countless generations before consumed whole milk and benefitted.”
She noted that, “Some in the industry say ‘let’s not rock the boat’ because it’s only a couple percentage points. They say, does it really make a difference? Just serve whole milk at home and 1% at school. Turn it the other way, it’s only a couple percentage points, so give them the good stuff.”
Adams cited documents showing the extra percentages of milk fat allow for better digestion, reducing some lactose intolerance issues. The fat slows the lactose (carbohydrate) absorption for a more favorable rate.
She pointed to studies (many cited in pages 6 through 15 of this document) showing how whole milk consumption helps kids maintain a healthy body weight, stressing the value of milk’s many essential vitamins and minerals, some of them being fat-soluble, so the milk fat allows the body to get the benefit.
Vitamin D absorption, in one trial, for example, was triple for kids drinking whole milk vs. low fat and risk of being overweight was reduced by 40%.
“That’s huge today,” said Adams.
Senators get it.
Chairman Scavello (below, left) had set the stage for the hearing, noting in his opening remarks that farming is the Commonwealth’s number one industry and dairy is 37% of Pennsylvania agriculture.
“Pennsylvania has the second largest number of dairy farms in the nation, only second to Wisconsin,” he said. “The industry supports approximately 52,000 jobs and contributes $14.7 billion to the state’s economy. Given these facts, it is essential that we continue to follow and review important decisions that are made that can have an impact on such an important part of our economy, such as the federal prohibition of whole milk in schools.”
Senator David Argall (R-29th, above, right) said this hearing “begins a serious conversation about what the state can do to encourage our federal partners to drop this arbitrary provision. Many of our dairy farmers are really struggling, and part of this… is due to the fact that in 2010, Congress passed legislation putting restrictive regulations on the consumption of whole milk in schools.”
He observed that in the first two years of that action, 1.2 million fewer students drank milk at lunch, “but they still had access to sugary juices and soda, which offer none of the nutritional value that whole milk does. This isn’t just hurting our dairy farmers, it’s teaching a terrible lesson in nutrition to our students.”
Joining the Policy Committee by zoom (above) was Senator Scott Martin (R-31st), representing Lancaster County. He chairs the Pennsylvania Senate Education Committee and noted the timeliness of this public hearing topic.
“From an educational standpoint…as a large consumer of milk when I was growing up, it’s amazing from a policy perspective that we ended up where we are trying to teach our kids good habits to what it is now the selection of things that I would put in the category of not so healthy and not having those benefits. What we are teaching and providing, combined with the devastating impact on our family farms? I truly hope we can make inroads in getting the federal prohibition removed,” said Chairman Martin.
“It’s heartbreaking to see as dairy farmers struggle, they are out there educating the public on the nutritional value (of whole milk). You can even see homemade signs or bales of hay wrapped in plastic, talking about the importance of the nutritional value of whole milk,” Martin observed.
Grassroots response is all volunteer
In his brief testimony, retired agribusinessman Bernie Morrissey talked about the start of that ‘homemade’ grassroots campaign, when Berks County farmer Nelson Troutman painted his first wrapped round bale: Drink Whole Milk 97% Fat Free.
“That was the start of this grassroots dairy committee and it’s been going ever since,” said Morrissey about several of the volunteers testifying on panels during the hearing. “The major point is choice for our children, our grandchildren, our great grandchildren… and this area of milk marketing where our farmers have been mistreated, financially. Even on the news yesterday was about the milk prices going up… but not at the farm. The tank truck backs up to their farm, takes their milk. They are business people, just like I am. The truck backs up, takes the milk out of the bulk tank, and they don’t know what they’re going to be paid for it.”
Testifying from the 97 Milk education effort and in her work with dairy farmers through R&J Dairy Consulting, not to mention as a mother with young children, Jackie Behr gave a quick summary of the grassroots whole milk education efforts online at 97milk.com and through the social media platforms. She volunteers in that effort.
“Consumers are savvy. They want to learn. I can’t begin to share all of the countless responses we have received from people saying, ‘I’m going to switch to whole milk,’” said Behr. “Since removing the option of whole milk from schools, we have lost a generation of milk drinkers.”
“Yes, of course I give my kids whole milk,” said Behr. “I have done the taste test with my kids. I gave them skim, 1%, and they all have looked at me and said: ‘what is this?’ My kids taste the difference and I want to know how many other kids taste the difference as well. As a mother, I know if we’re going to give something healthy, they need to like it. Our dairy farms are struggling. I see it every day in my business. Something has got to change or we will keep losing our dairy farms in Pennsylvania.”
A healthy child should be our number one priority
It is really the children who were front and center in this hearing. The testimony of 11 people opened eyes and impressed senators, who confirmed how valuable it was to understand the federal issue in order to begin navigating it at the state level.
“We have a responsibility to help our children be the best they can be and allow them to perform to their highest potential. We should want no kid to be hungry,” Adams testified. “Milk fat allows a body naturally to be satiated, so children can concentrate in school. If a hungry, growing child does not get that feeling, they will turn to sugary snacks or drinks to fill the void. For some kids, the school lunch is the only real meal they get in a day. Some, our daughters included, get two meals at school.”
Whole milk satisfies, she added: “A healthy child should be our number one priority, please let us in Pennsylvania lead by example.”
Frankly, it’s neither. Let’s go behind the mirror, shall we?
In the rule, yogurt is defined as: “Cream, milk, partially skimmed milk, skim milk, and the reconstituted versions of these ingredients that may be used alone or in combination as the basic dairy ingredients in yogurt manufacture.”
The rule states: “Yogurt is produced by culturing the basic dairy ingredients and any optional dairy ingredients with a characterizing lactic acid-producing bacterial culture.”
In its response, NMPF pointed to this language as “reinforcing the concept that where food comes from, and how it is made, matters.
“Logic matters. Consistency matters. That’s why the new FDA rule that defines what is and isn’t yogurt has much broader, and potentially very positive, implications in one of the most contested consumer issues of the day — the proper labeling of milk and dairy products,” NMPF states.
However, given the fact that FDA is still working on the standards of identity (SOI) for milk and dairy within its larger NIS framework, the biggest questions are still unanswered, and FDA indicated their guidance on milk and dairy SOIs won’t come until June 2022.
