MARKET MOOS: Whole milk up 6.5%, Negative PPDs = $1.47 bil. unpaid value, Jan-July imports mirror butter inventory growth

By Sherry Bunting, Farmshine, Sept. 11, 2020 and preview Sept. 18, 2020

Whole milk sales up 6.5% Jan through May, total milk sales flat

While consumer packaged goods (CPG) reports indicate fluid milk sales being up 4 to 5% through the Coronavirus pandemic — and flattening as of the end of August back to year ago levels — the other side of that coin is the loss of institutional, foodservice and coffee house demand. Thus, the extra CPG sales at supermarkets slightly more than covered the lost usage in foodservice and the net wholesale volume of fluid milk sales reported by milk handlers January through May 2020 was virtually unchanged (up 0.2%) compared with a year ago, according to USDA.

Within that volume are some important shifts. Conventional fluid milk sales to all uses were down 0.5% vs. year ago in the first 5 months of 2020 while organic fluid milk sales were 14% higher than a year ago.

Within the conventional milk sales, whole milk was up 6.5% and reduced fat (2%) milk was up 3.3%. Also gaining in sales January through May 2020 were “other” fluid milk sales, which includes ultrafiltered milk such as Fairlife, up 10.5% vs. year ago.

The big losers were fat free milk down 12% from year ago and flavored fat reduced milk down 22%.

These numbers were reported in the most recent USDA product sales report. Given that this included the mid-March through early May period when shortages and purchase limits were put on fluid milk in many stores throughout the country, it will be interesting to see June and July data when they are reported in the next 30 to 60 days.

Clearly, consumers are shifting even more strongly to whole and 2% milk and away from 1% and fat-free milk. With organic sales also experiencing sales increases, it is a sign that consumers are looking at health indicators, and a sense for wanting what’s real, natural and perceived to be most local when choosing milk for home. At the same time, overall sales of conventional milk are negatively impacted by the steep drop in institutional, foodservice and coffee house demand.

Class I milk markets get demand push from gov. purchases

At the wholesale milk handler level, USDA reports tightening milk supplies in the eastern U.S. relative to Class I usage. Specifically, the USDA Eastern Fluid Milk and Cream Report Wednesday, Sept. 9 indicated Class I sales picking up this week in the Northeast with balancing operations receiving steady to lighter milk volumes compared with recent weeks.

In the Mid-Atlantic region, milk reported to be adequate for Class I needs, and loads traveled to the Southeast for immediate needs as USDA reports Southeast milk production is tight and output is down with most milk loads clearing only to Class I plants and no loads to manufacturing.

USDA reports production of seasonal milk beverages such as pumpkin spiced flavored milk and eggnog have begun to pick up.

USDA reports that the steady to higher Class I demand is due to some schools returning to session along with government programs purchasing extra loads from manufacturers this week. In fact, reports USDA, bottlers in eastern markets are receiving milk from other regions, which is loosening up the previously tighter cream availability.

Block cheese rallies past $2/lb, but futures rally is short-lived

Cheese markets made significant gains for the third week in row, fueled in part by the third round of USDA CFAP food box purchases for delivery October through December 2020.

On Wed., Sept. 9th, 40-lb block Cheddar was pegged at $2.1575/lb — up 25 cents from a week ago with a single load trading. The 500-lb barrel cheese price was pegged 10 cents higher than a week ago at $1.67/lb, with zero loads traded. The barrel price had reached $1.70 earlier in the week before backing down Wednesday, taking early week futures market gains along with it.

The block to barrel spread is at its widest level of 48 cents per pound, an indicator of cheese market vulnerability and volatility for the longer term.
Butter loses cent, powder gains cent

Spot butter lost a penny with a significant 13 loads trading Wednesday on the CME spot market, pegging the price at $1.50/lb. Nonfat dry milk gained a penny at $1.0425/lb with 3 loads trading.

Negative PPDs persist, unpaid component value across 7 MCP Orders totals $1.47 billion for June through August milk

Look for more on this in the 9/18 Market Moos in Farmshine, but for now, here’s a chart I’ve compiled showing relevant information for August, July and June 2020 vs. same month year ago in 2019.

The bottom line is three months of significantly negative PPDs resulted in $1.47 billion in total unpaid component market value across the 7 Multiple Component Pricing Federal Milk Marketing Orders.

Losses were also incurred by the 4 Fat/Skim Pricing Orders but are not easily quantified on the FMMO pool balance sheet.

This has cost dairy producers even more who have paid to manage risk through a variety of tools because those tools only work when the milk check follows the market higher to provide the protected margin. When the market says ‘no fire here’ but the house burned down just the same, it’s a double-whammy.

Remember, fluid milk does not have a ‘market’ because it is regulated or used as a loss-leader by the nation’s largest supermarkets. Thus, the value of the components in fluid milk can only be market-valued in the other products made with milk that “sort of” have a market. When that market rallied, the value was pulled instead of pooled.

Instead of ‘band aid’ approaches to milk pricing reform, given the Class I change made in the 2018 Farm Bill has been a disaster, it’s long past time for a national hearing on milk pricing with report to Congress.

Read on, to see how other factors such as imports vs. exports affect storage anc contribute to unprecedented market misalignment.

Close-up Cl. III / IV spread widens, average for next 12 months narrows

The spread between Class III and IV milk futures widened to a $4 to $5 spread for September and October, $2 to $3 for November and December. But the average over the next 12 months for both classes in CME futures trading has narrowed this week.

The Class III futures contract for September traded at $16.62/cwt Wednesday, Sept. 9 — fully steady with a week ago while Class IV traded 15 cents lower than a week ago at $12.83.

October’s Class III futures contract traded at $18.48 Wednesday, down 54 cents from a week ago, while Class IV traded at $13.64, down 40 cents.

The next 12 months of Class III milk futures closed the Sept. 9 trading session at an average $16.68 — down 24 cents from a week ago.

The next 12 months of Class IV futures averaged $15.03 — down 4 cents from a week ago.
At these midweek trading averages, the spread between Class III and IV over the next 12 months averages at $1.65/cwt — 20 cents tighter than the previous Wednesday.

Import-Export factors affect storage, which in turn affects markets

As mentioned previously, the most recent USDA Cold Storage Report showed butter stocks at the end of July were up 3% compared with June and 13% above year ago. Total natural cheese stocks were 2% less than June and up only 2% from a year ago. Bear these numbers in mind as we look at exports and imports.

According to the U.S. Dairy Export Council (USDEC), total export volume is up 16% over year ago year-to-date – January through July. For July, alone, total export volume was up 22% over year ago. Half of the 7-month export volume was skim milk powder to Southeast Asia. January through July export value is 14% above year ago.

However, butterfat export volume averaged 5% lower than a year ago year-to-date. The big butter export number for July was not enough to make up for the cumulative decline over the previous 6 months.

On the import side, the difference between cheese and butter is stark. Cheese imports are down 10% below year ago, but the U.S. imported 14% more butter and butterfat in the first 7 months of 2020 compared with a year ago.

The largest increase in butter and butterfat imports occurred in the March through June period at the height of the pandemic when retail butter sales were 46% greater than year ago.

Looking at these butter imports another way, is it any wonder butter stocks are accumulating in cold storage to levels 13% above year ago at the end of July — putting a big damper on butter prices and therefore Class IV?

The U.S. imported 14% more butter and butterfat and exported 5% less butter and butterfat year to date while storage has been running double-digits higher, up 13% at the end of July.

As accumulating supplies pressured butter prices lower, the U.S. became the low price producer and exported a whopping 80% more butter in July compared with a year ago. This was the first year over year increase in butter exports in 17 months. But the record is clear, year-to-date butter exports remain 30% below year ago and total butterfat exports are down 5% year-to-date.

Analysts suggest that butter and butterfat imports are higher because U.S. consumer demand for butterfat has been consistently higher — even before the impact of the Coronavirus pandemic stimulated butter demand for at-home cooking and baking.

This reasoning is difficult to justify — given there is 13% more butter currently stockpiled in cold storage vs. year ago keeping a lid on the wholesale prices (while retail prices rise) and undervaluing butterfat and Class IV milk price in the divergent milk pricing formula. If 14% more butter and butterfat are being imported, does this mean we need to import to serve consumer retail demand and keep larger inventory at the ready to serve that retail demand?

If so, why is the inventory considered so bearish as to hold prices back and thus amplify the Class III and IV divergence?

Does month to month cold storage inventory represent excess? Or does it simply represent a difference in how inventory is managed in today’s times, where companies are not as willing to do “just in time” and “hand to mouth” — after they dealt with empty butter cases and limits on consumer purchases at the height of the pandemic shut down this spring.

The trade has not sorted out the answers to these questions.

Meanwhile, these export, import, and government purchase factors impact the inventory levels of Class III and IV products very differently — and we see as a result the wide divergence between Class III and IV prices and between fat and protein component value.

Interestingly, USDA Dairy Programs in an email response about negative PPDs that have contributed to the wide range in “All-Milk” prices, says the higher value of components “is still in the marketplace” even if All-Milk and mailbox price calculations do not fully reflect it across more than half of the country.

Rep. Thompson and Keller want Whole Milk choice for WIC

The American Dairy Coalition, a national organization headquartered in Wisconsin, applauded Congressmen Fred Keller and G.T. Thompson, representing districts in Pennsylvania, for recently introducing a bill designed to offer an expanded variety of dairy products, including 2% and Whole fat milk, to participants of the Special Supplemental Nutrition Program for Women, Infants and Children (WIC). The bill, officially titled, “Giving Increased Variety to Ensure Milk into the Lives of Kids (GIVE MILK) Act,” would expand WIC offerings.

The Grassroots Pa. Dairy Advisory Committee joins the American Dairy Coalition in thanking Congressmen G.T. Thompson and Fred Keller for their dedication to trying to help nutritionally at-risk Americans have the ability to choose what dairy products fit the taste preferences of their families. Thompson is prime sponsor and Keller a co-sponsor along with 39 other members of Congress on another bill — the Whole Milk for Healthy Kids Act, H.R. 832 — aimed at allowing whole milk choice in schools too.

Current Dietary Guidelines have stifled Whole milk choice by recommending 1% and fat-free milk for children over 2 years of age even though Whole milk provides a nutritionally dense, affordable and accessible complete source of protein that children love.

Science shows consumption of these products promote a healthy weight in both children and adults and fends of chronic diseases.

