Category Archives: Dairy

Part One: What’s driving rocky road for milk prices?

Posted on by
3
The stunner in the USDA FAS data is the U.S. imported 51% more Whole Milk Powder (WMP) in the January through May 2023 period vs. year ago. Looking at import volumes vs. All Milk prices, Fig. 1 shows the pattern: From 2008 to today, whenever there is a period of high farm milk prices, WMP imports increase, and farm milk prices fall. While cheese imports are down 3% YTD, non-cheese dairy exports are up 80% for a 9.2% total increase based on straight volume. Retired co-op executive Calvin Covington recently figured the January through April imports up 15% on a total solids basis. Graphic by Sherry Bunting compiled from USDA FAS and NASS data

— WMP and other imports accelerate, cow-less lab-protein analogs become ‘extenders,’

— Class I sales keep declining, fresh Italian cheese production down, inflation drives CPGs to reduce unit-sizes,

— RNG-driven dairy construction accelerates concentrated growth in cheese-heavy Central U.S.

By Sherry Bunting, Farmshine June 30, 2023

EAST EARL, Pa. — Current milk futures and dairy commodity markets have turned sharply lower and signal a rocky road ahead for farm level milk prices. Because of the lag times built into federal milk pricing, the most recent steep losses in spot cheese markets will hit the Class III price and create more Class I mover losses via the ‘average of’ method to hit milk checks in July, August and September. 

Factors driving this include: declining Class I sales and fresh Italian cheese production, inflation-driven unit-size shrinkage, two months of reduced dairy exports and five months of increased dairy imports, and the advertising of cow-less lab-protein analogs as ‘extenders’ for food processing.

The May Milk Production Report confirmed that the Central U.S. is, indeed, “awash in milk.” Part two of this series will zoom into the geographic shifts in the concentration of milk growth, driven largely by Renewable Natural Gas digester projects for the California RNG gold rush. Much of the new dairy construction in the cheese-heavy Central U.S. is focused on manure to energy, not necessarily on milk and cheese to consumers.

The Production Report was released after the futures closed on June 21. In the next four trading sessions from June 22 through 27, Class III contracts for July through September lost $1.50 per cwt, on top of previous losses of more than $2. 

By June 28, the expiring June Class III milk futures contract was at $14.92, and at $14.91 in the June USDA announced.

The ‘market’ has simply ignored USDA’s May 30 announcement that the government will bring in a ‘game changer’ to purchase 47 million pounds of cheese for food banks and schools as block and barrel cheese plunged to $1.31 and $1.39 per pound, respectively, by Tues., June 27.

USDA confirmed last week that the first round of its bid solicitations for the first phase of the 47 million pound cheese purchase won’t open until October. Bids and deliveries will come in stages from fourth quarter 2023 through mid-2024. 

This means cheap milk will make cheap cheese, which could get even cheaper if inventories build in anticipation of selling that cheese at a tidy profit into the seasonal demand increases that begin in October, along with these announced government cheese purchases. (Who needs a make-allowance raise with this game in town?)

For the past several weeks, USDA Dairy Market News has been reporting spot loads of milk in the Central U.S. selling as much as $11 per cwt below the Class III price. DMN also reports milk from the Central U.S. growth region is moving farther to find a home. We are also hearing from readers about substantial milk being dumped in the Midwest, while a few independent dairies in Minnesota, one milking over 1000 cows, have been told by their creamery that their milk is not needed after schools close.

May milk production, nationwide, was up only 0.6% from a year ago. The 24 major monthly states were up by 0.8%. Milk cow numbers did not grow from April to May and are running just 13,000 head above year ago. This modest increase comes on the heels of no net gain in milk production for 2022.

All year, the monthly USDA World Ag Supply and Demand Estimates (WASDE) kept increasing the 2023 U.S. milk production forecasts, based on what it said are ‘more milk cows and less output per cow.’ The most recent WASDE walked that production forecast back a bit, but still expects U.S. dairies will milk an average of 9.415 million cows in 2023. 

Then, somehow, the May Production Report pegged the number of milk cows on farms at 9.424 million head, even after the loss of 18,000 milk cows in a fire in west Texas in April. This is how tight the figuring has become on what we are told today is a surplus of milk and a lackluster demand.

The idea of a milk surplus that is big enough to drive these current price losses does not line up with USDA’s Jan. 1 cattle inventory report. So, in May, the WASDE began to walk it back, noting higher feed costs, reduced milk margins and higher beef cattle prices will slow the flow of milk.

Where are the cattle coming from? The Jan. 2023 inventory showed milk cow numbers were virtually unchanged from Jan. 2022 at 9.4 million head. The number of dairy heifers over 500 pounds was down 2% at 4.337 million head — the lowest number since 2006. Within that heifer number, expected calvings from Jan. 1, 2023 to Jan. 1, 2024 were also 2% lower than for Jan. 2022 to Jan. 2023. The next semi-annual cattle inventory report will be released in three weeks on July 21.

The Report’s smaller dairy replacement inventory is believable given the fact that offerings have been selling $300 to $500 per head above year ago levels, and the few weekly dairy cattle auctions throughout the U.S. have seen offerings down 30% below year ago… until June, when prices came under pressure on a suddenly increased offering at auctions over the past two weeks. 

Meanwhile, dairy cow slaughter rates are also increasing, according to USDA, especially in the Midwest and Southwest, up 31 and 47% above year ago, respectively.

While the WASDE has forecast per-cow output to fall by 55 pounds per cow per month in 2023, the May Production Report pegged an 11-pound per-cow per month increase.

This means, it took just 13,000 more cows nationwide, and just 11 more pounds of milk output per cow per month to flip the switch to sharply lower milk prices based on – suddenly — too much milk? (Geographic concentration of milk growth plays into this equation, and we’ll discuss that in Part Two.)

In Part One, we look at the other supply and demand factors that are having a direct impact on where farm level milk prices are headed. These factors fill in the gaps left by the perplexing and contradictory sets of USDA dairy data.

I.               Fresh fluid milk sales and fresh Italian cheese production both declined, pushing more available spring-flush milk into storable products.

Fluid milk sales January through April were down 2.8% from a year ago, and as bottlers slowed school packaging ahead of summer recess, the June 5th Dairy Products Report showed April production of fresh (made to order) Italian cheeses also declined 2.6% vs. year ago.

Meanwhile, butter production was down 4.9% while nonfat dry milk production increased just 1.9%, and skim milk powder production was down 22.4%. This put more of the available ‘spring flush’ milk into production of American cheese, up 2.3% vs. year ago in April, and the accompanying dry whey and whey protein concentrate production up 1.7 and 7.2%, respectively. 

Record volumes of dry whey and cheese have been coming to the daily CME spot auction, driving down the spot prices that drive the National Dairy Product Sales Report prices that are then used in federal class and component pricing formulas.

II.            Inflation pressures consumer demand, but inventories are not burdensome.

The May Cold Storage Report released on June 23 was a head-scratcher. Despite the ramped up American cheese production in the Dairy Products Report, the Cold Storage Report showed both the total amount of cheese in inventory, and the amount of American cheese in inventory, are both actually down 1% from a year ago at the end of May, while butter inventory was up 14% against last year’s higher-price-driving short supply.

Meanwhile, producers in the Midwest are being told that milk co-ops and buyers are facing cheese sales declines and that there’s not enough capacity to process all the milk now being produced in the region, with the existing capacity also experiencing labor and transport disruptions.

Dairy demand has stagnated, the analysts say, after months of high inflation. The May dairy consumer price index (CPI) was more bearish than the overall CPI. Dairy CPI was up 4.6%, with cheese up 3.6%, ice cream up 8% and other dairy products up 9.3% while whole milk decreased 3.4% and other non-whole milk increased 0.6%.

Inflationary pressure is driving some consumer packaged goods companies (CPGs) to trim unit-sizes for an appearance of stable consumer pricing. For example, we see unit-size shrinkage in cheese packages and slices. Not all American cheese slices today are 8 ounces, some are 6. Such moves effectively ration demand. 

III.            The stunner is dairy imports, up 9.2% with Whole Milk Powder imports up 51% year-to-date.

Looking at import volumes vs. All Milk prices, the pattern is clear (Fig.1). From 2008 to today, whenever there is a period of high farm milk prices, Whole Milk Powder (WMP) imports increase, and farm milk prices fall. 

WMP is basically farm milk from another country, in bulk dried form, not a specialized product. It can be used in processing virtually any dairy product, containing all of the milk components — both fat and skim solids.

From December 2022 through April 2023, the U.S. imported the highest percentage of dairy production equivalent since 2016. And there is more milk equivalent comparison today than in 2016. The National Milk Producers Federation’s monthly market report confirmed this. 

Then May imports worsened this trend. 

Digging into the June 12 USDA Foreign Ag Service (FAS) Import Circular, the U.S. imported 80% more non-cheese dairy products from January through May vs. year ago. At the same time, cheese imports were down 3.3%. Combined, the total cheese and non-cheese imports were up 9.2% vs. year ago.

But the stunner in the data is the U.S. imported 51% more WMP in the January through May 2023 period vs. year ago. 

It’s no wonder that the USDA Dairy Market News reported on June 15 that, “Dry whole milk processing (in the U.S.) is limited, despite hearty milk volumes.” 

The report went on to say that even as seasonal milk output recedes “market contacts suggest dry WMP market tones may remain steady (at the current lower price levels) due to lighter demand.”

Not surprising, given the U.S. imported more WMP in May (550,000 kg) than for any month since April of 2020. WMP was imported at a record-setting pace during the pandemic while milk was being dumped in the U.S. and production-base-programs were tightened on U.S. dairy farms by milk cooperatives and buyers. 

As the cumulative 2023 WMP imports accelerated in May, milk prices are set to take the sharp turn lower.

The year-to-date imports of butter, butterfat and butter oil are also well above year ago as part of that 80% increase in non-cheese imports January through May 2023 vs. year ago.

The June WASDE raised dairy import forecasts, yet again, especially on a fat basis, and it again lowered dairy export forecasts. The Report sees butter and nonfat dry milk (Class IV) continuing to sell stronger on better demand, while demand and prices for cheese and whey (Class III) are further reduced. 

This combination reduced the WASDE forecast for the 2023 All Milk price to $19.95, down 55 cents from the May forecast. Part of this is the Class IV over III divergence that is substantially lowering the Class I fluid milk price under the ‘average of’ method, which took more than $1.00 off the advance Class I price mover for July, announced last week at $17.32. It would have been $18.34 using the previous ‘higher of’ method.

IV.          Lab-created dairy protein analogs are advertised to processors as ‘extenders.’

Another emerging factor is the lab-created dairy protein analogs, which are the excrement of microorganisms that have been bioengineered with bovine DNA. These proteins are advertised in dairy food and manufacturing magazines as carbon-footprint-lowering, interchangeable ‘extenders’ for production of cheese, ice cream and other dairy foods.

The companies that are ramping up this fermentation-vat-lab-protein are doing limited consumer marketing. Mainly, they pursue a B2B model (business to business, not business to consumer) and try to capitalize on ESG scoring benefits based on who-knows-what-calculations that large processors are seeking as they navigate the investment, credit, and retail shelf-space ESG decisions up and down the supply chain.

No one knows how much lab-dairy-protein is being used at this time — or in what brands of dairy products — because these proteins do not have to be labeled, and they are not part of any dairy market or production report.

The Bioengineered Food Disclosure Law was passed by Congress in July 2016, and USDA established the national mandatory standard for disclosing foods that are, or may be, bioengineered in December of 2018. This Standard was implemented on Jan. 1, 2020 with mandatory compliance for all food manufacturers by Jan. 1, 2022.

According to USDA, the Standard defines bioengineered foods as “those that contain detectable genetic material that has been modified through certain lab techniques and cannot be created through conventional breeding or found in nature.”

The lab-dairy-protein-analogs are the harvested excrement of fermentation-vat-grown bioengineered yeast, fungi and bacteria, so BE labeling is not required due to the ‘detectable genetic material’ loophole. The modified genetic material is in the microorganisms, not their excrement.

-30-

Northwest PA farmers fear future land-grab as U.S. Fish and Wildlife proposes Refuge designation for 798,000 acres of French Creek watershed

Posted on by
1

PREVIEW – By Sherry Bunting, Farmshine, June 30, 2023

WATTSBURG, Pa. — Kevin and Amanda Bush are fourth generation dairy farmers with their children Ava, 17, Clara, 6, Jarrett, 5, Georgia, 1, and 110 milk cows. On an early June day, unseasonably cold even for Erie County, Pennsylvania, a visit to the Bush Family Farm shed light on farmers’ concerns about a U.S. Fish and Wildlife Service proposal to designate 798,000 acres of French Creek watershed as a National Wildlife Refuge. Potential land acquisitions could begin a year from now if approved by the USFWS Director later this summer. Mark Muir from Erie County Farm Bureau, who raises hay and livestock, and Brian Young, whose extended family operates a nearby seventh generation farm were part of the discussion of the proposed protection area that would stretch 117 miles from Chautauqua County, New York south through Erie, Crawford, Mercer and Venango counties, Pennsylvania. The region is home to farms and other businesses that are the lifeblood of rural towns and counties. They use conservation practices and a lot of grazing and haying, with a vested interest and pride in their stewardship and relationships with existing conservation efforts. 