The yogurt rule simplifies FDA’s books and offers processors more flexibility, to a point. It revokes the previous individual SOIs for low-fat and non-fat yogurt, making one SOI for yogurt, in which low- and non-fat become labeling modifiers.
The intent of this, according to FDA, is to “modernize SOIs for technological advances while preserving the basic nature and essential characteristics.”
In the 22-page rule, FDA writes: “Any food that purports to be or is represented as yogurt, must conform to the definition standard of identity for yogurt.” — That’s the enforcement piece.
The thrust of FDA’s NIS is explained in documents as moving toward both revoking and modernizing standards so foods can compete on a nutritional basis, and to remove barriers to innovations. This includes determining how plant-based and synthetic alternatives are labeled.
New genetically-altered yeast excreting proteins are being made by companies like Perfect Day Foods, and they are pressuring FDA to designate them as dairy proteins, saying they are identical to casein and whey found in milk. They don’t want these proteins labeled as bioengineered because even though the yeast is genetically altered with bovine DNA, the protein excrement is used, not the yeast itself.
This is a bit of what’s under the surface on the dairy SOIs.
In January 2020, IDFA had Perfect Day CEO and co-founder Ryan Pandya on an industry panel at the IDFA Dairy Forum in Arizona. During that IDFA Forum, Pandya told Food Dive in an interview that, “Every major multinational (company) is talking to us.”
Pandya pitched the bioengineered yeast excrement to processors during the IDFA Forum, noting that they work through The Urgent Company, under the leadership of former Glanbia VP of product strategy in a business-to-business model, touting climate impact reductions by ‘partnering’ with the dairy industry to replace just 5% of dairy protein with their analog.
In fact, the January 2020 Food Dive article goes on to quote Monica Massey, an executive vice president and chief of staff for Dairy Farmers of America (DFA), as she told Pandya from the audience during the IDFA panel that she purchased the limited-edition Perfect Day ice cream last year.
“We sat down in a dairy cooperative headquarters and ate it, and I said ‘Oh, we’re screwed’ because it tasted just like ice cream,” Food Dive quotes Massey’s exchange with Pandya during the IDFA Forum.
“In the industry we get hung up on ‘You can’t call it dairy.’ … (Perfect Day’s) not focused on the cow, you’re focused on the consumer, and we are so hellbent on focusing on the cow, the milk,” said Massey.
(Author’s note: Working for a cooperative owned by dairy farmers does kind of make it about the cows and the milk, but it can still be about the consumers, using the milk from the cows.)
An article posted publicly on the day of the new yogurt rule, July 12, gives us a good idea why IDFA is protesting the new SOI for yogurt, and why the big unanswered questions of milk and dairy identity — that the FDA expects to propose a year from now in June 2022 — are so important as the undergirding for individual SOIs like yogurt.
The July 12 article in Dairy ProcessingbyDonna Berry (who is also a contractor on the payroll of DMI — the national dairy checkoff every dairy farmer must pay into, by law), quotes a representative of Perfect Day talking about the so-called ‘animal-free milk proteins,’ saying they are identical to casein and whey. They are excreted from microorganisms such as bacteria, yeast or fungi, that have been genetically altered with bovine DNA and are grown in fermentation vats on sugar substrate.
(The current, though unenforced, FDA SOI for milk is: “Milk is the lacteal secretion…obtained by the complete milking of one or more healthy cows.” Of course, goat milk would be a consistent qualifier in source, characteristics and nutrition, but almond, oat, soy, bioengineered yeast, are not consistent with that legal definition.)
Without FDA guidance and enforcement of real dairy SOIs for milk, and 80 other products with FDA SOIs that come from milk, what’s to stop “seamless” swapping of bioengineered yeast-excrement in place of dairy protein in standardized dairy products and no bioengineered labeling? What ensures that consumers know what they are consuming, and dairy farmers aren’t put out of business by captive supply in the market and?
Yes, deciding what is and isn’t ‘milk’ and ‘dairy’ is still a huge item on the FDA to-do list.
IDFA is protesting what it says are ‘overly prescriptive’ process requirements in the new yogurt rule they claim are “not current with today’s innovations,” such as requiring cream to be added before, not after, lactic acid fermentation to meet standardized 3.25% fat levels. (That’s a bit of a monkey wrench for Perfect Day.)
Just a few of the other things IDFA is objecting about include the requirement for yogurt that contains ‘non-nutritive’ sweeteners be labeled as ‘reduced calorie’, and how high the vitamin A and D levels are set for processors choosing to voluntarily fortify the yogurt.
The rule does offer the industry a peek into where milk and dairy standards could be headed since former FDA Commissioner Scott Gottlieb made the now-famous “almonds don’t lactate” statement at the very same time that the FDA NIS was launched in July of 2018.
Tied-in with the NIS are the stated purposes of addressing chronic diseases like obesity and heart disease by modernizing all 280 standards of identity, updating food labeling rules to educate consumers on nutritional choices, clarifying standards for new innovations (including lookalikes), and developing a voluntary ‘healthy symbol’ for foods so consumers get a ‘quick signal’ to make choices lower in sodium, saturated fat, and calories via the Dietary Guidelines, while including the nutritional quality consumers expect.
Rob Post, with yogurt-maker Chobani, was a presenter that day, and he expressed concerns that the current yogurt standards made it difficult for Greek yogurt to be offered in schools and other institutional feeding situations to accurately quantify the protein levels. Strained Greek yogurt is 52% protein, twice that of regular yogurt, he said.
He asked for a better process that keeps pace with innovation, but he was very quick to defend the current definition of milk and dairy — and its enforcement.
“It’s important to have options,” said Post. “But words matter to consumers and dairy means something specific. It means nutrient dense, minimal processing. It is important that this standard is preserved. Standards are important because they assure the consistency of the product, its authenticity and nutrition.”
Meanwhile, FDA’s new yogurt rule “expands the allowable ingredients in yogurt, including sweeteners such as agave, and reconstituted forms of basic dairy ingredients.”
This simpler, more flexible statement means ultrafiltered (UF) milk solids and even dry milk protein concentrate, can be used in formulation as ‘optional functional dairy ingredients.’ As milk-derived ingredients, these examples don’t reconstitute to the properties of the basic ingredients listed in the yogurt SOI, and must be labeled.