“More initiatives such as the GIVE MILK Act are necessary to change the antiquated and unscientifically based notion that saturated fats are dangerous to public health,” states a press release from the American Dairy Coalition. “We encourage all members of the dairy industry to not only support the GIVE MILK Act, but also encourage their legislators to urge the Dietary Guidelines for Americans also be updated to remove caps on saturated fats, allowing once more the choice of whole milk in public schools. Children deserve the best — let’s give them whole milk!”

Look for more next week on what the Grassroots Pa. Dairy Advisory Committee and 97 Milk are working on to get the word out to “Vote WHOLE MILK choice in schools — Citizens for children’s immune-boosting nutrition.”

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How data analytics, supply chain ‘ecosystems’ fit DMI’s global strategy for U.S. Dairy

DMI CEO Tom Gallagher shared this slide with August ‘open mic’ call participants as consumer data confirm a current focuse on health and economics — even though global supply chain transformation is pursued on an accelerating scale.

By Sherry Bunting, excerpts summarized from Farmshine, August 21 and 28, 2020

CHICAGO, Ill. — Early in the pandemic, consumers were initially focused on health drivers in food purchases and then began moving toward economics. But with the resurgence of Covid cases across the country, data insights show “consumers are now back to a focus on health again,” said Tom Gallagher, CEO of Dairy Management Inc. (DMI).

Consumer insights and purchasing patterns pre- and post-Covid were discussed in an early August DMI ‘open mic’ call with Gallagher, as well as DMI president Barb O’Brien, board chair Marilyn Hershey and Inmar Intelligence CEO David Mounts.

Health and value were expressed as big opportunities for dairy. But the underlying message of food transformation was also clear in the discussion of how consumer data analytics and supply chain ‘ecosystems’ are integrated and streamlined to fit the dairy checkoff’s global strategy for the future of ‘U.S. Dairy’ — including new product innovation and the relationship DMI now has as Amazon’s dairy ‘category captain’.

Gallagher sent graphs indicating the percentage of change in fluid milk sales rising during the Coronavirus pandemic corresponds with increased sales of cereal.

“We think this is important, showing there are multiple reasons — no one reason why — during ‘panic buying’ consumers bought what they bought,” he said. “Cereal and milk have historically been tied. Cereal has been on a decline for years.”

Gallagher noted that as more people eat breakfast at home, new opportunities are presented beyond cereal and milk.

“This is an opportunity for us for innovation and marketing,” said Gallagher. “One of the reasons we lost fluid milk consumers is that their spending away from home was a big percentage on breakfast, and the white gallon is not suited to that.”

He said new breakfast ideas are coming out. For example, Kraft is getting into the breakfast game with new “breakfast mac and cheese.”

Gallagher also stressed a statistic he looks at, which is the “velocity” of money.

“This is simply the rate of spending and saving. Americans are at the lowest rate of spending since the 1950s and 60s,” he said, explaining that savings rates show a second reason for opportunity as Americans are on more of a savings trend since the pandemic.

“If we can get into the ‘right product’ and the ‘right positioning’ and the ‘right marketing’, people will want our product, and we’ve got that, but innovation needs to be done too,” said Gallagher. “As the unemployment rates ease, the money will be there for people to pay a little more (for innovative products).”

Dairy positioning for in-home meals is something the industry has not seen for decades, said Gallagher. He explained that before Covid, 10% of consumers were eating at home 90% of the time. After Covid, 50% of consumers were eating at home 90% of the time. More people eating at home — even after Covid — presents “huge new opportunities for us,” he said.

E-commerce was highlighted as one of those opportunities.

“Change is happening in an ‘omnichanneled’ world,” said David Mounts of Inmar Intelligence. He described media networks, digital networks for in-store, curbside, delivery and online, and how Amazon is integrating all of these as not just a retailer, but also a merchant, a media company and data company in the ‘strike zone’ of everyday business.

“We saw this opportunity a few years back and did a program on home delivery that was extremely successful,” Gallagher reported.

O’Brien noted that this gave DMI the experience to work with Amazon.

“E-commerce will change the supply chain,” she said. “As of June 14, internet purchasing surged 70%, so we are pleased we anticipated that growth, and now we see Covid has accelerated it.”

DMI has been working with Amazon for two years. Then, a year ago, Amazon named DMI as dairy “category captain.” Since then, DMI has been helping Amazon “navigate the whole dairy category with dairy 101 for their entire grocery leadership team,” O’Brien explained. “From the beginning, we were able to position ourselves as category experts and brand agnostic. We gave them a deep dive into each sector, and in the end, demonstrated the dairy category as a driver.”

As category captain, DMI will work deeper into Amazon’s e-commerce business across 31 sales regions to identify sources and tie consumer shopping experiences online through a promotion portal that puts it right at the internet point of purchase and can measure consumer response.

DMI will work with MilkPEP and other partners on this, she said.

“It was important to first prove the size and value of dairy to Amazon, where placing their investments,” said O’Brien. “Because competition is stiff in plant-based allocation, we now have been able to come back with data, with proof of what dairy can do for their business, so we think opportunities will continue.”

Mounts also highlighted e-commerce.

“This is a time for digital transformation to accelerate in the retail environment,” he said. “The entire retail industry got caught under-invested in digital readiness for what happened in this pandemic. Now massive resources across the retail industry are in catch-up mode.”

‘Real time’ consumer shopping data during the pandemic was also shared by David Mounts of InMar Analytics during the recent ‘open mic’ call. Slide from presentation

Inmar’s analytics show consumer behavior has changed to fewer trips to the store, buying more at each trip with total retail sales up 10% over year ago and some dairy categories up by more than that. Retail sales of fluid milk have settled in at 4 to 5% over year ago and butter up 46%, for example.

Total supermarket baskets are up 15% per trip, and the number of trips are down 6% right through end of July, “so this is real time data,” said Mounts.

Online shopping spiked 6 times higher than year ago in March and is up 2 to 3 times over year ago for the year to date.

Mounts said the number of people who have registered to be online grocery shoppers is increasing at rates of 100%, with the majority seeking value and savings as priorities.

“Consumers are also thinking about in-home health and wellness, ways to boost immunity and stay healthy,” said Mounts.

“Dairy is such a positive for consumers in retail. It is a core part of strong at-home food sales,” Mounts observed. “Dairy is an anchor for at-home meal planning and stock-up trips, and its always part of every shopping list.

“That’s where we think the opportunity exists — right now — as consumers shift from list-buying to ‘solutioning,’ and the occasion now is one that requires planning and thoughtfulness to have more value,” he explained.

Meanwhile, as retailers have been transitioning through their supply issues, “they are understanding new in-home categories and assortments to be more dynamic,” he said. They are being more data-driven to be more agile.”

At the same time, he said “manufacturers are focusing on their core — their most productive products — and are streamlining and trimming.”

These trends set the stage for a more centralized, streamlined and globalized dairy supply chain at a time when consumers are showing they want to be more – not less – connected to where their food comes from and to know more about the nutritional benefits.

“Consumers will deal with fewer players,” said Mounts, emphasizing the point that, “The mindset of the consumer, retailer and manufacturer must adapt to set the right priorities.”

Those priorities are being set within the tools of technology. According to Mounts, investment in technology and data tools support the strategic pillars of DMI and its partners, which Gallagher said are geared for dairy to be “viewed as an industry leader setting the gold standard on environment and animal treatment, and fitting into the efficient and healthy lifestyles of consumers.”

Searchable apps for phones, in-home voice activation systems tied to marketing outlets, namely Amazon, these tools “bring consumer preferences and marketing targets together for effective campaigns that demonstrate super strong value to consumers,” Mounts explained. “By connecting data into such platforms, the advantage for advertisers is they see it generate sales.”

But the conversations will change, and the level of personalization will increase in the food sector around the data, according to Mounts. “The digital assets are more efficient, and you talk directly to people you want to speak with and are going where the buying audience is to capture them.”

“That’s where we need to be,” said Gallagher. “This is the information the industry looks to DMI to share and will be used to create partnerships with industry.

“We won’t get the drinker or eater back if we do not do these things,” he asserts. “Farmers are great and we have a great product, but it still requires innovation. Until whole milk is recommended for kids, and even when it is, we still need innovation to get it to the kids in a style that they like.”

Mounts said innovation is a “team sport, and the key to speeding it up is to create the ecosystem, the environment, that inspires others to come in and bring solutions.”

Where dairy farmers are most familiar with the production playing field, Gallagher sees DMI as the entity that expands the dairy supply chain ecosystem to bring in other resources globally. In short, DMI has identified itself as U.S. Dairy’s supply-chain integrator and expander. Gallagher said checkoff partnerships are regional, national and international — along with the industry and National Milk Producers Federation.

“Working together as one is our hope for the future,” Gallagher insisted. “If we do not have that unity, then we are small players in a big marketplace.”

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Iowa farms deal with derecho’s aftermath: ‘I’ve got all my family and cows alive, that’s everything.’

By Sherry Bunting, Farmshine, August 21, 2020

This farm in Benton County was just one of many east-central and northeast Iowa dairy farms sustaining damage to silos, bent, toppled and with top halves blown off. Behind it is a view many are looking at right now of flattened and greensnapped corn. Dairies are pushing to chop silage while it’s still green so it will feed through the chopper, especially where stalks are snapped. KWWL drone photo

NEWHALL, Iowa — Farmers in Iowa say they’ve not seen anything like the derecho storm that hit so many with so much impact on Monday, Aug. 10. It was 780 miles long and 50 miles wide, moving at 50 to 70 mph west to east from South Dakota to western Ohio, straight through the middle of Iowa. Wind speeds were recorded up to 112 mph at the epicenter, with most severe impacts toward the east-central and northeast counties of the Hawkeye State, with virtually no time to prepare.

The winds of the “derecho”– like a hurricane over the Heartland — impacted an estimated 40% of the state’s crops on what the Iowa Department of Agriculture estimated Tuesday (Aug. 18) to be 14 million acres of corn and soybeans across 57 counties in its path. Within the 36 hardest-hit counties, the greatest impact is estimated on 3.57 million acres of corn and 2.5 million acres of soybeans.

USDA Photo by Jeremy Davis.

The storm also left in its wake destruction to infrastructure, an estimated 8,300 structures – homes, businesses, hospitals, schools – damaged or destroyed in towns, and untold losses to farm structures.

On Tuesday, the Ag Department responded to our inquiry to say that no livestock losses have been officially reported; but of five farms with dairy and beef cattle we spoke with in a hard-hit three county area this week, a collective 4% of cattle were euthanized or culled due to injuries or displacement.

Miraculously, on one dairy farm in Benton County, between the hard-hit towns of Cedar Rapids and Marshalltown, calf huts were found half a mile away, but the calves are all okay. On another dairy farm in that area, 44 calf huts were thrown about by the wind, and only two calves were lost.