On a map showing land protection ‘areas of interest,’ whole farms are included, not just setbacks (see map in main story below). This includes many dairy farms ranging from small herds managed by young next-generation farm families, like the Bushes, to larger farms with multiple generations of families involved. USFWS wants to purchase land or use permanent easements for whole farms. ‘You can still farm it,’ they say. But when specific questions were brought to an April meeting, the locals came away with very few answers. They anticipate another meeting in July. 

Why are farmers concerned? They fear future use of eminent domain and farming restrictions as dominos start to fall. A National Refuge designation with Land Protection Plan, is perpetual. They fear the loss of rented ground to feed their cows. They worry about their towns and counties. They want to know the minimum goals of the project so they can have an intelligent conversation with USFWS. They have asked for scientific studies to be shared that show how the freshwater mussel population and other aquatic life are actually doing today vs. 10, 20, 30 years ago.

It feels like the start of what could become a gradual 30 x 30 land grab. Surely, if this was happening in agricultural communities of southeastern Pennsylvania along the Susquehanna River in the Chesapeake Bay watershed, instead of northwestern Pennsylvania in the French Creek watershed, there would be much more attention paid. See main story below as published in July 7, 2023 Farmshine, and stay tuned as we follow this developing story.

They say National Refuge for mussels will move at snail’s pace, but farmers see muddied water ahead

MAIN STORY – By Sherry Bunting, Farmshine, July 7, 2023

WATTSBURG, Pa. — The rural French Creek watershed is in the sights of the U.S. Fish and Wildlife Service for a proposed National Wildlife Refuge that could span nearly 800,000 acres, stretching 117 miles from the headwaters in Chautauqua County, New York across the Pennsylvania border through Erie, Crawford, Venango and Mercer counties.

Meetings this spring in Meadville and Edinboro were part of the ‘public scoping’ phase. They were packed with citizens and fraught with questions, deep concern and objections. 

An initial public comment period ended May 19.

From the Southwest corner of New York through the Northwest corner of Pennsylvania, the French Creek river and watershed runs through rural communities where farming is the lifeblood. If this potential land-grab were happening in southeastern Pennsylvania in the Chesapeake Bay watershed, more attention would be paid to the concerns of the farmers and communities.

Vicki Muller, the proposed Refuge’s project manager, told local television station FOX-66 that the U.S. Fish and Wildlife Service (USFWS) is “looking to protect and preserve more wildlife habitat within the French Creek watershed, so this plan is just the beginning stages of that.”

Mentioned were freshwater mussel species, said to be the only populations east of the Mississippi, along with several species of fish, wetlands, and migratory waterfowl.

Land acquisitions are about a year away, Muller confirmed.

Farmers and other community members, along with managers of existing conservation efforts, say federal land acquisition is not necessary to meet environmental goals because those who are living, working, farming in the region already work with local conservationists to manage the land in ways that have been recognized for success.

French Creek was named Pennsylvania’s “River of the Year” in 2022. 

Opponents of the Refuge argue that its designation could place federal regulation on private landowners for perpetuity. They say an accompanying Land Protection Plan (LPP) could take properties and money off local tax rolls, move land ownership away from local residents, and take products generated on the farmland away from local communities, weakening the region’s economy and food security.

To top it off, USFWS could offer no evidence that this would improve — at all — the status of French Creek and its aquatic life, nor any evidence that either are in trouble.

USFWS is currently in the process of reviewing public comments and stakeholder feedback and is developing a final plan for approval by the USFWS Director later this summer, according to a Q&A document at the webpage devoted specifically to the French Creek proposal at https://www.fws.gov/project/evaluating-new-refuge-lands-french-creek-watershed. 

A June 4 ‘Public Scoping Recap’ is also provided at this webpage, stating the proposal is not yet an official proposal because it is still in the ‘public scope and biological environmental assessment’ phase.

The webpage indicates that the framework would be built after they get the buy-in, after they get the National Refuge designation and LPP approved, and after they complete the biological environmental assessment. That’s when officials say they can answer the probing questions of locals about environmental and land acquisition goals.

Isn’t that putting the cart before the horse?

One of the strategies being used here is to protract the conversation and soothe public concern with assurances that the Refuge to save mussels will move at a snail’s pace.

Essentially USWFS is looking to designate land now for decades of acquisition and that it will answer specific questions as the process moves forward working collaboratively to refine the plan after the designation and plan are approved.

Such circular talk makes farmers and landowners skeptical, uneasy.

Within the “land protection areas of interest” on the ambitious map, there are both small and larger farms, many of them dairy farms as well as beef cattle, crop and produce growers.

“I started looking at the map, and I see I am an area of interest. Everything I own is an area of interest,” said Mark Troyer, a potato, corn and wheat grower, in an on-camera interview during the Edinboro meeting. “I think we can work and live hand-in-hand (with wildlife) and have been doing a great effort. We’ve already been doing a great job.”

Concerns about eminent domain were specifically raised. Muller stated this will not happen. 

Landowners are not convinced. They want to know the endgame. 

They want to know what happens once there is an approved LPP with specified land acquisition timelines. What happens to their farms if they are eventually surrounded by acquired land? What happens to the farms outside of the areas of interest that will find themselves next to a National Refuge? What is the ultimate land acquisition goal?

What are the actual environmental goals, and why does the federal government need to acquire the land to meet those undisclosed goals, instead of supporting existing local conservation efforts that show measurable success?

They share the concern that once the designation and LPP are approved, this could take on a life of its own… forever.

A pristine view across the road from the Bush Family Farm. Behind the trees is French Creek. The Bushes wonder why land acquisitions are needed. Farms throughout the watershed do a good job. They wonder what will happen to their farm if there are willing sellers up and down the road from them…

According to the USFWS Q&A, the land protection plan will take decades to complete as the number of willing sellers and the availability of funding will determine the timeline.

With that in mind, U.S. Congressmen Mike Kelly (R-Pa.) and Nick Langworthy (R-N.Y.), whose congressional districts cover the “areas of interest” in the draft proposal, along with U.S. House Ag Committee Chairman Glenn ‘G.T.’ Thompson (R-Pa.), led a letter calling on the USFWS to reconsider federal designations on private land.

In the letter, the members of Congress recognize that a healthy, vibrant ecosystem along French Creek must continue to be protected, but also that local farmers and residents are better suited than Washington bureaucrats hundreds of miles away to dictate how this land is best protected.

Mark Muir with the Erie County Farm Bureau grows hay and raises livestock in the area. He has been involved in the meetings, asking questions at the front end of this proposal.

Farmshine met in June with Muir at the Bush Family Farm outside of Wattsburg in Erie County. He was joined by Kevin and Amanda Bush as well as Brian Young, whose extended family operates a nearby 7th generation farm.

The Bush farm has been in the family since 1939. French Creek borders it, surrounded by grasses across the road from the dairy barn and hillside grazing paddocks. The Bushes also rent crop ground in the watershed.

They and others are concerned that once a final plan is developed and approved later this summer, land acquisitions from willing sellers could eventually morph into a land-grab that won’t stop until all of the “areas of interest” are federally owned or controlled by the USFWS.

The designation of the land as a National Wildlife Refuge and the approval of an LPP would be the first concrete steps.

“We are told there is nothing set in concrete yet,” says Muir, “But we had many questions they couldn’t answer at the meetings. We tried to talk to them about farm BMPs (best management practices), but they didn’t understand the concept.”

Because the USFWS is still in the ‘public scoping, comment review and final development’ phase,’ officials won’t engage in land use questions or what-if scenarios. They don’t answer questions that help farmers understand the ultimate impact because they say that completion of the Refuge would be “decades away.”

“Decades away” is really tomorrow for most farmers who continually look ahead at their operations and land use, making plans for future generations.

Mark Muir (right) and Brian Young stand across the road from Bush Family Farm by a section of French Creek that runs parallel. This is just one small part of what could be a massive target for federal land acquisitions and easements if the watershed is designated a National Refuge.

“At the end of the day,” says Young, “Fish and Wildlife can target any wildlife and the ecosystem areas that an environmental assessment deems necessary. They are not like the BLM or NRCS. The USFWS is comparatively small and does not have the cross-correlation to agriculture.”

Furthermore, land acquisitions are funded by duck stamp sales, land access fees, and other sources of revenue that make USFWS less reliant on tax dollars to use their authority. In other words, Congressional oversight — from an appropriations standpoint — is lacking.

If a final plan and Refuge designation are approved, the gradual creep of land acquisitions would begin, giving USFWS oversight of current working lands that could affect the fate of farming in the region, in particular dairy and beef cattle.

Without data and without answers, this becomes “a slippery slope with no guard rails,” says Muir. “We want to be objective about it, and to have those conversations at a July meeting. We need certain information to have a meaningful conversation so we can see if and where we might be able to work together.”

Meanwhile, Kevin and Amanda and their four children milk 110 cows and raise their youngstock. They are a small family dairy on land that the Bush family has been farming for 85 years.

There is not only a legacy here, but also progress as they have implemented many BMPs, just as other farms have throughout the region.

Muir notes that NRCS funding, and other cost-shares, don’t seem to flow as much in the Northwest direction of the state. 

He says BMPs on farms could improve even more with cost-sharing and a productive dialog, which is preferable to a multi-decade federal plan to acquire the land.

“If this is supposed to be to save the freshwater mussels, and they have these dollars to spend, why not try other approaches first?” Amanda wonders, adding that they could promote BMPs that farms can do even better than what they are already doing, and cost-share some of that. “It would go a lot farther instead of designating a Refuge, buying up land, and disrupting family farms, local towns and their economies.”

“We do no-till and minimum tillage here. We do cover crops wherever we can, and we are working now already with the County Conservation District,” Kevin adds.

Bottom line, these and other young farmers want to continue farming and producing food for their communities. They are part of these rural communities where cows and crops, grazing and haymaking, youth programs and showing at the county fair are part of the fabric.

Maybe it’s more important to identify the rural community fabric that is at stake — the younger generations who want to continue. As farm families of all sizes, they are accustomed to working with USDA, NRCS, county conservation districts, local conservation efforts that all have connections to agriculture, so they speak the same language.

But when Fish and Wildlife makes its entrance with a draft proposal for a National Refuge of immense proportions across so many miles, acres and counties — having no crossties to agriculture — that’s a scary place for any farm family to be, and it can lay threadbare the fabric of the communities beyond the farms.

To be continued

AUTHOR’S NOTE: A USFWS National Refuge designation and Land Protection Plan includes acquisition timelines and a “Landscape Conservation Design” to “ensure actions contribute to the landscape-level vision,” according to USFWS documents. USFWS is a Bureau within the Department of Interior and operates in a quasi-independent fashion, having federal administrative authority to establish and manage such refuges and complete them over time with its own sources of funding. In 2021, at the start of the new Administration, the USFWS updated its “Climate Adaptation Strategy” to be a framework that is part of the Administration’s “U.S. Climate Resilience Toolkit,” equipping USFWS to “take immediate action to build ecosystem resilience in the face of climate challenges.”  (One thing to keep in mind is to look overseas at the Netherlands, where the climate-based land-grab is in full swing. Farms have been ordered to cut from 15 to 90% of their production or sell their farms to the government. The farms identified for 75 to 90% production cuts to be economically unsustainable are those that are closest to the EU Nature Preserves designated decades ago.)

USDA inches closer to a national FMMO hearing

Posted on by
2

Consensus evident on some key proposals, such as returning the Class I mover formula to the ‘higher of’; but 10 packages contain over 30 variations and a few new biggies.

New to the party are:

  • AFBF wants to end ‘advance’ pricing of Class I;
  • NAJ wants uniform component-based pricing of Class I in all Orders;
  • MIG, made up of 7 fluid processors want organic exemptions, an assortment of new credits, and they want to knock $1.60 off the Class I differentials, forgetting they already get over $3.00 in ‘make allowance’ credits while not incurring those costs
  • California Dairy Campaign seeks an extension to consider alternative pricing formulas
  • Some proposals want to drop products (500-lb barrel cheese) from the FMMO formulas and price surveys, others want to add products (ie. 640-lb block cheese, mozzarella, unsalted butter)
Dana Coale, Deputy Administrator (top, left) and Erin Taylor, Director (top, right) and their USDA Dairy Division staff engaged with leads for 30 hearing proposals contained in packages submitted by 10 organizations in the pre-hearing information session Friday, June 16. Tim Doelman (bottom), CEO of Fairlife, a Coca-Cola subsidiary, explains one of the Milk Innovation Group’s (MIG) proposals that bucks the consensus on going back to the ‘higher of’ in setting the Class I mover. MIG wants to keep the averaging method with their ‘Floored Adjuster” proposal. He said returning to the ‘higher of’ prevents processors from forward-pricing their milk like soda and other beverage companies do for other ingredients. MIG also wants to knock $1.60/cwt off the current Class I differentials, and they want an assortment of new credits (obviously forgetting that fluid milk processors already get more than $3/cwt in various Class III and IV product manufacturing credits. These so-called ‘make allowances’, are built in as credits on the Class I and II prices also, for costs that fluid processors do not incur.) Zoom screen capture

By Sherry Bunting, Farmshine, June 23, 2023

WASHINGTON – In preparation for a potential national Federal Milk Marketing Order (FMMO) hearing, the Dairy Division of USDA’s Agricultural Marketing Service had a pre-hearing information session Friday, June 16. During the day-long session, held virtually through zoom, Deputy Administrator Dana Coale, Director Erin Taylor and others heard presentations of the more than 30 pieces contained in proposals submitted by 10 organizations, and they engaged in questions for clarification as well as accepting requests for data before the 10 proposals were to be modified for final submission June 20.