The new rule also “establishes a minimum amount of live and active cultures yogurt must contain to bear the optional labeling statement ‘contains live and active cultures’ or similar statement.” And, if the yogurt is treated for extended shelf life in a way that inactivates viable microorganisms, the yogurt must now include a statement ‘does not contain live and active cultures’ on the label.
“The final rule is already out of date before it takes effect,” wrote Joseph Scimeca, Ph.D., senior vice president of regulatory and scientific affairs for IDFA in a statement. “For the most part, FDA relied on comments submitted 12 or more years ago to formulate its final rule — as if technology has not progressed or as if the yogurt making process itself has been trapped in amber like a prehistoric fossil.”
Scimeca added that the yogurt rule is “woefully behind the times and doesn’t match the reality of today’s food processing environment or the expectations of consumers.”
On the other hand, there were numerous industry comments seeking a more traditional rule in terms of milk and cream vs. ‘milk-derived’ or ‘reconstituted’.
FDA responded in the rule, stating: “Technological advances in food science and technology allow for a wider range of milk-derived ingredients developed with advances in membrane processing technology in the dairy industry. The final rule permits the use of emulsifiers and preservatives to prevent separation, improve stability and texture, and extend the shelf-life of yogurt.”
While the rule, in effect, “permits optional functional dairy ingredients,” and “modernizes the yogurt standard to allow for technological advances,” it also requires the 3.25% milkfat and 8.25% solids not fat threshold at a point in the process before bulky flavorings are added. That’s helpful.
Calling the new rule “a robust defense of standards of identity,” NMPF cited its citizen’s petition filed with FDA in 2019, saying: “With the yogurt rule complete, our petition should be answerable in much less than 21 years.”
“We are continuing our efforts to revoke or amend certain standards of identity — from frozen cherry pie and French dressing to yogurt — especially when the standard of identity is inconsistent with modern manufacturing processes or creates barriers to innovation,” states FDA about its process.
As pieces, like this yogurt rule drift out of that process, a thought emerges: FDA is cleaning its books full of hundreds of SOIs to consolidate and simplify them — before tackling the really big questions of legally defining what the broader SOIs will be.
Still on deck are the all-important SOIs defining and enforcing core milk and dairy terms, even as pressure from plant-based, cell-cultured, yeast-cultured and other lookalikes push for SOIs that simply set nutritional standards for analogs to meet.
The cover story of a recent Junior Scholastic Weekly Reader — the social studies magazine for elementary school students — was dated for school distribution May 11, 2021, the same week USDA approved a Child Nutrition Label for Impossible Burger and released its Impossible Kids Rule report. This label approval now allows the fake burger to be served in place of ground beef in school meals and be eligible for taxpayer-funded reimbursement. Meanwhile, Scholastic Weekly Reader and other school ‘curricula’ pave the marketing runway with stories incorrectly deeming cows as water-pigs, land-hogs, and huge greenhouse gas emitters, without giving the context of true environmental science.
Is USDA complicit? Or ring-leader? One Senator objects
By Sherry Bunting
WASHINGTON – It’s appalling. Bad enough that the brand of fake meat that has set a goal to end animal agriculture has been approved for school menus, fake facts (brand marketing) about cows and climate are making their way to school curriculum as well. The new climate-brand edu-marketing, and USDA has joined the show.
“Schools not only play a role in shaping children’s dietary patterns, they play an important role in providing early education about climate change and its root causes,” said Impossible Foods CEO Pat Brown in a May 11 statement after Impossible Meats received the coveted USDA Child Nutrition Label. “We are thrilled to be partnering with K-12 school districts across the country to lower barriers to access our plant-based meat for this change-making generation.”
U.S. Senator Joni Ernst (R-Iowa), who was born and raised on a rural Iowa family farm, has called on U.S. Agriculture Secretary Tom Vilsack to ensure students will continue to have access to healthy meat options at schools. The Senator’s letter to the Secretary asked that USDA keep political statements disincentivizing meat consumption out of our taxpayer-funded school nutrition programs.
Food transformation efforts are ramping up. These are political statements where cows and climate are concerned, not backed by science, but rather marketing campaigns to sell billionaire-invested fake foods designed to replace animals. (World Wildlife Fund, the dairy and beef checkoff sustainability partner, figures into this quite prominently.)
As previously reported in Farmshine, Impossible Foods announced on May 11 that it had secured the coveted Child Nutrition Label (CN Label) from the USDA. The food crediting statements provide federal meal guidance to schools across the country. The CN label also makes this imitation meat eligible for national school lunch funding.
“This represents a milestone for entering the K-12 market,” the CEO Brown stated, adding that the use of their fake-burger in schools could translate to “huge environmental savings.” (actually, it’s more accurate to say it will translate to huge cash in billionaire investor pockets.)
Concerned about ‘political statements’ made by USDA and others surrounding the CN label approval — along with past USDA activity on ‘Meatless Mondays’ initiated by Vilsack’s USDA during the Obama-Biden administration — Sen. Ernst wrote in her letter to now-again current Sec. Vilsack: “School nutrition programs should be exempt from political statements dictating students’ dietary options. Programs like ‘Meatless Monday’ and other efforts to undermine meat as a healthy, safe and environmentally responsible choice hurt our agriculture industry and impact the families, farmers, and ranchers of rural states that feed our nation.”
No public information has been found on how Impossible Foods may or may not have altered its fake-burger for school use. My request for a copy of the Child Nutrition Label from USDA AMS Food Nutrition Services, which granted the label, were met with resistance.
Here is the response to my request from USDA AMS FNS: “This office is responsible for the approval of the CN logo on product packaging. In general, the CN labeling office does not provide copies of product labels. This office usually suggests you contact the manufacturer directly for more information.”
I reached out to Impossible for a copy of the nutrition details for the school product. No response.
It’s obvious the commercial label for Impossible is light years away from meeting three big ‘nutrition’ items regulated by USDA AMS FNS. They are: Saturated Fat, Sodium, and Calories.
As it stands now, the nutrition label at Impossible Foods’ website shows that a 4-oz Impossible Burger contains 8 grams of saturated fat. That’s 3 more grams than an 8-oz cup of Whole Milk, which is forbidden in schools because of its saturated fat content. The Impossible Burger also has more saturated fat than an 85/15 lean/fat 4-oz All Beef Burger (7g).
Sodium of Impossible Burger’s 4-oz patty is 370mg! This compares to an All Beef at 75g and a McDonald’s Quarter-pounder (with condiments) at 210 mg. Whole Milk has 120 mg sodium and is banned from schools.