Unlike a tornado hitting one area, the span of the derecho was broad, including Iowa’s second-most populated city of Cedar Rapids, where damage was severe. The uprooting of its many trees, hundreds of years old, bore testimony to the sheer strength of the winds and intense directional pressures within them.

For most of the first week after the storm, up to half a million people were without power, and 9 days later, 50,000 remain so. Some residents in the towns are living in tents as many structures are condemned. Access to communications and necessities have been disrupted — from food, water, fuel, building and repair supplies to power, phone lines, cell towers and internet access.

President Trump approved a nearly $4 billion emergency declaration requested by Iowa Governor Kim Reynolds on Monday. These are emergency funds for the state, not covering the farm, business and individual homeowner losses, which will be accounted for later.

The President held a disaster recovery conference in Cedar Rapids Tuesday afternoon, not televised by any national news network, except The Weather Channel. In fact, aside from The Weather Channel, social media posts, regional news coverage and a few national print media stories, the world is largely unaware of the derecho and its devastation.

The Iowa Department of Agriculture estimates the magnitude of impact to the state’s corn and soybean industry, alone, may exceed $4 billion as grain storage is decimated on farms and area elevators, and crop damage is so significant and widespread, it can be seen in satellite photos.

MODIS images like this one graphically illustrated by storm chaser and meteorologist Peter Forister are used by the Iowa Department of Agriculture and USDA Risk Management Agency to gauge the estimated crop damage across millions of acres at different wind speeds in the Aug. 10 derecho’s path across Iowa. Satellite photo provided by Peter Forister

Farmers are resourceful and resilient, and the farmers we spoke with in Iowa this week were also grateful their families and the vast majority of their animals are safe.

Through it all, Iowans are helping Iowans, despite their own troubles.

The Benton County Cattlemen’s Association grills meals for linemen, work crews and displaced families. Hy-Vee stores have been dropping water and necessities at farms and points in town. Farmers, with their own troubles at home, brought equipment to towns to help cleanup trees and debris so linemen could get in to work, including linemen from a dozen states responding to a nationwide call.

Churches are sending work crews and supplies. Insurance adjusters encourage farms to move quickly to recovery, to start fixing, harvesting as necessary, getting repairs scheduled. Vendors bring equipment, manpower and ideas to farms, many are donating products. These actions help everyone keep moving forward.

These dry cows have a makeshift area where a 100-cow robot barn once stood at Green Branch Farms in Newhall, just east of Cedar Rapids, Iowa. Brian Schanbacher moved his milk cows to other farms and is looking to rebuild.  Photo provided

Dairy producer Brian Schanbacher of Green Branch Farms, Newhall reports that a work crew from Oakview Church 200 miles south in Memphis, Missouri showed up on his hard-hit dairy to help with cleanup and stabilizing remaining components of structures to tend dry cows while milk cows went to new homes and a rebuilding assessment could begin.

Similar stories are shared throughout the area.

A field rep working with dairy farms in the area notes that five of his producers have serious building damage or destruction, but that all farms in the area are dealing with power outages and crop damage.

“They have to start chopping silage, and as long as it’s staying green, they are trying to get out and do it, focusing on fields with snapped corn first. They can only chop in one direction, and it’s difficult to get it to feed through the chopper,” he said. “It remains to be seen how this will go, but corn can do amazing things, but in this case, the damage is later in maturity.”

Flattened corn, some of it dead, shown here in an aerial photograph. After a tour to assess damage this week, Iowa Ag Secretary Mike Naig has asked USDA Risk Management Agency for a no-harvest crop insurance option, deeming some of the over 14 million affected acres will be unharvestable. At the same time, last year’s crop is affected by damage to grain bins at elevators and on farms. Corn took the brunt, while several farmers report their soybeans may come back. Drought is also a problem in Iowa, but derecho’s path flattened some of the most promising acres. Agriculture in northern Illinois and northwest Indiana was also impacted by the derecho spinning off potential tornadoes as it slowed down into Ohio. Photo credit Iowa Dept. of Agriculture and Land Stewardship

In driving across the region, the fields he sees “range from 100% ruined to slightly ruined.” This was confirmed by Iowa Secretary of Agriculture Mike Naig’s aereal report Tuesday, stating many affected acres will not be harvestable and tens of millions of bushels in grain storage is lost.

The hardest-hit area is mostly crop farms, with hogs and beef cattle, while Iowa’s heavier dairy area is to the north and west. At the storm’s epicenter are pockets of dairies and those working with farms there say many will have to have facilities totally re-done or significant repairs at a time when work crews are busy everywhere and lumber and tin are already in short supply at higher prices since the Coronavirus pandemic.

Three fatalities are attributed to the storm and many injuries.

“I’ve got all my family and cows alive. That’s everything,” says Brian Schanbacher. His three-row freestall barn is gone that had housed 100 cows and two Lely robots.

The derecho’s destruction at winds estimated between 100 and 112 through this part of the storm’s path through Iowa claimed the robot barn at Green Branch Farms, Newhall. Photo provided

“The only thing left standing is the north wall end with the robots. The cows were packed into that end of the barn in a 30 x 50-foot area, and no injuries to any of them,” Brian relates. “We lost a heifer and five others have injuries.”

Thirty of his cows went to Biercrest Holsteins, just a couple miles north in Van Horne, where Cary Bierschenk reports damage to facilities, feed storage and machine shop, but the parlor and freestall barn are operational. “Brian would do the same for me,” he says.

At Biercrest, the 150-cow freestall barn and milking parlor are functional, but with damage at one end. The recently remodeled barn for their show cows has its roof, fans and lights gone. The top halves of silos are gone, and a grain bin collapsed. But Cary and Kristen Bierschenk are moving forward one step at a time, even taking 30 cows needing a home from Green Branch Farms, because “Brian would do that for us too.” Photo provided

The Franck family of Newhall will also evaluate how to go about rebuilding. Their 200-cow freestall barn is destroyed, along with the old barn that housed the milking parlor. The milking equipment appears to be workable, but without a building, says Ron Franck, “we’re out of business right now.”

Ron and his wife Joan operate the dairy farm with their five children, ages 12 to 24. They sent half the herd to a farm 10 miles away and the other half an hour north. Like others in this situation, they truck feed to the cows that are nearby and help milk them, keeping dry cows at home and swapping fresh cows for dry going forward.

Ron recalls the first hours: “A pair of young kids just showed up around 4 p.m. when we were getting trailers around. Our boys were driving trailers and our daughters were getting cows out of stalls, and these kids could move and sort cows and set panels. The next day the hoof trimmer came with eight guys to clear a portion of the rubble to move dry cows to get feed and water and some shade. Our manure hauler brought 25 people here to canvas the corn fields, bringing out tin and debris, and my wife’s cousin brought a track hoe.

“We’ve not had to cook one meal. Too many people to mention have made sure of that,” he adds.

Photo credit Iowa Dept. of Agriculture and Land Stewardship

Attention this week turned from cleanup to crops. “Much of the corn is flat, leaning or snapped over, a bunch of stalks with the leaves stripped off,” Brian observes. He and others report their bean fields look like they may come back.

Salvaging corn silage is a priority for dairies. “We don’t feel like we get much done each day, but we are getting it done,” says Cary. He and Jennifer and their son Zachary and daughter Ally operate Biercrest Holsteins.

The tremendous crop he expected to harvest is now flat on the ground. He started chopping some fields this week, concerned that many had snapped stalks where the corn was dying.

Seven miles east of Brian Schanbacher’s Green Branch Farms, his cousins at Schanbacher Acres mainly lost feed storage, silos and stored feed that is either lost or inaccessible. They milk 280 cows, and the freestall barn and parlor are fine, they say, but are scrambling for what to feed. This week, Ron Franck and his sons began chopping fields for them before getting to their own, so at least the Schanbachers have green chop to feed. Photo provided

It’s a slow-go, chopping in just one direction, while hoping to avoid unseen debris in the fields that can stop progress in a hurry.

“Everyone has a story from this storm,” says Brian. They’ll remember where they were when it hit. He tells of his cousin who was baling hay in the middle of a field in a tractor and of a farmer grabbing the axel of the combine with his arms around his grandkids holding on to him as the machine shed broke apart around them.

“It’s therapy to talk about it, I guess,” says Brian. “This was no tornado, it lasted at least 20 minutes.” He and his wife Kristen were at home, and their children were 15 miles north where the damage was less severe.

Ron and his sons were also at home 10 miles north of the main farm when the derecho hit at lunchtime. “By the time we heard about Marshalltown, it was already here,” he recalls. “Our first warning was the emergency sirens, and 5 to 10 minutes later, it was on us.”

To a person, farmers recall how devastating the wind was in its duration. “A tornado comes through, lasts a few minutes and hits one area. This lasted 20 to 30 minutes or more and it covered a large area,” says Ron. “The meteorologists couldn’t keep up with it because as it hit the towns, it annihilated weather stations, cell phones went haywire, so they didn’t have data points.”

Even before the storm was completely over, Ron and his older sons knew they had to get back to the farm. “We got a mile or two south and it was pretty bad, straight west of the house, the farmstead was wrecked,” he reflects. “There must have been big variations in the pressure. We would see things look good on one place, and the next place, totally wiped out. Just no rhyme or reason to it.”

(Above and below) The derecho split the Franck family’s 200-cow freestall barn right down the middle and destroyed the building that housed the milking parlor. They’ve sent cows to other farms, keeping only dry cows at the main farm. Their attention this week is getting the flat corn chopped for neighbors who have cows to feed, but lost or can’t access their feed. The tall green bountiful corn crop close to normal chop date is now flat in the distance, but they are getting what they can. KWWL drone photos

What they found at their main farm was half the cowherd in the corn fields and the other half huddled against a corner with most of the barn gone — split right down the middle by the force of the winds.

By 11 p.m., all the milk cows were placed at other farms. By midnight, they had one area functional for dry cows.

While it’s hard to see forward more than a day at a time, producers talk of rebuilding – grateful for the help offered in the early hours and days — to help find animals, pull debris from fields, sort cattle to be moved, bring meals, lend a hand, give a hug.

“We have insurance and crop insurance, but we need profitability in agriculture to keep going. We need to be able to rebuild, and rebuild right, and to know we have a future. This is unlike anything we’ve seen. Trouble, we’ve seen before, but never so many at once,” said a beef producer during the President’s disaster recovery conference in Cedar Rapids.

Amid the significant challenges ahead, the recovery begins.To facilitate the neighbor-helping-neighbor process, the Iowa Farm Bureau has developed the Farming Community Disaster Exchange – an online message board.