While the Secretary of Agriculture has not yet declared a hearing, the AMS Dairy Division has publicized the timelines and action plan.

Coale stated that mandated time frames by Congress, govern the amount of time from the point at which a proposal is received to the end of a hearing 120 days later. “All of our proposed time frames are based on keeping us focused to meet the 120-day mandate,” she said.

“Once submitted, USDA will further evaluate them, and the Secretary will make the determination,” said Coale. “If the Secretary intiates rulemaking, you will see a hearing notice containing all proposals to be heard. This will be mid- to late-July, and we would expect to move forward – if a hearing is initiated – on Aug 23 as the start of that hearing.”

The location will be Carmel, Indiana, and because of the new time constraints, new procedures will be put in place, she said.

“Expect to see a very different process than customarily done to create a very efficient process while maintaining transparency and a robust evidentiary record,” she explained, noting this includes a process for submitting testimony in advance, and a naming vs. numbering convention for exhibits.

After the hearing is noticed, there will be another information session, said Coale.

“It takes an entire village,” she stressed. “Ex parte communication does not begin until a hearing is noticed, so if you have questions or need explanation or discussion on data for submitted proposals, contact us at fmmohearing@usda.gov”

The marquis proposal is the comprehensive package submitted by National Milk Producers Federation (NMPF) that set into motion the Secretary’s call for other proposals. The NMPF package has five proposals, previously reported in Farmshine through various articles since the October stakeholders meeting hosted by American Farm Bureau in Kansas City in October 2022.

Retired cooperative executive Calvin Covington is the lead on one of the five NMPF proposals, which seeks to update skim components to more accurately reflect the percentage of protein, nonfat solids and other solids in a hundredweight of milk today.

Covington said he also expects to testify on the NMPF proposal to raise Class I differentials with a new pricing surface map, something that has not been done since 2007-08, and the proposal to return the Class I base price ‘mover’ to the ‘higher of’. The current average plus 74 cents method has been in place since May of 2019, which produced unintended consequences and losses for dairy farmers.

In a phone interview Tuesday, June 20, Covington explained that after more than a year of task force meetings and discussions via NMPF with its members and their farmer members, “We’ve gotten this far, and we have got a consensus,” he said of the NMPF package.

In addition to updating skim components and Class I differentials and changing the Class I ‘mover’ back to the ‘higher of,’ the NMPF package includes a proposal to modestly update make allowances and to discontinue the barrel cheese price in the Class III protein formula while allowing 45-day forward-priced nonfat dry milk and dry whey to be included in the formula price survey instead of the current 30-day forward-price limit.

“It took a year, and that’s pretty good, to have coast-to-coast consensus on five major proposals,” said Covington. “Then you also read the Farm Bureau’s proposal and there’s pretty good consensus there too.” 

Central to both the NMPF package and AFBF package of proposals is strong support for returning the Class I mover formula back to the previous ‘higher of’ method.

(Farmers have had a cumulative net loss of nearly $950 million, equivalent to losing 53 cents on every hundredweight of milk shipped for Class I use for the past 51 months or 15 cents per hundredweight on the FMMO blend price for all milk across all 51 months — since the change to ‘average of’ was made in May 2019 via the 2018 Farm Bill. In fact, the July 2023 Class I mover was announced June 22, 2023 at $17.32, which is a whopping $1.02 below the $18.34 it would have been under the ‘higher of’ method.)

AFBF supports NMPF’s proposal to restore the Class I mover to the ‘higher of’ Class III or IV, to drop the barrel cheese price from the Class III component and price calculation, to update component values into Class III and IV formulas, and to update Class I differentials, but notes this should be done through careful review where changes are based on a transparent record.

AFBF chief economist Roger Cryan stated that AFBF will defer to NMPF for substantiation on the Class I mover change, but if by any chance NMPF would back away from this proposal, Farm Bureau wants it kept on the table and will defend it.

On adjustment to Class III and IV product make allowances, AFBF supports this under the same logic as the NMPF proposal, but states that “such adjustment cannot be fairly undertaken except in using the data from a mandatory and audited USDA survey of, at least, those plants participating in the National Dairy Product Sales Report (NDPSR) survey.” 

The difference is NMPF says it will seek mandatory surveys through legislation, whereas AFBF sees USDA as already having the authority to do this.

AFBF’s package includes some “new” proposals as well. One would add 640-pound block cheese to the Class III component and price formula and the NDPSR survey and another would add unsalted butter to the butterfat and protein calculation and the NDPSR survey.

AFBF includes a proposal to update the Class II differential to $1.56 to account for current drying costs and to adjust formula product yields and include an adjustment to the ‘make allowances’ for cooperatives and plants that “balance the market.”

The AFBF package also cites “universal milk check transparency requirements” regarding clarity to be shared on producer milk checks regarding pooled volume, Order value and actual payment for pooled and nonpooled milk.

AFBF seeks a seasonal Class I differential adjustment to “address seasonal differences in supply and demand.”

The most notably divergent AFBF proposal is one that seeks to eliminate the advanced pricing of Class I milk and components and the advanced pricing of Class II skim milk and components. It would base both on the 4-week “announced” Class III and IV components and prices instead of the 2-week “advanced” pricing factors. The advanced factors are calculated for a given month during the first two weeks of the previous month and have been part of FMMO pricing for decades.

Edge Dairy Farmer Cooperative, representing farmers in nine Midwest states shipping to 34 processors also proposes ending advanced pricing of Class I.

A newsflash proposal came from the Milk Innovation Group, which was formed within the last few years and testified at the recent Southeast FMMO hearings. 

MIG is made up of seven companies — Anderson Erickson Dairy, Aurora Organic Dairy, Danone North America, Fairlife, HP Hood, Organic Valley/ CROPP Cooperative, and Shamrock Foods.

They want to REDUCE Class I differentials, whereas NMPF and AFBF support updates that increase them. 

MIG companies want to establish Class I differentials that remove the “Grade A compensation” portion that has been built into all Class I differentials from the beginning, as well as removing the “market balancing compensation.” 

Together, these removals would account for the $1.60 per hundredweight base differential that all FMMOs receive. As explained in the pre-hearing session, this would have the net effect of reducing Class I differentials (and producer pay prices) by $1.60 per hundredweight across all FMMOs.

In their justification, MIG writes that it is “far past time for the base Class I differential to be reconsidered in light of market changes, including the exploding growth of dairy beverage alternatives… and the exponential growth of non-fluid milk products often sold in the export market.”

(In this reporter’s analysis and opinion, reducing Class I differentials instead of raising them, ignores the fact that every Class I fluid milk processor – including the aseptic, ultrapasteurized, organic, ultrafiltered and other ‘specialty’ fluid milks – are already getting more than $3.00 per hundredweight embedded as a processor credit in the Class I base price mover by virtue of the cumulative sum of all product make allowances on the Class III and/or IV pricing factors used to establish that mover, but since they don’t make Class III and IV product, they don’t incur these costs. Now they want $1.60 more, plus “assembly” and other credits?)

The MIG also proposes exempting processors of Class I organic milk from paying into FMMO pools as long as they show they pay their producers at least the minimum FMMO price. There are a few other guard rails to this. 

They also want to receive “assembly credits,” specialty credits, and a higher shrink credit (forgetting that they already get make allowance credits that don’t even apply to them).

Citing the “unequivocal decline in Class I sales,” the MIG sets the stage with its package of proposals to transition further away from pricing mechanisms that support local fresh milk in favor of aseptic, extended shelf-life milks and specialty products. Some of the companies in the MIG are making dairy beverages that are not even Class I, and several are getting big into plant-based and other non-milk alternatives and blends. (Is that a conflict of interest?)

USDA AMS also accepted further information on the prior petition by the International Dairy Foods Association (IDFA) and Wisconsin Cheese Makers Association (WCMA) to update make allowances. With this additional information, their petitions are back on the table and are based on voluntary cost surveys.

Additionally, IDFA submitted a proposed alternative method for establishing the Class I mover they call the “Floored Class I Mover proposal.” This is IDFA’s response to NMPF’s proposal to return Class I to the ‘higher of.’

The IDFA alternative is described as using the current simple average of the Class III and IV advance pricing factors to set the base Class I price, and floor the adjuster at the current 74 cents — while allowing that adjuster to increase if a two-year look-back shows it was deficient vs. the higher of. This is a complex two-years back “making producers whole” in the two-years forward with the adjuster always being floored to go no lower than 74 cents even if it turns out that this method benefited farmers vs. the ‘higher of.’

The IDFA Class I proposal contains several pages of justification for the averaging method built around “preserving price hedging and risk management” for processors, particularly those in the ‘value-added’ category,” such as ultrafiltered and aseptic Class I milk products.

But it doesn’t end there…

National All Jersey (NAJ) brought forward its proposal, explained by Erick Metzger. “One mirrors NMPF’s proposal to update skim component factors in the Class III and IV formulas, except we want to see it be a simple annual update based on the previous year’s average, with an appropriate lag time to address risk management tools instead of being based on a three-year average,” he said.

In addition, NAJ proposes that FMMOs 5, 6, 7 and 131 (the Southeastern Orders and Arizona) become multiple component pricing (MCP) Orders instead of pricing on a fat/skim basis.

NAJ also proposes Class I payment requirements to be based on MCP pricing instead of skim / butterfat in all FMMOs, nationally.

“We are proposing uniform pricing across all orders — both on how processors pay for components and how producers are paid for components,” said Metzger. “Extensive updates are needed to Orders 5, 6, 7 and 131, and the needed Order language already exists in the other Orders.”

The NAJ proposal notes that Class I should be paid on actual solids, instead of valuing the skim on a skim basis. “In our proposal, it would be valued or priced on actual skim components,” he said.

What this means is if a dairy farm’s actual components processed (in Class I) were below the standard components in the Class III or IV formulas, the processor obligation would be less; and if the farm’s skim components are greater than the standard, then the obligation of Class I processors to the pool would be more. In short, accounting for actual skim components in the NAJ proposal, would replace the current pricing of Class I skim on a pounds of skim basis.

Select Milk Producers cooperative submitted proposals to update product yields to reflect “actual farm-to-plant shrink,” to update the butterfat recovery factor and to update nonfat solids yields. According to their own limited 5-year-average analysis the three proposals combined would net 13 cents/cwt on the Class III price and 42 cents/cwt on the Class IV price, but they’ve requested more data from USDA AMS to analyze — if their proposals are accepted for a hearing.

For its part, Edge Cooperative states in a cover letter to its proposals that a hearing should occur after the farm bill. “There is no imminent crisis that would present a compelling reason to initiate a hearing before the next farm bill is enacted,” the proposal states.

In the farm bill, Edge seeks a mandatory cost of processing survey before make allowance updates could be heard. Edge also seeks legislative language to expand flexibility to base individual FMMOs around something other than uniform pricing, to be determined on an Order by Order basis. This “flexibility” was explained by Lucas Sjostrom and Marin Bozic at the Farm Bureau stakeholders meeting in Kansas City last October.

However, Farm Bureau’s package of proposals asserts that there is no reason to hold off on a hearing while waiting for a farm bill, and indeed seeks the fastest resolution to the Class I ‘mover’ issue. Furthermore, Congress previously mandated timelines that don’t allow “waiting” once proposals are received by USDA. This process is in motion, unless Secretary Vilsack refuses a hearing on any of the proposals.

AFBF, in fact, cited areas of the Agricultural Agreement Act that give USDA authority to do mandatory cost surveys, without further legislation, because the Secretary has discretion to require any reporting deemed necessary from FMMO participating plants.

On the Class I ‘mover, Edge proposes two options, either a Class III-plus option if the ‘advanced pricing’ is retained or if the ‘higher of’ option is used, then to base it on final 4-week announced skim milk prices each month. This option would effectively end the 2-week advanced pricing factors and advance pricing of the Class I ‘mover,’ which has also been proposed by AFBF.

The Edge proposals include a request to align make allowance changes so that they don’t impact ‘risk management tools’ and a proposal to add Order formulation language about the information handlers shall furnish to producers with the intent of “transparency in producer milk checks.”

The California Dairy Campaign’s proposal asks USDA to extend the proposal deadline and to add mozzarella to the Class III component and price formula and the NDPSR survey. They also want consideration of “alternative pricing formulas that guarantee dairy farmers are paid according to current market rates.”

The California proposal includes a National Farmers Union (NFU) Dairy Policy Reform Special Order of Business that was passed at the 2023 NFU Convention in San Francisco. It states opposition to the call for a federal milk marketing order hearing, noting that, “If a hearing is granted, it is essential that any modifications to the federal order minimum pricing formulas take into account the volume and value of all dairy products, particularly high-moisture cheeses such as mozzarella.”

Dairy Pricing Association (DPA) submitted a few proposals explained by Wisconsin dairy farmer Tom Olson. One seeks to pay Grade B milk at FMMO minimums, but without a producer price differential (PPD).

DPA also proposes a supply-balancing feature, whereby milk handlers notify farms at least 7 days prior to milk disposal action, stating the baseline production needs, how much to reduce production, and for how long, with farmers making this reduction by dumping (or not producing) this milk.

In effect, the DPA proposal includes a processor-led supply management program, not a government intervention. But to do it, the FMMOs would be the arbiter, and therefore all Orders would have to be amended to require 100% mandatory participation and pooling of all U.S. milk. Something like that may require legislation since a producer referendum bloc-voted by cooperatives could vote it down, and it’s unclear how unregulated areas would be included since states like Idaho already voted the FMMOs out.