The Impossible Burger 4-oz. patty also has more calories than an All Beef patty and more calories than an 8 ounce cup of Whole Milk. But there’s the ticket. USDA is hung up on percent of calories from fat. If the meal is predominantly Impossible Burger, then the saturated fat (more grams) become a smaller percent of total calories when the fake burger has way more calories! Clever.
In her letter to Vilsack, Sen. Ernst observes that, “Animal proteins ensure students have a healthy diet that allows them to develop and perform their best in school. Real meat, eggs, and dairy are the best natural sources of high quality, complete protein according to Dr. Ruth MacDonald, chair of the Department of Food Science & Human Nutrition at Iowa State University. Meat, eggs, and dairy provide essential amino acids that are simply not present in plants. They are also natural sources of Vitamin B12, which promotes brain development in children, and zinc, which helps the immune system function properly.”
She’s right. A recent Duke University study goes behind the curtain to show the real nutritional comparisons, the fake stuff is not at all nutritionally equivalent. But USDA will allow our kids to continue to be guinea pigs.
In May, Ernst introduced legislation — called the TASTEE Act — that would prohibit federal agencies from establishing policies that ban serving meat. She’s looking ahead. Sen. Ernst is unfortunately the only sponsor for this under-reported legislation to-date.
Meanwhile, within days of the Impossible CN approval from USDA, school foodservice directors reported being bombarded with messaging from the school nutrition organizations and foodservice companies, especially the big one — Sodexo — urging methods and recipes to reduce their meal-serving carbon footprint by using less beef for environmental reasons, and to begin incorporating the approved Impossible.
The Junior Scholastic Weekly Reader for public school students across the nation — dated May 11, the same day as the USDA CN Label approval for ‘Impossible Burger’ — ran a cover story headlined “This burger could help the planet” followed by these words in smaller type: “Producing beef takes a serious toll on the environment. Could growing meat in a lab be part of the solution?”
The story inside the May 11 scholastic magazine began with the title: “This meat could save the planet” and was illustrated with what looked like a package of ground beef, emblazoned with the words: “Fake Meat.”
Impossible Foods is blunt. They say they are targeting children with school-system science and social studies (marketing disguised as curriculum) — calling the climate knowledge of kids “the missing piece.”
In the company’s “Impossible Kids Rule” report, they identify kids as the target consumer for their products, and how to get them to give up real meat and dairy.
Toward the end of the report is this excerpt:“THE MISSING PIECE: While most kids are aware of climate change, care about the issues, and feel empowered to do something about it, many aren’t fully aware of the key factors contributing to it. In one study, 84% of the surveyed young people agreed they needed more information to prevent climate change. Of the 1,200 kids we surveyed, most are used to eating meat every week—99% of kids eat animal meat at least once a month, and 97% eat meat at least once a week. Without understanding the connection between animal agriculture and climate change, it’s easy to see why there has been so little action historically on their parts. Kids are unlikely to identify animal agriculture as a key climate threat because they often don’t know that it is. Similar to adults, when we asked kids what factors they thought contributed to climate change, raising animals for meat and dairy was at the bottom by nearly 30 points.“
After showing the impressionable children Impossible marketing, they saw a big change in those “awareness” percentages and noted that teachers and schools would be the largest influencers to bring “planet and plate” together in the minds of children, concluding the report with these words:
“When kids are educated on the connection between plate and planet and presented with a delicious solution, they’re ready to make a change. And adults might just follow their lead,”the Impossible Kids Rule report said.
USDA is right with them, piloting Impossible Burger at five large schools using the Impossible brand name to replace ground beef with fake meat in spaghetti sauce, tacos and other highlighted meals. This allows brand marketing associated with the name — free advertising to the next generation disguised as “climate friendly” options with marketing messages cleverly disguised as “education.”
In the New York City school system, one of the pilot schools for Impossible, new guidelines are currently being developed to climate-document foods and beverages served in the schools.
Impossible doesn’t have a dairy product yet, but the company says it is working on them.
Impossible’s competitor Beyond Meat is also working on plant-based protein beverages with PepsiCo in the PLANeT Partnership the two companies forged in January 2021. PepsiCo is the largest consumer packaged goods company globally and has its own K-12 Foodservice company distributing “USDA-compliant” beverages, meals and snacks for schools.
How can this brand-marketing in school meals be legal? Dairy farmers pay millions to be in the schools with programs like FUTP60 and are not allowed to “market”. In fact, dairy checkoff leaders recently admitted they have a 12-year “commitment” to USDA to “advance” the low-fat / fat-free Dietary Guidelines in schools, top to bottom, not just the dairy portion.
Pepsico has a long history of meal and beverage brand-linking in schools. Working with Beyond, they will assuredly be next on the Child Nutrition alternative protein label to hit our kids’ USDA-controlled meals.
Like many things that have been evolving incrementally — now kicking into warp speed ahead of the September 2021 United Nations Food System Transformation Summit — the taxpayer-funded school lunch program administrated by USDA is a huge gateway for these companies. Ultimately, will parents and children know what is being consumed or offered? Who will choose? Who will balance the ‘edu-marketing’? Will school boards and foodservice directors eventually even have a choice as huge global companies mix and match proteins and market meal kits that are guaranteed to be USDA-compliant… for climate?
WASHINGTON, D.C. — Senator Kirsten Gillibrand (D-NY), chair of the Senate Agriculture Subcommittee on Dairy, Livestock, Poultry, Local Food Systems, Food Safety and Security, told reporters in late May that she is working on milk pricing legislation and wants to have dairy pricing hearings in her subcommittee before the August congressional recess.
According to a document obtained by Farmshine, the Senator has been granted the request to hold the hearing in her subcommittee. The American Dairy Coalition (ADC) reports their appreciation for Senator Gillibrand moving forward on this, noting her office has established the hearing scope and is contacting testifiers. A date is anticipated for late summer 2021, though not yet confirmed on the Senate Ag calendar.
“We cannot lose the ability to feed our own people,” Gillibrand said during her May press conference. “If you have a market that’s fundamentally flawed and are constantly leaving producers unable to survive in the industry, there’s a problem. So, I think we need a very thorough investigation of my concerns.”