“It’s a little overwhelming how much help we have had,” Ron says, pausing a moment to collect his thoughts.

“I will say this… six days after the storm, we are stabilized — as long as the weather is nice – from a cow health perspective with just the dry cows here now. Those little calves in the huts went for quite a ride, but we’ve modified things with what we have left to make pens, and my daughter has them looking pretty good again.”

‘No rhyme or reason to it.’ Toppled silo wagons are to be expected in a massive storm like this. But what amazed some farmers we spoke with is how there was no rhyme or reason to it. One example, two wagons side by side – one knocked over while the other is found a mile away in a field, destroyed. Photo provided

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WHOLE Milk gets results too important to ignore!

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DIETARY GUIDELINES COMMENT PERIOD ENDS THURSDAY, AUG. 13!

The Grassroots PA Dairy Advisory Committee and 97 Milk LLC urge everyone to comment by August 13, 2020 at https://beta.regulations.gov/comment/FNS-2020-0015-0001 or submit your comment to @97Milk on facebook private message or by email at 97wholemilk@gmail.com to have your comment included in a packet to be submitted together Aug. 12 before the Aug. 13 deadline. Visit 97milk.com for more information.

By Sherry Bunting, Republished from Farmshine, Friday, August 7, 2020

BROWNSTOWN, Pa. —  One school in Pennsylvania had the courage to just do it.

For the 2019-20 school year beginning in September, they conducted a trial that simply offered the choice of whole milk and 2% next to the required fat-free and 1% to middle and high school students daily for breakfast and lunch. They did not promote the trial or call attention to it, just waited to see how students would react and what their responses would be.

The results are too important to ignore!

Within a short time of expanding the milk choices last September, students were choosing whole milk 3 to 1 over low-fat milk.

In January, four months into the trial, they found that allowing students to choose from all varieties of milk fat levels increased overall milk consumption by 65% and reduced milk waste by 95%.

Just before schools closed in March due to the pandemic, students were surveyed to learn what they had to say about their milk consumption behavior. Here’s a sampling: 60% said they had thrown away milk in the past before the trial, but only 31% said they had thrown away milk AFTER the whole milk trial.

Only half the students said they were aware of the restrictions on what type of milk could be offered at school.

Incredibly, the percentage of teens at this school who said they were choosing milk at breakfast before the trial was 67%, after expanding milk choices to include whole milk, 80% were choosing milk at breakfast.

All of this data and more in just seven months at a middle school and high school in Pennsylvania. We are withholding the name of the district and its foodservice director to shield their identity from potential backlash due to the USDA rules on fat content of purchased ala-carte “competing” beverages.

The foodservice director who set up the trial, with the support of the school board, states that students have now tasted the difference. Now that the school is using the intermediate unit as the vendor for packaged pickup meals and can only make 1% milk available, the kids are asking: “Where’s the Whole milk?”

“I am 100% convinced that most parents do not know about all that is going on with the school meals programs,” the Pennsylvania school foodservice director said. She is letting them know about the Dietary Guidelines and school nutrition rules so they can become aware and perhaps be led to be involved.

The official public comment period on the 2020-25 Dietary Guidelines Advisory Committee’s Scientific Report ends August 13. After that, USDA and HHS will use the DGA Report to finalize the next five years of Dietary Guidelines.

 Two key points to make in a comment, include asking that the Guidelines be delayed until ALL the science on saturated fat is considered and to mention the nutritional benefits our children actually consume when they love the milk they are offered at school.  Citing the benefits of the healthy fats in whole milk is also a plus, and personal experiences are encouraged.

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DMI circles wagons around new ‘Net-Zero’ hire

By Sherry Bunting, Farmshine, Friday, August 7, 2020

BROWNSTOWN, Pa. – After last week’s Farmshine cover story, dairy producers across the country have been reaching out to DMI board members and staff seeking answers to questions posed about the Net Zero Initiative, direction of sustainability goals, and the newly hired Executive Director of Dairy Scale for Good, Caleb Harper. He was tapped in May to lead the effort to ‘scale up’ technologies for “U.S. Dairy” to meet its commitment, despite his history of involvement in cellular agriculture and other concerns.

DMI has not yet responded to the questions posed by Farmshine. However, producers are getting some responses. During Wednesday’s “open mic” call with DMI CEO Tom Gallagher, the topic was addressed at the top of the hour to indicate a future “open mic” would be devoted to this topic.

“We’ve been getting questions,” said DMI chairwoman Marilyn Hershey as she opened the call Wednesday. She referred the 350 people on the line — including 50 board members, 80 dairy farmers, along with media and staff — to her blog post at usdairy.com.

“The Net Zero Initiative has pathways for all size farms to be able to stand behind our sustainability goals,” she said.

“Our next ‘open mic’ will focus on sustainability because there is a lot going on in that arena. There is misinformation and good information, and we want to get the details and have National Milk and Newtrient — a company of dairy co-ops and people from the Innovation Center — on where we are going and why,” said Gallagher.

“The industry is focused on being net-zero, but profitable net-zero. That is something that will take time and hard work to get to. We are focused on all size farms — not just large, medium, or small — and on all regions,” he stated. “We know each region has different challenges.

“Most of the small farms are probably net-zero already,” he said.

Gallagher explained that DMI recently added several people in different parts of the organization. “One (new person) is Caleb Harper, and we are really glad to be able to attract him,” said Gallagher.

“We know Caleb is completely a dairy guy. Let’s face it,” said Gallagher. “Cell ag and other competitors are getting well-funded. Caleb is a smart guy, a guy who is pro dairy. He understands the playbook of the other team, so we are miles ahead.”

In the blog post callers were asked to read for answers, Hershey writes: “Caleb Harper joined our team in May to lead Dairy Scale for Good. Caleb is a former principal research scientist at Massachusetts Institute of Technology (MIT) and director of the Open Agriculture Initiative at the MIT Media Lab. He has a tremendous background of leading engineers, scientists and educators in the exploration and development of future food systems and technology.”

Hershey goes on to describe his responsibilities as “directing best practice and technology adoption and implementation on a handful of pilot farms. Harper will also develop third-party strategies to generate investments, partners and technologies that will keep farmers from bearing the entire commitment of this endeavor.”

Harper has already been visiting dairy farms in the Southwest and Upper Midwest after his first-ever dairy farm visit to Fair Oaks Farm.

Both in the blog post, and in other responses made in writing to producers from DMI staff, Harper is described as “coming from a family that raises horses and goats on a small ranch in Texas and crops and cows on a fifth-generation homestead in Kansas.”

What isn’t mentioned is that, according to a Sept. 2019  Chronicles of Higher Education story, Harper’s father, Steve Harper, was a grocery executive, actually Senior Vice-President of Marketing and Fresh Product Development, Procurement and Merchandising from 1993 to 2010 for the H-E-B supermarket chain in Texas and northern Mexico, among the largest supermarket chains in the U.S. in sales. He stayed on part-time through 2012 before retiring in 2015.

H-E-B was the first and longstanding partner of Mike and Sue McCloskey, when they were dairying in New Mexico and founded Select Milk Producers. They were working to get closer to the consumer, and the H-E-B alliance was instrumental, Sue explained in her presentation at the Pennsylvania Dairy Summit in February 2020, where she painted a picture of dairy’s future as seen by DMI’s Innovation Center for U.S. Dairy, and its food industry partners.

In fact, according to the Houston Chronicle, the McCloskeys worked with H-E-B, supplying their milk and in 1996 to produce Mootopia ultrafiltered milk, an H-E-B brand. This was the pre-cursor to fairlife, the ultrafiltered milk beverage line in which DMI partnered with the McCloskeys, Select, and Coca Cola to market and R&D. (On Jan. 3, 2020, the Coca-Cola Company announced it was sole owner of fairlife LLC after acquiring the remaining stake from its joint venture partner Select Milk Producers.)

Both Caleb Harper and Mike McCloskey currently serve on WWF’s “Markets Institute” Thought Leadership Group.

Hershey writes of Caleb Harper’s involvement in several non-profit organizations, including World Wildlife Fund (WWF), World Economic Forum, as an explorer for National Geographic, and at New Harvest (www.new-harvest.org), a cellular agriculture research institute, which has provided research funding to such startups as Perfect Day.

Meanwhile WWF — the DMI sustainability partner — will stop at nothing in its quest for food transformation away from animal use. WWF is currently using the Coronavirus pandemic and “threat of zoonotic diseases jumping from animals to humans” as the angle for pushing food transformation, with a “stop the next pandemic” campaign at the WWF website stating: “The conversion of land for unsustainable agricultural and livestock use drives wildlife, domestic animals, and humans in closer contact.”

Both New Harvest and WWF support and advocate for rewilding of lands as farms and ranches fold under the pressure of low prices, rapid consolidation, misinformation used to position new plant-based and cellular ag products as future of food replacements for meat, eggs and dairy, using climate change, sustainability and now pandemic fears to prepare people to accept these bio-engineered versions grown in fermentation vats and bio-reactors instead of farms and ranches.

“While (New Harvest) goes against the essence of who we are as farmers, and Caleb no longer serves on its board, his knowledge and insights in this area will be an asset,” writes Hershey. “I am very excited about Caleb’s ability to open new doors for dairy. He brings an astounding depth of relationships with other scientists, organizations and companies.”

New Harvest is more than a “cellular agriculture research institute.” It’s mission is to replace cattle and other livestock by growing portions of animals, separating protein excrement from yeast, and other ‘genetically altered and digitized” methods of displacing farmers and ranchers from the land. In 2017 and 2018, Harper was one of five board members for New Harvest. In fact, though canceled due to Covid, the New Harvest 2020 Conference was scheduled for the M.I.T. Lab in Cambridge, Mass., where Harper was a lead researcher until April 30, 2020.

In her blog post, Hershey writes that, “Earlier this year, the Innovation Center for U.S. Dairy set new environmental stewardship goals to further the progress and commitment that dairy farmers and the broader dairy community have to responsible production.”

She describes it as a “collective effort” expected to benefit all farms with a pathway for farms to voluntarily contribute. She writes that it will not be mandatory. Instead, she notes that it will provide opportunities for farms of all sizes to adopt technologies and practices and create revenue streams.

Stay tuned.

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Fair Oaks, fairlife co-founder paints picture of dairy’s future as seen by partner DMI

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By Sherry Bunting, Farmshine, February 14, 2020

STATE COLLEGE, Pa. — The big question Sue McCloskey gets about fairlife is “How did you think of it?”