Currently, only Class I milk handlers are required to participate in FMMOs within marketing areas that have FMMOs. Participation is voluntary for most Class II, III and IV processors. Over the past three years, roughly 60% of total U.S. milk production has been pooled on FMMOs.

-30-

Editorial: Momentum builds for whole milk in schools

Posted on by
2
Standing with U.S. House Ag Committee Chairman, Glenn ‘G.T.’ Thompson are some of the volunteers who participated in the legislative staff briefing on G.T’s Whole Milk for Healthy Kids Act, including a June Dairy Month celebratory Whole Milk Bar at the Capitol in Washington on Tuesday, June 13. Congressman G.T. says he wants to reach 150 to 200 cosponsors before it comes to the House floor for a vote. Currently, there are 128 cosponsors representing 43 states (103 R’s and 25 D’s), and the Education and Workforce Committee recently passed H.R. 1147 in a bipartisan 26-13 vote. From left are Christine Ebersole, a school nurse in Blair County, Pa.; John Bates, executive director of The Nutrition Coalition; Nelson Troutman, a Berks County dairy farmer and 97 Milk Baleboard originator and his granddaughter Madalyn, the 2022-23 Lebanon County, Pa. Dairy Maid; Congressman G.T. Thompson (R-PA-15), the champion and prime sponsor of the Whole Milk for Healthy Kids Act; Sara Haag, the 2023-24 Berks County Dairy Princess; Krista Byler, a school foodservice director in Crawford County, Pa.; Sherry Bunting, Farmshine contributor and volunteer advocate for whole milk in schools. Photo credit: Maddison Stone

By Sherry Bunting, Farmshine, June 16, 2023 with June 23 update

WASHINGTON – “Wouldn’t it be great if we could unite the country with whole milk?” That question was posed by a fellow journalist in the Southeast, Julie Walker of Agrivoice, as I was updating her about the grassroots effort to bring milk education and the choice of whole milk to schools.

After the events of the past two weeks, my answer to that question is: Yes, I believe we can and we are… seeing the fruits of the labor of grassroots volunteers.

On Tuesday, June 13, the Grassroots Pennsylvania Dairy Advisory Committee and 97 Milk were part of a legislative staff briefing hosted by Congressman G.T. Thompson and his staff at the Longworth House office building on Capitol Hill in Washington. This had been planned weeks earlier, before Thompson’s bill – the Whole Milk for Healthy Kids Act, H.R. 1147 – passed the Education and Workforce Committee on June 6 in a bipartisan 26-13 vote.

This week, the identical bipartisan Senate companion bill was introduced on June 13 by prime sponsor Senator Roger Marshall, a Republican and medical doctor from Kansas and prime cosponsor Peter Welch, a Democrat from Vermont along with other bipartisan cosponsors.

Allow me to take you behind the scenes of the June 13 legislative staff briefing on Congressman Thompson’s House bill and why it gives me hope to see people rediscovering and uniting behind the effort to legalize whole milk in schools so children have true access to the most wholesome nutritional beverage, milk.

What becomes apparent is that children are not benefiting from milk’s nutrition when their choices at school are restricted to fat free and low fat. They should be able to choose whole milk and 2% milk that are currently banned by federal nutrition standards, and they should be able to continue to choose flavored milk, which USDA is considering restricting to only high school students.

“Milkfat was demonized as a part of the child nutrition standards, especially since 2010… and we’ve seen a lot of waste and unopened milk cartons at school cafeterias because (fat-free/low-fat milk) is not a great milk experience for kids. Meanwhile, we’ve seen a significant increase in childhood obesity. If they don’t have access to milk they like, they will drink something, and the alternatives won’t give them milk’s essential nutrients or be as satisfying,” said Rep. Thompson. “Everything has its own time, and I’m pleased that we’ve gotten to this point with the bill and appreciate the panel here today to share and answer the question: ‘Why whole milk in schools?’”

Two school professionals from the grassroots advisory group were on the panel: Krista Byler (second from left) of Spartanburg, foodservice director for Union City Area Schools and Christine Ebersole RN, BSN, CSN (left) of Martinsburg, school nurse at Williamsburg Community School District. They were joined by John Bates (second from right), executive director of the Nutrition Coalition, a nonprofit founded by Nina Teicholz, author of The Big Fat Surprise; as well as Paul Bleiberg (right) of National Milk Producers Federation.

Around 25 to 30 staff members working for Representatives and Senators from both parties attended for the entire briefing. That may not sound like a lot, but for this setting, and the constantly changing schedules during floor votes, hearings and meetings, it’s a big deal. The event was by invitation and targeted key legislative offices for an educational briefing on the bill.

It was Congressman Thompson’s idea to have a “whole milk bar,” so our crew brought 100 half pints of whole milk — unflavored, chocolate, strawberry and mocha — donated by the Lesher family of Way-Har Farms, Bernville, Pennsylvania. We added some full pints of flavored and unflavored milk picked up at two convenience stores on the way (Rutter’s and Clover) to be sure we had enough as we heard interest in the briefing was growing.

We baked fresh strawberry cheesecake cookies with butter and cream cheese, and brought a few other types of cookies, as well as cheese snacks and nuts, arranged a nice table, kept the milk iced cold (that was a fun challenge through security scanners).

We brought with us Berks County Dairy Princess Sara Haag and former Lebanon County Dairy Maid Madalyn Troutman. Ebersole brought her daughter Vanessa Wiand, an elementary school teacher.

Nelson Troutman (right) with our driver Frank Tomko

Berks County farmer and Drink Whole Milk 97% fat free Baleboard originator Nelson Troutman was part of our crew, and he made sure the van we rented for travel had several 97 Milk magnets for the ride.

I provide these details because here’s the deal: Each person in our crew is a volunteer among the many volunteers working on the whole milk in schools issue, not just in Pennsylvania, but in other states as well.

Sara and Madalyn handed out the 6×6 cards designed by Jackie Behr at 97 Milk that visually show what milk provides nutritionally. It’s an impressive piece. They also handed staffers a business card with a QR code (above) that they could scan to reach the online folder to a video created by students and technology teacher at Krista’s school as well as finding other important information about whole milk and the Whole Milk for Healthy Kids Act. On the table next to the whole milk bar was a one page handout with bullet points, and 97 Milk provided milk education tabletop displays.

As Congressman Thompson talked about “ruining a generation of milk drinkers with failed federal nutrition policy,” he praised the bipartisan support for H.R. 1147 and noted the 107 cosponsors in the House (as of June 13, the number as of June 23 is 128 and counting).

That’s a large number by historical standards, but Thompson wants to get to 150 cosponsors by the time the bill is officially reported to the House, which will be soon.

There is still time, and it is still important to keep contacting members of Congress to ask them to consider cosponsoring the Whole Milk for Healthy Kids Act in the House, and thank them if they already have signed on.

Ebersole shared with staffers her perspective as a nurse, what she observes, what milk nutrition means for children.

“I thought it would be interesting to compare BMI (Body Mass Index) screenings when whole milk was served in schools with the recent screening where students have been served only skim and 1% milk. The results of the comparison are striking (above). 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 low fat milk during school hours, the overweight and obese categories were increased to 52% while the recommended range was decreased to 46%. That is a 13% increase over the past 13 years!” said Ebersole.

“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,” she said.

Ebersole explained that, “Whole milk is a nutrient dense food and with its natural combination of protein, fats and carbohydrates, it is called Nature’s most nearly perfect food. Whole milk also provides satiety, which is stabilizing for blood sugar as well as feeling fuller longer thus decreasing food intake. Another important quality is that students prefer the taste of whole milk compared to the reduced fat and skim milk options.”

Byler talked about the trial at her school in the 2019-20 school year. She explained that the milkfat restrictions at school have led to a loss of school milk consumption with results that are far reaching.

“We are now hearing of very early onset osteoporosis and an increase in malnutrition and/or obesity. It is shameful that our youth cannot have a choice of a wholesome, nutritious product that is farm-to-table/farm-to-school,” said Byler. This, and the amount of milk wasted daily prompted the school trial.

She provided slides of the trial results and talked about how half of the students didn’t really know whole milk was not allowed. This means they didn’t know how good milk can be.

“The results of the trial were astounding. When offerings were expanded to include whole and 2% milk, the amount of wasted milk was reduced by 95% and we saw a 52% increase in students choosing milk,” said Byler, explaining that the student council did actual milk collection data as part of an environmental project.

She also shared results of her survey of the elementary school children showing that if this latest possible restriction on milk options for schoolchildren is approved by USDA, fewer than 25% of students currently taking and drinking the milk say they would continue taking milk and drinking it if flavored milk were not offered. 

“That’s huge,” said Byler.

That means we would see even more reductions in milk consumption at school and more waste. This struck a chord because when Byler presented the 2019-20 trial where her school offered whole and 2% along with fat free and 1% milk, for trial purposes, we heard audible gasps among those attending the briefing when Byler shared the data on the reduction of wasted milk. ((The students also created a video about school milk, view it here.)

We also saw reactions while Ebersole was sharing her analysis of student BMI data over the past 13 years.

Both women concluded by sharing a heartfelt message about how important dairy farmers are to communities, how they care for their cattle and work to provide a high quality nutritious product, and what it means to them for children to be able to choose milk they love so they can benefit from the nutrition the milk provides.

“As the wife and granddaughter of proud Pennsylvania dairymen, I knew the decrease in milk we were ordering for schools would impact dairy families. I know firsthand about the dairy farmers we have lost,” said Byler. “What I know based on 18 years in school nutrition, raising two children and being part of two dairy families is that restricting milk offerings to our school children does not benefit our children or our dairies. It benefits big corporations who have exponential marketing power and are preying upon our youth.”

School nurse Christine Ebersole and her daughter Vanessa Wiand, an elementary teacher at the briefing.

Ebersole noted that, “Being born and raised on a dairy farm and having lived in the dairy community all my life, I can say I know something about the American Dairy Farmer. They are on call 365 days a year and 24 hours a day.  They care about their animals and also care about their neighbors. When a tragedy happens like a fire, the neighbors come together. Dairy farmers work diligently to bring a wholesome natural food to us. Let’s do our part to support this industry by allowing students to have a choice of a delicious, nutritious whole food, whole milk,” she said.

For the Nutrition Coalition, John Bates explained they are a non-profit, non-partisan organization that seeks to improve health in America by ensuring that the public gets evidence-based nutritional advice. They emphasize good science, transparency, and methodology and receive no industry funding.

“When the Healthy, Hunger-Free Kids Act was enacted in 2010, milk became counted as part of that less than 10% of calories from saturated fat, when previously it had been in its own, separate beverage category,” said Bates.

He noted that the U.S. Dietary Guidelines that these rules for schools are based on “never reviewed studies on dietary fat specifically for children until 2020. Children have just been assumed to be like adults, but children are different: they need more protein for their growing bodies and more fat for their growing brains,” said Bates.

The Guidelines in 2020 cite a single clinical trial on school-aged children, ages 7-10 (“DISC,” funded by the NIH). It showed ‘Modestly’ lowered LDL-cholesterol, he explained. “Yet the study was not on a normal population. The expert USDA committee acknowledged this study could not reliably be generalized to a larger population

The bottom line, said Bates is that expert committees have found “insufficient evidence” to show that restricting saturated fats in childhood could prevent heart-disease or mortality in adulthood.

“In our view, a single trial on an atypical population is not enough to make population-wide guidelines to all American children,” he said.

Paul Bleiberg for National Milk Producers Federation focused his comments on the problems with underconsumption of dairy.

“Milk is the number one source of three of the four food nutrients of public health concern as identified by the DGA’s — calcium, vitamin D and potassium. Dairy delivers 7 of the 14 nutrients the American Academy of Pediatrics recommends for optimal brain development as well as nutrients vital for immune health and bone growth and development during a child’s school-aged years,” said Bleiberg. 

“The 2020 DGA Committee found that 79% of 9 to 13 year olds fall short of recommended dairy intake and the data from MilkPEP show that students take less milk and throw away more milk at schools when they do not have options they like,” he added.

Before, after and during these four short presentations on whole milk choice in schools, staffers trickled in, gathered around the whole milk bar and had conversations.

In fact, when news began to spread through texts and emails that there were milk and cookies in room 1302 — more staffers came and went. Connections were made around good food and delicious, nutritious milk.

From congressional staff we heard appreciation and these words: informative, enlightening, authentic, delicious!

Those four words give me hope that we can unite with whole milk… for our children and our dairy farmers.

June 23 UPDATE: This was another good week for the Whole Milk for Healthy Kids Act in Washington, and here’s how you can help…

As of June 23, the bipartisan Whole Milk for Healthy Kids Act, H.R. 1147 grew the number of cosponsors to 128 including prime sponsor G.T. Thompson (103 Republicans, 25 Democrats). These cosponsors represent 43 states.

Texas tops the list with 13, followed by Pennsylvania 10, New York 8, California, Florida and Wisconsin at 7. Maine, Idaho, Iowa, North and South Dakota and Wyoming have fewer Representatives and their full delegations are on board. Wisconsin is nearly 100% with 7 of their 8 Representatives signed on.

