Biden, Vilsack pledge “whole of government approach” in scripted White House Nutrition Conference that converged with Tufts ‘Food Compass’ and FDA’s ‘healthy labeling’ rule; Fed. Reg. comments due Dec. 28, 2022

By Sherry Bunting, updated from original publication in Farmshine, Sept. 30, 2022

WASHINGTON — Get ready for unscientific nutrition bullying. Announced more than a year ago, the White House Conference on Food, Nutrition and Health Wednesday, September 28 was cloaked in secrecy until the eve of the event, when the 44-page “Biden-Harris Administration National Strategy on Hunger, Nutrition, and Health” was released Tuesday, September 27 around Noon. 

By 5:00 p.m., the Conference agenda appeared in the inbox of registered participants, and during the overnight hours, the Biden Administration released a fact-sheet announcing $8 billion in “new commitments” from over 100 private businesses, local governments and philanthropies for what it calls a “transformational vision.”

Taking a page from the World Economic Forum’s (WEF) Davos-style approach to food transformation, the White House solicited pledges to address the five “pillars” in its playbook. 

Of note among them are a $500 million investment by Sysco (foodservice vendor), nearly $50 million by Danone, $250 million from a collaboration of the Rockefeller Foundation and the American Heart Association on a ‘food as medicine’ initiative, and an undisclosed amount for a collaboration between Environmental Working Group, the James Beard Foundation, the Plant Based Foods Association and the Independent Restaurant Coalition to prompt more plant-based alternative and vegan offerings in foodservice — to name a few.

Then, at 9:15 a.m., just 15 minutes before USDA Secretary Vilsack was set to open the Conference ahead of President Joe Biden’s remarks, the Food and Drug Administration (FDA) announced its “proposed updated definition of a ‘Healthy’ claim on food packages to help improve diet and reduce chronic disease.”

Presto: FDA provided the ‘teeth,’ describing its proposal as aligning directly with the Dietary Guidelines. For the proposed rule, click here and to submit a comment by Dec. 28, 2022, click here

This morsel had been under development over the past four years after public hearings in 2018-19 were reported by Farmshine and then deliberations went silent – until now.

The flurry of activity appeared in scripted fashion within the 24-hours prior to the start of the White House Nutrition Conference convening stakeholders. The first such conference was over 50 years ago and had served as the launch pad for what are known today as the infamous Dietary Guidelines for Americans (DGAs).

A Senate nutrition hearing exactly one year ago in November 2021 paved the way for the September 2022 White House Nutrition Conference.

CAPTION: “We have to give families a tool to keep them healthy. 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 President Biden. White House Conference screen capture

The Conference and follow up actions, said President Biden on Sept. 28, are being devoted to “nourishing the soul of America so that no child goes to bed hungry and no parent dies of a disease that can be prevented. We can do big things,” he said about the stated 2030 goals of ending hunger, increasing healthy eating and physical activity, and reducing diet-related illnesses and other nutrition-related health inequities.

“But,” Biden declared: “We have to give families a tool to keep them healthy. 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.”

The President continued: “We can use these advances to do more to be a stronger and healthier nation, to achieve ambitious goals. We must take advantage of these opportunities when we have these children in a whole of government, whole of society approach. We need to think in ways we never thought before.”

CAPTION: Ag Secretary Tom Vilsack told the White House Nutrition Conference crowd of more than 500 in-person and more than 6000 logged-in virtually that the Administration is looking to extend the child tax credits, provide more funds for more free school meals, and “take nutrition in a new direction using a whole of government approach that involves the entire federal family.” White House Conference screen capture

In his remarks ahead of the President, Ag Secretary Tom Vilsack stated that government programs feed 1 in 4 children. He and Biden both talked about expanding the child credit permanently. They talked about $2 billion in funding for food banks and schools, including $100 million for ‘incentives’ to make school meals healthier. They both noted funding to make free school meals available for 9 million additional children. A laundry-list of throwing money at a problem without re-evaluating the flawed guidelines that run the school meals and other USDA food programs despite preponderance of evidence that saturated fats are not the enemy.

There was talk of going “a new direction” but this is all process-based. There was no talk of reviewing the flawed Dietary Guidelines that helped get us here and that the Biden-Harris strategy puts so much emphasis on.

Parsing through the 44-page National Strategy, the bottom line is to expect more of the same drill-down on eliminating animal fats, only worse and with stiffer process, labeling and speech boundaries through FDA and the FTC.

We can expect nutrition bullying to commence — if we step outside of the still-vague but Dietary Guidelines-centered White House playbook. In fact, in addition to the FDA ‘Healthy’ label update, a small-print detail in the 44-page Strategy promises power and funding to the Federal Trade Commission (FTC) to scrutinize and penalize food marketing claims for being out-of-bounds on the Biden-Harris DGA-scripted nutrition field of play.

Vilsack noted the National Strategy’s approach is a “whole of government approach that involves the entire federal family.”

In preparation for the Conference, many have lamented the lack of transparency leading up to it. For months, the Conference website gave instructions on how to hold a ‘watch party,’ or a ‘satellite event,’ and how to rally support for nutrition and health ahead of time. But all of the necessary details were missing — until the day of the conference. 

Emailed invitations were sent to those who registered just three days before — requesting that they visit a web-portal and record an interview to provide input. There, people respond to White House questions and their faces are added to a streaming screen full of moving mouths — giving the appearance of broad input flowing in from Americans.

Made nervous by the lack of a published agenda or framework, over a dozen agricultural organizations had sent a letter to President Biden on September 8th asking for a “seat at the table.” Those organizations included American Farm Bureau and commodity groups for wheat, beef, sorghum, peanuts, canola, soybeans, barley, corn, sunflower, eggs and rice.

Dairy organizations were conspicuously absent from any of the pre-Conference letter-writing or other such public statements. But then, the dairy industry has its man Vilsack in play, and its DGA 3-a-day – so case-closed – can’t be bothered on the milkfat and whole milk issue.

On the agenda provided the day of the Conference, we found former DMI vice president of sustainability, Erin Fitzgerald — who now serves as CEO of the U.S. Farmers and Ranchers Alliance and who represented USFRA and referenced her boss at the dairy checkoff during a WEF panel in Davos earlier this year — leading a plenary session on “access to affordable foods.” Also, Chuck Conners of the National Association of Farmer Cooperatives led the plenary discussion on “empowering consumers to make healthy choices.”

(We learned after the Sept. Conference that National Milk Producers Federation and the National Dairy Council, funded by the mandatory dairy farmer checkoff, were invited to attend. They were represented, and they brought “student leaders” from GENYOUth. To read NMPF’s statement after the Conference, click here).

Key questions around “what are those healthy choices” to be compassed in tools and identified in FDA labeling went repeatedly unanswered as the discussions focused on approaches and processes, perhaps deeming the unsettled dietary science on fats to be settled science with no need for discussion.

Nutrition Coalition founder, advocate, author and investigative journalist Nina Teicholz has been writing about the Conference for weeks before it began, noting the lack of a pre-conference agenda and the refusal of the Administration to review the science on saturated fats ahead of this ‘landmark’ event.

She points out that the White House delegated Conference planning to the Dean of the Tufts Friedman School of Nutrition Science and Policy at Tufts University Professor Dariush Mozaffarian — developer of the Food Compass, which is a new method for rating and ranking foods in categories to be consumed frequently, modestly, and occasionally.

To understand what the Food Compass looks like — sugary cereals rank far ahead of the milk that goes in the bowl with them. And, nearly 70 brand-named cereals from General Mills, Kellogg’s, and Post are ranked twice as high as eggs cooked in butter! Alternative fake milk beverages, such as almond juice, rank ahead of skim milk and far ahead of whole milk. Potato chips (yes, potato chips) are an example of a food that ranks ahead of a simple hard-boiled egg and light-years ahead of whole milk, most cheeses and real beef.

In fact, the only cattle-derived product to get top sector ranking is plain non-fat yogurt. (Surprise: Danone was one of the Food Compass development sponsors). Meanwhile, most cheeses, whole milk, and beef ranked near or at the very bottom of the lowest categories.

Coincidentally, Mozaffarian’s department at Tufts also received a $10 million grant from USDA in November 2021 for a five-year project “to help develop cultivated meat” (aka lab-created meat) through assessment of consumer attitudes and development of K-12 curriculum.

Teicholz laments the lack of consideration by the White House, USDA, HHS and FDA as they ignore many reviews including the most recent state-of-the-art review on saturated fats, whose authors include five former members of the Dietary Guidelines Advisory Committee.

“These are the people who wrote the guidelines saying: ‘We got it wrong,’” writes Teicholz.

Their paper was published in the prestigious Journal of the American College of Cardiologists, whose Editor in Chief named it as one of the top 5 papers of the year. Science like this appears to be off the menu of the White House nutrition playbook.

The entire playbook hinges upon the main tenets of the current Dietary Guidelines for Americans even though the DGAs are being questioned by the scientific community… Even though the DGAs have screened out sound science on dietary animal fats and proteins for at least the past three cycles (15 years)… Even though the rates of American obesity and diet-related illnesses were mostly stable pre-DGA but have risen steadily since the DGA cycles began… And even though these consequences have risen dramatically among children and teens during the past decade since school meals, school milk and a la carte competing foods and beverages were further restricted to the low-fat levels of the DGAs.

What does the White House blame for this poor performance? The playbook cites the Covid pandemic food choices of Americans — stuck at home — for the deteriorated statistics. Unbelievable! These statistics have been deteriorating for decades, especially since 2012.

Looking over the playbook, it closely follows the pattern of FDA’s Multi-year Nutrition Innovation Strategy proceedings that have been quietly underway after public hearings in 2018-19 until the ‘Healthy’ label proposal was announced Sept. 28, 2022.

Appearing in the White House playbook is the proclamation that food and beverage packaging will move toward simpler nutrition guidance under FDA, that an easily recognizable ‘healthy symbol’ will be reserved for front-of-package labeling on those foods the government deems Americans should eat, and a potential ranking system for symbols will be developed for packaging of foods and beverages the federal government deems unhealthy.

This is all coincidentally similar to the Tufts Food Compass, and the substance behind these simplified ‘healthy’ (or not) symbols is a doubling-down on the low-fat DGAs as a primary base metric. Here is a deep dive into the Tufts Food Compass that Mozaffarian, the White House Nutrition Conference Chairman, had a critical role in developing to now be the formation of future food policy. Read the comprehensive analysis here

The National Strategy calls for even more adherence to the flawed DGAs among every sector of the economy beyond government feeding programs, schools, hospitals, and military diets to include foodservice offerings, supermarket layouts, online shopping algorithms, even licensing for all daycare or childcare providers and nutrition certification for these licensed childcare providers – not just those receiving government subsidies for food. 

This is so-called “stealth-health” at its best — or rather its worst.

The Biden Administration professes to be concerned about the 1 in 10 households experiencing food insecurity and the rise in diet-related diseases among the leading causes of death and disability in the U.S. The White House cites data showing 19 states have obesity prevalence at 35% or higher with 1 in 10 citizens having diabetes, 1 in 3 with cancer in their lifetime, and nearly 5 in 10 with high blood pressure. 

Yet, there is no pause for a comprehensive review of the very dietary guidance, the DGAs, that helped get us here. 

The National Strategy reveals how the Administration is assembling executive orders, legislative prompts, calls for action among food organizations, companies, agencies, academia and state and local governments to get everyone on the same page making Davos-style pledges and to conform to the federal playbook.

In the executive summary, the President writes: “Everyone has an important role to play in addressing these challenges: local, State, territory and Tribal governments; Congress; the private sector; civil society; agricultural workers; philanthropists; academics; and of course, the Federal Government.”

(Note Biden’s only reference to farmers or food producers is as “agricultural workers.”)

The playbook’s five pillars talk about improvement, integration, empowerment, support and enhancement. It coins phrases like ‘food as medicine’ and ‘prescriptions for food.’ Reading deeper, we see a launch pad for a new method of nutrition ranking and labeling with the primary factors listed as low-sodium, low-fat and reduced added sugars.

CAPTION: This diagram on page 6 of the 44-page Biden-Harris Nutrition Strategy, the White House ‘playbook,’ clearly identifies the very real concerns, but the pillars of this strategy double-down on perpetuating the problem by giving even more influence to the low-fat / high-carb Dietary Guidelines that many in the scientific community are questioning. The ‘playbook’ also increases the reach of the federal government into the diets of children in daycare and schools. 

The playbook’s diagrams show us the concerning impact of food insecurity and diet-related diseases in poor overall health, poor mental health, increased financial stress, decreased academic achievement, reduced workforce productivity, increased health care costs and reduced military readiness – but then doubles-down on the solution being more of the same low-fat / high-carb dietary path that got us here.

The White House playbook states that, “The vast majority of Americans do not eat enough vegetables, fruits or whole grains and eat too much saturated fat, sodium and added sugars.” But at the same time, on the saturated fat question, the data show per capita consumption of red meat has declined since the start of the DGAs, and milk consumption has substantially declined.