As co-founder with her husband Mike of Select Milk Producers, Fair Oaks Farms and the fairlife brand, McCloskey spoke about “the spark of innovation” to a crowd of over 500 at the 2020 Pennsylvania Dairy Summit in State College last Thursday, Feb. 6. She was among the featured speakers that were sponsored by ADA Northeast.

“We are all innovators in agriculture,” said McCloskey, telling how they learned of reverse osmosis when a well on their New Mexico dairy backed up 25 years ago, and RO membranes were used to separate solids to restore water quality. That experience introduced them to the concept of filtering solids by molecular size, but her larger message was about the concept of innovation in allowing companies to differentiate in a generic category like milk.

For example, she said, who would think, years ago, that water would become the multi-billion-dollar industry that it is today? And coffee? She cited Starbucks as a catalyst for the rise of coffee houses and coffee drinks and blends today.

As in these examples, someone was the first innovator to bring value to those generic categories. She said for milk, the parallel is fairlife.

“Innovation – thinking outside the box — that’s what grabs people,” she said.

McCloskey maintains that as consumers, “We are all waiting for the next new thing. We want more. We want new. That’s where we have seen success with fairlife.”

The journey

McCloskey talked about her husband’s journey from being a dairy veterinarian to a dairy producer and innovator. They started with 300 cows in California and a partner they still have today in Tim DenDulk. One by one they bought dairies, fixed them up and rolled them over.

Once they got to New Mexico with a 3000-cow dairy, that was the real beginning of it, she said. That’s where they founded Select Milk Producers 25 years ago, which is today the sixth largest cooperative on a milk volume basis with 99 members.

They formed to focus on high quality milk with low somatic cell counts and to sell that concept direct to retailers instead of being part of a co-op that commingled their milk to blend-down the somatic cell counts. That’s where they were introduced, she says, to the concept of what has become fairlife through the use of RO membranes to ultrafilter the milk. She explained that the milk going in must be very low in somatic cell counts because the process of ultrafiltration concentrates the solids – including somatic cells.

She pointed to the “incredible success” of building different plants and beginning to build the fairlife brand, which led them to their next opportunity in the Midwest – Fair Oaks Farms.

When the McCloskeys came to Indiana, DenDulk, their original partner in California, was already in Michigan.

McCloskey said the housing technology had developed by that time to where they felt they could do larger dairies in the Midwest climate. They built the first of the original four 2800-cow dairies in 1999. Today, there are 13 separate dairies totaling over 36,000 cows that are owned and managed by a few families on the roughly 30,000 acres, including the new 800-cow robotic dairy that opened at the end of 2019.

In fact, she spent part of her time talking about the innovations coming out of Fair Oaks to recycle and recover nutrients and to address greenhouse gas emissions to improve the “sustainability” and carbon footprint of dairy.

“There are cool things happening and things we are doing that we really need to embrace,” she said.

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(Sue’s husband Mike, who spoke in March at the PDPW virtual business conference on U.S. Dairy’s goals for GHG emissions, was the first chairman of the Sustainability Initiative when it was launched under DMI’s Innovation Center for U.S. Dairy in 2009-10, and the checkoff’s research and development and marketing assistance for fairlife and Fair Oaks came from DMI through the Innovation Center where such partnerships are born.)

The process

Establishing fluid milk supply relationships with large retailers like H-E-B and Kroger, McCloskey said they have worked over two decades to move closer to consumers as they began using RO and ultrafiltration as early as 1995 to reduce the water moving loads of milk to cheese plants, while at the same time beginning the high protein, low sugar milk proposition partnering with H-E-B in Mootopia in 1996, before what is fairlife today.

They saw other protein drinks in the market they could compete with – by concentrating the protein in milk.

So began the process of building the brand from coast to coast as new products have been added continually. While most people are familiar with fairlife ultrafiltered milk, the CorePower fitness recovery drink was among the first that was created as a competitor for Muscle Milk.

Today, there are flavored Yup drinks, snack drinks that pair ultrafiltered milk with oats and honey, new coffee creamers, and a full line of weight management and healthy lifestyle products that are just emerging under the fairlife brand.

While Select Milk Producers sold its remaining half-interest in fairlife to its early partner Coca-Cola a few weeks ago, McCloskey remains a spokesperson for the brand. Also, the research and development teams remain intact and are still located in Chicago.

The spotlight

What Coca-Cola did for fairlife, said McCloskey, is to provide a nationwide distribution network that the Select co-op could not have achieved on its own.

“The hardest thing in consumer goods is to get a product in front of the people who want to buy it,” said McCloskey. “Our challenge was distribution. So, we formed a partnership with Coca-Cola. With Coca-Cola as 100% owner of fairlife, what happens now is that they are just going to run with it.”

This means that, “Milk is in the spotlight. While we hear the bad news from Dean’s and Borden, the good news is that the Coca-Cola, a top-five company, is involved in milk,” said McCloskey.

With an ultrafiltration plant producing fairlife in Michigan, she explained that the east coast and midwestern markets could be served and that the new Select plant in Arizona will serve the west coast market. A plant is also being built in Canada.

Answering a question about whether fairlife, or this direction of milk innovation, would ever “play ball” with the smaller average size farms in Pennsylvania, she replied that any milk supply for fairlife must be very low in somatic cell counts and will have to meet with flying colors all of the new levels of audits and animal welfare requirements that Select Milk Producers and Coca-Cola have implemented since the undercover animal abuse video at McCloskey’s original farm at Fair Oaks this past summer.

When asked how producers are compensated for these additional measures, she did not disclose proprietary information about how producers are paid.

The proposition

She said the fairlife story shows “there is still room for investment and innovation in milk, innovation that makes milk relevant to consumers.”

McCloskey explained how the ultrafiltration process raises the protein and calcium levels, removes the lactose and reduces the natural sugars in milk without adding anything.

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“And it is still real milk… but better,” she says, explaining that fairlife is finding “amazing growth in differentiation,” that fairlife’s entire proposition to consumers is the concept of  “believe in better.”

“Our core tenets of the master brand are better taste, better nutrition, and better values,” she said.

“The brand is created around values, and these values are not new, but they are done in a way that is a little more creative to today’s consumers.”

She explained that Select Milk Producers sends milk that goes into a jug at Krogers and sends milk to fairlife, “but it’s the innovation and sharing the values that leads to growth.”

Sharing consumer surveys showing 90% of fairlife consumers are satisfied and 69% are repeat customers, McCloskey said this growth and innovation “mean bigger things for dairy than just fairlife.”

She said that 45% of the fairlife market share is coming from within the milk category and 55% of their consumers are coming over from outside of the milk category.

While fairlife’s ultrafiltration process is patented, McCloskey said a dozen new products have come on the market since fairlife that use similar technology or other means of delivering high protein, low sugar outcomes.

This allows these products to differentiate themselves next to the gallon of milk as a generic staple, she explained.

“If someone is on food stamps and can’t afford these new products, that’s okay,” McCloskey said. “They can buy milk. People will still buy milk.”

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The next phase

McCloskey stressed the “tremendous value checkoff organizations bring to dairy farmers to promote how to innovate dairy and make it better.”

She explained the next phase, how DMI is sitting down with young urban-suburban consumers to “learn how they make food choices, to learn what they look for. This is leading us into sustainability and carbon footprint,” said McCloskey.

“We also sit down with the different NGO’s (like World Wildlife Fund for example). We all sit at the table and talk about the challenges that face dairy farmers,” said McCloskey. “The Net Zero Initiative coming out of that is one of the coolest things, and we are a collaborator on what is needed for dairy to get to net zero. It’s a big stake in the ground, but it’s got to be the place where we need to go.”

She explained the Net Zero Initiative under DMI’s Innovation Center for U.S. Dairy has a catalog of technologies to help producers deal with environmental issues.

“What if 37,000 dairy farmers could have net zero greenhouse gas emissions? This is what we have to chase,” she said. “The innovation can’t stop. The whole genome of the dairy cow has been mapped. Manure can be fractionated. There is innovation that is so exciting for us to think about what dairy can look like in the future.”

The forward-looking picture McCloskey painted for Summit attendees includes even more fractionization and extraction of milk’s elements, more use of specialized GMO crops and more consolidation of farms and processors with fewer cows producing more milk to meet new sustainability benchmarks.

McCloskey said the innovation from fluid milk to cheese to fractionating protein into “all kinds of other products” — while reducing the overall dairy carbon footprint — is the road to 2050.

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The ‘perfect laboratory’

“We have only begun to know milk’s power and the different vitamins and elements we are just discovering how to use and extract,” she said.

“And it all happens in nature’s perfect laboratory – the dairy cow.”

On the flip side, McCloskey acknowledged that DMI has also learned consumer choices come back to this bottom line:

“It’s got to taste good and it’s got to do something for me,” she noted. “This is why dairy is not going away. Dairy is real and it tastes great and it makes you feel good.”

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Deep discounts on All-Milk prices bring new risk management challenges

NOTE: In the first part of this three-part series, we’ll look at some of the factors contributing to the huge divergence between Class III and IV at the root of current losses in milk income, especially for risk-managers who were caught off guard with no good tools to manage the misalignment and especially the de-pooling. In the next two parts, we’ll look at some of the advice for managing basis risk in CME-based tools and revenue insurance.

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This graph at dairymarkets.org shows the divergence between Class III and IV milk futures at the root of deep discounts in All-Milk prices as compared with Class III.

By Sherry Bunting, Farmshine, Friday, August 7, 2020

BROWNSTOWN, Pa. — Dairy producers find themselves in uncharted territory, where a mixed bag of market factors, pricing structures, class price misalignments, Federal Milk Marketing Order (FMMO) provisions, product-in / product-out flows via imports and exports vs. inventory, as well as the government’s thumbprint on the scales in a pandemic shutdown of the economy and the dairy product purchases that followed. All have affected Class III and Class IV milk prices quite differently, creating deep discounts in blended farm milk prices vs. Class III.

“We’re seeing milk class wars,” said economist Dan Basse of AgResource Company, a domestic and international agricultural research firm located in Chicago, during a PDPW Dairy Signal webinar recently. Basse opined that the current four-class FMMO system is old and outdated with pitfalls creating new volatility issues for producers in the form of the $7 to $10 spread between Class III and Class IV in June / July.

He noted, as have others in the past, that a simpler pricing system with one manufacturing milk price and one fluid milk price is something that “dairy farmers could live within.”

Under the current four-class system, and the new way of calculating the Class I Mover via averaging, dairy farmers now find themselves “living on the edge, not knowing what the PPD (Producer Price Differential) will be,” said Basse.