The 43 states now represented are listed in the order of number of cosponsors vs. the total number of representatives for the respective states: Texas 13 of 36, Pennsylvania 10 of 17, New York 8 of 26, California 7 of 52, Wisconsin 7 of 8, Florida 7 of 28, Georgia 5 of 14, Indiana 4 of 9, Iowa 4 of 4, Michigan 4 of 13, Minnesota 4 of 8, North Carolina 4 of 14, Illinois 3 of 17, Virginia 3 of 11, Washington 3 of 10, Alabama 2 of 7, Arizona 2 of 9, Connecticut 2 of 5, Idaho 2 of 2, Kansas 2 of 4, Kentucky 2 of 6, Maine 2 of 2, Missouri 2 of 8, New Jersey 2 of 12, Ohio 2 of 15, Oklahoma 2 of 5, Oregon 2 of 6, South Carolina 2 of 7, Tennessee 2 of 9, Arkansas 1 of 4, Colorado 1 of 8, Hawaii 1 of 2, Louisiana 1 of 6, Maryland 1 of 8, Mississippi 1 of 4, Nebraska 1 of 3, Nevada 1 of 4, New Mexico 1 of 3, North Dakota 1 of 1, South Dakota 1 of 1, Utah 1 of 4, West Virginia 1 of 2, and Wyoming 1 of 1.

To reach all 50 states, here’s what we need in the East: Delaware, Massachusetts, New Hampshire, Rhode Island, and Vermont. In the West: Alaska and Montana. Is your state on the list? Is your Congressional Representative a cosponsor? Make the call! Go to this link to see the bill’s progress and cosponsors, and click “contact your member” on the right to find your Representative.

Call Senators too. On June 13, the bipartisan Senate companion bill, S.1957, was introduced by Senator Roger Marshall, a Republican and medical doctor from Kansas, along with prime cosponsor Peter Welch, a Democrat from Vermont. Also cosponsoring right out of the gate are Democratic Senators Kirsten Gillibrand of New York and John Fetterman of Pennsylvania; Independent Senator Angus King of Maine; and Republican Senators Ron Johnson of Wisconsin, Chuck Grassley of Iowa, Susan Collins of Maine, Cindy Hyde-Smith of Mississippi, and James Risch and Mike Crapo, both of Idaho. As of June 23, that’s 11 Senate sponsors from 9 states. Maine and Idaho have both of their respective Senators on board!

-30-

Congressman G.T. Thompson’s Whole Milk for Healthy Kids Act approved 26-13 by House Education Committee

Posted on by
3

Thompson: ‘This is a win for children and dairy farmers, but we’re not done’

“This policy has cheated our children and has led to economic demise in Rural America as we’ve seen a loss of dairy farms and small businesses that are in that supply chain. It’s time to reverse the mistake that was made in 2010. We need to follow real science, not political science. I question the process of the Dietary Guidelines Advisory Committee. These are unelected bureaucrats, and there’s no oversight. This is our chance to actually do something positive in that process to say ‘hey we’re watching what you’re doing. We’re looking over your shoulder,’” said Rep. GT Thompson (R-PA-15). In a bipartisan 26 to 13 vote, the Committee on Education and Workforce passed Thompson’s motion to report the Whole Milk for Healthy Kids Act, H.R. 1147, to the House of Representatives with recommendation of passage. On the Republican side, 21 voted yes and 4 were absent. On the Democratic side, 5 voted yes, 13 no, and 3 were absent. The next step is getting the bill on the calendar for a vote on the House floor.

By Sherry Bunting, Farmshine, June 9, 2023

WASHINGTON — The Whole Milk for Healthy Kids Act, H.R. 1147, reached a major milestone this week, passing mark-up in the U.S. House Committee on Education and Workforce.

Dairy farmers could not have asked for a better way to kick off June Dairy Month as the committee discussion exposed the sides of this issue, and Congressman Glenn ‘GT’ Thompson, the Republican from Pennsylvania and the bill’s prime sponsor, laid out the case for children to have true access to the most nutritional beverage — milk.

In the end, the Education Committee on Tuesday, June 6 approved the bill in a bipartisan 26 to 13 vote. 

(Cross-section highlights of Education and Workforce Committee discussion and vote.)

Now that it is recommended by the House Education and Workforce Committee, the next step is scheduling of the vote on the House floor.

This is the first time in three legislative sessions that the bill to restore the choice of whole and 2% unflavored and flavored milk in schools has made it this far in the legislative process.

“This is a win for children and dairy farmers, but we’re not done. I took a deep breath to see this satisfying outcome in this first stage and another deep breath as we move to the next stage to get it onto the House calendar,” said Rep. Thompson in a Farmshine interview after committee passage.

A further breath of bipartisan fresh air also came from Rep. Jahana Hayes, a Democrat and educator from Connecticut. She rose in support of the bill, quoting from the Dietary Guidelines 2020-25 report and from USDA, giving statistics about what is offered and what is consumed in recommended dairy intake, especially for children ages 2 to 18.

“I have belabored this point that children receive a huge amount of their daily nutrition at schools. Also, the school meal programs are a significant source of milk and dairy for kids,” said Hayes.

“But the part that sticks for me is that none of this matters if kids aren’t drinking the milk. We can have as much data and statistics on what kids need as dietary dairy intake, but if they’re not drinking it, then it’s all for naught,” she stressed. “We’ve seen students take less milk and throw away more milk when they don’t like the way it tastes.

“I support this amendment. I drink whole milk. My kids drink whole milk. We like it,” Hayes asserted.

Chairwoman Virginia Foxx, a Republican from North Carolina said the debate over whole milk “takes the cake.” 

She talked about how previous recommendations have been “walked back,” and she bemoaned the fact that there are “no checks and balances” over the Dietary Guidelines process of making these recommendations.

“I was shocked last year when I learned that whole milk has only 3.5% fat content, when we are saying to students: ‘drink skim milk or 1% milk,” the Chairwoman said. 

“Surely-to-goodness, that kind of fat content is not doing the damage that some people are saying. This Dietary Guidelines Advisory Committee is just a small group of unelected, appointed people, and we want to turn children’s lives over to groups like this? We should be dealing with this,” she added.

The bill’s champion, Rep. GT Thompson is a senior member of the Education Committee, and chairs the Agriculture Committee. 

Thompson said he is discussing the next stage with the House Majority Leader to schedule the legislation for a vote on the House floor.

“The bill had 106 bipartisan cosponsors supporting it from 39 states — before this committee vote — and we can build on that,” said Thompson. (As of June 16, there are 110 from 40 states).

This cosponsor list includes 22 members of the Education Committee. It also includes bipartisan cosponsors from the Agriculture Committee. It includes prime cosponsor Rep. Kim Schrier, a pediatrician from Washington State, and numerous members of Congress who are doctors, educators, parents. It has garnered the support of schools, students, parents and families throughout America who will benefit, according to Thompson.

His staff reports that more cosponsors continue notifying their office to sign on to the bill.

“This has been a really grassroots effort. Dairy farmers, the dairy industry, all of the rural businesses who provide inputs, the folks in the schools, the parents… we’ve had great support for this bill, and all of that helps,” said Thompson with a tip of the hat to the grassroots 97 Milk effort.

In fact, while speaking on his bill, Thompson mentioned “how this policy has negatively impacted the economy in Rural America. This (federal prohibition of whole milk in schools) negatively impacts kids and dairy farmers, and it’s time to turn that around.”

The Whole Milk for Healthy Kids Act allows the 95% of schools that are participating in the school lunch program to serve all varieties of flavored and unflavored milk, including whole milk. Thompson amended the bill from previous renditions to make minor technical changes that will help ensure foodservice workers have the flexibility they need in serving the students whole milk.

“Some Democrats on the committee spoke in opposition to the bill, using the same outdated science, but in the end, the committee vote to approve it was bipartisan,” said Thompson. 

During the committee discussion, he told his colleagues that he is focused on “listening to the school professionals who serve students every day and parents who are concerned about the lack of options.

“We need to follow real science, not political science. It’s time that we push back on the notion that federal bureaucrats know what’s best for students. Although there is more work to be done on school nutrition, this bill gives students access to the milk they want and need. The bottomline is the Whole Milk for Healthy Kids Act is all about ensuring students have the necessary nutrients to learn and grow,” he said.

Thompson was quick to point out that, “We’re not force-feeding anybody anything. We’re providing children options so we don’t turn them over to less healthy beverages.

“We’ve really ruined an entire generation of milk drinkers and have cheated them out of access to the most nutritional beverage. I appreciate the comments that there is nutrition also in 1% milk, but even that’s because of the milkfat, the vehicle that delivers the nutrition,” he explained.

This bill “will improve the nutritional status of our children going forward. If we give them a good milk experience …  I would argue we will see a reduction in childhood obesity,” he said, pointing to studies showing whole milk to be an effective drink weight management because of how satisfying it is.

To his colleagues citing ‘the science’, Thompson was tactful but blunt: “I agree we ought to do things with data and science, I just question the process of the Dietary Guidelines Advisory Committee. They’re completely appointed. These are unelected bureaucrats, and there’s no oversight. This is our chance to actually do something positive in that process to say ‘hey we’re watching what you’re doing. We’re looking over your shoulder.’”

Chairwoman Foxx reminded her committee that, “This is a choice. Instead of having bureacrats tell us what to do… we give a choice and not let someone else run our lives.”

At the start of the discussion, she explained the Whole Milk for Healthy Kids Act as “empowering food service providers and parents to make decisions on the health and welfare of children.”

Ranking Member Bobby Scott (D-VA-3, right) and Rep. Jamaal Bowman (D-NY-16) read from a letter of opposition to the whole milk bill from the Physician’s Committee for Responsible Medicine (PCRM). According to Guidestar, PCRM describes its vision as “creating a healthier world through a new emphasis on plant-based nutrition and scientific research conducted without using animals. ” In 2010, Newsweek and New York Times articles identified PCRM links to extreme animal rights organizations such as PETA. 

Ranking member Bobby Scott, a Democrat from Virginia, was one of four Democrats voicing opposition, saying H.R. 1147 is “an attempt to legislate nutrition standards and disregard evidence-based recommendations made by the Dietary Guidelines for America.” He said the bill would allow schools to “violate current science-based standards. 

“If it was consistent with science, we wouldn’t be here. The science-based committees would have already done this,” he said, also objecting to considering the bill outside of doing a comprehensive childhood nutrition reauthorization.

The last childhood nutrition reauthorization by Congress was the 2010 Healthy Hunger Free Kids Act, which tied schools more closely to the saturated fat restrictions of the Dietary Guidelines in the first place.

Scott noted the American Heart Association, Association of Nutrition and Dietetics, Center for Science in the Public Interest have “expressed concerns for this bill.” But mostly, he quoted from a letter of opposition from the Physicians Committee for Responsible Medicine. (PCRM is a known animal rights group tied to PETA.)

Rebutting Scott’s assertions in his characteristic calm and methodical manner, Congressman Thompson said he appreciated the recognition of science but that, “we don’t always get it right, and that’s what we’ve found with the Dietary Guidelines process. 

“You reference the Dietary Guidelines Committee, but the most recent Dietary Guidelines reported that more than two-thirds of school age children FAIL to meet the recommended level of dairy consumption, and a big part of that is, quite frankly, we gave them since 2010 an awful milk experience,” said Thompson.

“We’re talking about 3.5% milkfat. I was here for that 2010 debate. It’s been proven since then that it was bad science. The most recent science I referenced and our practioners, the American Academy of Pediatrics, have stated that dairy plays an important role in the diet of children, and it’s the leading food source for three of the four nutrients of public health concern — calcium, vitamin D and potassium,” said Thompson, providing 15 academic studies for the record on full fat dairy.

As members of Congress, “we visit our schools and spend time in the lunch line, and we see the waste and the unopened half-pint milk containers that are discarded. Quite frankly, we’ve been contributing to childhood obesity because … children are going to drink some type of beverage, and the substitutes have been high sugar beverages that do not have healthy outcomes,” said Thompson.

“This policy has cheated our children… and has led to economic demise in Rural America as we’ve seen a loss of dairy farms, dairy herds and small businesses that are in that supply chain. It’s time to reverse the mistake that was made in 2010,” he stressed.

Rep. Jamaal Bowman, a Democrat from New York agreed that the meals at school are for some kids the most important that they receive, and he said these meals should be consistent with the “latest science on nutrition.” 

However, he maintained that the Dietary Guidelines for Americans (DGAs) are “based on up-to-date science” and said “allowing whole milk to be served to children contradicts those recommendations.”

Rep. Bowman called the bill an “inappropriate attempt to legislate nutrition standards,” but he failed to acknowledge the shortcomings observed by other independent scientific bodies calling into question the research screening methods used in the DGA process, the make-up of the DGA committee, and the predetermined questions that form the boundaries for what “up-to-date research” will be included as “relevant” to the predetermined questions in each 5-year DGA cycle.

Bowman quoted extensively from the PCRM letter, which stated that “full fat milk is both unnecessary and harmful to children’s health.” Reading from the PCRM letter, Bowman said “early signs of heart disease, high total and LDL cholesterol and other indicators of impending cardiovascular disease are appearing in children with increasing frequency.”

(If that’s the case, then how can whole milk be blamed? How can saturated fat be blamed? Whole milk is nonexistent at school, and saturated fat is limited to less than 10% of calories in school meals since 2010. Children receive one, two, or even three meals a day, five days a week for at least three-quarters of the year at school. If the poor health outcomes the PCRM letter identifies are rising, doesn’t that tell us something about the scientific validity of the DGA recommendations? The PCRM’s own letter hits that nail on the head with its own statistics. PCRM calls “whole dairy milk a troubling source of saturated fat.” And yet, kids have not been allowed to have whole milk or 2%, and in some cases not even 1% fat milk, for the past 13 years during two meals a day, five days a week, most of the year!)