Americans are being called upon to “unify around a transformational vision,” said Biden. 

This vision includes more federal control of diets and nutrition education after failing miserably with the control it already possesses. There is no talk of revisiting the path we are on, just doubling-down on how to get more Americans onto that DGA path, to tell them what to eat, and to put the FDA stamp on ‘approved’ foods and beverages while having the FTC investigate health and nutrition claims that fall outside of the flawed DGAs.

Translation: Let the ‘nutrition bullying’ from the White House bully-pulpit begin. Some of us are ready to rumble.

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Why I’m pulling the Republican lever Tuesday, without exception

By Sherry Bunting

America is in turmoil with so many distractions in our public discourse. By the time you read this editorial, we’ll be a few days away from what could be the most important midterm election in recent memory.

Our nation has gone through tough times of both unity and division throughout its mere 246-year history. It seems that never has it been to this point where we have trouble debating the issues, the policies, the future in a productive way without malice. Some things just can’t be said in the current political environment, and those who do, pay a steep price.

What’s missing is we don’t have healthy journalistic skepticism probing the current government mouthpiece like we did for the previous. More media sources today show an obvious disdain for their common reader, viewer, listener. Instead of bringing the news, providing analysis, asking probing questions and keeping that healthy skepticism toward government edicts, we have media sources playing the role of justifying, of taking the government talking points and coaxing everyone to tacitly believe them.

There is a staleness in the air that is difficult to pinpoint, but it is there. It is the resumption of an interrupted agenda.

In Pennsylvania, the constant barrage of negative ads about Mehmet Oz are hard to take.

The debate last week between Oz and Fetterman, the two candidates for U.S. Senate, was enlightening. I was impressed with Oz, where before I was lukewarm having supported someone else for the Republican nomination. But after hearing his responses on education, social security, medicare, foreign policy, energy, labor and immigration and looking into his background and positions on specific items such as whole milk choice in schools (he supports it), I posted on social media that my lukewarm vote would now be a proud vote for Oz for Senator.

My post was promptly seized-upon by a few ‘friends’ from other states putting me down personally in a condescending manner, instead of continuing a discussion on the actual issues and policies. A tough thing to do when Fetterman could not answer or explain his positions, and could only put words in his opponent’s mouth that contradicted the answers Oz gave to questions in a clear, concise and comprehensive manner.

It got to the point where my simple response to the social media attacks was to tell said ‘friends’ to worry about who they are voting for in their states and I’ll worry about who I vote for as a Senator that I feel represents me in my state.

Not good enough, because they are incredulous at the prospect that the Democrats may lose seats.

You see, we are at an inflection point where a global, corporate, collusion is rapidly underway, a freedom-undermining agenda — that is tied up with pretty words about planet-saving policies.

The train left the station slowly over the past few years. Some of us saw it moving, most of us didn’t worry too much about it. Now it’s careening down the track at a high rate of speed. A derailment is coming. The question is: Can the train be slowed down by a change in Congressional leadership to where the track can be evaluated for pitfalls laid in its path?

Under the current regime, it’s not possible to hold a discussion about the traps and pitfalls being laid around our nation’s food and energy sourcing without being called a climate-denier, a racist, a sexist, a fascist, or worse.

The fabric of independent farms and businesses across this land — those producing the essentials of life that allow America to remain a free country — is being ripped apart by the Economic, Social and Governance (ESG) goals of the world’s largest money managers investing in the biggest global corporations that all pledge to collude – in the name of saving the planet of course – to not only push left-wing policies without healthy debate, but also to undermine the ability of any competitor to continue operating.

At the current rate of speed that this train is traveling, it won’t be long before companies – eventually even farms and food producers – will be effectively shut out of commerce or shut out of access to capital if not meeting ESG goals, which include the contentious implementation of Scope 3 emissions-tracking downstream and upstream through entire supply chains.

Such supply chain configurations are in fact what a billion dollars in USDA spending is going toward developing in pilot programs, aimed at carving out the winners and losers not on competition for what is being produced but on an ESG scoring system that most of us don’t understand except for the few large insiders that have been planning it years before now.

If we continue down this track, consumers won’t be doing the choosing. The former DMI executive who spoke at Davos came right out and said it. Farmers are no longer marketing to consumers. Their new consumer is the investment sector, the money managers, the people behind the people who buy their commodities and secure their mortgages.

We even heard DMI CEO Barb O’Brien mention in a state of dairy report before she was promoted to CEO that the Net Zero Initiative is looking to attract investors to dairy, not so much to attract consumers to drink more milk or eat more dairy products.

At some point, as the left-leaning ‘woke’ elites have admitted publicly at Davos, ESG scoring will ultimately mean tracking individuals. Oh, it will be voluntary at first, with monetary incentives – no doubt. But at the end of the day, Big Brother wants to know everything you and I do, what we eat, where we source it, where we travel, and how we get there.

Food and energy. That’s what this is about. Under the guise of saving the planet, we are poised to give centralized global control over food and energy.

If we can gas up a car, we can go. If we are reliant on a charger or an electricity grid, a centralized control mechanism can come into play. If we are able to access diverse local and regional food sources and supply chains, we remain strong and tied to the farms taking care of the land, but if a global ESG target controls revenue and access to credit, centralized control of food is eminent.

A handful of Republican states have already issued legal challenges to the ESG investing on the basis that it runs counter to antitrust laws and creates anticompetitive behavior — holding some businesses hostage while others are flooded with investment – all to steer our paths on how we source the necessities of our economy, commerce, and life itself.

If America cannot sustain itself, we become pawns in a global game played at the highest levels by the biggest money managers. Republicans are looking at this issue. Democrats are on the train telling the rest of us, find a seat now, before it’s too late.

We see it already in education of our children — first dietary-control, followed by word-control, followed by thought-control.

There is so much competing information flying around from the extremes on the left and right, that we lose sight of the middle where the essence of logic and common sense can be found.

In fact, we’re so busy trying to figure out what is truth and what is gaslighting that we don’t see the real crisis. We can talk about crime and guns, viruses and vaccines, justice and freedom, while missing the point that the unprecedented level of turmoil clouds the transformation that is taking place and will continue to take place quietly in our food supply chain – that which we cannot live without.

From imported food sources to franken-food replacements and from centralized supply chains and foreign ownership of American farmland to policies that will impact the future viability of our nation’s farmers, the very backbone of freedom and security is at risk.

I don’t have full faith and confidence in either party — knowing what lies beneath the surface in this global transformation of food and energy and understanding the way it is being driven by money managers.

But one thing is for sure. I am voting Republican, across the board, for what might be the first time in my life that I didn’t pick and choose more independently.

Why? Because the Democrats are all-in for global transformation, telling us what they are doing, where we are going, how our dissent might be handled in the future… and for me, it appears to be a dangerous seat on a high-speed train without a clue about the real track we are on.

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Fluid milk’s precarious future can’t be ignored

Class I is at a tipping point, will future FMMO strategies strengthen or exploit it?

“Probably some of you have never recently met an independently owned fluid milk bottler. We are the only prisoners in the Federal Order system. Everybody else can opt in or opt out. Even now… our cooperative competitors don’t have to pay their member producers a minimum price — but we do. I just ask that you take into consideration not just what we can get from Class I … We are on a 13-year losing streak that fluid milk consumption has declined on a total basis. We are at a tipping point,” said Farm Bureau member Chuck Turner, Turner Dairy Farms, a third generation independent milk bottler near Pittsburgh, Pa.

By Sherry Bunting, Farmshine, October 28, 2022

KANSAS CITY, Mo. — The precarious future of Class I fluid milk was an underlying concern expressed in different ways at the AFBF Federal Milk Pricing Forum in Kansas City recently. Some have written off the future of fresh fluid milk and have turned sights elsewhere. Others recognize federal orders don’t fulfill their purpose when fresh fluid milk doesn’t get to where the people are. And then there’s the wedge product — aseptic milk — in the mix as some changes have already been made to promote investment in it.

Since the federal orders are based on regulation of Class I fluid milk, its future is most definitely at the core of the Federal Milk Marketing Order (FMMO) discussion. 

A critical point made by panelists is that more money is needed to get fresh milk to consumers in high population areas. Also mentioned was the restoration of higher over-order premiums to farmers in milk-deficit areas to keep these areas from becoming even more deficit.

But at the same time, Class I sales are declining relative to a growing dairy pie of other class products, and the flurry of fluid milk plant closures near population areas has caused further disruption. 

On day three of the forum in Kansas City, Phil Plourd of Ever.Ag attributed most of the fluid milk sales decline to the fact that “milk lost its best friend – cereal.” When asked, he did acknowledge that about one-third of the problem facing fluid milk is rooted in the low-fat school milk requirement. He also pointed out how the entire food industry is changing, and he warned about the lab-created dairy proteins made in fermentation tanks that can be ‘turned on and off.’

Bottom line is the growth markets are in other products, he said. The declining fluid milk sector can no longer shoulder all of the responsibility for the federal order system. 

He showed a bar-graph depicting the decline in the share of total U.S. production participating in federal or state revenue sharing pools. Using estimates of California’s pre-federal order mandatory state order, the percentage of U.S. milk production that was pooled exceeded 80% in 2018. In November of 2018, California became a federal order. Pooled volume vs. total production fell to just over 70% in 2019, the first year the new Class I mover formula was implemented. In 2020, during the pandemic, pooled volume fell to just over 60% and ticked a few points lower to 60% in 2021.

Several panelists, including Calvin Covington, confirmed that cooperatives, especially DFA, own the majority of the fluid milk plants in the U.S. today. This evolution has only increased with plant closures over the past 18 months, and cooperatives have payment and pooling flexibilities not enjoyed by proprietary plants.

As the Class I sector consolidates to roughly 80% owned by cooperatives and the balance owned by grocery chains and independents, there is another problem with federal orders that is easily overlooked. Who is it regulating? It does not regulate what cooperatives pay their members, therefore, it is regulating a declining number of participants in a growing global industry.

A milk bottler from Pennsylvania used the open-microphone between panels to address this 800-pound gorilla in the room full of consensus-builders doing their level-best to ignore it.

“I am sort of an ‘odd duck’ here. Probably some of you have never recently met an independently owned fluid milk bottler. We are the only prisoners in the Federal Order system,” said Chuck Turner, a long-time Farm Bureau member and third-generation milk bottler from Pittsburgh.

“Everybody else can opt in or opt out. Even now, with recent developments, our cooperative competitors don’t have to pay their member producers a minimum price — but we do,” he confirmed.

Turner asked the room of consensus-builders to “take into consideration not just what we can get from Class I — but let’s think more about what we need to do to sell it. We are on a 13-year losing streak with Class I — 13 years that fluid milk consumption has declined on a total basis. We are at a tipping point,” said Turner.

While half of the forum’s table groupings agreed Class I differentials need to be increased, others wondered how much more money can be extracted from Class I without killing it?

Joe Wright, former president of Southeast Milk Inc., laid out the problem as a “downward spiral” — making it more difficult to attract milk to populated areas in the Southeast. He said it started with the Dean and Borden bankruptcies and continues with more plant closings announced every few months.

In the Southeast, said Wright, it’s to the point where school kids won’t get fresh milk in some areas because no one will bring it.

He noted that the over-order premiums in Florida have decreased by $1.50 per hundredweight. Some 30 years ago, it was $3.00. “We don’t have that now,” said Wright, noting this makes it difficult for farms to continue producing milk for the Class I market in the face of encroaching subdivisions and other pressures to sell.

“There are 9 million people just from Miami to Orlando,” said Wright. “But if we don’t do something soon, we’ll have no dairy farms left in Florida. Do we want the answer to be a push to aseptic milk? Total milk consumption was stable until 2010. That’s when the government gave us low-fat, low-taste milk in schools. Now, we’re going to start them with low-fat, low-taste, aseptic milk? That is going to kill fluid milk.”

He also noted that fluid milk sales are not helped when dairy shelves are empty, showing slide after slide of empty Walmart dairy cases in the same town in Florida in December – three years straight (pre-Covid, during Covid, and post-Covid). When he asked attendees if they have seen this in their own areas, many hands were raised.

He pointed out that when the fresh milk is completely missing on store shelves, it is the aseptic or ESL milk – and plant-based alternatives – that are available. This has a cumulative effect on fresh fluid milk sales.

Again, the topic of aseptic, shelf stable, warehoused milk was brought up with feelings of ambivalence as milk producers are both drawn to it as a hedging mechanism to even-out the supply and demand swings in areas like the Southeast, but on the other hand offended by the prospect that this product can be considered by bottling retailers like Kroger as an innovative “value added” growth category, while the original fresh fluid milk is treated like the Cinderella sister – a low-margin commodity non-growth category.

As more aseptic packaging comes on line, and as schools go without milk and stores short customers on the availability of fresh milk, a transition is being signaled toward packaged milk that is capable of moving farther without refrigeration cost — from anywhere to anywhere – right along with Coke or Pepsi for that matter.