“A $7.00 per hundredweight discount is a lot of capital, a lot of income and a lot of margin to lose with no way to hedge for it, no way to protect it, when the losses are not being made up at home (as reflected in) the PPD,” Basse related.

Previous Farmshine articles over the past few weeks have explained some of the FMMO factors reflected in the negative PPDs everyone is focused on because they are so large. While June’s PPD was primarily affected by lag-time, the next several months of negative PPDs are likely to occur based on the legislated change to the Class I Mover calculation in the last Farm Bill.

The significance of the PPD is that it indicates to the producer the value of the milk in FMMO-available pool dollars as compared to the announced Class III price. The PPD is how the FMMO pool revenue is balanced.

Normally, component values are paid by class, and the extra is divided by hundredweights in the pool to calculate a PPD reflected as the difference (usually positive) between the FMMO uniform price and the Class III price, according to Dr. Mark Stephenson, University of Wisconsin dairy economist in a recent PDPW Dairy Signal.

When higher-value Class III milk is de-pooled in this scenario, the dollars don’t stretch, so the pool has to be balanced by dividing the loss (negative PPD). Even in the southern FMMOs based on fat/skim the same shortfall occurs and shows up as milk being worth less than Class III, instead of more.

The problem faced right now is the Class III price does not represent the broader industry, and there are no straightforward tools for managing this type of risk, especially when the higher-value Class III milk is de-pooled or replaced with a lower class.

“It’s a terrible situation on the hedging side, with three material sources of the problem,” notes Bill Curley of Blimling and Associates in a Farmshine interview this week.

While he describes ways to manage some of these sources in building a risk management price or margin, such as using a mix of Class III and IV and other strategies that reflect a producer’s milk market blend of classes, “there’s no hedge for de-pooling,” he relates.

In fact, Stephenson illustrates this for the Upper Midwest FMMO 30, showing a difference of $7 between the level of negative PPD for July without de-pooling and the level of negative PPD with de-pooling.

While July de-pooling figures won’t be known until mid-August, the June de-pooling in the Northeast wasn’t as bad as in California, as an example. In California, so much milk is already sold outside the pool, that it is easy to replace virtually all of the Class III milk with lower-value Class IV in this divergent classified price scenario.

In the Upper Midwest, only so much de-pooling can occur due to qualifying criteria, so utilization that may normally be 75% Class III, was 50% in June. They don’t have enough Class IV to simply replace Class III and stay qualified on the Order.

Curley and others explain that this situation could leave producers unprotected, especially since they can’t control any of the sources of misalignment between their All-Milk price and Class III. The only factor they can control is whether or not to drop the hedges, which then leaves them unprotected for market risk at a volatile time in the midst of a pandemic as virus rates are reportedly re-surging.

Meanwhile, this week began with risk working its way back into markets as three consecutive days of steep losses in CME cheese and butter prices pushed both Class III and IV milk futures lower, but still with a $4 to $7 gap between them in the next few months.

For its part in balancing broader industry demand, USDA announced a third round of food box purchases for September and October, which will again include cheese, but this time will include more from Class II (sour cream, yogurt, cream cheese) as well as some butter from Class IV. All told, the government will have spent about $1 billion in three phases of dairy purchases for the Farmers to Families Food Box program.

Stephenson reminds producers of the silver lining in this cloud.

“Remember what the pandemic economy looked like just a little over two months ago,” he said. “It was absolutely devastating. Cheese was at $1.00/lb, and milk dumping was unprecedented.

“Now, as we look at things, it’s going to be better than we expected then,” he said showing the All-Milk price for 2020 is now forecast to come in at just under $18 for the year, but that many farms will net $20 per hundredweight for the year via the combination of Dairy Margin Coverage (DMC) and Coronavirus Food Assistance Program (CFAP) payments.

He estimates 2020 DMC payments at the $9.50 coverage level should net 66 cents across annual production for the year while CFAP payments have produced, so far, an impact equal to $1.55 per hundredweight across annual production.

For many producers, however, it won’t feel like $20. It might not even feel like $18.

Agricultural Prices 07/31/2020

USDA NASS reported June All-Milk prices last Friday, July 31. The range from high to low is $8, nearly double the normal range. At $18.10, the U.S. average All-Milk price did push the Dairy Margin Coverage milk margin above the highest payout level at $9.99.

Take June milk checks for example. USDA announced Friday, July 31 that the June U.S. All-Milk price was $18.10. That’s almost $3 below the Class III price of $21.04 for June, something we just don’t see.

Worse, USDA’s own report showed an $8.00 per hundredweight spread between the lowest All-Milk price reported at $14.80 for Michigan and the highest reported at $22.70 for South Dakota. This unprecedented spread is almost double the normal range from top to bottom. (Table 1)

Also unprecedented is the Pennsylvania All-Milk price reported by USDA for June at $16.30. That’s a whopping $1.80 below the U.S. All-Milk price when normally the state’s All-Milk price is 30 to 60 cents above the U.S. average.

The same thing can be said for Southeast fluid markets and other regions where a mixed products, classes and de-pooling of higher-value milk left coffers lacking for producer payment in the pool, and results varied in how co-ops and handlers  compensated producers outside the pool.

Dairy producers participating in the June milk check survey announced in Farmshine a few weeks ago, have reported gross pay prices that averaged fully $2 below the respective USDA All-Milk prices calculated for their state or region. Net prices, after deductions, averaged $4 below, and the same wide $8 spread from top to bottom averages was seen in this data from over 150 producers across six of the 11 Federal Orders. (Table 2)

This all creates an additional wrinkle in terms of the impact on the DMC margin, which was announced this week at $9.99 for June – 49 cents over the highest coverage level of $9.50 in the DMC program. This margin does not reflect anything close to reality on most farms in June and potentially July.

Large, unexpected and unprotected revenue gap

Normally the All Milk price is higher than Class III, and the cost of managing risk when the market moves higher is then covered by the performance of the cash price, or milk check, instead of the hedge, forward contract or revenue insurance. The inverse relationship in June and July between blend prices and Class III price, left a large, unexpected and unprotected revenue gap.

For its part, USDA AMS Dairy Programs defines the All Milk price in an email response recently as “a measurement of what plants paid the non-members and cooperatives for milk delivered to the plant before deduction for hauling, and this includes quality, quantity and other premiums and is at test. The NASS price should include the amount paid for the ‘not pooled milk.’”

USDA’s response to our query further confirmed that, “The Class III money still exists in the marketplace. It is just that manufacturing handlers are not required to share that money through the regulated pool.”

MilkCheckSurvey080320

By the looks of the milk check data from many areas (Table 2), most of this value was not shared back to producers, with a few notable exceptions. However, economists project the situation for July milk will be worse in this regard.

The factors depressing June and July FMMO uniform prices, USDA All-Milk prices and producer mailbox milk check prices are three-fold: the 6 to 8-week lag-time in advance-pricing of the Class I Mover, the new method of averaging to calculate the Class I Mover, and de-pooling of the higher-value Class III milk. All three factors are rooted in the $7 to $10 divergence between Class III and IV in June and July.

The part of the equation attributed to the new Class I Mover calculation is perhaps most discouraging because this is not money producers will eventually see. On the other hand, the lost value from the advance-pricing lag-time is eventually “caught up” in future milk checks. Most of the discount to come in July farm-level prices and negative PPDs in future months vs. Class III will be from the divergent factors that are not reconciled later.

Demand drivers differ for Class III vs. IV

Driving Class III $7 to $10 above Class IV was the abrupt turnaround in the cheese market, fed by strong retail demand, the resupply of foodservice channels, a significant May rebound in exports of cheese and whey, significant declines in cheese imports in the March through June period, and new government purchases of cheese for immediate distribution under CFAP.

On the flipside, Class IV value weakened at the same time as butter and powder did not have as many competing demand drivers. Additionally, butter stocks were overhanging the market, despite butter being the dairy product that saw the very highest increase in retail demand during the March through June Coronavirus shutdown period with retail butter sales up 46% over year ago.

Butter and powder production in the U.S. are mainly through co-op owned and managed facilities, while cheese production is a mix of co-op, private and mixed plant ownership.

When co-ops petitioned USDA for a temporary Class I floor hearing, most of the pushback came from the Midwest, and there were calls instead for government direct payments and cheese purchases for distribution to bring down what had been a growing cheese inventory. A stabilizer, or “snubber” on the Class I Mover calculation would have helped avoid much of this unrecouped discount on All-Milk price compared with Class III that affected most of the country.

While cheese moved to retail, foodservice, government purchases and export, butter was mainly relying on the surge in retail sales. Butter and milk powder were not draws in government CFAP purchases.

Overall, however, CFAP has not been the biggest driver in the cheese rally, according to Stephenson, although it added another demand driver to the Class III mix.

He notes that while the government CFAP purchases included a lot of cheese, those purchases accounted for 10% of the cheese price rally in June and July. The rest was fueled by retail demand staying strong and restaurants reopening and refilling supply chains, along with strong demand for other dairy products at retail, such as fluid milk. Producers were also pulling back to avoid overbase penalties. These factors combined to reduce cheese production in May and June, while demand drivers reduced inventory vs. demand.

Other dairy products also saw higher retail demand and were included to some degree in the USDA’s CFAP purchases, but without the same level of visible pull for the trade.

Import/export and inventory equation differs for Class III vs. IV

In taking a closer look at imports and exports relative to inventory to gauge differences between the product mix for Class III vs. Class IV, there are some key differences on both sides of that equation.

Exports of cheese in May were up 8%, and whey exports up 16% over year ago, according to U.S. Dairy Export Council.

Meanwhile butter and butterfat exports were down 7% in May, and down 21% below year ago year-to-date.

Powder exports did break records up 24% for May on skim milk powder. Whole milk powder exports were up 83% in May and 44% year-to-date.

On the import side of the equation, cheese imports were down 13% in the March through June period vs. year ago, according to USDA’s Dairy Import License Circular.

Non-cheese imports, on the other hand, were up 37% above year ago at the same time.

One factor hanging over Class IV markets is the butter inventory — up 11% over year ago — despite significant draw-down month-to-month and retail sales volume being almost 50% higher than a year ago throughout the Covid period.

While U.S. dairy imports are dwarfed in volume by U.S. exports, overall, it is notable that the 37% increase in non-cheese imports included 17% more butter and butter substitute imported compared with a year ago during the March through June period and up 28% year-to-date. Furthermore, whole milk powder imports were up by 25% in the March through June period.