Here’s an eye-opener: Quoting again from PCRM, Bowman said lactose intolerance among communities that have been impacted by “historic racism” and “health inequities” are those less likely to be able to see a doctor for the doctor’s note to have dairy substitutes at school. The letter even mentioned children needing ‘climate friendly’ beverages. 

The roots of the anti-whole-milk agenda are clear in terms of encouraging more “non-dairy substitutes” for children in schools.

Rep. Alma Adams, a Democrat from North Carolina said the bill sets a “dangerous precedent” that takes the years of building nutrition programs backward, noting this would cause poor health outcomes. (But the poor outcomes were said to be already happening by those opposing the whole milk bill. This is occurring while whole milk is prohibited.)

During the committee markup, Thompson said he is proud of the number of cosponsors to-date and the broad and bipartisan support for the whole milk bill. 

“My legislation supports students and dairy farmers across America,” he explained.  “Milk is an essential building block for a well-rounded and balanced diet offering 13 essential nutrients and numerous health benefits. However, out of touch federal regulations have imposed dietary restrictions on the types of milk that students have access to in school meals… limited to fat free and low-fat milk since 2010. For our children to excel in the classroom and beyond, they must have access to more nutritious options they enjoy.”

Thompson  also stressed that the situation could become worse if the Whole Milk for Healthy Kids Act is not enacted into law. 

“The USDA’s latest proposed guidelines could roll back options even further by restricting flavored milk only to high school students and counting milk fat against weekly saturated fat allowances,” he said, giving several reasons why these top-down regulations are harmful to students and school districts that are forced to comply.

“First, we have seen students opt out (from milk) altogether,” said Thompson. “Let’s face it, the only way to benefit from milk’s essential nutrients is to consume it, and when students turn away from milk, they often opt for far less healthy alternatives.”

Thompson noted that these regulations also “perpetuate baseless claims that milk is bad for kids, but research has shown time and time again that whole and 2% milk are not responsible for childhood obesity and other health concerns. In fact, these beverages are so nutritious that research consistently shows positive health outcomes for children who consume milk.”

Referencing the 15 academic studies submitted from researchers across the country and around the world, Thompson asserted that, “These studies, and there are more, show that full fat dairy foods have no association with high blood pressure, cardiovascular disease, type II diabetes, obesity or cholesterol. In fact, several show full fat foods helped improve or lower negative health outcomes for children who drank more full fat dairy beverages.”

He also added to the record several letters of support, including a letter from the Nutrition Coalition (founded by science journalist Nina Teicholz, author of the Big Fat Surprise), the International Dairy Foods Association, the Northeast Dairy Foods Association, and a coalition of dairy producers from across the country. 

He said the bill has the support of schools and families across the country. 

This is evident by the tens of thousands of citizen petition signatures over the past few years and a 2021 IDFA survey of parents showing 78% find whole or 2% milk healthier for their families. Trouble is, their kids can’t get it at school where most of their meals are consumed.

-30-

Understanding the factors as action on FMMO ‘modernization’ unfolds

Posted on by
Reply
Using the Northeast as an example of a multiple component pricing Federal Milk Marketing Order that still has significant Class I utilization, Dr. Chris Wolf showed how long-term trends and other factors have reduced the Class I utilization and Class I revenue from 50% in 2000 to 34% in 2021 in FMMO 1. The most dramatic part of this decline occurred after 2010 — leaving not enough money to go around with less Class I value in the pool. FMMOs were structured for Class I fluid markets not for the dairy product and export markets where growth is occurring today. Screen capture from Center for Dairy Excellence Protecting Your Profits webinar with CDE’s Zach Myers and his guest Dr. Chris Wolf, Cornell University dairy economist.

By Sherry Bunting

WASHINGTON – There are irons in two fires when it comes to federal milk pricing and dairy policy. One is to do modernization through the Federal Milk Marketing Order (FMMO) hearing petition process. The other is to make some adjustments or seek authorizing language through the dairy title of the 2023 Farm Bill.

On the farm bill front, the May 12 CBO baseline score shows this could be the first trillion-dollar farm bill. Food assistance programs, like SNAP, are eating into the capacity to do other things, say top-level staff for the Senate Ag Committee. 

For dairy and livestock, the Dairy Margin Coverage (DMC) baseline now includes $1 billion in additional outlays projected over the 10-years, while livestock disaster outlays have doubled – even without making any changes in these programs that some are suggesting.

Still, farmers and organizations that represent them are seeking some expansion for the DMC, livestock disaster, and other programs and safety nets, and some are seeking language to instruct the Secretary to do hearings on the Class I ‘mover’, or to expand the flexibility of the scope of a hearing, or to require mandatory reporting germaine to things like raising make allowances. 

The jury is out on whether a farm bill gets done by September 2023 after the May 12 baseline was announced by CBO in the current political environment, but members of the House and Senate Ag Committees and their chairpersons are gathering information in earnest toward that goal.

On the FMMO hearing front, as previously reported in Farmshine, the USDA responded April 28 to the March 30 petitions from two processor organizations by asking for more information instead of granting or denying a hearing on their make allowance update request.

The two petitions from International Dairy Foods Association (IDFA) and Wisconsin Cheese Makers Association (WCMA) both requested a hearing focused exclusively on updating the ‘make allowances’, which are processor credits that are subtracted from the wholesale end-product prices used to derive farm level milk class and component prices.

Make allowances were last updated in 2008 using 2006 plant cost data.

Four days later on May 2, the National Milk Producers Federation (NMPF) submitted its petition seeking an FMMO hearing on a range of national amendments.

NMPF is petitioning USDA for a hearing on these five items:

1.     Increase make allowances in the component price formulas to the following levels: Butter   $0.21 per pound, Nonfat dry milk $0.21 per pound, Cheese  $0.24 per pound, Dry Whey $0.23 per pound 

2.     Discontinue use of barrel cheese in the protein component price formula

3.     Return to the “higher-of” Class I mover

4.     Update the milk component factors for protein, other solids, and nonfat solids in the Class III and Class IV skim milk price formulas

5.     Update the Class I differential pricing surface throughout the U.S.

Not noted within this list is a point that NMPF’s board approved on the legislative front, and that is to seek language in the 2023 farm bill directing USDA to do periodic mandatory and audited plant cost surveys instead of voluntary surveys for future hearings on make allowances.

The American Farm Bureau Federation took a positive approach in their response letter to USDA, showing support for the fact that NMPF’s petition is comprehensive and includes areas of strong consensus among farmers such as returning the Class I mover to the ‘higher of.’

However, AFBF president Zippy Duvall also points out in the response letter that the Secretary of Agriculture already has the authority under the Agricultural Marketing Agreement Act to require processors to provide information relevant to FMMO pricing. This could include mandatory surveys of plant cost data when used to determine the processor credit, or make allowance, in the pricing formulas.

It is Farm Bureau’s position that make allowances should only be updated based on mandatory and audited plant cost surveys.

This leaves a bit of a loophole in the discussion about how to acquire the data to make current or future updates. The Secretary may have the authority to require data from plants that participate in FMMOs. However, it is unclear if the Secretary has this authority to require cost data from plants that do not participate in the FMMOs.

The end-product pricing formulas are based on wholesale prices that are collected mandatorily by USDA AMS on a weekly basis through the Livestock Mandatory Reporting Act on only those products that are used in FMMO formulas. This includes butter, nonfat dry milk, dry whey and 40-lb block and 500-lb barrel cheddar cheese.

The USDA AMS weekly National Dairy Product Sales Report surveys 168 plants for this price data. Therefore, if make allowances are updated as processor credits against those prices, then all 168 plants should have to report their costs, and only the costs that pertain to those specific products, whether or not they participate in FMMOs. In a recent voluntary cost survey, more than 70% of those plants did not report their cost data.

During a Center for Dairy Excellence Protect Your Profits zoom call recently, risk management educator Zach Myers had as his guest Cornell dairy economist Dr. Chris Wolf to talk about the FMMO reform process and background from an economist’s perspective.

Dr. Wolf gave some important and relevant background and statistics.

The FMMOs have been around for 85 years and were created because of disorderly milk marketing conditions. Their primary function is to make markets function “smoothly” with a second stated objective to provide price stability.

“If we were to re-do them today, I would say price adequacy should be addressed,” Wolf opined, noting that “we have times that the milk prices are very stable, but not very adequate.”

Other stated objectives of FMMOs are to assure adequate and wholesome supplies of fluid milk and equitable pricing to farmers.

“These things are still important today,” Wolf suggests, adding that the auditing, certification and a certain level of market information that is provided by the FMMOs benefits all participants and contributes to the public good.

He explained that FMMOs are changing.

“The primary sources of dissatisfaction with FMMOs in recent years arise because there is not enough money to go around, and some of this is related to the longer-term trends (in Class I sales),” Wolf explains.

He showed that while per capita dairy consumption has been increasing roughly three pounds per person per year, the decline in Class I fluid milk is the underlying factor.

“It really is startling how much of that decline (in Class I) in most areas really happened since 2010,” Wolf illustrated with graphs.

Not only did per-capita fluid milk sales decline more rapidly since 2010 than the already long-term decline charted since 1980, but population growth in the U.S. also stalled — so the total Class I sales have been hit with a double-whammy.

“This relates back to where the value is in the Orders, with most of the decline in the past 20 years occurring in that second half, — since 2010,” he explains.

(The Healthy Hunger Free Kids Act of 2010 was the precursor to USDA removing whole and 2% unflavored and flavored milk from schools and requiring flavored milk to be fat-free. Today, USDA has a proposed rule that could eliminate flavored milk until grade 9 as reported previously in Farmshine).

Because Class I has to participate in FMMOs, the FMMOs were “intentionally structured” in a way that the Class I revenue has always tended to be the highest class price because the FMMOs are in place to structure the fluid milk market, and so Class I accounted for at least 50% of the pool revenue – until 2010.

“We finished 2021 at 34% (down from 50%),” Wolf notes. “So there’s not enough money to go around with less (Class I) value in there.”

What changed? Wolf notes some of the long-term trends.

“First, exports are now 18% of U.S. milk solids production when it used to be that the U.S. exported about 5%… Milk beverage consumption is down while cheese, butter and yogurt are all up. We are still importing 4 to 5%, but as a large net-exporter now,” he says, “The U.S. is basing bulk commodity product prices off the world market. This introduces more outlet for milk but brings back the issues that come with international price-setting, overall,” he explains.

Another change, according to Wolf, is the level of consolidation at every level of the supply chain.

Wolf went over some of the make allowance data based on existing voluntary surveys as well as a prior California state order audited survey. He showed there is a wide range in costs between older and smaller plants vs. larger and newer plants. When determining where to set make allowances – as an ‘average’ or at a percentile of this wide range — there are regional impacts to consider, he suggests.

Wolf also took webinar attendees through the steps of a hearing that can take at least a year or more to complete and he dug into the make allowances from an economic perspective and some of the other pieces of potential reform. Over the next few weeks, we’ll continue to examine them in this series.

The Center for Dairy Excellence Protecting Your Profits webinar with Zach Myers and Dr. Chris Wolf can be heard as a podcast at https://www.centerfordairyexcellence.org/pyp/ or viewed on YouTube at https://www.youtube.com/watch?v=YEMDA4iWyNw

Under the DMI umbrella: Fonterra CEO to chair Global Dairy Platform, Danone sustainability strategist to join GDP operating committee

Posted on by
Reply
Global Dairy Platform launched Pathways to Dairy Net Zero Initiative in September 2021, one year after DMI’s Innovation Center for U.S. Dairy launched the Dairy Net Zero Initiative (NZI) in October 2020 (A year prior to that in 2019, the current and former Ag Secretary Tom Vilsack testified to the Senate Ag Committee as a dairy-checkoff executive, serving then as president of the U.S. Dairy Export Council, and he foretold the nuts and bolts of the not-yet launched Dairy Net Zero Initiative and asked Congress to fund pilot farms. GDP has governance in and manages the Dairy Sustainability Framework that underpins what U.S. farmers, and their cows, will have to live up to — including how livestock methane is calculated, mitigated and monitored, which may be based on inaccurate math and science in terms of CO2 equivalents.

By Sherry Bunting, Farmshine, Friday, May 5, 2023

ROSEMONT, Ill. — Fonterra CEO Miles Hurrell has been named the new board chairman of the Global Dairy Platform (GDP), a non-profit industry association representing the international dairy sector. A portion of its revenue is from membership dues, but also from the 7.5-cents per hundredweight equivalent checkoff on U.S. dairy imports as well as grants for research and program services from Dairy Management Inc (DMI).

Fonterra’s Hurrell will replace Hein Schumacher, who is leaving his position as CEO of Royal FrieslandCampina to become CEO of Unilever.

In the April 26 news release, Hurrell cites Schumacher’s leadership in “accelerating climate action via the ground-breaking Pathways to Dairy Net Zero Initiative.” 

Announced in the same release is the appointment to the GDP operational committee of French multinational Danone’s senior vice president of sustainability strategy.

According to its 501(c)6 non-profit tax filings, “GDP is a pre-competitive collaboration,” and its governance groups — the board and the operational committee — “manage a ‘Dairy Sustainability Framework’ to unify the approach being taken by dairy organizations to the broad challenges of sustainability from environmental, social, and economic perspectives.”

The Dairy Sustainability Framework is part of the Dairy Sustainability Alliance of the Innovation Center for U.S. Dairy, another non-profit founded and funded by dairy checkoff organizations under the DMI umbrella. The Innovation Center sets U.S. Dairy Stewardship Commitments that are implemented through the FARM program and reviewed every three to five years to show U.S. dairy is, according to its website, “moving the needle toward achieving the Sustainable Development Goals (SDGs) of the United Nations.”