“How do we fix the empty case syndrome that has gotten worse over the years? It’s all about being accountable,” said Wright, giving some history on how this was handled in the past and voicing his hope that having the Dean plants under DFA and Prairie Farms ownership could help.

“Can they push back on Walmart on stocking? I don’t know. There has to be margin in that relationship, but these are correctable problems that affect milk sales,” he said.

For its part, Kroger also closed a plant last year that was running half-full, according to Mike Brown, senior VP of Kroger’s dairy supply chain. 

Milk bottling is consolidating rapidly to run the remaining plants at or above capacity to capitalize on throughput and improve margin.

“The reality,” says Wright, “is we are seeing a downward spiral, and milk is not always available where the people are. The question is, what are we going to do about it?”

Brown noted that the Class I mover formula change, which was an agreement by IDFA and NMPF in the 2018 farm bill, was intended to make fluid milk pricing “more predictable.” This was deemed necessary to attract investment to make fluid milk “more durable and transportable.”

In short, the Class I change was done to attract investment in expensive aseptic packaging to make shelf-stable milk and milk-based high protein beverages. 

Going forward, said Brown: “Risk management is important and especially for specialty products such as extended shelf-life and aseptic milk, which are growing more than the plant-based beverages for Kroger. We have to be sure we nurture these new products because they are value-added growth markets for fluid milk.”

On the other hand, farmers in Kansas City voiced their concern for what happens to fresh fluid milk, that it matters for consumers and it matters for their dairy farms, and it also matters for the continuation of the federal orders. 

Aseptic milk is experiencing growth, but why? Is necessity the mother of invention or is the investment driving the necessity. 

After all, it is the regional and perishable nature of fresh fluid milk that led to the development of the federal orders in the 1930s. Aseptically-packaged and warehoused milk is not fresh enough — and may not be local enough — to be the product that helps extend the viability of the federal orders. 

AFBF milk pricing forum draws 200 stakeholders to KC, some consensus gained, high priority given to return Class I ‘mover’ to ‘higher of’ formula

By Sherry Bunting, Farmshine, October 21, 2022

KANSAS CITY, Mo. — It was intense, productive, enlightening, and at times a bit emotional. And, yes, there was consensus on some key points during the American Farm Bureau Federation (AFBF) Federal Milk Marketing Order (FMMO) Forum in Kansas City last weekend (Oct. 14-16).

The event was a first of its kind meeting of the minds from across the dairy landscape, involving mostly dairy farmers, but also other industry stakeholders. It was planned by a 12-member committee representing state Farm Bureaus from coast-to-coast, working with AFBF economist Danny Munch.

Farm Bureau president Zippy Duvall kicked things off Friday afternoon, urging attendees to get something done for the future of the dairy industry, to stay cool, leave friendly, and set a pattern for continuing conversations.

“We have the people in this room who I hope can come up with guiding principles,” said Duvall, noting that a meeting like this is something he has dreamed about for years, even prayed for. He talked about his background as a former dairy farmer and assured attendees that milk pricing is a topic he is very interested in.

He challenged the group to come at it with “an open mind. The answers are sitting in this room, not on Capitol Hill. There are some geniuses in this room, people who really understand this system,” said Duvall.

“We all have ideas, and we can lend an ear to other ideas. We learn a lot if we listen to each other,” he said, noting a few of the existing Farm Bureau dairy policy principles: that FMMOs should be market oriented, with better price discovery. They should be fair and transparent, and farmers should be able to understand and compare milk checks.

Hearings not legislation

Duvall noted AFBF agrees with NMPF that future FMMO changes should go through the normal USDA hearing process, not through Congressional legislation. By Sunday, this seemed to be a point of consensus, along with the recognition that FMMOs need updating, but they are still vital for farmers and the industry. 

On the Class I ‘mover,’ specifically, Munch noted Farm Bureau already adopted the recommendation through its county, state and national grassroots process to return to the ‘higher of’ — plus 74 cents. The addition of the 74 cents is to make up for the unlimited losses incurred over the past four years.

For NMPF’s part, chief economist Peter Vitaliano and consultant Jim Sleper laid out a series of updates the economic committee’s task force is recommending to the NMPF board, which will vote at the annual meeting at the end of October.

These recommendations include going back to the simple ‘higher of’ for the Class I ‘mover,’ updating make allowances and yield factors, doing a pricing-surface study to update Class I differentials, making changes in the end-product pricing survey to allow dry whey price reporting of sales up to 45 days earlier, not 30 days, and eliminating the 500-pound barrel cheese sales from the Class III cheese price formula to base it only on the block cheese.

Intense, informative, valuable

The three days were intense, covering a lot of information, and were shepherded by expert panels and ‘cat herder in chief’ Roger Cryan, AFBF’s chief economist since October 2021.

Munch served as the emcee — akin to the ghost of milk pricing Past (Friday), Present (Saturday) and Future (Sunday). He introduced the various panels and provided economic snapshots and questions for the 25 breakout tables to discuss, decide and deliver.

Meeting organizers reshuffled the deck of 200 attendees from 36 states and representing nearly 150 state and national producer organizations, Farm Bureau chapters, regulatory agencies, farms, co-ops, processors, financial and risk management firms, and university extension educators.

Attendees were assigned tables with a number on the back of each name tag. The goal was to mix the table-groupings for varied geographic and industry perspectives. Each table was equipped with its own large flip tablet mounted on an easel. 

According to Munch, Farm Bureau will scan and collate the information from all of the large tablets and issue a preliminary report to attendees followed by a public report later this year.

On Sunday, the open microphone was lively and most tables reported from their flip tablets. Overwhelmingly, attendees said they found value in the meeting and appreciated the platform. They reported a desire to keep the conversations going, to do this again, not just every 20 years, and not just in response to a problem, but to be forward-looking with the many challenges on the dairy horizon.

Platform for next big issue

For example, Gretl Schlatter, an Ohio dairy producer on the board of American Dairy Coalition (ADC) noted that only Class I milk is mandated to participate in FMMOs, and that today, the FMMOs are weakened with only 60% of U.S. milk production participating in the revenue-sharing pools.

“Where will we be in five years? We do not want to give up on fluid milk – our nutrition powerhouse,” she said. “The issue now is federal milk pricing but the next one coming — fast — is the sustainability benchmarks, the climate scores. We need to keep meeting like this as an industry, keep talking to each other, and get ready for the next big thing affecting our farms and family businesses.”

This was touched upon by Duvall and others, but Cryan reminded everyone that, “Federal Orders are complicated enough without adding the sustainability discussion to it.”

Duvall reminded attendees that this meeting was Farm Bureau’s response to the words of Ag Secretary Tom Vilsack last year, when he said there would be no USDA hearing until the dairy industry reaches some “consensus” on solutions.

This set into motion an already dairy-active Farm Bureau that had formed its own task force, responding to grassroots dairy policy coming up from the county and state levels to national through AFBF’s grassroots process.

In fact, NMPF’s Vitaliano, noted that, “having Roger Cryan at Farm Bureau makes it easier to do this,” to partner on formulating dairy policy because of his background. Prior to coming to Farm Bureau a year ago, Cryan was an economist for NMPF and then for USDA AMS Dairy Programs.

The first hour of the first day included a recorded message from Secretary Vilsack and an in-person presentation by Gloria Montano Green, USDA deputy undersecretary for Farm Production and Conservation.

They encouraged attendees to work together and told them what the Biden-Harris administration has done and is doing for dairy. Primarily, they went through a list of funding and assistance, including the improved Dairy Margin Coverage, the PMVAP payments, Dairy Revenue Protection, Livestock Gross Margin, dairy innovation hub grants and the recent funding for conservation and climate projects that includes 17 funded pilots involving dairy. 

They told attendees that the dairy industry is “far ahead” on climate and conservation because it has been involved in these discussions and is already mapping that landscape.

Dana Coale, deputy administrator of USDA AMS Dairy Programs, took attendees through the FMMO parameters. She engaged with the largely dairy farmer crowd in a frank discussion of what Federal Orders can and cannot do. The headline here is that this current time period before a hearing is a time when she and her staff can talk freely and give opinions. Once a hearing process begins, she and her staff are subject to restrictions on ex parte communications.

Consensus to go back to ‘higher of’ formula

If there was one FMMO “fix” that achieved a clear consensus and was given priority, it was support for going back to the Class I ‘mover’ formula using the ‘higher of’ Class III or IV skim price instead of the current average plus 74 cents method that was changed in the 2018 farm bill.

Since implementation in May 2019 through October 2022, the new method will have cost dairy farmers $868 million in net reduced Class I revenue, which further erodes the mandatory Class I contribution to the uniform pricing among the 11 Federal Milk Marketing Orders (FMMO), setting off a domino effect that has led to massive de-pooling of milk from FMMOs and decreased Federal Order participation.

Pa. Farm Bureau presiden Rick Ebert (left), moderated the first panel Friday afternoon (l-r) Dana Coale, deputy administrator USDA AMS Dairy Programs; Calvin Covington, CEO emeritus, Southeast Milk; Anja Raudabaugh, CEO Western United Dairies. After this panel, during the first open-microphone and roundtable breakout, attendees were urged not to leave their flip tablets blank. “Groups with blank boards will have to drink the almond juice in the back,” said AFBF economist Danny Munch, taking note of the hotel offering and to have real milk on-site — provided Saturday and Sunday by Hiland Dairy.

During his presentation Friday, retired Southeast Milk CEO, Calvin Covington, said dairy farmers lost $69 million in revenue for the first 8 months of post-Covid 2022, alone. That figure will rise to an estimated $200 million when September and October Class I milk pounds are tallied. 

Noting NMPF’s task force recommends the board approve petitioning USDA to go back to the ‘higher of,’ Vitaliano cited “asymmetric risk” as the reason.

This risk scenario was also explained by others. ADC’s Schlatter, for example, noted the current averaging formula “caps the upside at 74 cents, but the downside is unlimited.”

Vitaliano noted that whenever there is a ‘black swan’ event or new and different market factors, this downside risk becomes unacceptable for farmers, and he indicated these market events that create wide spreads in manufacturing classes are likely to continue into the future.

Dr. Marin Bozic, University of Minnesota assistant professor of applied economics, observed the way this downside ‘basis’ risk becomes unmanageable via new and traditional risk management tools. In his futuristic talk on Sunday, producers asked questions, to which he responded that, “Yes, farmers show me that they can’t use the Dairy Revenue Protection because of this basis risk.”

Bozic is also founder and CEO of Bozic LLC developing and maintaining the intellectual property for risk management programs like DRP. 

He also spoke about the concerns of the Midwest as FMMO participation declines. 

Presenting his own ideas and separately the ideas of Edge Dairy Farmer Cooperativ, Bozic said Edge is seeking a consensus to support two or three lines in the upcoming farm bill to simply “enable” FMMO hearings to introduce flexibility on an Order by Order basis, so that uniform benefits can be shared instead of a uniform price. Flexibility, they believe, would enable new ‘uniform benefits’ discussion that can help maintain or encourage FMMO participation in marketing areas with low Class I utilization.

Early in the Class I formula loss scenario of 2020-21, Edge had suggested a new Class III-plus formula to determine the ‘mover.’ Bozic said that “the idea of returning to the ‘higher of’ is not a deal breaker for Edge in the short-term.”

Even Mike Brown, senior supply chain manager for Kroger, unofficially indicated IDFA “could be open to the idea” of reverting back to that previous ‘higher of’ formula. As dairy supply chain manager on everything from Kroger’s milk plants to its new dairy beverages, cheese procurement, and so forth, Brown was asked if the averaging formula allowed him to ‘hedge’ fluid milk to manage risk as a processor.

The answer? Not really. Brown said there are ways for processors to manage risk under the ‘higher of’ formula also, but that they haven’t done any hedging under the averaging formula with fresh fluid milk – and very little risk management with their new aseptically packaged, shelf-stable milks and high protein drinks.

Incidentally, he said, the aseptic, ultrafiltered, shelf-stable dairy beverage category “is growing faster than plant-based” in their retail sales.

This exchange and other discussions suggested the averaging formula may have been geared more toward price stability that would encourage processors to invest in expensive aseptic, ultrafiltered and shelf-stable milk-based beverage technologies that result in a storable product needing risk management. 

Fresh fluid milk is already advance-priced and quite perishable with a fast turnaround. Aseptic, ultrafiltered and shelf-stable products, on the other hand, can be packaged under one set of raw milk pricing conditions and sold to retail or consumers up to nine months later under another set of raw milk pricing conditions.

Frankly, it appears that the consumer-packaged goods companies (CPGs) may be driving such shifts, just as we heard from Phil Plourde of Blimling/Ever.Ag that CPGs are “all-in” on the climate scoring — the next big thing on the dairy challenge list.

Tacking de-pooling – regional or national?

Attendees came back to the specific concern about de-pooling, which Vitaliano and Cryan both described as an issue to be handled regionally and not through a national hearing.