Looking ahead

In a dairy market outlook recently, both Stephenson and professor emeritus Bob Cropp said these wide swings that are creating deep discounts are expected to begin moving toward more normal pricing relationships after August, with Class III and IV prices both forecast to be in the $16s by the end of the year, and in the $16s and $17s for 2021.

Already this week, CME cheese has slipped below the $2 mark, pushing August Class III futures under the $20 mark and September into the mid-to-high $16s. Spot butter tumbled to $1.50/lb, pushing Class IV futures down into the low $13s — keeping the divergence between Class III and IV in place.

Experts encourage producers to be thinking more holistically about the milk markets in planning risk management and not to look at Class III as the leading indicator of which direction the market will take.

This makes any discussion of “margin” based on a Class III milk price irrelevant to the reality under the present conditions. In short, risk management tools did what they were designed to do, but new challenges on the cash price, or milk check side, will change how producers implement and use these tools, or blends of tools, in the future.

“Class III might be a wonderful market for cheese, but it’s not reflecting the entire dairy industry. Risk managers are losing margin on contracts that were meant to protect them from market risk,” says Basse.

“We normally trade at an All-Milk premium to the CME Class III. Today, that has changed dramatically,” he adds. “We are at a significant discount to the CME. We just don’t see these discounts relative to the CME. It is unprecedented.”

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New face, new position, ties ‘Undeniably Dairy’ to ‘milk without cows’

NEW HOLLAND 092206

By Sherry Bunting, Farmshine, July 31, 2020

CHICAGO, Ill. – A new face has “joined” Undeniably Dairy with direct ties to the effort to produce milk without cows.

Caleb Harper is the new hire for a new position via Dairy Checkoff. It was created within the DMI Innovation Center for U.S. Dairy’s Net-Zero project. His title as of May 1, 2020 is executive director of Dairy Scale for Good (DS4G).

On April 30, 2020, as reported last week in Farmshine, Harper left his position as the principle researcher at the M.I.T. Media Lab where he spearheaded the Open Agriculture Initiative, described as a “food computer” project. The lab came under scrutiny last fall for certain financial ties.

According to the May 13 New York Times, Harper’s OpenAg project “was quietly closed amid allegations that its results were exaggerated to sponsors and the public, the university confirmed. The Massachusetts Institute of Technology also announced that it would pay a $15,000 fine to the State Department of Environmental Protection because the project… improperly disposed chemicals into a well at a research center outside Boston where it conducted some experiments.”

For dairy farmers, that’s not even the worst of it. Harper has been a prolific writer and speaker touting cellular agriculture – milk, eggs and meat without animals.

Public Disclouser Copy for New Harvest.pdf

According to the most recent IRS 990s (2017 and 2018) for New Harvest Inc., Harper was a New Harvest board member during those two years.

This new DMI executive will head the work of scaling up the ‘climate-friendly’ practices dairy farms will implement in the future, when his past is rooted in cell ag to replace them. His direct association with New Harvest as part of their 5-member board is troubling.

New-Harvest-screenshot

New Harvest describes its purpose as “support for education and scientific research that advance technologies that make animal products (meat, eggs, milk, etc.) without the animals in order to reduce animal suffering, improve human health, and protect the environment.”

We reached out to DMI through Scott Wallin, vice president of industry media relations and issues management. We also sent questions to the DMI chair.

— We asked whether this newly created position filled by Harper had been advertised and if other candidates had been interviewed.

— We asked what are the responsibilities and qualifications for this “executive director of Dairy Scale for Good (DS4G)”? (For his part, Mr. Harper has the following description listed on his resume at Linked-In, that he is “part of an initiative working to help U.S. Dairies pilot and integrate new technology and management practices to reach net zero emissions or better while increasing farmer livelihood.”)

— We asked whether Harper had prior connections to DMI or any member of staff or leadership before getting this position.

— We asked for confirmation of how Mr. Harper’s salary is paid, through what sub-agency of DMI or partnership?

— We asked to know his starting salary, given his listing with a speakers agency showing he charges between $30,000 to $50,000 as a speaker – a speaker who frequents events side-by-side with the executive director of New Harvest, such conferences sponsored by the United Nations, World Government Summit, EAT Forum and other entities on planetary diets, “future of food” and cellular agriculture – milk without cows, eggs without hens, beef without cows.

— We also messaged Mr. Harper to ask him how a board member of New Harvest that funds research and supports technology specifically for milk without cows gets a job paid by mandatory checkoff funds from American dairy farmers who feed, care for and milk cows?

— We asked him what are his interests and qualifications in dairy?

— We asked if he was tapped for this position by someone within the DMI organization or one of DMI’s “partners” or did he simply respond to a job posting and interview for the position?

— We asked DMI how it came to be that a person who is an obvious supporter of technology to create milk without cows became the person hired by dairy checkoff — with dairy farmer money — to help develop, scale and implement environmental practices for real dairy farmers?

So far, the only response we have received was a brief general email from DMI’s Wallin, as follows: “Caleb Harper joined on May 1 to support U.S. dairy’s growing commitment to environmental stewardship and the development of new, scalable technologies and practices to support U.S. farmers.”

Harper, who goes by the handle @CalebGrowsFood on Twitter, has deep connections to cellular agriculture, a new sector populated with Silicon Valley “tech food” startups that the largest global dairy and meat integrators and food giants are now investing in to ramp up to scale. They use false science on human health and environment, especially climate change, as the angle to push these new product investments so they take root in retail and foodservice sectors across the nation, the world.

In fact, the continuation of status-quo low-fat and fat-free diets via the Dietary Guidelines Advisory Committee’s unscientific “Scientific Report,” July 15 is a key in the cell ag arsenal. A primary vegan on the saturated fats subcommittee alluded to “making way for new foods coming” that will deliver the nutrients the government-sanctioned meal patterns leave lacking.

New Harvest has funded and supported research with donations to companies making bovine DNA-altered yeast that excrete “dairy replacement” proteins that companies claim are “interchangeable” with real dairy protein in any food processing application. Companies like Perfect Day tout their B2B model of working with large dairy companies to scale, to provide replacement dairy protein that reduce the need for real dairy protein and thus reduce the need for cows and the “pressure” on the environment.

These “cell ag” companies and non-profits work together to seek from FDA the ability to label their creations as the dairy and meat they replace because they declare them to be biological replicas — achieved through gene-editing and modifying.

They seek the new “healthy” icon FDA is creating with its ongoing development of a Nutrition Innovation Strategy to meet dietary goals, such as low-fat. They say their replacements are superior because they reduce the impact of livestock on the planet and can be genetically customized to meet goals for the low-fat DGA recommendations.

Even the USDA bio-engineered (BE) labeling implemented in January is all set and ready for this, and guess what? Dairy producers helped lobby for it, thinking it applied to the crops they grow. Our industry leaders used producer reactions to non-GMO labeling to get grassroots support for label language that now does not require bio-engineered replacements to be labeled as such unless the engineered DNA is detectable within the final edible food.

A visit to the New Harvest web page at new-harvest.org will make your hair stand on end. Seeing the motto so boldly proclaiming: “Milk without cows. Eggs without Hens. Beef without Cows,” offers the realization that their goal – in concert with World Wildlife Fund (WWF), DMI’s “sustainability partner” — is the end of animal agriculture through cell agriculture.

Don’t get angry and don’t be depressed. Have hope. Be bold.

If every Farmshine reader does some of the suggestions below, maybe the Titanic can be steered away from the iceberg:

1)      Send this article to your Congressional representatives with a short note stating that this is just one example of how your rights as an American dairy farmer are being violated by the 15-cent mandatory dairy checkoff. Ask for his or her help in getting you an exemption from paying the checkoff, or in allowing you to assign your checkoff “tax” to another promotion, research and education entity.

2)      Call, email, or write to the cooperative director who represents you and ask what your cooperative is doing to protect its members from even more FARM requirements, considering an obvious supporter of “milk without cows” will be implementing the “Undeniably Dairy” environmental piece as executive director of DS4G.

3)      Call your state or regional dairy promotion representative or CEO and ask them to keep all of your dime in regional promotion instead of sending those 2.5 to 3 extra cents to DMI’s Unified Marketing Plan. They have the nickel. That’s enough.

4)      Watch for opportunities to support a dairy checkoff referendum. The law states that when 10% or more of the dairy producers and importers subject to the checkoff request a referendum, the Secretary of Agriculture must oblige.

At best, DMI did not do its homework on this, and other decisions that have influence over the future of rank-and-file dairy producers footing the bill.

At worst, DMI’s “pre-competitive” alliances with global food giants and WWF are steering efforts toward dilution in order to meet some ethereal environmental goal.

Meanwhile hard working, conscientious dairy farmers have done and are already doing more good for health, climate, water and soil than the combined efforts of billionaire Silicon Valley ‘tech-food’ startup investors, multinational food corporations, gene-altering animal replacers, plant-based imitators, high-paid future food fast-talkers, sly and cunning dietary do-gooders, cows-and-climate catastrophe exaggerators, and so-called ‘sustainability’ WWFers.

In times like these, dairy checkoff unity could mean circling the wagons to protect dairy farmers with a locked-and-loaded promotion, education and research front that keeps the cunning wolves from getting in, but instead it gives them an opening and some leverage to devour.

Business is business. But dairy farmers should not be forced to fund their own dilution and demise.

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DOJ files ‘Statement of Interest’ in DFA lawsuit, case goes to jury trial Sept. 30

By Sherry Bunting, Farmshine, July 31, 2020

BURLINGTON, Vt. – The U.S. Attorney General’s office and attorneys for the Department of Justice (DOJ) filed “Statement of Interest by the United States of America” Monday (July 27) in the civil lawsuit brought in October 2016 by Farmers United (Sitts, et. al.) alleging monopsony antitrust activity by Dairy Farmers of America (DFA) and Dairy Marketing Services (DMS).

The case is scheduled for a trial by jury beginning September 30, 2020 in the U.S. District Court of Vermont with Judge Christina Reiss presiding.

The plaintiffs are 116 dairy farmers who opted out of the earlier settlement by DFA of the Northeast class-action lawsuit approved by the U.S. District Court of Vermont.

In this Statement of Interest, the DOJ makes three main arguments: 1) The allegations against DFA in the case are not shielded by the Capper-Volstead Act from antitrust laws. 2) The Capper-Volstead Act does not insulate exclusionary acts from the antitrust laws prohibiting monopsonization. 3) The defendants (DFA) bear the burden of proof that they are protected by the Capper-Volstead Act.

According to the 15-page DOJ brief, the allegations in this case do not appear to have involved efforts to increase farmers’ bargaining power but rather efforts at monopsonization. Basically, the brief explains the “heartland protections” provided by the Capper-Volstead Act, and states the plaintiffs’ claims, if shown in Court, fall outside of those protections.