DMI, its Innovation Center, Dairy Sustainability Alliance, Dairy Sustainability Framework, and U.S. Dairy Stewardship Commitments are all located at Suite 900, 10255 W Higgins Road, Rosemont, Illinois, and the Global Dairy Platform (GDP) address of record is Suite 820 at the same street address.

Along with New Zealand’s Fonterra, CEOs from these top-15 dairy multinationals serve on the GDP Board: Dairy Farmers of America (DFA), headquartered in Kansas; Arla Foods, headquartered in Denmark; Leprino, headquartered in Colorado; China’s Mengniu Dairy Company; Moringa Milk Industry, headquartered in Japan; Royal FrieslandCampina, headquartered in the Netherlands, and Saputo, headquartered in Canada.

Along with the board of directors, the GDP operational committee provides governance and includes sustainability executives for Arla, DFA, Fonterra, Land O’Lakes, Meiji Holdings and FrieslandCampina.

In a separate April 2023 bulletin, GDP announced the May 1, 2023 retirement of Dr. Greg Miller from his position as research lead for GDP since its inception. Known as ‘Dr. Dairy’, Miller has served as the chief science officer for the National Dairy Council for nearly 32 years and as executive vice president of research, regulatory and scientific affairs for DMI. Miller will continue as a member of the UN Food and Agriculture Organization Scientific Advisory Committee.

Key paid staff for GDP is Donald Moore, the executive director since 2010. Before that, he was a Fonterra senior executive in business development and ingredients marketing for 20 years.

Moore also serves as chairman of the governance group for the Dairy Sustainability Framework since its inception in 2013.

With Fonterra’s CEO as the new board chairman of the GDP, and with a former Fonterra senior executive serving 13 years to-date as the executive director of the GDP and the chair of the governance group for the Dairy Sustainability Framework, it’s worth noting that Fonterra announced six months ago its new start-up company for alternative dairy ingredients. According to the October 2022 press release, Fonterra has partnered with Royal DSM, a Dutch company, in creating this start-up “to accelerate the development and commercialization of (animal-free) fermentation-derived proteins with dairy-like properties.” 

With Danone’s senior vice president of sustainability strategy now appointed to the GDP operational committee, it’s worth noting that in October 2022, Danone announced it would use artificial intelligence to reformulate 70% of its plant-based fake-milk products. This followed the 2021 earnings call where Danone executives outlined new fake-milk and dairy product launches with plans to use “new dairy-like technology” to “win over” the 60% of U.S. consumers not in the plant-based category because of taste and texture. The Danone executives told shareholders their Renew strategy identifies the U.S. as a “key plant-based market.” In January 2023, Danone announced it is eyeing sale of Horizon Organic, saying it falls outside of their key areas of focus.

Global Dairy Platform (GDP) was formed in 2006 as an alliance, according to its website. Its tax filings confirm incorporation as a 501(c)6 non-profit in 2012 and its address of record at Suite 820 at 10255 W Higgins Road, Rosemont, IL 60018.

According to the GDP’s most recent IRS 990s that are publicly available for 2017 through 2019, the years when former DFA CEO Rick Smith was its chairman, GDP had revenues between $3.7 and $4.2 million annually. This increased to $4.7 million in 2020, according to an available summary of the IRS 990 for that year.

The tax returns show approximately $1 million in GDP revenue came from membership dues and approximately $2.7 million annually from granted program services and research funds (checkoff). 

The GDP revenue also included approximately $500,000 in ‘import assessments.’ The 7.5-cent import checkoff, which was implemented in 2011 amid formation of the Innovation Center and its resulting alliances and frameworks.

GDP’s executive director Donald Moore is paid a salary package of nearly $600,000 annually. The top three independent contractors in 2018-19 included DMI receiving over $800,000 annually for program services and administration; Massey University in New Zealand $451,000; Emerging Ag in Calgary, Alberta, Canada $600,000 (for UN access), and Lindsey Consulting, in the UK nearly $300,000 with Brian Lindsey serving as the GDP’s sustainability lead.

According to GDP, its membership consists of more than 95 corporations, companies, associations, scientific bodies, and other partners, with operations in more than 150 countries, collectively accounting for approximately one-third of global milk supplies.

DMI manages the national nickel from the 15 cents per hundredweight checkoff deducted from U.S. milk checks for research, education, and promotion. DMI also manages the unified marketing plan many state and regional checkoff organizations contribute toward, and DMI manages the 7.5 cents per hundredweight equivalent import checkoff, handed off to the GDP.

DMI states in its 501(c)6 non-profit tax filing that it is “investing dairy producer checkoff funds in strategic, coordinated marketing programs designed to increase consumption of U.S. dairy products domestically and internationally.”

The Innovation Center for U.S. Dairy was initiated in 2008, but according to its tax filings, was incorporated as a 501(c)6 non-profit in 2012 under the name: The Dairy Center for Strategic Innovation and Collaboration Inc., doing business as Innovation Center for U.S. Dairy.

In 2017, DMI trademarked the names ‘Innovation Center for U.S. Dairy’ and ‘Dairy Sustainability Alliance.’

Leprino CEO Mike Durkin was elected chairman of the board of the Innovation Center in January 2023.

-30-

AUTHOR’S NOTE: Why do these connections matter? Because the UN Food and Agriculture Organization is getting ready to make a decision about how livestock methane is calculated using GWP100, a 30 year old measure that the Intergovernmental Panel on Climate Change even agreed overblows the problem by 3 to 4 times, or GWP*, which includes not just the sources but also the natural sinks for methane as a short-lived greenhouse gas. Dr. Frank Mitloehner has written about this, and Farmshine readers have read my many articles about the differences between the calculations and what they mean for our cows in the future. The Global Dairy Platform put out a bulletin a few months ago and pinned it to their website exploring the differences in these calculations, saying that “GWP* is not appropriate as a benchmarking tool at less than a global level.” This is concerning because it means that global dairy multinationals have oversight through dairy checkoff non-profits and alliances into formulating and deciding what U.S. dairy farmers — and their cows — will be expected to live up to, even when the science behind the decision is highly debatable. As we now know, even scientists are becoming frustrated. It’s important to know that multinational companies investing in competing animal-free fermentation-produced DNA-altered dairy-like ingredients are in leadership positions in these collaborations.

FDA launches ‘rumor control’ hub, will this eventually include its ‘nutrition initiatives’?

Posted on by
3

By Sherry Bunting, Farmshine, May 19, 2023

WASHINGTON D.C. — The Food and Drug Administration (FDA) launched a new “rumor control” webpage on May 16, described as the hub to stop what the FDA calls “false, inaccurate, or misleading health information” that is “negatively impacting the public’s health.” 

How does FDA define misinformation? “It’s information, spread intentionally and unintentionally, that is false, inaccurate, or misleading according to the best available evidence at the time,” the announcement explains.

Who decides what is the best available evidence at the time? An info-graphic recommends checking sources and cross-referencing the information with reliable sources.

What is a reliable source? FDA describes it in one section as “the federal government and its partners” and describes it in another section as “a non-profit fact-checking source or government resource.”

A video narrator at FDA rumor-control explains the next step is to read beyond the headlines on the internet for context and to “understand the purpose of the post.” 

Scrolling to the bottom of the landing page are instructions to report misinformation.

“We face the challenge of an overabundance of information related to our public health. Some of this information may be false and potentially harmful,” the FDA rumor control webpage states. “If you see content online that you believe to be false or misleading, you can report it to the applicable platform.” 

These words are followed by icons to click for administrators at Twitter, Facebook, TikTok, Instagram, LinkedIn, YouTube, and WhatsApp.

FDA has posted to this hub its ‘fact documents’ on several hot topics such as vaccines, dietary supplements, and sunscreen, stating that more topics will be added in the future.

Will nutrition become one of them, now that the Administration has placed a priority on FDA’s role as purveyors of the Dietary Guidelines as gospel?

Case in point, just three weeks prior to launching the rumor-control hub, the FDA announced it is “prioritizing nutrition initiatives to ensure people in the U.S. have greater access to healthier foods and nutrition information to identify healthier choices more easily… to improve eating patterns and, as a result, improve everyone’s health and wellness.”

These FDA initiatives came out of the “whole of government approach” pledged by President Biden and Ag Secretary Vilsack in the White House Strategy on Hunger, Nutrition and Health.

“People need to know what they should be eating, and the FDA is already using its authority around healthy labeling, so you know what to eat,” said the President during the White House Conference where the Biden-Harris National Strategy was unveiled in September 2022. 

The FDA proposed rule on ‘healthy labeling’ came out on the same day. Comments ended months ago but the final rule has not yet been published in the Federal Register.

The FDA nutrition initiatives are being pursued “to help accelerate efforts to empower consumers with information and create a healthier food supply.”

According to the FDA news release, the federal government currently believes obesity and chronic diet-related diseases are on the rise because American eating patterns are not aligning with the federal Dietary Guidelines. The press release states that most people consume too much saturated fat, sodium and added sugar, and the FDA nutrition initiatives aim to correct this.

FDA’s nutrition priorities in progress, include:

1)    Developing an updated definition and a voluntary symbol for the ‘healthy’ nutrient content claim, front-of-package labeling, dietary guidance statements and e-commerce labeling, and

2)    Supporting innovation by changing standards of identity such as labeling requirements for plant-based foods.

In addition to issuing its controversial plant-based milk labeling rule earlier this year, which would allow the pattern of fake milk proliferation to simply continue, the FDA in the first four months of 2023 sent letters of ‘no objection’ to three companies in their respective requests for GRAS (generally regarded as safe) status for cellular lab-created meat. 

Several ferrmentation-vat dairy protein analog makers — including Perfect Day with its genetically-altered yeast excrement posing as dairy protein — received their ‘no objection’ to GRAS letters from FDA in 2020.

As reported in Farmshine over the past several years, the FDA has been on its “multi-year nutrition innovation strategy” since 2018. However, the pace has accelerated since September 12, 2022, when Executive Order 14081 was signed by President Biden just 10 days before the White House Conference on Hunger, Nutrition and Health.

Entitled Advancing Biotechnology and Biomanufacturing Innovation for a Sustainable, Safe and Secure American Bioeconomy, the Presidential EO 14081 states: “For biotechnology and biomanufacturing to help us achieve our societal goals, the United States needs to invest in… and develop genetic engineering technologies and techniques to be able to write circuitry for cells and predictably program biology in the same way in which we write software and program computers; unlock the power of biological data, including through computing tools and artificial intelligence; and advance the science of scale‑up production while reducing the obstacles for commercialization so that innovative technologies and products can reach markets faster.”

(AUTHOR’S NOTE: All roads lead back to the umbrella of the Dietary Guidelines. The current DGA Committee began meeting recently in the process of formulating the 2025-30 DGAs. Entrenched in four decades of low-fat dogma, the USDA and HHS, along with the 2010, 2015 and 2020 DGA Committees, repeatedly left out of the discussion dozens of scientific papers, even research by the National Institutes of Health, that showed the neutral to beneficial impact of saturated fats on human health and the positive role of nutrient dense foods that are high in protein and essential nutrients but also contain saturated fat such as whole milk, full-fat dairy, and unprocessed red meat. Given the fact that childhood obesity and chronic diet-related disease incidence are rising rapidly, an objective fact-checker could easily determine that the Dietary Guidelines, themselves, are health misinformation. Clearly, children are the sector of the population whose eating patterns closely align with the Dietary Guidelines since 2010. They don’t have a choice. Most children today eat two meals a day, five days a week, three quarters of the year at school where the Dietary Guidelines rule with an iron hand. Let’s not forget the 2020 DGA Committee admitted that all of the DGA eating patterns came up short in essential nutrients found in animal foods, but when a committee member warned of this on final public reading, the saturated fat subcommittee chair mentioned taking vitamin pills and noted ‘new designer foods are coming.’)

Coca-Cola gives New York the nod for new fairlife milk plant

Posted on by
1

Officials say it will be Northeast’s largest milk plant, using 5 million pounds of ‘locally sourced’ milk per day

By Sherry Bunting, published in Farmshine, May 12, 2023

WEBSTER, N.Y. – New York got the nod this week as the “preferred location” where The Coca-Cola Company will build its new fairlife ultrafiltered milk processing plant in the Northeast.

New York State Governor Kathy Hochul made the announcement Tuesday (May 9) that the company selected a site in Webster, Monroe County, New York for the $650 million project, expected to break ground this fall and be operational by the fourth quarter of 2025, pending final due diligence and appropriate approvals.

The 745,000 square-foot facility is expected to create up to 250 new jobs and “utilize an estimated 5 million pounds of locally sourced milk per day, making it the largest dairy plant in the Northeast,” the NYS Governor’s announcement stated.

Founded in 2012 through a “strategic partnership” between Select Milk Producers cooperative and Coca-Cola, with early grants from Dairy Management Inc (checkoff), fairlife is now wholly-owned by Coca-Cola since 2020.

Calling the fairlife project a “major opportunity for New York,” Gov. Hochul said it will “drive economic impact, particularly in the Finger Lakes,” and it will “position New York to regain its spot as the 3rd largest producer of milk in the U.S.”

“The Town of Webster is well situated between high-quality dairy cooperatives in the Rochester and Niagara regions, with a surrounding workforce that has the relevant manufacturing and food and beverage experience, making it the ideal location for fairlife’s expansion,” said fairlife CEO Tim Doelman in a statement at the company’s website.