This did not seem to satisfy some who raised the concern. Toward the conclusion Sunday, Cryan explained it this way: 

“De-pooling is a national issue in principle but a regional issue in detail. Every region will have different ideas, needs and situations. If there is consensus (on pooling rules) in a region, then changes could move forward quickly,” he said.

Make allowances are sticky wicket

Attendees appeared to agree that make allowances should be addressed or evaluated through a hearing, but ideas on how to handle this sticky-wicket varied.

Attendees questioned panelists, pointing out that if a farmer’s profit margin on milk is only around $1.00 per hundredweight, then raising make allowances an estimated $1.00 per hundredweight is going to be a tough pill to swallow.

Vitaliano said NMPF is commissioning an economic study with their go-to third-party economist Scott Brown at University of Missouri to show the actual milk check impact of raising make allowances that are embedded into the end-product pricing formulas for the four main products: cheddar, butter, nonfat dry milk and dry whey. 

He said the discussions about make allowances as a cost to farmers are “purely arithmetic” but that the “true impact” is not a straight math calculation. Instead, he said, when make allowances are set appropriately, dairy producers ultimately benefit, so in his opinion, it’s not a penny for penny subtraction.

Several other panelists and attendees observed that processors and cooperatives have been creating their own ‘make allowances’ through assessments, loss of premiums, and other milk check adjustments.

The Saturday afternoon panel of (l-r) Kevin Krentz, Peter Vitaliano, Chris Herlache, and Roger Cryan dove into Class III and IV pricing topics including make allowance formulations and structures.

Vitaliano stressed that when make allowances are set properly, the industry is stronger and better able to compensate producers. Initially, he said, raising make allowances would have a negative impact on expansion, which in turn would have a positive impact on producer prices.

When asked if raising make allowances would mean lost premiums would return to farmer milk checks, he responded by saying “that depends, and it won’t happen right away.”

In other words, raising make allowances will be painful in the short term, but in the long-term (to paraphrase) that pain leads to gain. 

Some panelists and attendees referenced an idea of “phasing in” a future raise in make allowances.

Others wondered why it is necessary with the amount of innovation happening in the 15 years since they were last raised as processors make a wider variety of dairy products – not just those bulk items that are surveyed for end-product pricing formulas.

One idea suggested by a Wisconsin dairy producer was to tie make allowance increases to plant size — much the same way that dairy farmers are only assisted up to a production cap of 5 million annual milk pounds. Cryan said he heard a similar proposal previously to use a graduated scale for make allowance increases according to plant size and presumably age.

This is the crux of the make allowance issue because the new state of the art plants produce many types of products, both commodity and value-added; whereas some of the smaller and older plants that are still vital to the dairy industry are more apt to specialize in producing a bulk commodity with a more limited foray into value-added non-surveyed products.

Modified bloc voting?

While there appeared to be consensus that changes to the FMMOs should be done by USDA petition through the administrative hearing process, not through Congressional legislation, some of the discussion at tables and the open-microphone noted the importance of a producer vote after hearings and USDA final decisions. Many felt farmers should have an individual vote on FMMO changes. 

Currently, cooperatives bloc vote for their members to assure that FMMOs are not ended inadvertently by lack of producer interest in following-through on a vote. 

One compromise suggested by Bozic was to have a preliminary non-binding vote by individual producers, followed by the binding vote done in its usual way.

This, he said, would at least increase accountability and transparency in the FMMO voting process and bring producer engagement into the FMMO hearing process. To be continued

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Dairy checkoff is ‘negotiating’ your future: Train wreck ahead. Stop the train. Correct the track. (DMI Net Zero – Part One)

By Sherry Bunting, Farmshine, Sept. 16, 2022

Dairy farmers are being used without regard. Their future ability to operate is right now being negotiated, and they are paying those negotiators through their 15-cents-per-hundredweight mandatory checkoff with no idea how the negotiations will ultimately affect their businesses and way of life.

Inflated baselines and an inflated methane CO2 equivalent assigned to cows is setting the stage for a head-on collision, a train wreck on the misaligned track laid by DMI’s Innovation Center for U.S. Dairy.

In fact, the Net Zero Initiative has been designed to help everyone but the dairy farmer. It sets up a methane money game for carbon traders at the expense of those dairy farms that have long been environmentally conscious with no-till, cover crops, grazing, and other practices already on their farms.

Such farms will be of no use in what is shaping up to be a focus on harvesting reductions, not attaining neutrality, in DMI’s Net Zero Initiative (NZI).

Small and mid-sized dairy farms that are already at or near carbon-neutral could show smaller reductions for the industry to harvest. 

Conversely, the largest dairies installing the newest biogas systems are realizing even this route could become a dead-end because the credits are signed over and sold for big bucks, a few bucks get kicked back to the dairy, but the methane capture becomes the property of other industries outside of the dairy supply chain.

If the industry does not act now to stop the NZI train for a period of re-examination, adjustment and correction, then the current trajectory may actually move food companies clamoring for reductions ever closer to alternatives and analogs that boast their climate claims solely on the fact that they are produced without cows.

This is a big money game that is operating off the backs of our cows, and the checkoff has been at best complicit as a driver.

RNG (renewable natural gas) operators are signing up large (3000+ cows) dairies left and right for digesters and covered lagoons to capture methane piped to clustered scrubbing facilities to be turned into renewable fuel for vehicles or electricity generation. Meanwhile dairy protein analogs are being created without cows by ‘precision fermentation’ startups partnering with the largest global dairy companies.

In turn, millions if not billions of dollars in carbon credits are generated while farmers and their milk buyers will be left figuring out how to show their reductions when they are left holding the inflated methane bag.

Six organizations, four of them non-profits under the DMI umbrella, officially launched the Net Zero Intitiative (NZI) in the fall of 2019, five months after Ag Secretary Tom Vilsack made headlines talking about it in a Senate hearing while he was pulling down a million-dollar salary as a DMI executive in 2018.

NZI is the proclaimed vehicle for negotiating the terms for U.S. Dairy to continue, terms based on showing carbon reductions that many family farms may find difficult to meet — especially if the farm is already at or close to carbon neutral.

As DMI’s sustainability negotiators data-collect all previous reductions into farm-by-farm comprehensive baseline estimates, where will those farms find new reductions? 

According to DMI staff, over 2000 dairy farms have already gone through their environmental stewardship review via the FARM program to establish their “comprehensive estimates.”

The six organizations, four of them filing IRS 990s under the national dairy checkoff, that launched NZI are: Dairy Management Inc. (DMI), Innovation Center for U.S. Dairy, U.S. Dairy Export Council (USDEC) and Newtrient, along with the other two organizations being National Milk Producers Federation (NMPF), and International Dairy Foods Association (IDFA).

They have collectively bought-into the global definition that inflates the CO2 equivalent used for methane, effectively committing the cow to perpetual GHG purgatory. 

Because the NZI structure is based on continually showing GHG reductions, no farm is insulated with a get-out-of-jail-free-key — not even the largest farms with the most advanced biogas systems.

Why haven’t checkoff funds been used to defend the cow – to get the numbers right, to get the current practices farmers have invested in counted toward reductions not baselines, and to get the methane CO2 equivalent correct — instead of giving in to this notion that feels an awful lot like ‘cows are bad and we are committed to making them better?’

Perhaps it was ignored or embraced because this inflated methane CO2 equivalent gives the suite of tech tools being assembled by DMI’s Newtrient a bigger runway to show reductions — a money maker for the RNG biogas companies and others that will in many cases end up owning the carbon credits after paying the farmer a nominal fee. 

Carbon trading rose 164% last year to $851 billion, according to a Reuters January 2022 report. A big chunk of this is coming from the methane capture and fossil fuel replacement of RNG biogas projects, mostly in California but popping up elsewhere at a rapid rate and mostly traded on the California exchange.

Farmers are getting some money for these projects, but they don’t own the carbon credits once they are sold or signed over. When they are sold outside of the dairy supply chain, this reduction becomes someone else’s property, so it is no longer part of the dairy farm’s footprint nor the footprint of their milk buyer. 

Likewise, this inflated methane equivalent — along with the emphasis on reductions, not neutrality — has some processors wondering if they’ll be able to come up with the Scope 3 reductions they need in ESG scoring.

They are facing upstream pressure from retailers and consumer packaged goods (CPG) companies as well as asset managers to show reductions, and they have counted on big numbers from their Scope 3 suppliers, the dairy farms.

The problem for dairy processors and dairy farmers comes down to the central definitions of methane equivalent and carbon asset ownership — the rights of farmers to own their past, present and future reductions, whether or not they’ve signed them over as offsets to a milk buyer or a project investor and whether or not they’ve sold the resulting credits on a carbon exchange, and whether or not they’ve installed new practices that are now part of a baseline but represent a new investment every year as they operate their businesses.

Back in June, the American Dairy Coalition added this concern to their list of federal milk pricing priorities because of the impact this climate and carbon tracking will have on milk buying and selling relationships and contracts — and the lack of clarity or fairness in this deal for essential food producers at the origination point that is closest to nature, the farm. 

ADC worded their “carbon asset ownership” priority this way: “No matter where a dairy farm’s milk is processed, that farm should be able to retain 100% ownership at all times of its earned and achieved carbon assets, even if this information is shared with milk buyers to describe the resulting products that are made from the milk.”

For its part, IDFA took a swing last Friday, going one step farther to recommend global accounting methods that would allow the dairy supply chain (farmers and processors) to retain carbon credits even if they are sold on a carbon exchange or signed over to an asset company that invested in an on-farm technology. 

IDFA executives penned the Sept. 9 opinion piece in Agri-Pulse laying out the concerns of their members who are starting to realize the future consequences of the rapid and inflated monetization of methane — and the race to sell carbon credits — leaving dairy processors unable to get those credits they were counting on from the farms that supply them with milk, while at the same time being stuck facing the cow’s inflated methane CO2 equivalent in their downstream Scope 3 even while they try to get reductions in their own controlled areas of Scopes 1 and 2.

When dairy farms no longer own their reduction or cannot show a large reduction because they are already virtually neutral, processors become concerned about how they will gain the Scope 3 reductions that are part of the ESG scoring the large retailers and global food companies are pushing. 

All of this has come down through the non-governmental organizations like World Wildlife Fund (WWF), investment and asset management sector via the World Economic Forum (WEF), the global corporate structures through the Sustainability Roundtable and through government entities via the United Nations Agenda 2030. DMI has been at those tables for at least 14 years.

“It is becoming clearer every day that the global accounting standards underpinning GHG measurement and reporting are biased against the very people making the (GHG) reductions,” the IDFA executives wrote in their opinion.

In other words, while some farmers are beginning to profit from GHG-reducing practices that are turned into offsets and traded on the carbon markets, the system is tilted against them because it leaves them without the offsets they traded and leaves them in a position of having to continually reduce in order to secure a position in the value chain.

IDFA points out that under the current rules, once the offset is sold outside of the value chain as a carbon credit – it is gone. The current GHG accounting system says only the buyer of that reduction can claim ownership.

Those farms can no longer claim their own reduction, and it means the company buying milk or other commodities from a producer cannot integrate the reduction into the description of their final product.

This weakens U.S. Dairy, the IDFA opinion states, and it makes dairy farmers less competitive sources of pledge-meeting carbon reductions for retailers and manufacturers – setting real dairy up for fake dairy dilution with the inclusion of whey proteins and other pieces of milk that are being produced in fermentation vats by genetically modified yeast, fungi and bacteria, as well as other analogs.

A bigger problem not mentioned in the IDFA opinion may be the inflated baselines that leave farms that have implemented best practices years ago positioned to show smaller reductions.

While the American Farm Bureau earlier this year lobbied against proposed SEC accounting intrusions for quantifying ESG scoring, it has been silent on the issue of carbon asset ownership for food producers. AFBF has also said little about the recently signed climate bill (Inflation Reduction Act).

National Milk Producers Federation, on the other hand, as reported last week, sang its praises for being right in line with where the industry’s Net Zero Initiative is going.

DMI voices its pride to have been leading the way, positioning its Innovation Center as founded by dairy farmers. They have conceded that dairy farms impact the environment and launched NZI as a collective pledge to reduce that impact.

In other words, DMI submitted to the idea that cows impact the environment, but never fear, through NZI, the Innovation Center and Newtrient, farmers will make them better, and turn them into a climate solution.

This is a fool’s errand given the inflated methane equivalent and the movement of carbon reductions to entities outside of the dairy supply chain such as paper mills, bitcoin miners, and the fossil fuel industry.

Did dairy farmers have a say in any of this? Not really. They were kept in the dark as this was developed over the past decade or more, and the boards representing them on the six organizations that launched NZI (four of them under the checkoff umbrella) have been duped.

Farmers are largely unaware of the NZI train, and their silence as it runs down the track becomes a further signal to the industry and to the government that they approve of the track they are on.

As the industry sits at this crossing, the Net Zero train full of dairy farmer passengers is barreling high speed down the track DMI has laid.