In fact, the DOJ brief notes that the claims at issue do not involve claims that farmer cooperatives acted anti-competitively against processors and other middlemen, but rather these are claims that farmer cooperatives – through agreements with processors, middlemen and other cooperatives – acted anti-competitively against farmers.

According to the Statement of Interest, “The United States is principally responsible for enforcing the federal antitrust laws… and has a strong interest in their correct application. In particular, the United States seeks to ensure that antitrust exemptions, including the Capper-Volstead Act, are not interpreted more broadly than necessary because antitrust law “is a central safeguard for the Nation’s free market structures.”

The full statement offers an analysis of the Capper-Volstead Act and the Sherman Antitrust Act as pertains to the claims made by the plaintiff dairy farmers should they be shown in Court. The Statement of Interest was filed as an aid to the Court in applying (Capper-Volstead) to this case.

“Congress enacted the Capper-Volstead Act to give farmers who produce food greater bargaining power with processors and other corporate handlers of food products. It would be inconsistent with the Act’s text and purpose to allow a defendant to use the Act as a shield when it acts as a food processor or exercises monopsony power to harm individual farmers,” the DOJ statement explains.

The brief goes on to state that Capper-Volstead “does not protect a cooperative’s agreements with non-cooperatives, and it should not protect agreements between cooperatives that have nothing to do with ‘processing, preparing for market, handling, and marketing’ the cooperatives’ products.”

On the monopsony claims, the DOJ brief indicates that the range of “predatory” conduct falling outside the scope of Capper-Volstead exemption “should be construed broadly… and the totality of the defendant’s predatory acts should be considered.”

The DOJ brief indicates that the Capper-Volstead Act “protects effort to increase farmers’ bargaining power against corporate food handlers and does not insulate monopsonies from the antitrust laws.”

Recounting the Court’s recognition in summary judgment that dairy cows produce milk seven days a week, and as a result, dairy farmers must find a processor that will take their milk regardless of demand, the DOJ brief states that this reality puts dairy farmers “at the mercy” of large milk processors seeking to buy raw milk at the cheapest price. In fact, the DOJ statement observes that farmers are potentially the main entities behind the passage of the Sherman Antitrust Act in the first place.

“The legislative history of the Sherman Act shows that its passage was motivated in large part by the harmful effect that agricultural trusts were thought to have had in reducing the prices paid to farmers,” the brief relates, describing a situation in the beef industry at that time, when members of Congress during passage of the Sherman Act condemned the beef trust for suppressing prices paid to cattle farmers.

When the Sherman and Clayton Acts did not sufficiently aid farmers, Congress sought a stronger statute in the 1920s, later passing the Capper-Volstead Act “to support the cooperative form of organization that would help equalize farmers’ bargaining power…”

The DOJ brief notes that Capper-Volstead allows cooperatives to have marketing agencies in common as long as “such associations are operated for the mutual benefit of the members thereof, as such producers, and conform to certain membership and organization requirements.”

In the statement, DOJ attorneys note that the Supreme Court recognized that the Capper-Volstead Act does not protect agreements that would be unlawful under Section 1 of the Sherman Act when they are between cooperatives and non-cooperatives, except perhaps when they are necessary to carry out the purpose of a cooperative as set forth in the Act.

For example, an exempt cooperative can lose its exemption if it conspires with nonexempt parties.

In other words, the case law cited in the DOJ brief indicate there is precedent set that cooperatives may not lawfully combine or conspire with non-cooperatives in the restraint of trade, nor may they use predatory or coercive practices to stifle competition.

“Such behavior remains subject to normal antitrust remedies,” the DOJ brief states.

In short, the Statement of Interest by the United States upholds that to the extent the plaintiff dairy farmers can show at trial that DFA violated the Sherman Act in reaping profits as a handler or processor from lower milk prices rather than for the mutual benefit of its members, “it would turn the (Capper-Volstead) Act on its head to allow DFA to use the Act as a legal shield,” according to the DOJ brief.

If at trial, the plaintiffs can show DFA had monopsony power and used it to injure other cooperatives or independent dairy farmers who actively – or potentially – compete with DFA, the DOJ statement is basically indicating that Capper-Volstead is not a shield for that.

“It would be inconsistent with the (Capper-Volstead) Act to allow a monopsony to use it as a shield when Congress had no intention to ‘vest cooperatives with unrestricted power to restrain trade or to achieve monopoly by preying on independent producers,’” the DOJ statement indicated.

Judge Reiss in her Opinion for the case to go to jury trial previously stated that, “a rational jury could conclude that DFA management favored growth of its commercial operations and empire building over the interests of its farmer-members.”

The jury trial is set to begin September 30. Stay tuned for more from the docket next week on a flurry of pre-trial activity occurring over the past week.

Note: The defendant in this civil suit, DFA, is the nation’s largest milk cooperative with 14,000 members (nearly half of all U.S. dairy farms), 42 dairy processing plants, plus joint ventures, and on May 1, consummated purchase of substantially all assets of the nation’s largest milk bottler Dean Foods — 44 of its 57 plants — in Chapter 11 bankruptcy sale. Previously in the U.S. District Court of Vermont, the Northeast Class Action Antitrust lawsuit alleged market control conspiracy by DFA and Dean Foods. Both settled for $50 and $30 million, respectively. The 116 dairy farmer plaintiffs in this current proceeding had previously opted out of the “class” when the class action settlement was approved by the Court.

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What’s this? DMI hires ‘director of DS4G’, Resume looks impressive if the goal is to keep on diluting dairy

By Sherry Bunting, Farmshine, July 24, 2020

CHICAGO, Ill. – Dairy Management Inc (DMI) has a new hire at the Innovation Center for U.S. Dairy, under the leadership of Tom Vilsack and Mike McCloskey,  as part of the big push to make “sustainability” center of the plate. The definition could surprise us.

We know the goal on climate is to get “U.S. Dairy” to “net-zero” emissions across the supply chain by 2050 or sooner, but for me, this looks like a smoke screen to ramp up the rate at which the dairy food industry giants seek to scale dairy production and fill in the gaps with a little Perfect Day.

No announcement, but an occupation change and new Undeniably Dairy logo’d cover photo on his twitter feed signals that Caleb Harper — the former principle researcher and founder of the now closed Open Agriculture Initiative at M.I.T.’s embattled Media Lab — is the new DMI “Executive Director Dairy Scale for Good,” whatever that means.

Our initial inquiry for DMI’s vice president of media relations and issues management about the position and whether other candidates were interviewed — and other questions — was emailed earlier this week and not immediately answered.

Harper has a long history of advocacy for urban food production in the sense of digitized, software-programmable, particulized and reconstituted food.  He wrote opinion pieces and did TED Talks about how the cutting edge of this movement is agri-‘culturing’ companies making lab-created dairy protein from DNA-engineered yeast and meat replacements from gene-edited muscle cells, stating that these are the food innovations needed to be sure the world does not go hungry.

In a National Geographic opinion piece in 2017, Harper even mentions and advocates for companies like Perfect Day and Modern Meadow, makers of replacement dairy protein from bovine-DNA-altered-yeast, as the future of food production because, according to Harper, people will move to cities and the rural lands will lose population.

Yes, he’s a guy who believes in true factory farms, the kind of factory farms where fermentation vats feed yeast and collect their excrement to separate out interchangeable dairy components, like protein and where gene-edited muscle blobs grow in bioreactors instead of as animals on farms.

All part of the WWF (World Wildlife Fund) plan, I might add. They want to move everyone to the cities, re-wild the farms and rural lands, and they’ve already begun.

Harper, who goes by the handle “CalebGrowsFood” on Twitter, is part of the WWF “Thought Leadership Group.” In fact, Mike McCloskey of Fair Oaks, fairlife, and Select Milk Producers as well as a key leader in DMI’s Innovation Center for U.S. Dairy is also on the WWF Thought Leadership Group. Harper’s association with WWF goes back a long way.

For his part, Harper’s OpenAg Project at MIT set out to prove people in cities could grow their own food in LED boxes controlled by computers. Trouble is, it appears that despite the glowing reviews in 2016-18 when models were featured, the boxes never really worked. Some of the photos and demonstrations were allegedly fudged with plants purchased from local stores, according to Oct. 2019 and May 2020 articles in the New York Times, Propublica, WBUR public radio and several reports in science and technology publications.

On April 30, 2020, Caleb Harper left his position as the lead researcher for the OpenAg Project at MIT.

His departure coincides with the Institute’s investigation into the entire Media Lab at MIT amid the brewing scandal that first came to light last fall when the MIT Media Lab’s main director Joichi Ito was found to have financial ties to Jeffrey Epstein. Epstein is the international financier and socialite, who was a previously-convicted sex-offender and committed suicide last year in prison awaiting trial on new charges of human trafficking.

According to the New York Times, and other sources, the OpenAg project, led by Harper, was being used through various meetings between Ito and Epstein to get Epstein to invest more than the half million the MIT Media Lab was already receiving from him in “discretionary” funds — funds MIT was not aware of. As this became known, the work of the lab itself came under scrutiny, and that scrutiny is still in progress even though the lab shut down at the end of April with Harper’s departure.

Here’s the clincher. MIT began a thorough investigation of its Media Lab after firing the director over the Epstein financial ties, and along with that, is investigating Harper’s OpenAg project. Portions of the investigation were reported on in May of 2020 by various science journals and even the New York Times, indicating Harper’s OpenAg project released water from its “computerized plant boxes” with too much nitrogen, well beyond the levels they were permitted to release, and it went to an underground well. When a researcher on-site blew the whistle with local authorities, resulting in a $25,000 fine, he was reprimanded in an email from Harper for jeopardizing the future of the project, the report indicated.

In addition, Harper’s computerized artificial intelligence plant boxes, that were showcased on 60 Minutes and National Geographic as well as other high profile outlets, never really worked, according to researchers in the lab, who were interviewed by ProPublica, a non-profit journalism entity judged high in their accuracy based on evidentiary reporting.

What we are learning is concerning. Harper, in this Undeniably Dairy Scale for Good position, may be the very person to work with Vilsack and McCloskey on what practices dairy farmers (most likely via the FARM program) must implement in order to remain part of “U.S. Dairy” by meeting their environmental benchmarks on soil, air, and water. That’s being funded with your checkoff funds, and there is a big question mark behind the name of the new hire on implementation. Does he really know anything about those three resources – and how to really produce real food while stewarding them?

To be continued in the July 31, 2020 edition of Farmshine

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