At that time, Gillibrand also talked about a multi-part scenario where this hearing could be followed by an investigation. Since 2003, the U.S. has lost almost half its licensed herds with milk price returns declining 23% in the past five years, according to USDA.
In addition to pricing and competitive market concerns over the past decade, the billions of dollars in dairy farm losses due to negative producer price differentials (PPDs) and de-pooling are part of the hearing equation.
Of this, a documented $783 million in net losses have accrued over 26 months directly tied to the reduced Class I price for beverage milk under the new averaging method implemented by USDA in May 2019 (See Chart 1).
That equates to a straight average loss of nearly $25,000 per farm or $83 per cow, but the Class I value losses would be greatest in milk marketing areas with a higher percentage of Class I use. Other types of losses were incurred by producers in milk marketing areas that have a lower Class I utilization but experienced large volumes of Class III milk de-pooled, making the much lower Class IV price a bigger portion of the blended price paid to farmers.
At the height of these losses being incurred, the American Dairy Coalition worked to bring dairy producers together through conference calls and emails, driving a letter signed by hundreds of producers and organizations to National Milk Producers Federation and International Dairy Foods Association. The March letter requested a seat at the table for producers to address the Class I method.
NMPF and other groups came out with statements about potential FMMO hearing requests, which did not materialize.
In May, ADC worked with Senators in supporting Senator Gillibrand’s letter to Ag Secretary Tom Vilsack, seeking use of available CFAP and PAP funds to assist dairy farm families with these losses.
Secretary Vilsack recently responded to questions from Senator Patrick Leahy (D-Vt.) during an Ag Appropriations hearing to say USDA is working on a plan to compensate Class I and Class III differential losses, but no details have been forthcoming. Producers are also waiting for details from USDA about the enhanced Dairy Margin Coverage base payments approved by Congress in December.
Sen. Gillibrand has observed the extreme volatility in milk prices over the past decade of her service as a member of the Senate Ag Committee. Dairy farm revenues have steadily declined due to a combination of trade wars, increased production costs, and competition from non-dairy alternatives leading to reduced consumption of fluid milk.
Other seismic shifts have also occurred in the dairy market landscape over the past five years, including shockwaves of rapid cooperative and plant mergers, plant closings, farms and small cooperatives losing milk markets since 2015, Walmart opening its own fluid milk processing plant in 2018, and the bankruptcy filing in 2019 and sale of plants in 2020 by the nation’s largest milk bottler, Dean Foods.
Multiple factors have also converged around the pandemic to create further losses for dairy farm families operating on already razor-thin margins and struggling to attain equitable markets and revenue.
Even the risk management tools purchased by producers did not function as designed because they are based on market values that most farmers did not receive in their actual milk checks. That’s like filing an insurance claim for a fire, but the adjuster looks at someone else’s intact property to determine your damages.
The upcoming hearing will likely look at all of this in relation to the change in the Class I pricing method for fluid milk, which was added to the 2018 Farm Bill without being vetted through a hearing process. The hearing is also expected to look at ways to address the Class I change and the FMMO hearing process, as well as FMMO pooling and de-pooling rules and dairy cost of production.
FMMO revenue sharing pools are the mechanism for how the usually higher Class I base price and normally positive differentials are shared with producers across a milk marketing area, no matter what class of products their milk is used in.
However, when the Class I price — due to the new averaging method — fell below Class III for 16 of the past 26 months, an estimated 85 billion pounds of Class III milk normally associated with FMMOs was kept out of the revenue-sharing pools, dropping the Class III portion to less than half its normal size from May 2019 through May 2021, and ultimately depressing milk check returns to producers. Some handlers may have paid their own shippers a portion of this de-pooled value, most did not.
In effect, the equitable method became inequitable when pricing turned upside-down, and risk management, at a time when farmers needed it most, failed.
Additionally, the USDA Farmers to Families Food Box cheese purchase effects on markets in relation to Class I pricing, are also expected to be part of the hearing.
The Food Box program included cheese, milk and other dairy products to help struggling families and at the same time was intended to support struggling farmers that were having to dump milk and be docked further penalties by milk buyers and cooperatives as ‘balancing costs’ or ‘market adjustments’ to handle milk supplies during the disruptions of the Coronavirus pandemic.
These purchases prompted cheese market rallies, followed by intervals of higher Class III milk prices (see Chart 2). However, this support became inequitable in large part due to the Class I pricing change, alongside a record large spread between the Class III and Class IV prices of $5 to $10 per hundredweight. This spread was affected on one side by record-large butter imports and inventories (Class IV), a slowdown in milk powder exports (Class IV) and on the other side by cheese sales (Class III) rising because of active exports and government cheese purchases for food boxes during the pandemic.
Even though every food box contained a gallon of fluid milk, there is no way to determine the ‘market value’ of Class I fluid milk, apart from the manufacturing class and component values. This is because fluid milk is treated as a base commodity. It is present in 95% of shopping carts, and thus used by large retailers as a loss-leader on the one hand, while on the other hand, the USDA regulates Class I fluid milk handlers as the only class that must pay a minimum FMMO price to farmers.
The hearing is also expected to look at processor ‘make allowances’ that are built into USDA’s end-product pricing formulas for bulk surveyed commodities: cheddar and dry whey (Class III) and butter and powder (Class IV).
Make allowances and yield factors currently add up to $3.17 per hundredweight on the Class III milk price and $2.17 per hundredweight on Class IV, according to a 2018 presentation by John Newton, formerly the chief economist for Farm Bureau who was hired this year by the Senate Ag Committee, explained make allowances as part of a risk management conference in Pennsylvania.
In effect, the make allowances are deducted from the milk component values as a ‘processor credit’ per pound of product, and the yield factors are applied, determining the number of pounds of product made per hundredweight of milk. Processors are indicating the make allowances should be raised because of the “circular” nature of end-product pricing.
But there’s another way to look at that ‘circularity.’ While it’s true that 12 years have passed since make allowances and yield factors were last updated (2008), it also true that in those 12 years vast amounts of value-added manufacturing have been added that benefit from these make allowances but are not part of the end-product-pricing ‘circle’ back into the farm milk price. The cost of making those products can be easily passed up the supply chain instead of back to the farmers.
For the plants making the four USDA-surveyed bulk commodities that determine class and component prices — cheddar, butter, nonfat dry milk and whey — the issue may be ‘circular’. However, if make allowances are too high and too rigid, then there’s too much incentive to make product for storage that further depresses raw milk prices through end-product-pricing. So make allowances can be circular in that way also.