He noted the new facility will allow the company to “significantly increase capacity and deliver fairlife to more households.”

Empire State Development (ESD) is providing up to $21 million in assistance for the fairlife project through the performance-based Excelsior Jobs Tax Credit Program in exchange for the job creation commitments.

Monroe County Industrial Development Authority (IDA) is expected to apply to the ESD for a separate $20 million Capital Grant, to provide adequate power and infrastructure services to the site. Also collaborating on the project are the Town of Webster, Rochester Gas and Electric and Greater Rochester Enterprise, and NYS Ag and Markets.

ESD Commissioner Hope Knight highlighted Upstate New York’s farm and dairy infrastructure, and Assemblyman Brian Manktelow observed the increased demand for local dairy production and transportation would be additional economic benefits on top of the creation of in-facility jobs.

NYS Ag Commissioner Richard Ball said the decision “highlights the excellence of our dairy community whose farmers will be supplying the milk.”

New York Farm Bureau president David Fisher, a dairy farmer, said the news “is needed for the long-term success of our dairy farms.” He noted the state has 3500 dairy farms, milking 620,000 cows and producing over 15 billion pounds of milk annually with “abundant resources, good land, access to water, and innovative farmers.”

“We were in tough competition with other states,” said New York Gov. Hochul, noting her own heritage coming from a family of dairy farmers in Ireland.

One of the states competing for selection was Pennsylvania.

“While the outcome of this selection is not what we hoped, the Shapiro Administration remains strongly committed to supporting Pennsylvania’s dairy industry and attracting processors to grow here,” said Pennsylvania Ag Secretary Russell Redding in an email response to Farmshine questions Wednesday (May 10).

Redding noted that Gov. Shapiro and teams across agencies were engaged in this project “allowing us to meet fairlife’s criteria for tax climate, resources, utilities, permitting, and incentives.” He reported that Pennsylvania currently makes $15 million in tax credits available annually for dairy manufacturing companies to expand processing in the Commonwealth.

“Just as we were nationally competitive for this project, we plan to be in the running for other selections of this type,” Redding added, thanking all industry and government entities who work on these coordinated efforts to welcome businesses and support agriculture.

When asked specifically about the whether or not Pennsylvania’s state-mandated Class I fluid milk over-order premium (OOP) played any role in the outcome, Redding stated: “The OOP was not a factor.”

The fairlife line includes Class I fluid milk products as well as dairy beverages that fall outside of the Class I criteria into manufacturing milk classes. The company offers a range of products including fairlife ultrafiltered milk, Core Power protein shakes, and fairlife Nutrition Plan  meal replacement shakes.

The fairlife products are made through an ultrafiltration process that removes lactose and condenses other solids to raise the protein content while lowering the natural sugar (lactose) content. For flavored beverages, this means more sugar and other sweeteners can be added because the natural sugar content is lower.

According to the New York Governor’s press announcement, this ultrafiltration process “gives milk a longer shelf life.” 

All fairlife products carry the UHT mark for ultra high temperature pasteurization, which also increases shelf-life. Some of the flavored fairlife products, such as YUP and CorePower are already offered as shelf-stable beverages in supermarkets and online, so it is unclear whether aseptic packaging will extend to all fairlife milk and beverage products in the future.

Other leaders from the collaborating New York State agencies and organizations highlighted the project expands their goal of positioning New York as a hub for attracting technology and innovation in food and beverage manufacturing.

In fact, the Governor’s press announcement stated that, “The research for fairlife’s branded milk process (ultrafiltration) originated at Cornell University over a decade ago.”

However, the story told by fairlife co-founders Mike and Sue McCloskey, as recently as the 2020 Pennsylvania Dairy Summit, and in earlier meetings, presentations, and published interviews, is that they discovered the reverse osmosis and membrane filtration process when dealing with a well issue on their former dairy in New Mexico.

After seeing what this filtration did for separating minerals in the water to make it more palatable to the cows, they started tinkering with filtration for milk, the story goes.

Select Milk Producers (SMP), also founded by the McCloskeys, then began using reverse osmosis and ultrafiltration as early as 1995 to reduce the water when moving loads of milk to cheese plants. At the same time, they began their high protein, low sugar milk proposition by partnering first with H-E-B supermarkets across the Southwest under the Mootopia brand in 1996 – a precursor to what is fairlife today.

Sue McCloskey explained to Pennsylvania producers at the 2020 Summit that they saw other protein drinks in the market they could compete with by concentrating the protein in the milk. 

She said this means that the raw milk going into the ultrafiltration process must be very low in somatic cell counts because the process separates some solids, like lactose, while concentrating other solids.

Products in the fairlife line are currently made at the original SMP ultrafiltration plants in Dexter, New Mexico and Coopersville, Michigan. Newer plants opened in Goodyear, Arizona in 2021 and Petersborough, Ontatio, Canada in late 2020. The latter sources all of its milk from Canadian farms for the Canadian consumer market.

Ultrafiltration is employed by other dairy companies, such as Cayuga Milk Ingredients (CMI) using proprietary European technology to produce unique liquid and dry milk and dairy ingredients for sale in the U.S. and internationally. 

Also located in the Finger Lakes Region of New York in the town of Auburn, CMI announced its own expansion last year to break ground this spring on a second facility that will have aseptic packaging capabilities for manufacturing a range of shelf-stable fluid milk, filtered milk, and dairy-based beverage products.

-30-

My thoughts on the ABC’s of PA’s state-mandated OOP

Posted on by
1

By Sherry Bunting, published in Farmshine, May 5, 2023

The purpose of Pennsylvania’s 1930s Milk Marketing Law was to regulate and support the Commonwealth’s dairy industry. Today, it continues to set a retail minimum price for milk through the Pennsylvania Milk Marketing Board (PMMB) while most other states have zero protection against supermarkets using milk as a loss-leader to attract shoppers. 

To me, that’s the real problem. Nationwide, consumers don’t know or appreciate the true value of milk after years of rampant and extreme loss-leading. I’m not talking about random sales to clear inventory, I’m talking about day-in-day-out well-below-cost prices as a retail business model.

Supermarkets chains have gotten into doing their own milk bottling or refuse to pay for services or quality as a way to avoid eating all of the cost of their own decisions to knock the price of milk back several dollars per gallon. They know milk is in 95% of shopping baskets. It’s a staple. If their store brand is the cheapest around, they’ll get your business and sell other high margin items at the same time.

Dairy farmers and milk bottlers, quite frankly, should not be on the hook for that. Period. But indirectly they are.

At the federal level, no one wants to address this because USDA also benefits when it comes to buying cheap (skimmed) milk for food programs like school lunch, where they also reimburse Impossible not-burger, nacho chips and pop-tarts — but not whole milk, only skimmed.

Is it any wonder consumers balk at spending $5 for a gallon of milk in Pennsylvania but will pay $1.50 for a cup of water, even more for a cup of water with artificial additives? 

Is it any wonder consumers don’t think of milk’s nutritional value next to other protein and vitamin drinks? Intrinsically, the higher margin drinks are perceived as more valuable because the price is higher. Milk is perceived as worth less than water!

This makes Pennsylvania a sitting duck in a national, no, a global market. Why? Because Pennsylvania sets a minimum retail and wholesale milk price each month.

Pennsylvania’s Milk Marketing Law prevents supermarkets from selling milk under the monthly announced state-minimum price. The over-order premium (OOP) portion of this price was intended to help Pennsylvania farmers. The Milk Marketing Law already gives the retailers and bottlers a 2.5 to 3.5% profit margin over average industry costs within that set minimum-price buildup.

The OOP is currently set by the PMMB at $1.00 per hundred pounds of milk plus a 44-cent per hundredweight fuel adjuster. This come out to 13 cents per gallon paid within the state minimum retail price that is meant to be the farmer’s over-order premium (OOP).

A variety of loopholes have diminished how much of the state-mandated OOP gets back to Pennsylvania dairy farmers as intended by the law. It has encouraged interesting business models that involve more out-of-state milk coming in to displace Pennsylvania milk in some Pennsylvania stores (and some creative accounting for sure).

Whether in tankers or packages, more out-of-state milk is competing with an unfair advantage when the built-in OOP is either collected and not paid to farmers or remains completely undocumented — floating around and up for grabs by the supply chain.

Senate Ag Minority Chair Judy Schwank had an interesting exchange with Chuck Turner of Turner Dairy near Pittsburgh during the recent Senate Ag hearing on the matter. She asked whether or not the aseptically processed, shelf-stable milk, which she buys, has the OOP built into its price.

Good question.

Turner explained that for the members of the Pennsylvania Association of Milk Dealers, the OOP is factored in as a cost that they incur when they procure milk within the state and then return this OOP to their Pennsylvania farmers based on their sales of Class I fluid milk products within the state.

On the other hand, when a Nestle or some other company, like fairlife, makes a shelf-stable flavored milk that ends up in a retail dairy case in Pennsylvania, the OOP doesn’t enter into their thought process on these products coming most likely from Indiana (and New York), he said. To his mind, that means it does not “collect” OOP.

In reality, such out-of-state packaged fluid milk products that fall into the Class I fluid milk category are ‘collecting’ the OOP — even ultrafiltered and aseptically packaged milk. These products compete for Pennsylvania consumer dollars. Whether out-of-state fluid milk products are unflavored or flavored, fresh or shelf-stable, they are part of the unknown number Schwank said the Senate Ag Committee needs to know.

It doesn’t matter if the milk is sold above state-minimum price, the OOP is in there.

Take for example the fresh fluid milk brands that are bottled in Pennsylvania — that are not shelf-stable – but are priced on supermarket shelves above the state minimum retail price.

This happens when stores like Walmart and Costco want to differentiate their private label store brands as the lowest-price. What do they do? They put other brands higher.

Since supermarkets in Pennsylvania cannot go below the state’s minimum price to “loss-lead” with their in-house private label, they bump-up the price on competing name brands instead.

In some cases, this pressures sales volume even lower for name brands that are produced, processed and sold in Pennsylvania, reducing the OOP that goes back to the Pennsylvania farms. At the same time, some of the private-label store brands sold at state-minimum fall into the category of breaking the chain of produced, processed and sold in Pennsylvania, which affords them the ability to keep the farmer’s OOP.

Here’s my bottom line from the recent Pennsylvania Senate Ag hearing on the OOP:

For 15 years grassroots dairy producer groups have been grappling with the concerns shared at the hearing, and how the OOP may be affecting the use of Pennsylvania-produced milk in Pennsylvania consumer markets. The embarrassment of not knowing definitively how much fluid milk is sold in the state and how much premium is stranded off-record or on-record has been the subject of meetings, hearings, estimates, emotion, stonewalling and bickering for over 15 years!

Attempts have been made by lawmakers like former State Senator Mike Brubaker and current State Representative John Lawrence repeatedly putting forward bills that would have penetrated the armor surrounding this issue.

Now, in the past 12 to 18 months, we have the Pennsylvania Farm Bureau on high-alert, the Department of Agriculture now is involved and has come up with a plan. 

The CDE and PDMP are studying the issues around the premium and the obstacles to processing investment with the help of a Cornell economist. 

And the Senate Ag Chairman and Minority Chair offered their data-driven bills last session and will offer them again, because, of course, they are paralyzed by still needing that data they’ve been needing for 15 years!

Now, as the fluid milk market is in steep decline over the past 15 years (ironically the same 15 years in which whole milk and 2% milk have been federally prohibited as choices in schools and daycares)…

Now as most of the milk bottling assets, nationally, are owned by cooperatives and most of the rest by retailers…

Now as fluid milk plants are closing to the south and the west, while Pennsylvania has managed to hold on to a core of independent bottlers…

Now as the state courts the favor of Coca-Cola / fairlife or other new processors to invest in Pennsylvania … (Coca-Cola announced May 9 that New York will get the new plant).

Now as everyone is sitting up noticing that the tens of millions of Pennsylvania-paid ‘stranded’ OOP annually over the past 15-plus years may have been fueling growth beyond Pennsylvania’s borders while Pennsylvania’s own farms have been stagnated by more stringent supply management programs due to lack of processing capacity…

Here we are, back to the question of needing the data. Senators were interested in doing something, but Chairman Elder Vogel, said threading the needle will be difficult, and Minority Chair Schwank said “we have to have the data.”

Pennsylvania is enduring erosion on one hand in part because of the OOP and/or the minimum pricing, while on the other hand, these structures are believed by some to provide a stabilizing effect for the Class I bottlers that remain.

And so, the cats keep chasing their tails around the milk bowl!

Meanwhile, more producers have strived to get some of their milk outside of this game by selling it raw – an entirely separate market. The PMMB reached out to a number of them last year telling them they had to be licensed and do monthly reports, then backed off a bit for the time being. They are not the problem. Their milk is not pasteurized, and it is not part of the system in Federal Milk Marketing Orders either.

My biggest questions after the recent hearing, after 15 years of following this and for a time helping farmers who were involved in seeking changes more than a decade ago: Where would we be today if in any of the prior legislative bills, meetings, hearings, plans, would have moved forward in some fashion? 

And yes, this too is related: Where would we be today if whole milk had not been removed from schools?

One thing is clear on the first question, we would by now have solved the math equation of A + B = C instead of estimating, stonewalling, bickering…

On the second question? We might be selling more milk.

Read Part One and Part Two of the PA Senate Ag Hearing about the ABC’s of the OOP here and here

-30-