This train must be stopped because the future-bound track needs to be re-examined, adjusted and re-aligned so that the passengers are not ejected by the train wreck – the accelerated consolidator — that lies ahead.

Fundamentals must be vigorously revisited. Every passenger on that train, every dairy farm, must be recognized as an essential food producer, get credit for their prior investment in current practices, and be able to retain ownership of their carbon assets as part of their farm’s footprint — even if these assets have been provided, sold or signed over as offsets to milk buyers or project investors or traders on an exchange.

Furthermore, this train – built with farmer dollars – should protect the so-called founding farmers from being denied a market based on the size of their GHG reductions. If a carbon neutral farm can’t show reductions to its milk buyer, will that buyer look for other downstream vendors who can fulfill their Scope 3 reduction needs?

Will those vendors be other farms with larger perceived GHG reductions or will they be alternative analogs created without cows?

Nestle announced this week it is partnering with Perfect Day toward that end. In fact, the proliferation of plant-based, cell cultured, DNA-altered microbe excrement analogs for dairy protein and other elements are entering the market on big GHG reduction claims based on being made without the cow and the inflated methane CO2 equivalent she has been assigned!

The current standard for methane CO2 equivalency is inflated by orders of magnitude. Dr. Frank Mitloehner has addressed this repeatedly and other researchers back his view with efforts to change it.

As Mitloehner and others point out, climate neutrality should be the goal, not net-zero. Furthermore, the current methane CO2 equivalent is calculated based only on the much greater warming effect of methane vs. CO2. However, the current calculation does not account for the fact that methane is short-lived in Earth’s atmosphere — about 10 years compared with 100 to 100 years for CO2 and other GHG. It also does not account for the cow’s role in the biogenic carbon cycle.

Remember, DMI and company have ignored or embraced this definition. At the same time, the Innovation Center’s data collection of progressive accomplishments are included in the baselines from which new reductions (opportunities) must be found.

These two trains run in opposite directions for a future head-on collision on a mis-aligned track. 

The bigger the perceived GHG problem, the bigger the reduction through technology, and the bigger the monetization of that reduction outside of the dairy supply chain. At the same time, this creates an even bigger problem for farms that are unable to participate in biogas projects, farms that don’t fit the Innovation Center’s 3500-cow-dairy-as-solution template, farms that may be carbon neutral or close to it already.

DMI and company have played fast and loose with the truth. 

Farmshine readers will recall the glaring error reported more than a year ago in the white paper written by WWF for DMI. It showcased these biogas projects and the 3500-cow dairy template it proclaimed could be Net Zero in five years, not 30. 

That paper inflated U.S. Dairy’s total GHG footprint by an order of magnitude! A Pennsylvania dairy farmer brought the error to Farmshine’s attention. In turn, the magnitude of the error was confirmed by Dr. Mitloehner who then contacted DMI. A corrected copy of the white paper magically replaced all internet files with no discussion from DMI or WWF. That number was changed, but all of the assumptions in the paper were left as-is.

Put simply: DMI does not appear to be concerned about inflating the size of dairy’s perceived GHG problem. The bigger the perceived problem, the bigger the reduction that can be monetized, but that is now happening outside of the dairy supply chain. 

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Vilsack is de facto architect as Climate Bill dovetails with DMI Net Zero

Methane tax exempts agriculture, for now… Meanwhile the energy sector impact will affect farm cost of production

By Sherry Bunting, Farmshine, Sept. 9, 2022

WASHINGTON — Make no mistake about it, the dairy industry via DMI’s Innovation Center for U.S. Dairy — is and has been moving toward a future that rank-and-file dairy farmers have had no real voice in and in many cases are just waking up to.

From the annual World Economic Forum (WEF) meetings at Davos to the UN COP26, high-ranking DMI staff have been at the table

In fact, the current U.S. Ag Secretary Tom Vilsack, who President Biden credited for writing the agricultural piece of his Build Back Better campaign platform (same tagline used by the WEF), was the first to announce a Net Zero Initiative during a Senate climate hearing in June of 2019 while he was at the time the highest paid dairy checkoff executive at DMI before round-two as Ag Secretary.

When news of DMI’s Net Zero Initiative spread, farmers were told this would be voluntary, and that DMI was making sure companies understood that it has to be profitable for the farms.

But it is rapidly becoming apparent that requests for on-farm data from milk buyers and co-ops, guidelines for environmental practices under the FARM program are voluntarily mandatory through the member co-ops of National Milk Producers Federation (NMPF) and the privately owned plants that join the alliance and pledge get on board the Net Zero train.

All of this dovetails neatly with the Inflation Reduction Act (IRA) passed by Congress and signed by President Biden in August. Loosely referred to as ‘the climate bill’, NMPF is “thumbs up” on the deal, calling it “a milestone for dairy” as the industry “moves forward.”

(Others in-the-know who wish to remain anonymous call these billions a ‘slush fund’ for Secretary Vilsack.)

During the past 12 to 14 years, DMI has portrayed itself as representing U.S. dairy farmers (because after all, every U.S. dairy farmer pays into DMI, mandatorily by law of course). All the while plotting, planning, partnering and aligning with World Wildlife Fund using the middle of the supply chain as the leverage point to move consumers and farmers to where they want them to go.

They are proud to be working to “get you money” for what you are doing for the environment.

What we hear now is the manure technology and sustainability that checkoff dollars are used to promote brings new income streams to the dairy farm so they are less reliant on the volatile milk price. 

We are told that dairy farmers will make money from manure, from farming the carbon markets, perhaps even farming new climate-related USDA programs some of the $20 billion “for agriculture” will be spent on. 

According to NMPF, this is right in line with where the dairy industry is moving and “supports” the industry’s Net Zero Initiative and “other pledges.”

What pledges?

Did you, Mr. and Mrs. Dairy Producer pledge to do something or agree on the value and cost?

The government is making these pledges in global treaties. The industry as a collective whole through this DMI Innovation Center is making pledges to the investment bankers and global companies who are driving the monetization of climate through ESG — Environmental, Social and Governmental benchmarks.

This all has a very “contractual” feel to it – something that must be measured and recorded and monitored and reported, something that includes various scopes from the center point of one’s business to all of its downstream vendors.

There has been little if any open discussion of parameters, of value, of costs and of consequences. 

There has been little if any democratic process to determine pledge participation. This ESG-driven change is happening at a quickening pace all while most of us don’t know what the acronym stands for, what it means, what it entails, how it is measured, what is its value, who will profit from it, what it will truly accomplish, and how much consolidation it will create of the already consolidating market power in food and energy.

Control of carbon is what we are talking about here, and that means control of life itself.

University of Minnesota economist Marin Bozic mentioned this concern when questioned by members of the House Ag Committee at the farm bill dairy hearing in June.

Processors talked about the ESGs and the downstream impacts of businesses dealing with “Scope 3”. Members of Congress wanted to understand the impact on family farms, and Bozic was asked for his observations.

“In solving the climate, we should not allow the pace of consolidation to pick up in the dairy industry,” he responded.

“Congress should look to the industry for advice on how to make sure smaller family farms are not left behind in implementing the (sustainability) requirements they will need to meet to remain in business. Some of these technologies work better when you have more animals to spread fixed costs over more (cattle),” Bozic observed.

When this question came up a third time in Bozic’s direction, he took another swing, encouraging the House Ag Committee to “help the smaller farms meet these standards that the processors will require over the next 5 to 7 years as far as sustainability. It may be more difficult for some of them to meet that, and I would hate to see increased consolidation pace because of the sustainability standards.”

Does the IRA package do that? A deeper dive is required to fully answer that question. So far, there hasn’t been much open discussion about how these ‘standards’ will affect the farms and how much of these funds go to support vs. monitoring.

Industry insiders from processing to marketing have complained anonymously that they are concerned about what the retailers are expecting, what the largest processors are moving toward.

Some of it seems illogical and counter-productive, they say. All of it is being decided in boardrooms and back hallways – not in an open forum, not in a democracy.

Take for example NMPF’s proclamation that the IRA (climate bill) now signed into law is good for the industry, that the methane tax it includes is harmless and will not affect farmers.

Really? What parallel universe are industry executives living in?

Farms – especially dairy farms – are some of the biggest downstream users of fuel and fertilizer producing nutrient-dense food. If those companies are taxed for methane emissions, with graduated scales based on meeting pledges, farmers downstream from that will be incorporated into these pledged targets.

Who among us believes this won’t affect fuel and energy costs on the dairy farm? How will this impact decisions made about milk transportation, even though farmers pay for the hauling of their milk, ultimately. What are the downstream impacts of this tax? 

Congressional staffers admit the downstream impacts have yet to be calculated, but it has been passed into law.

There’s an even bigger question lurking in the smoke from that backroom where deals are made.

Reading through the Congressional Research Service explanation of the IRA package it’s clear that whether the methane tax does or does not pertain to agriculture is – well – unclear, and highly subjective.

There is zero language to ‘carve out’ an exemption for agriculture and food production. What the language does say is that the methane tax applies to fuel and energy sourced methane emissions because these industries are already required to be monitored for these emissions, and to report them.

Surprise.

Some of the $20 billion in the IRA “for agriculture” will go to EPA and USDA to ‘support’ methane reducing practices – but also to monitor them and develop reporting consistency.

Once measuring, monitoring and reporting of methane emissions occurs consistently in agriculture, it is a small step by a future President or EPA head to slip agricultural methane emissions into the scope of the now passed-into-law methane tax.

Again, no carve-out language in that bill, no specifically mentioned exemption for agriculture or for cattle.

However, interest is growing as a hearing in the Senate Committee on Environment and Public Works Sept. 7 dug into this a bit.

Scott VanderHal, American Farm Bureau Federation vice president was among those testifying Wednesday. The hearing pertained to a series of ‘protective’ bills for everything from livestock to motorsports in terms of the Clean Air Act through which emissions monitoring and reporting falls.

Interest is now even higher for bills like S. 1475 to protect livestock operations from permits being granted based on emissions. This now takes on a whole new meaning when contemplating a methane tax in the IRA package that is – for now – limited to industries that are monitored and required to report.

Expect to see stepped up interest from Farm Bureau as the methane tax falls into EPA’s warm embrace.

In conversations with congressional staffers, it’s also clear that new leadership in Washington, a new Congress, a new President, can make some changes to executive orders that have come to pass under the current administration, but changing the laws that have passed in this Congress will be more difficult.

However, the scope of the implementation process for the IRA funding (2023-26) will be greatly influenced by the 2023 Farm Bill reauthorization. Those funds will not have been spent yet, and can be rescinded or reallocated by Congress to other areas within the 2023 Farm Bill.

These laws are open to interpretation, so the executive branch has the power to take things in a positive or negative direction where agriculture is concerned.

What does all of this mean for dairy farmers?

First, it is possible that a portion of the $20 billion for agriculture and the environment will fund good programs that are positive for farmers and the environment. But at the same time, look at where the emphasis has been on the part of NMPF and the Innovation Center for U.S. Dairy under DMI’s umbrella. 

The emphasis is on revenue streams for dairy farms from something other than milk. The emphasis is on digesters and renewable energy. The emphasis can also be on regenerative agriculture, but this is an area that doesn’t produce much profit for others, so will it gain traction?

What happens when these government billions and industry / checkoff pledges become embedded at the farm level? What happens to the farms of the small to mid-sized scale under 3000 cows that are not going to be able to capitalize on the California goldrush to RNG fuels from methane digesters?

As good as digester technology can be in the situations where it provides positives – it is not the panacea, and it leaves most of today’s dairy producers on the sidelines from a revenue standpoint, while setting a standards bar that they may or may not be able to reached by other means – and should they have to honor these pledges they did not make?

In many cases, obtaining a milk market may rely upon participation in these pledges, which means small to mid-sized processors outside of the 800-lb gorilla are beginning to sit up and take notice too.

Yes. This most definitely impacts dairy. The industry via DMI and NMPF and their partners say dairy is moving forward to embrace the Vilsack ‘slush fund’ the Congress and President Biden have made available. They call it a partnership.

Instead of government rules, you, Mr. and Mrs. Dairy Producer are getting government help, support and partnership. You are getting a government that sees the value in what you are doing and will pay you for it. 

That’s what we are being told, but we aren’t being told about the monitoring and reporting and the consequences thereafter.

NMPF says the $20 billion for agriculture in the IRA will assist and support and partner with farmers to value their sustainability. That is all well and good until the carrot transforms into a stick. It all depends on where the drivers of the pledges are going.

Can we please have an open discussion of the pledges before making them?

My advice for farmers? Do what is good and right for your farm, for your community, your animals, the environment around you, within your means, and yes, government programs that help cost-share a beneficial practice are a good thing, a win-win.

But when the talk turns into pledges and deadlines and terms that sound contractual, beware. 

When asked for proprietary information about your farm, ask the asker how it will be used and what its value is. Ask for this in writing. Don’t sign anything without taking time to understand it or have an attorney perhaps review it.