Dairy pricing is complicated and intricate — a huge topic. But then again, maybe what can come out of a Senate Subcommittee hearing is a simple straightforward message about making milk pricing simple and straightforward.
Pennies per pound here and there across milk volumes mean millions for big players, and when they add up to nickels and dimes that turn into dollars per hundredweight in the farm milk price, the intricacies become something farmers should be able to see and understand.
In a word: Transparency.
As indicated in her May press conference, Senator Gillibrand is looking to have each part of the dairy sector represented to offer their unique perspectives in the upcoming hearing, which is expected to have two panels, the first being dairy farmers and the second panel bringing in cooperatives, processors and an expert on dairy policy and economics.
In May, Senator Gillibrand made it clear she wants to see a multi-part evaluation of current and longstanding dairy issues, with this hearing being a first step to get a look at the lay of the land.
Good morning Honorable Chairman Scavello and Senate Committee. Thank you for inviting me to testify on whole milk choice in schools. My name is Sherry Bunting. As an ag journalist 40 years and former Eastern Lancaster County School Board member 8 years, not to mention as a mother and a nana, I see this from many sides.
From the dairy side, fluid milk sales had their steepest decline over the past decade as seen in the chart (above) with my written statement. There was a decline slowly before that, but you can see the drop off after 2010.
That was the year Congress passed the Healthy Hunger-Free Kids Act.
Two years prior, the national dairy checkoff, which farmers must pay into, signed a memorandum of understanding with USDA to advance the department’s Dietary Guidelines using the checkoff’s Fuel Up to Play 60 program in schools — promoting only fat-free and low-fat dairy.
(Note: This was confirmed in a May 2021 dairy checkoff press conference, stating that “DMI has been focusing on the youth audience ever since making its commitment to USDA on school nutrition in 2008,” and that Gen Z is the generation DMI has been working on since the launch of Fuel Up to Play 60, which was followed by the formation of GENYOUth and the signing of the memorandum of understanding, MOU, with USDA Secretary Tom Vilsack in that 2008-10 time period.)
By 2011, USDA had their data showing schools that voluntarily gave up whole and 2% milk were meeting the Department’s Dietary Guidelines more consistently — on paper — as far as fat content across the ‘served’ meals and the ‘a la carte’ offerings, combined.
With this data, USDA targeted whole and 2% milk, specifically, for mandatory removal from school grounds during school hours by 2012.
In fact, the ‘competing foods’ regulatory language at the time stated that even if you wanted to have a vending machine (with whole milk) as a fundraiser for FFA, it could only be open for two weeks for the fundraiser, maybe three. The rest of the time it had to be closed between the hours of midnight before the start of the school day and 30 minutes after the end of the school day.
This is how we are treating whole milk.
That looked good on paper, but the reality? Since 2008, the rate of overweight and diabetes has climbed fastest among teens and children after a decade of stipulations that you can only have whole milk until you’re 2 years old — and in the poorest demographics, who rely the most on school lunch and breakfast. This fact was acknowledged during a U.S. Senate Ag hearing on Childhood Nutrition in 2019, where senators even referenced a letter from 750 retired Generals sounding the alarm that young adults are too overweight to serve.
This is a federal and state issue, and I might add, a national security issue. Our state has an interest in the outcomes.
While Pennsylvania school doors are closed to whole milk — a fresh product most likely to be sourced from Pennsylvania farms — their doors are wide open to processed drinks profiting large global beverage and foodservice companies.
What the kids buy after throwing away the skimmed milk does not come close, as you’ve heard, to offering the minerals, vitamins and 8 grams of complete protein in a cup of whole milk. What’s on paper is not being realized by growing bodies, brains and immune systems. Not to mention the milkfat satiates and helps with absorption of some of those nutrients. A wise foodservice director who saw this coming told me in the late 1990s, while I was serving on the School Board, he said: “when too much fat is removed from a child’s diet, sugar craving and intake increase.” Some of the latest data show he was right.
School milk sales are 6 to 8% of total U.S. fluid milk sales. However, this represents, as you’ve heard, the loss of a whole generation of milk drinkers in one decade.
The Northeast Council of Farmer Cooperatives looked at school milk sales from 2013 through 2016 and reported that 288 million fewer half pints of milk were sold in schools during that period. This does not include half-pints that students were served but then discarded.
This situation impacts Pennsylvania’s milk market, farm-level milk price, and future viability — a factor in Pennsylvania losing 1,974 farms; 75,000 cows and 1.8 billion in production since 2009 – rippling through other businesses, ag infrastructure, revenue and jobs. We are, actually now, 8th in milk production in the U.S. If you go back 15 years, we were 4th. As of last year, we were passed by Minnesota.
The fat free / low fat push devalues milkfat as a component of the price paid to farms, making it a cheaper ingredient for other products. Our kids can have whole milk. There is no shortage of milk fat because if there was, producers would be paid a fairer price that reflected its value.
While the flaws in the Dietary Guidelines process would take a whole hearing in itself, Pennsylvania consumers see the benefits of milk fat in study after study and are choosing whole milk for their families. Redner’s Warehouse Markets, for example, reported to me their whole milk sales volumes are up 14.5%. Nationally, whole milk sales surpassed all other categories in 2019 for the first time in decades. So parents are choosing whole milk, and we saw that during Covid, and even before Covid.
Today, children receive one or two meals at school, and there’s a bill actually being considered by Congress to make three meals and a snack universal at school. Then what?
Many parents don’t even know that whole milk choice is prohibited. Even the New York State Senate Agriculture Committee, during a listening session on various issues, had a request brought up to legalize whole milk in schools. Three of the senators expressed their shock. One asked the person testifying — who is both a dairy farmer and an attorney — how could this be true? They thought she was joking.
(In fact, skepticism prompted Politifact to investigate. They confirmed, indeed, Lorraine Lewandrowski’s statement — “Make it legal for a New York state student to have a glass of fresh whole milk, a beautiful food from a beautiful land” — received the completely true rating on Politifact’s Truth-O-Meter because, yes, there is a federal prohibition of whole milk in schools.)
There’s just not enough people understanding that this is happening. Many people think the kids do have the choice, but they don’t.