When you are asked tough questions about your farm, ask the questioner tough questions about why they want to know.

Be polite, engage in a discussion, and make them explain it. Then tell them you’ll want to think it over. 

President Ronald Reagan said it best. “The top nine most terrifying words in the English Language are: I’m from the government, and I’m here to help.”

As much as we may want to believe the collective “they” are here to help, take nothing for granted.

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Net loss to farmers now $824 mil. over 41 months as change to Class I formula costs farmers $132 mil. so far in 2022

By Sherry Bunting, Farmshine, August 26, 2022

WASHINGTON —  Against the backdrop of declining fluid milk sales, declining Federal Milk Marketing Order (FMMO) participation, coinciding with the accelerated pace of plant mergers, acquisitions and closures in the fluid milk sector, farm bill milk pricing reform discussions are bubbling up.

The two main issues are the negative impact from the Class I price formula change in the last farm bill, and how to ‘fix it,’ as well as how to handle or update processor ‘make allowances’ that are embedded within the Class III and IV price formulas. 

Other issues are also surfacing regarding the pricing, marketing, and contracting of milk within and outside of FMMOs as historical pricing relationships become more dysfunctional — in part because of the Class I change. 

The change in the Class I price mover formula was made in the 2018 farm bill and implemented in May 2019. It has cost dairy farmers an estimated $132 million in lost revenue so far in 2022 — increasing the accumulated net loss to $824 million over these 41 months that the new average-plus-74-cents method has replaced 19 years of using the vetted ‘higher of’ formula. 

The change was made by Congress in the last farm bill in the belief that this averaging method would allow processors, retailers and non-traditional milk beverage companies to manage their price risk through hedging while expecting the change to be revenue-neutral to farmers. No hearings or referendums were conducted for this change.

Instead of being revenue-neutral for farmers, the new method has significantly shaved off the tops of the price peaks (graph) and only minimally softened the depth of the price valleys, while returning net lower proceeds to farmers and disrupting pricing relationships to cause further farm mailbox milk check losses in reduced or negative producer price differentials (PPD), reduced FMMO participation (de-pooling) as well as disruption in the way purchased price risk management tools perform against these losses.

In 2022, we are seeing this Class I ‘averaging’ method produce even more concerning results. It is now undervaluing Class I in a way that increases the depth of the valley the milk markets have entered in the past few months (graph), and as the Class IV milk price turned substantially higher this week against a flat-to-lower Class III price, the extent of the market improvement will be shaved in the blend price by the impact on Class I from what is now a $2 to $5 gap between Class III and Class IV milk futures through at least November.

During the height of the Covid pandemic in 2020, the most glaring flaw in the Class I formula change was revealed. Tracking the gains and losses over these 41 months, it’s easy to see the problem. This new formula puts a 74-cents-per-cwt ceiling on how much farmers can benefit from the change, but it fails to put a floor on how much farmers can lose from the change.

The bottomless pit was sorely tested in the second half of 2020, when the Class III and IV prices diverged by as much as $10, creating Class I value losses under the new formula as high as $5.00/cwt.

The bottomless pit is being tested again in 2022. The most recent Class I mover announcements for August and September are undervalued by $1.04 and $1.69, respectively, as Class IV and III have diverged by as much as $4 this year.

In fact, 6 of the first 9 months of 2022 have had a lower Class I milk price as compared to the previous formula. The September 2022 advance Class I mover announced at $23.82 last week would have been $25.31 under the previous ‘higher of’ formula. 

This is the largest loss in value between the two methods since December 2020, when pandemic disruptions and government cheese purchases were blamed for the poor functionality of the new Class I formula.

No such blame can be attributed for the 2022 mover price failure that will have cost farmers $132 million in the first 9 months of 2022 on Class I value, alone, as well as leading to further impacts from reduced or negative PPDs and de-pooling.

The graph tells the story. The pandemic was blamed for 2020’s largest annual formula-based loss of $733 million. This came out to an average loss of $1.68/cwt on all Class I milk shipped in 2020.

These losses continued into the first half of 2021, followed by six months of gains. In 2021, the net gain for the year was $35 million, or 8 cents/cwt., making only a small dent in recovering those prior losses.

Gains from the averaging formula were expected to continue into 2022, but instead, Class IV diverged higher than Class III in most months by more than the $1.48 threshold. Only 2 months in 2022 have shown modest Class I mover gains under the new formula, with the other 7 months racking up increasingly significant value losses – a situation that is expected to continue at least until November, based on current futures markets.

Bottomline, the months of limited gains are not capable of making up for the months of limitless loss, and now the hole is being dug deeper. 

True, USDA made pandemic volatility payments to account for some of the 2020 FMMO class price relationship losses. Those payments were calculated by AMS staff working with milk co-ops and handlers using FMMO payment data.

However, USDA only intended to cover up to $350 million of what are now $824 million in cumulative losses attributed directly to the formula change.

Furthermore, USDA capped the amount of compensation an individual farm could receive, even though there was no cap on the amount the new formula may have cost that farm, especially if it led to reduced or negative PPDs, de-pooling, and as a result, negatively impacted the performance price risk management tools the farm may have purchased.

The estimated $824 million net loss over 41 months equates to an estimated average of 58 cents/cwt loss on every hundredweight of Class I milk shipped in those 41 months.

Using the national average FMMO Class I utilization of 28%, this value loss translates to an average loss to the blend price of 16 cents/cwt for all milk shipped over the 41 months, but some FMMOs have seen steeper impacts where Class I utilization is greater.

This 16-cent average impact on blend price may not sound like much, but over a 41-month period it has hit mailbox milk prices in large chunks of losses and smaller pieces of gains, which impact cash flow and performance of risk management in a domino effect.

The 2022 divergence has been different from 2020 because this year it is Class IV that has been higher than Class III. During the pandemic, it was the other way around.

Because cheese milk is such a driver of dairy sales nationwide, the FMMO class and component pricing is set up so that protein is paid to farmers in the first advance check based on the higher method for valuation of protein in Class III. Meanwhile, other class processors pay into the pool using a lower protein valuation method, so the differences are adjusted based on utilization in the second monthly milk check.

This means when Class III is substantially higher than Class IV, as was the case in 2020-21, there is even more incentive for manufacturers to de-pool milk out of FMMOs compared to when Class IV is higher than Class III.

The PPD, in fact, is defined mathematically as Class III price minus the FMMO statistical uniform blend. Usually that number is positive. In the last half of 2020 and first half of 2021, it was negative for all 7 multiple component pricing FMMOs, while the 4 fat/skim Orders saw skim price eroded by the variance.

Now, the situation is different because Class III has been the lowest priced class in all but one month so far in 2022. The milk being de-pooled — significantly in some orders and less so in others — is the higher-priced Class II and IV milk. The Class II price has surpassed the Class I mover in every settled month of 2022 so far — January through July — and the Class IV price also surpassed the Class I mover in 2 of those 7 months. 

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Are we moving toward cow islands and milk deserts?

Opinion/Analysis

By Sherry Bunting, Farmshine (combined 2 part series Aug. 12 and 19, 2022)

In Class I utilization markets, the landscape is rapidly shifting, and we should pay attention, lest we end up with ‘cow islands’ and ‘milk deserts.’

Farmshine readers may recall in November 2019, I wrote in the Market Moos column about comments made Nov. 5 by Randy Mooney, chairman of both the DFA and NMPF boards during the annual convention in New Orleans of National Milk Producers Federation together with the two checkoff boards — National Dairy Board and United Dairy Industry Association. 

Mooney gave a glimpse of the future in his speech that was podcast. (Listen here at 13:37 minutes). He said he had been “looking at a map,” seeing “plants on top of plants,” and he urged the dairy industry to “collectively consolidate,” to target limited resources “toward those plants that are capable of making the new and innovative products.”

One week later, Dean Foods (Southern Foods Group LLC) filed for bankruptcy as talks between Dean and DFA about a DFA purchase were already underway. It was the first domino right on the heels of Mooney’s comments, followed by Borden filing Chapter 11 two months later in January, and followed by three-years of fresh fluid milk plant closings and changes in ownership against the backdrop of declining fluid milk sales and an influx of new dairy-based beverage innovations, ultrafiltered and shelf-stable milk, as well as lookalike alternatives and blends.

The map today looks a lot different from the one described by Mooney in November 2019 when he urged the industry to “collectively consolidate.” The simultaneous investments in extended shelf-life (ESL) and aseptic packaging are also a sign of the direction of ‘innovation’ Mooney may have been referring to.

Two months prior to Mooney issuing that challenge, I was covering a September 2019 industry meeting in Harrisburg, Pennsylvania, where dairy checkoff presenters made it clear that the emphasis of the future is on launching innovative new beverages and dairy-‘based’ products.

Here is an excerpt from my opinion/analysis of the discussion at that time:

“While we are told that consumers are ditching the gallon jug (although it is still by far the largest sector of sales), and we are told consumers are looking for these new products; at the same time, we are also told that it is the dairy checkoff’s innovation and revitalization strategy to ‘work with industry partners to move consumers away from the habit of reaching for the jug and toward looking for these new and innovative products’ that checkoff dollars are launching.”

These strategy revelations foreshadowed where the fluid milk markets appear to be heading today, and this is also obvious from recent Farmshine articles showing the shifting landscape in cow, farm, and milk production numbers.

When viewing the picture of the map that is emerging, big questions come to mind:

Are today’s Class I milk markets under threat of becoming ‘milk deserts’ as the dairy industry consolidates into ‘cow islands’?

Would dairy farmers benefit from less regulation of Class I pricing in the future so producers outside of the “collectively consolidating” major-player-complex are freer to seek strategies and alliances of their own, to carve out market spaces with consumers desiring and rediscovering fresh and local, to put their checkoff dollars toward promotion that helps their farms remain viable and keeps their regions from becoming milk deserts? 

What role is the industry’s Net Zero Initiative playing behind the scenes, the monitoring, scoring, tracking of carbon, the way energy intensity may be viewed for transportation and refrigeration and other factors in Scope 1, 2 and 3 ESG (Environment, Social, Governance) scores? 

Shelf-stable milk may provide solutions for some emerging (or are they self-inflicted?) milk access and distribution dilemmas, and maybe one view of ESG scoring favors it? But ultimately it also means milk can come from cow islands to milk deserts — from anywhere, to anywhere.

It also becomes clearer why the whole milk bill is having so much trouble moving forward. The industry machine gives lip-service support to the notion of whole milk in schools, but the reality is, the industry is chasing other lanes on this highway to ‘improve’ the school milk ‘experience’ and ensure milk ‘access’ through innovations that at the same time pave the road from the ‘cow islands’ to the ‘milk deserts.’ 

It is now clearer — to me — why the Class I mover formula is such a hotly debated topic. 

If major industry-driving consolidators are looking to transition away from turning over cow to consumer fresh, local/regional milk supplies by turning toward beverage stockpiles that can sit in a warehouse ‘Coca-Cola-style’ at ambient temperatures for six to 12 months, it’s no wonder the consolidators want the ‘higher of’ formula to stay buried. What a subversion that was in the 2018 Farm Bill.

In fact, if the industry is pursuing a transition from fresh, fluid milk to a more emphasis on shelf-stable aseptic milk, such a transition would, in effect, turn the federal milk marketing orders’ purpose and structure — that is tied to Class I fresh fluid milk — completely upside down.

Landscape change has been in motion for years, but let’s look at the past 6 years — Dean had already closed multiple plants and cut producers in the face of Walmart opening it’s own milk bottling plant in Spring 2018. The Class I ‘mover’ formula for pricing fluid milk — the only milk class required to participate in Federal Milk Marketing Orders — was changed in the 2018 Farm Bill that went into effect Sept. 2018. The new Class I mover formula was implemented by USDA in May 2019, resulting in net losses to dairy farmers on their payments for Class I of well over $750 million across 43 months since then.

(Side note: Under the formula change, $436 million of Class I value stayed in processor pockets from May 2019 through October 2019, alone. DFA purchased 44 Dean Foods plants in May 2019 and became by far the largest Class I processor at that time.)

These and other landscape changes were already in motion when Mooney spoke on Nov. 5, 2019 at the convention of NMPF, NDB and UDIA describing the milk map and seeing plants on top of plants and issuing the challenge to “collectively consolidate” to target resources to those plants that can make the innovative new products. 

One week later, Nov. 12, 2019, Dean Foods filed for bankruptcy protection to reorganize and sell assets (mainly to DFA).

Since 2019, this and other major changes have occurred as consolidation of Class I milk markets tightens substantially around high population swaths, leaving in wake the new concerns about milk access that spur the movement toward ESL and aseptic milk. A chain reaction.

What does Mooney’s map look like today after his 2019 call for “collective consolidation” and the targeting of investments to plants that can make the innovative products, the plants that DMI fluid milk revitalization head Paul Ziemnisky told farmers in a 2021 conference call were going to need to be “dual-purpose” — taking in all sorts of ingredients, making all sorts of beverages and products, blending, ultrafiltering, and, we see it now, aseptically packaging?

In addition to the base of Class I processing it already owned a decade ago, the string of DFA mergers has been massive. The most recent acquisitions, along with exits by competitors, essentially funnel even more of the market around key population centers to DFA with its collective consolidation strategy and investments in ESL and aseptic packaging.

The South —

The 14 Southeast states (Maryland to Florida and west to Arkansas) have 29% of the U.S. population. If you include Texas and Missouri crossover milk flows, we are talking about 37% of the U.S. population. 

The major players in the greater Southeast fluid milk market include DFA enlarged by its Dean purchases, Kroger supplied by Select and DFA, Prairie Farms with its own plants, DFA and Prairie Farms with joint ownership of Hiland Dairy plants, Publix supermarkets with its own plants, an uncertain future for four remaining Borden plants in the region as Borden has exited even the retail market in some of these states, and a handful of other fluid milk processors. 

In Texas, alone, DFA now owns or jointly owns a huge swath of the fluid milk processing plants, having purchased all Dean assets in the Lone Star State in the May 2020 bankruptcy sale and now positioned to gain joint ownership of all Borden Texas holdings through the announced sale to Hiland Dairy

The Midwest — 

Just looking at the greater Chicago, Milwaukee, Green Bay metropolis, the population totals are a lake-clustered 6% of U.S. population. Given the recent closure by Borden of the former Dean plants in Chemung, Illinois and De Pere, Wisconsin, this market is in flux with DFA owning various supply plants including a former Dean plant in Illinois and one in Iowa with Prairie Farms having purchased several of the Dean plants serving the region.

In the Mideast, there is Coca Cola with fairlife, Walmart and Kroger among the supermarkets with their own processing, and DFA owning two former Dean plants in Ohio, two in Indiana, two in Michigan, and a handful of other bottlers. 

In the West: DFA owns a former Dean plant in New Mexico, two in Colorado, two in Montana, one in Idaho, two in Utah, one in Nevada and one in California, as well as other plants, of course. 

The Northeast —

This brings us to the Northeast from Pennsylvania to Maine, where 18% of the U.S. population lives, and where consolidation of Class I markets, especially around the major Boston-NYC-Philadelphia metropolis have consolidated rapidly against the backdrop of declining fluid milk sales and a big push by non-dairy alternative beverage launches from former and current dairy processors.

DFA owns two former Dean plants in Massachusetts, one in New York, all four in Pennsylvania, one in New Jersey. The 2019 merger with St. Alban’s solidified additional New England fluid milk market under DFA. In 2013, DFA had purchased the Dairy Maid plant from the Rona family in Maryland; in 2014, the prominent Oakhurst plant in Maine; and in 2017, the Cumberland Dairy plant in South Jersey.

More recently, DFA struck a 2021 deal with Wakefern Foods to supply their Bowl and Basket and other milk, dairy, and non-dairy brands for the various supermarket chains and convenience stores under the Wakefern umbrella covering the greater New York City metropolis into New Jersey and eastern Pennsylvania. This milk had previously been supplied by independent farms, processed at Wakefern’s own iconic Readington Farms plant in North Jersey, which Wakefern subsequently closed in January 2022.

The long and twisted tale begs additional questions:

As Borden has dwindled in short order from 14 plants to five serving the most populous region of the U.S. – the Southland — what will happen with the remaining five plants in Ohio, Kentucky, Georgia, Louisiana, and Florida? What will become of Elsie the Cow and Borden’s iconic brands and new products?

What percentage of the “collectively consolidated” U.S. fluid milk market does DFA now completely or partially own and/or control?

Will the “collective consolidation” in the form of closures, sales and mergers continue to push shelf-stable ESL and aseptic milk into Class I retail markets and especially schools… and will consumers, especially kids, like this milk and drink it?

What role are rising energy prices, climate ESG-scoring and net-zero pledges and proclamations playing in the plant closures and shifts toward fewer school and retail milk deliveries, less refrigeration, more forward thrust for shelf-stable and lactose-free milk, as well as innovations into evermore non-dairy launches and so-called flexitarian blending and pairing?

Looking ahead at how not only governments around the world, but also corporations, creditors and investors are positioning for climate/carbon tracking, ESG scoring and the so-called Great Reset, the Net Zero economy, there’s little doubt that these factors are driving the direction of fluid milk “innovation” over the 12 years that DMI’s Innovation Center has coordinated the so-called ‘fluid milk revitalization’ initiative — at the same time developing the FARM program and the Net Zero Initiative.

The unloading of nine Borden plants in five months under Gregg Engles, the CEO of “New Borden” and former CEO of “Old Dean” is also not surprising. Engles is referred to in chronicles of dairy history not only as “the great consolidator” but also as “industry transformer.”

In addition to being CEO of Borden, Engles is chairman and managing partner of one of the two private equity investment firms that purchased the Borden assets in bankruptcy in June 2020. Investment firms fancy themselves at the forefront of ESG scoring.

Engles is also one of only two U.S. members of the Danone board of directors. Danone, owner of former Dean’s WhiteWave, including Silk plant-based and Horizon Organic milk, has positioned itself in the forefront on 2030 ESG goals, according to its 2019 ‘one planet, one health’ template that has also driven consolidation and market loss in the Northeast. 

Not only is Danone dumping clusters of its Horizon milk-supplying organic family dairy farms, it continues to heavily invest in non-dairy processing, branding, launching and marketing of alternative lookalike dairy products and beverages, including Next Milk, Not Milk and Wondermilk. 

There is plenty of food-for-thought to chew on here from the positives to the negatives of innovation, consolidation, and climate ESGs hitting full-throttle in tandem. These issues require forward-looking discussion so dairy farmers in areas with substantial reliance on Class I fluid milk sales can navigate the road ahead and examine all lanes on this highway that appears to be leading to cow islands and milk deserts.

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Dairyman sees Wagyu as ideal beef cross

No high energy diet, the key with this breed is to take your time,’ says Adam light (left). He and his cousin Ben (right) are partners in Lightning Cattle Company, Lebanon County, Pennsylvania. They raise Wagyu x Holstein crossbred cattle for direct beef sales. They say the full-blooded Wagyu and dairy crossbreds are quite docile. They leave the heifer barn at Adam’s dairy weighing around 500 pounds, come here to Ben’s father’s farm on grass and supplemental forage until 900 pounds, then finish back at Adam’s dairy to final liveweight 1450 to 1500 pounds. This is Part 2 of a Beef on Dairy series. To read the May 13 edition’s PART ONE, CLICK HERE. Photos and story by Sherry Bunting, Farmshine, May 20, 2022.

MYERSTOWN, Pa. — No, they don’t get massages, and they aren’t fed beer as the stories go about the intimate care of the Wagyu in Japan. 

However, at Spotlight Holsteins in Lebanon County, Pennsylvania, Wagyu is the beef-on-dairy crossbreeding fit, and the cattle are given the time they need to produce the outstanding beef characteristics the Wagyu are known for — doing so on a lower energy diet.

The whole thing started before 2020, the year Adam Light sold his 100-cow registered Holstein tiestall dairy herd in Jonestown and purchased the 240-cow robotic dairy farm and herd from Ralph Moyer in nearby Myerstown (above).

Today, Adam and his cousin Ben Light, a landscaper, are partners in Lightning Cattle Company.

They started with three Wagyu, two bulls and a heifer, purchased from the September 2018 dispersal through Hosking of the late Donald ‘Doc’ Sherwood’s Empire State herd he had bred over 17 years from imported genetics near Binghamton, New York. Doc Sherwood retired that year, and he and his herd were profiled in Farmshine (here)

Adam and Ben brought their investment home and had Zimmerman Custom Freezing collect the bulls. They also flushed the heifer for embryos.

Not only did they begin using those straws of Wagyu on some of Adam’s dairy cows, they also began making some available to other dairy farmers in return for first-dibs to buy the offspring, and they began leasing bulls to farms with beef cow-calf herds.

Today, they have two full-blooded Wagyu bulls, two full-blooded females, plus 34 crossbred animals in various stages of beef production, and they have sold almost a dozen finished beef.

“The key with this breed is to take your time. They need protein to grow, but on the energy side, they don’t need a whole lot. There’s no high energy diet in this. It’s really quite simple. Whatever the dairy heifers get is what the Wagyu crossbreds get, which is a kind of lower energy feed,” Adam explains.

The calves start in the nursery barn at his dairy, grouped with replacement heifers on automated Urban CalfMom feeders, where milk intakes can be customized. They also receive the same calf starter, calf grower and hay.

When they reach 400 to 500 pounds, the crossbreds are moved to Ben’s father’s crop and poultry farm near Jonestown, which is also home-base for Ben’s landscaping company.

There they become Ben’s responsibility until they reach 900 pounds on pasture with some supplemental forage as needed.

At around 900 pounds, the cattle come back to Adam’s dairy, where they are housed and fed the same mostly forage diet on the same steady growth plane of nutrition as the breeding age and bred heifers. 

They finish at 1450 to 1500 pounds at about 26 months of age and are sold as beef quarters, halves and wholes from pre-orders, with the buyers paying the custom butcher for processing.

Like the Wagyu breed, Holsteins are slower to finish out. The difference is a straight Holstein needs a push with a high-energy diet to reach a higher quality grade, whereas the Wagyu crossbreds do it on lower energy feed.

“You really want to raise them 26 months, that’s longer than for other crossbreds. For us, it’s not a problem because we have the facilities, and we can feed them economically — right with our dairy animals — and have a more valuable beef animal at the end,” Adam explains.

After those initial years of lead time, Lightning Cattle Co. sold nine animals for beef in 2021. They expect to sell 10 in 2022, which should put them even on their original investment and the cost to make embryos to keep their Wagyu seed stock rolling forward, and they project to double the number sold in 2023 based on calves started in 2021.

What they sell is known as American Wagyu beef — mostly F1 Wagyu x Holstein with a few Wagyu x Angus and Wagyu x Jersey. 

Having access to the crossbred calves from the dairy and beef herds that are using their Wagyu genetics helps ensure they can expand beef sales as demand grows, without tying up Adam’s dairy herd to make more crossbreds.

On his own cows, Adam turns to Wagyu after giving a cow two or three chances with Holstein. He’ll modify that decision based on visual appraisal and milk production, with an eye for the number and type of cows he needs and wants dairy replacements out of.

“They settle fast with Wagyu. The difference is evident under a microscope,” Adam reports.

Why Wagyu? Adam recalls his grandfather had some back in the early 2000’s. Half a dozen Wagyu cows and a bull were payment on a debt, which he added to the beef herd on his crop and livestock farm.

“No one really knew what they were back then,” Adam recalls, noting they aren’t beef show animals on-the-hoof. The outstanding meat characteristics are only seen on-the-rail as the flecks of fat are distributed evenly throughout the lean.

Almost 20 years later, Adam did the research. He learned about the breed from Japan, where there are different grades, names and regional identifiers for specific lines, and their tenderness transmissibility.

“The dairy industry was pretty ugly, and we were getting a bill instead of a check for our bull calves. Heifers weren’t worth much either, so we wanted to make a valuable animal to offset when other parts of the dairy industry are ugly,” Adam reflects back to 2018.

Wagyu won’t ring bells for average daily gain or fast finishing. While there are feedlots on the West Coast specifically dedicated to finishing F1 Wagyu dairy crosses, it’s different in the East and Midwest where they are mostly marketed into niche direct sales to consumers and restaurants.

Adam sees the Wagyu as a good fit for his dairy because he can optimize the assets he already has and feed them right with his heifers, instead of raising more heifers than his dairy needs. 

“We’ve had different repeat customers tell us the big thing they noticed is the roasts are so much better, with no dry spots,” Adam relates. “I didn’t think there could be that much difference, but there really is, and it seems the Wagyu x Holstein is a great cross for that.”

Even in Japan, the dairy cross is sought as an economical option of their preferred beef — owing to this compatibility. Holsteins deposit marbling in a manner similar to Wagyu — but the Wagyu genetics put the quality into overdrive.

Selling by halves and quarters is less work than selling by beef cuts. Buyers are getting a range of items with some options to customize how they get their portion processed. They can do a simple cut-and-grind or ask for special order items such as bologna.

Lightning Cattle Co. has been approached by restaurants in the area, but to serve them, Adam and Ben would need to use a USDA-inspected plant, not a state-inspected custom butcher. USDA plants are few and far between and booked well into the future.

“We’ve had no issue selling the meat, and we’ve not done any advertising,” Ben notes. “We figured if we advertised too much, we might not be able to meet the demand. We’re taking it step by step.”

To price the quarters and halves, Adam believes in being fair and reasonable.

“We go off what the steers are selling for at the New Holland auction,” he says. 

They look at the Choice and Prime steer price (not the dairy beef) and add a little to that for the Wagyu influence. The customer pays the liveweight price and the butcher’s fee. 

Adam and Ben help buyers understand what they are getting and their cost per pound of cut-and-wrapped beef by converting it on a dressed basis for an informational estimate. 