My petition, that I started in late 2019, has nearly 25,000 signatures online. The links are with my written statement — and 5000 were mailed to me by snail-mail — so over 30,000 total. Nearly half of those are from Pennsylvania, and New York would be second as far as signatures, but we have signatures from every state in the nation.
When I looked through to vet it, to balance it and make sure we didn’t have people from other countries in these numbers, I started to see who was signing, from all walks of life — from farmers, to parents, to teachers, doctors, and on and on. Even state lawmakers, I recognized some names on there. The whole milk choice petition has opened eyes.
Thank you for this hearing, and please help bring the choice of whole milk back to our schools. Our children and dairy farmers are counting on us.
If I could just have a couple more seconds here, this is personal for me, as a grandmother. One of my grandchildren is lactose intolerant, or I should say, that’s how it would seem, but she has no trouble drinking whole milk at home. Her doctor says she may be lactose intolerant because she keeps coming home from school and having stomach problems at the end of the day. She now is not drinking the milk at school, just drinking whole milk at home. She can’t drink the skimmed milk, and there’s really some science behind that.
A professor in North Carolina (Richard C. Theuer, Ph.D.) mentioned this role of milk fat actually slowing the rate of carbohydrate absorption — which is the lactose. (As a member of the National Society for Nutrition and Adjunct Professor in the Department of Food, Bioprocessing and Nutrition Sciences at North Carolina State University, Theuer addressed this in at least two public comments on the Dietary Guidelines Federal Register docket, once in 2018 and then again in 2019.)
I’ll end my comment here, sorry I went a little over.
— At the conclusion of my time, Pennsylvania Senate Majority Policy Committee Chairman Mario Scavello said this was a good place for me to end my testimony because “what we’ve heard here today is children are not drinking the skim milk and the low-fat milk. We’ve got to get this corrected, the more I listen to this,” he said. Then, turning to Nelson Troutman on the panel in regard to the 97 Milk education effort, Scavello added: “By the way, I did see that 97 percent bale. Thank you for explaining it because I thought, what is this about? I could see the bales while driving on I-80.”
ROSEMONT, Ill. — Strategic integration. Gen Z Gamers. Point of origin for innovation. Dairy-‘based’ positioning. Virtual authenticity. Over a decade of planning.
My head is spinning after a DMI press conference this week on three new “activations” for June Dairy Month in the digital world of video games, including “Beat the Lag,” a gamer-recipe contest and the integration of Fuel Up to Play 60 into the virtual world of video gaming exercise.
Dairy Management Inc. (DMI) has been on a 12- to 13-year path to streamline, dilute, blend and innovate dairy with a focus squarely on Gen Z since 2008 in the schools, now integrating rapidly into the digital spaces where dairy checkoff leaders say Gen Z is changing the world of marketing for companies globally.
According to DMI, Gen Z is not interested in facts like vitamins and minerals. They want to know how foods and beverages will make them feel.
On the other hand, DMI leaders described Gen Z as “very capable of discovering facts,” of “looking deeper” for “authenticity” and “relatability,” that when communicating with Gen Z “you want to be really factual and transparent and tap into the emotions that they care about.”
(The paradox of virtual authenticity is hard to overlook.)
Dairy-based or ‘sprinkled’ is the future, some cheese on a pizza or snack. Butter in a cookie, splash of milk in a smoothie, a bit of cream added to a soda, a half ultrafiltered low-fat milk / half almond beverage blend. A little here, a little there. Don’t confuse or interrupt DMI’s ‘strategic integration’ flow by talking about having a glass of whole milk or a piece of cheese. DMI’s website has a few posts lately talking about how blending is the future of dairy — tailor-made for flexitarian messaging in the confusing and not-quite-factual climate-impact comparisons and discussion.
It’s all about innovation of new products, integrating (and diluting) milk as a component of beverages. Looking deeper, it’s really all about increasing margins for processors beyond the farmgate in the ramped up $100 billion dollar global “functional beverage” space, also known as ‘designer beverages.’
Gen Z has been DMI’s target for over a decade as the gateway, the point of origin for how strategic integration innovation will be accomplished with dairy farmer checkoff funds.
Anne Warden, executive vice president of Strategic Integration for DMI spoke in the zoom press conference May 26, explaining how DMI has been “focusing on the youth audience ever since making its commitment to USDA on school nutrition (in 2008).”
In fact, in a May 25, 2021 blog post by Warden, she talks about the future of dairy in schools, that Gen Z wants flashy packaging, unique combinations and sustainable dispensers.
According to Warden, Gen Z is the generation DMI has been working on since the launch of Fuel Up to Play 60, which was followed by the formation of GENYOUth and the signing of the memorandum of understanding (MOU) with USDA under Secretary Tom Vilsack in that 2008-10 time period.
This is the very same time period in which the option of whole milk as a beverage choice was removed from schools, even in the Smart Snacks rules governing ala carte beverage purchases and vending machines – paving the way for strategic integration. Put some milk in that soda, maybe? (That will make sense in a few minutes).
Last fall, Farmshine reported on the “partnering” DMI did with Gen Z ‘gamers’ in the popular Minecraft game, which included three dairy farms hosting three gamers to see how dairies operate. But the partnership that is now moving into integration warp-speed through three June Dairy Month “activations” has been years in the making.
Warden was hired by DMI in May of 2019 to head the strategic integration. Prior to that date, she spent three years at Edelman with DMI’s strategic integration as her primary project for Edelman. Warden’s resume at Linked-In notes DMI as one of Edelman’s largest and most integrated services clients.
This means ‘strategic integration’ — courtesy of all-knowing Edelman — has been underway at DMI for more than 5 years. Have we ever heard of it before now? No, because this is what the ‘precompetitive’ Innovation Center works on, where future strategies are decided upon via DMI’s ‘industry partners’ and quietly implemented with dairy farmer dollars.
Warden laid out the rationale for the three activations aimed at using Gen Z’s “love of video games to capture their attention and show how dairy products fit well within their gaming occasions during the day.”
DMI president Barb O’Brien stressed the point that DMI is looking at gaming as a platform with the objectives of communication and “research.”
“The work that’s coming through now with new product concepts, make this a consumer research method to understand where Gen Z will place their dollars in considering new products,” O’Brien related. “So it’s fantastic. (Gaming) is a channel, an occasion and a communications vehicle. It’s all about contemporizing how we do the work of the checkoff. It is the new advertising. Television is one-way. This is interactive.”
(Authentic, relatable, interactive content is deemed the key to communicating with Gen Z in a virtual digital world of gaming to bring forth new products. Let that paradox sink in.)
One of three activations discussed was “Beat the Lag.”
Lag is a term used to describe the frustration that happens when a video game’s graphics won’t load fast enough so the gamer has to wait (like the frustration of your computer screen freezing). DMI is taking that concept, partnering with Jordan Maron, known as Captain Sparklez to his 11 million followers to address “human lag.”
Over the past six weeks (ending May 29), DMI has been running a gaming recipe conest through Maron, soliciting “dairy-based” snack, beverage and recipe ideas from his followers, what do they eat to ‘Beat the Lag?’
DMI wants Gen Z to bring the ideas. “We don’t want to tell them what to eat (or drink),” said Warden.
During the press conference Maron noted that he got involved when approached by DMI because he “eats a lot of dairy.”
“One of my favorite foods is pizza,” said Maron. “I’m an especially huge fan of drinks that have added milk or cream in them, like sodas with cream added… They’re delicious. I love them.”
(A splash of milk or cream in a soda is something that had a hey-day three generations ago. Apparently, it’s making a comeback.)
Maron talked about doing some focus group work for DMI on “new product innovations” last fall along with a virtual farm tour.
“Me, and a few people who are followers of mine, got together in a call, and DMI shared their ideas for products they want to roll out down the line,” said Maron. “We took it to my focus group of three people and then turned that into Instagram story slides I was able to share out with a wider range of followers, and they were able to give their feedback as to what products would interest them, that they would buy or eat in the future.”
Maron said he hoped that his focus group gave DMI “some good insight.”
The press conference moderator, Scott Wallin of DMI, promptly steered away from the product innovation revelation and brought the conversation back to the farm tours and sustainability, saying DMI hopes to show Gen Z gamers the dairy story through Captain Sparklez and others.
Wallin introduced Gen Z dairy farmer Nevin Lemos of California. The 24-year-old fourth generation dairyman started his own 400-cow Jersey herd on a rented farm near his family’s dairy at the age of 20. Lemos admitted he doesn’t have much time for gaming over the past 10 years as his time and passion are spent working his dairy business.
Lemos observed that Gen Z is a generation able to “look behind the façade, to look deeper.”
Calling Gen Z a “savvy audience,” Warden said they exist almost entirely in the digital world, moving between multiple devices and media platforms daily, with 90% of Gen-Zers gaming.
They are aware of what companies are doing for good – beyond making money — and will turn away from products that “don’t match their values and their desire for authenticity,” said Warden, emphasizing Gen Z’s interest to know what companies are doing for the environment.
“We’re going to make sure farmers they can relate to (like Lemos) are showing up in their social media feeds to tell that story,” she said.
Gen Z gamer Maron talked about what it was like last fall to do the virtual farm tour with Gen Z dairyman Lemos, seeing how cows live and are fed and having one named after him: Sparklez.
The activation of DMI’s “Beat the Lag” is aimed at more than sustainability, said Warden, it is to “help re-position milk and dairy to meet Gen Z’s wellness needs.
“It’s about balance,” she continued. “Gen Z is less interested in the particulars of vitamins and minerals in their food or beverage. They are more interested in what that food is going to do for their bodies, how it is going to make them feel.”
Warden said DMI’s research shows that, “Some of dairy’s biggest opportunities with Gen Z are positioning as a food that will sustain their energy throughout the day or let them feel relaxed and recharged while doing the things that they love.”
“Beat the Lag” is themed around “dairy-based foods and beverages giving gamers an energy boost or a tasty pick-me-up after a long stretch of gaming,” said Warden. “We’re not going to tell them what to eat, we’re letting Jordan Maron (Captain Sparklez) and Rosanna Pansino, a gamer and culinary influencer, get gamers suggesting the ideas in ways they can relate to.”
Maron talked about ‘gamer fuel up’ youtube videos he did with Pansino, one being pizza pockets (with cheese).
“This is a contest, and when the (Beat the Lag) contest is all wrapped up, we’ll look at the recipes submitted,” he said, indicating that the winners will be shown in stages through the Minecraft game and win gaming prizes.
In addition to pizza pockets, other snack recipe ideas at the usdairy.com website under “Game On” and “Beat the Lag” include a bowl of vegetables and avocados, with the tiniest sprinkling of grated cheese. A demonstration is posted there also for making “Pixel Jam Heart” cookies.
During the videos, Maron and Pansino talk about the contest suggesting smoothies, dips, protein drinks and things made with yogurt as ideas for creative contest submissions.
DMI’s O’Brien said: “This is today’s new form of advertising. It’s an opportunity to set the record straight on the nutritional side (vs. major advertising in all venues by plant-based dairy alternatives.)”
She said this avenue allows for “the exchange of factual information,” but was quick to point out that those nutrition facts “are not what is driving Gen Z’s choices.”
Bottom line? The virtual digital world of Gen Z gamers is, according to DMI president O’Brien, “the forum for putting forward innovation, for putting forward innovative products that are relevant to today’s lifestyle. We will be leading with products that are designed for gamers, by gamers, we know will have a much bigger appreciation beyond just gamers…
“We’ll see those products at retail. We’ll see those products at traditional foodservice. This is the point of origin for that innovation, and the inspiration,” she stated matter-of-factly.
There’s a lot to digest here, pieces of a dairy transformation agenda funded by farmers through checkoff. It’s important to know what checkoff dollars are doing in the integration phase of a 12 to 13 year plan to join the milk-disruptors with dairy-based innovations, now putting Gen Z gamers virtually in charge of how DMI’s products that are ready to roll down the line, come to market.
Meanwhile, a Hartman Group survey recently showed Gen Z prefers fast food and familiar tastes with a much lower attention paid to local, fresh products than prior generations. It’s no wonder. This generation has been worked over by PepsiCo, Domino’s, Sodexo, General Mills, brought into schools by USDA via the MOU marriage of low-fat / high-carb Dietary Guidelines and low-fat / high-carb promotion through Dairy Checkoff’s ‘school wellness foundation’ GENYOUth.
In this game, the obvious questions are: Who plays? Who pays? And who wins?
After that trip into virtual authenticity, I need a tall cold glass of real whole milk to relax and recharge.