“It’s tough to create a market that doesn’t exist, but that’s what we’ve had to do,” Ben adds.

This is another reason the Lights have taken it step by step, giving themselves some growing room by spreading seed stock to other dairy farms for access to more calves.

Last fall (2021), they started their biggest group of crossbred calves that will finish out in 2023, double the number for 2022.

They have begun thinking about setting up a facebook page and had Lightning Cattle Co. T-shirts made, but they are still a bit cautious about advertising to be sure demand doesn’t get too far ahead of cattle coming up through.

The cousins like working with cattle, and they take pride in selling a finished product to others in their community. This also gives them opportunities for conversations with consumers about beef, dairy, and farming in general.

“Some people have heard of Wagyu beef from Japan. Some have heard you could pay $200 for a fancy 12-ounce steak, and some people don’t know much about it at all,” says Ben about the learning curve and the way crossbreeding makes this beef more economically accessible.

“What people really like is the idea of buying beef from farms, and that gets them interested in trying it,” he adds.

That’s the window of opportunity for the quality of the beef to sell itself into the future.

“It has been fun,” Adam admits. “It’s something different, and we don’t know where it will take us.”

-30-

MILK MARKET MOOS — May 18-25, 2022

Market Moos is a weekly column in Farmshine by Sherry Bunting

US Apr. milk output off 1%, Georgia surpasses Florida

In its May 18 report, USDA pegged total U.S. milk production at 19.2 billion pounds — down 1% from a year ago. The report tallied 9.4 million milk cows on U.S. farms reflecting a 98,000-head decrease (-1%) from a year ago, with output per cow unchanged.

Among the 24 monthly-reporting states, output per cow fell 0.1%, and cow numbers were off 78,000 (-1.1%), pushing production 0.9% below year ago in those major states.

USDA’s May 18 GAIN report noted an even larger pull-back in Australia’s 2022 output, forecast to be down more than 4% for the year, and New Zealand’s first quarter milk production is reported to be running 6% below year ago and the lowest level since 2013. 

Milk collection in the European Union is also running behind first quarter 2021 by a smaller degree, down 0.3%, according to an EU milk situation report delivered in Brussels last week. And, milk deliveries are reported to be 4% below year ago in Great Britain for the first quarter of 2022 — 3.3% below year ago in Ireland in March.

Throughout the world, these reports note that farmers are exiting the dairy industry. “The slump in milk production (in Australia) is largely due to farmers continuing to exit the dairy industry through farm sales, and some dairy farms partially or fully transitioning to less labor-intensive beef cattle production,” the GAIN report said.

In the U.S., the national impact of this trend is being buffered by the large production growth in places like Texas and South Dakota offsetting reduced production almost everywhere else.

In addition to the U.S. milking 98,000 fewer cows in April compared with a year ago, dramatic movements of cows out of some regions and into others is occurring. Notable shifts are also occurring within regions. (See chart above)

One region — the Mideast — that had been growing rapidly is now going through a substantial pull-back. The Mideast lost 35,000 cows and 68 million pounds of monthly milk production in April compared with a year ago. That is a collective 3.6% year-over-year decline broken down as -3.4% in No. 6 Michigan, -3.8% in No. 12 Ohio and -4.1% in No. 15 Indiana. Technically, western Pennsylvania is included in the Mideast when we look at the Federal Milk Marketing Order map, and the Keystone state, as a whole, recorded a 2.2% decline in milk production in April.

The Northeast and Midatlantic region lost 15,000 cows and 31 million pounds (-1.3%) of milk production with most of the decline coming from No. 8 Pennsylvania, down 8,000 cows and 2.2% in milk output vs. year ago while No. 5 New York (-0.8%) and No. 19 Vermont (-0.9%) were just under the national average.

In the Southeast region, the big news is Georgia’s milk production outpaced Florida for the first time, moving the relative 24-state newbie into 21st place and Florida to 22nd. Georgia and Florida were dead-even in March.

Georgia’s 12.1% year-over-year milk increase in April eclipsed Florida’s 12.1% year-over-year decline, with Georgia producing 1 million more pounds of milk with 7,000 fewer cows compared to Florida. Georgia producers milked 91,000 cows in April — up 9,000 head from a year ago. Florida producers milked 98,000 cows in April — down 12,000 head from a year ago.

As noted last month, Texas surpassed Idaho in March as the No. 3 milk-producing state. However, even the 4.7% increase in year-over-year April production in Texas (up 63 million pounds) could not overcome the 12.9% decline in No. 9 New Mexico’s production (down 92 million pounds), for a net 1.4% loss of 29 million pounds of milk from the Southwest region.

Regions holding steady-ish — lower by less than the national average — are the Upper Midwest down 10,000 cows and -0.4% in milk output and the Mountain States / High Desert down 3,000 cows and -0.3% in production, with No. 4 Idaho unchanged in both cow numbers and production vs. year ago.

In the Upper Midwest, No. 2 Wisconsin was almost steady as production was down just 0.1% with 1,000 fewer cows in April, while No. 7 Minnesota milked 9,000 fewer cows and made 1.4% less milk than a year ago in April.

The West Coast showed a net-loss of 1% just like the U.S. average: No. 1 California had -0.6% production (but milked 2,000 more cows), and the 2.7% production increase in No. 18 Oregon was not enough to make up for the 5.4% loss in No. 10 Washington State.

The Central U.S. was the only region to see a net gain — owing to a 0.9% increase in No. 11 Iowa and the whopping 16.7% (48 million pound) increase in milk production in No. 17 South Dakota, where cow numbers are up by 25,000 head. South Dakota is nipping at the heels of No. 16 Kansas (-2.2%), despite Kansas overtly seeking dairies to fill expanded processing there according to dairy market podcast advertising messages at the International Dairy Foods Association website. Elsewhere in the Central U.S., in addition to production losses in Kansas, declines were also recorded to the east for No. 23 Illinois (-3.8%) and to the west for No. 13 Colorado (-1.1%).

All of this bears note as farmers face escalating costs and milk futures are hesitatingly recovering the past three weeks of losses but under market conditions that are again creating divergence between Class III and IV that could create producer price differentials (PPDs). When milk is de-pooled from Federal Orders in these circumstances, we see inequitable distribution of losses and of value that can contribute even faster to the way the milk production map is changing.

At the same time, the USDA World Agricultural Supply and Demand Estimates for May highlighted an expected increase in fat-basis exports as the world is tight on butterfat, but a decline in skim-basis exports, which could change if China resumes its earlier level of milk powder imports. 

On the flip side, the WASDE report forecasts 2022 U.S. dairy imports to run well ahead of previous years’ on both a fat- and skim-solids basis. The WASDE report stated this increase in dairy imports will be boosted by larger than expected importation of products that contain dairy.

WASDE: 2022 imports up

According to the World Agricultural Supply and Demand Estimates (WASDE) last week, the 2022 All Milk price is forecast to average $25.75, down a nickel from April’s forecast.

The May WASDE raised the 2022 milk production forecast on what it says are higher milk cow inventories more than offsetting slower growth in milk per cow. But it is important to realize the April milk production report this week (as reported above) showed otherwise.

Cheese and butter price forecasts are raised from the previous month’s report on strong demand, but non-fat dry milk and whey prices are lowered. The Class III price is unchanged and Class IV is lowered.

Some are suggesting that higher retail prices for butter and cheese and other dairy products are negatively affecting demand and that the food industry can shift from butter to oils. However, recent reports from many sources indicate the global supplies of food oils and butter substitutes are also in reduced supply and rising in price at wholesale and retail levels.

Biden orders Operation Fly Formula via Dept. of Defense

Operation Fly Formula was ordered by President Biden invoking the Defense Production Act on Wed., May 18, sending military planes abroad to bring infant formula home to America’s babies, especially the specialty hypo-allergenic formulas for babies with allergies to milk or special health needs. Parents currently face 45 to 60% out-of-stock shortages in infant formula and two military cargo plane loads of hypoallergenic specialty formula have arrived from Europe and the UK over the past 7 days.

Spot out-of-stock undercurrents in baby formula and specialized milk-based meal replacements have been mentioned in this column several times over the past few months, but the situation has worsened. The USDA announced WIC vouchers allowing participants to buy brands other than sanctioned low-bidders.

By Thurs., May 19, the American Academy of Pediatrics had issued a statement telling parents it is safe to switch to whole cow’s milk for babies over 6 months of age that are not on “special” formula, making sure they are consuming other iron-rich foods or talking to their own pediatricians about supplemental iron.

Discussion is rampant through social media about goat milk as a substitute for formula. There’s something to this because goat’s milk is A2A2 in its protein composition, as is sheep’s milk and human milk. There are A2A2 cow’s milk brands available now also. Parents are urged not to switch to plant-based beverages that do not have the nutrition of whole milk and to be cautioned that lactose free milks may not have sufficient carbohydrate for electrolyte balance since the lactose IS the carbohydrate in milk.

The FDA also struck a deal to get the Abbott plant back up and going by June 4 after product recalls and a plant closure related to bacteria tests occurred in February, in part because of a whistleblower’s report that was delayed for months by a “mail room disruption” according to FDA.

‘Confusion is real’

Anxiously waiting for the expected FDA decision on label standards of identity for milk and dairy, NMPF reported this recent exchange between FDA Commissioner Robert Califf and U.S. Senator Tammy Baldwin of Wisconsin at a recent Ag Appropriations Subcommittee hearing. Baldwin chairs the Senate subcommittee that sets spending levels for FDA. Baldwin asked the Commissioner for his thoughts on how plant-based beverages masquerading as dairy products should be labeled. His response noted that when people think about dairy vs. plant-based beverages, they “are not very equipped to deal with what’s the nutritional value” of the products. Yes, the confusion is real.

Milk futures flip higher, Class III and IV diverge

Green ink the past two weeks replaced three weeks of red ink as milk futures posted back to back gains despite some waffling on the Class III side due to a report this week showing record natural cheese inventories. By Wednesday, May 25, the Class III contract average for the next 12 months was 25-cents higher than the previous week and fully steady compared with the end of April at $22.96. The Class IV milk futures went roaring $1 to $1.50, spots $2 higher — tripling the spread between the two. On the close Wed., May 25, Class IV contracts for the next 12 months averaged $24.05 — up $1.03 from a week ago and 60 cents higher than the end of April. Class IV continues to top Class III, with the average divergence now at $1.10. Aug. through Nov. contracts on the CME futures board now diverge by more than the $1.48 threshold that suppresses the Class I mover value under the new averaging formula.

Dairy products rally higher

CME spot cash dairy product markets have reversed course to move higher for two consecutive weeks, capped by a strong rally on Class IV products (butter and nonfat dry milk) driven by a 22% decline in butter inventories. Compared with the end of April, the May 25 daily spot prices for the four commodities used in federal milk order pricing are: Butter up 28 cents at $2.89/lb after 12 consecutive days of gaining more than 2-pennies per day in active trade volume; Nonfat dry milk up 13 cents at $1.84/lb; Cheese steady compared with a month ago at $2.30/lb, Dry whey firming up the 8-cent loss at 50 cents.

April blend up $1-1.50

The April uniform prices across the 11 Federal Milk Marketing Orders (FMMOs) moved $1 to $1.50 higher, with the Upper Midwest closer to $2 higher than previous month. This is the 6th straight month of gains, reported as follows:

  • FMMO 1 (Northeast) SUP $26.07 PPD +$1.65
  • FMMO 33 (Mideast) SUP $24.91 PPD +$0.49
  • FMMO 32 (Central) SUP $24.65 PPD +$0.23
  • FMMO 30 (Upper Midwest) SUP $24.55 PPD +$0.13
  • FMMO 126 (Southwest) SUP $25.43 PPD +$1.01
  • FMMO 124 (Pacific Northwest) SUP $24.79 PPD +$0.37
  • FMMO 51 (California) SUP $25.08 PPD +$0.66
  • FMMO 131 (Arizona) uniform price $25.52
  • FMMO 5 (Appalachian) uniform price $27.17
  • FMMO 7 (Southeast) uniform price $27.35
  • FMMO 6 (Florida) uniform price $29.13

June Class I ‘mover’ $25.87

The June Class I base price, or ‘mover’, was announced Wed., May 18 at $25.87. This is 42 cents higher than the May Class I ‘mover’ and $7.58 higher than a year ago. This marks the 9th consecutive month of Class I mover gains.

The June 2022 Class I mover is 61 cents higher under the current average-plus formula than it would have been using the previous ‘higher of’ for the second consecutive month after being a loss under the averaging formula for the previous four consecutive months. In 2022, alone, the average-plus Class I mover formula produced no difference in January and was 51 cents below the ‘higher of’ method for February, 79 cents lower for March and 50 cents lower for April before turning 17 cents higher in May and now 61 cents higher for June.
Since implementation in May 2019, the new formula has been negative more months than positive (18 of 38 months) for a net loss in Class I value of over $725 million from May 2019 through June 2022.