Are dairy farmers funding their demise? USDA ‘straight-jackets’ promotion; GENYOUth alliances suspicious

AUTHOR’S NOTE: This is Part 2 of an investigative report on GENYOUth, which began with USDA contacting National Dairy Council in Sept. 2009, National Dairy Council contacting National Football League in 2009/10 and an official signing of a memorandum of understanding (MOU) between NDC and NFL with USDA in February 2011. 

By Sherry Bunting, from Farmshine, Friday, January 18, 2019

They call it “the dairy farmers’ youth wellness program,” but GENYOUth is under the thumb of USDA with some questionable corporate alliances and trends underway.

This multi-part series looks at GENYOUth’s founding, its alliances, its mixed-messages, intended and unintended consequences, its partners and the new alternative products they are and will be introducing into the nutritional vacuum paved by low-fat and fat-free promotion, the winners and losers, and the impact on our dairy farms, and our children.

Let’s pick up where we left off from last week’s Part One.

Helping America’s youth lead better and healthier lives is a worthy pursuit, and there is no intention here to blame good-hearted people trying to do good within the straight-jacket of USDA control. What is being questioned is the direction. What is being exposed is the roots of the oak tree and its impact on our dairy farms and our children.

The problem with the GENYOUth model is that it is primarily funded by mandatory dairy check-off dollars and the government control of it.

The anti-animal and environmental NGO’s (non-governmental organizations) are driving decisions by Big Food, Big Ag, Big Government (and the World Health Organization). And there are new billionaire corporate “sustainability” alliances poised to profit on this main course, while dairy farmer GENYOUth “founders” hope for crumbs.

GENYOUth began in 2010 as a memorandum of understanding (MOU) between National Dairy Council and National Football League with the U.S. Departments of Agriculture, Education, and Health and Human Services. This six-way MOU was officially signed on Feb. 4, 2011 during the Superbowl that year (below).

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This 2011 USDA photo found on a USDA flickr stream shows lots of cameras, but few, if any, dairy farming publications were notified. The Memorandum of Understanding (MOU) was signed Fri., Feb. 4, 2011 during Superbowl week in Dallas Texas. It had been under development since Sept. 2009. The MOU outlined the joint commitment of the NFL, USDA, National Dairy Council, GENYOUth Foundation, to end childhood obesity. Signing from left were NDC President Jean Regalie, Ag Secretary Tom Vilsack, NFL Commissioner Roger Goodell, GENYOUth CEO Alexis Glick.

According to Guidestar, the non-profit is listed under the name Youth Improved Incorporated (aka GENYOUth) with the tagline ‘exercise your influence.’ It refers to itself as an NGO. (NGO is defined as “a nonprofit organization that operates independently of any government, typically one whose purpose is to address a social or political issue.”)

GENYOUth was launched to increase physical activity among schoolchildren as well as to encourage healthy eating with emphasis on school breakfast and then mobile breakfast carts. The 2014 (most recent) progress report noted that 73,000 schools and 38 million children had been reached by Fuel Up to Play 60 (FUTP60), affecting the health and wellness of an estimated 14 million students’.

The only reference to dairy in the FUTP60 message pounded home about fruits, vegetables and whole grains is the inclusion of low-fat and fat-free dairy.

A year ago at a bank meeting in front of 500 farmers, then U.S. House Ag Committee vice chair G.T. Thompson of Pennsylvania said he wanted his healthy school milk bill to bring the standard up to 2% or whole milk, but, he said “producers and processors came to me and told me to go slow, to keep it at 1% and take baby-steps.”

Who were the “producers” and “processors” coming to him with that request? National Milk Producers Federation (NMPF), International Dairy Foods Association (IDFA) and the check-off MOU under the thumb of USDA.

Those same entities then turn around and tell grassroots farmers that they are forced to work within the confines of what USDA will allow. And so, the circular argument continues. Round and round we go.

Which brings us back to the Nov. 27, 2018 GENYOUth Gala in New York City and the Vanguard Award to PepsiCo.

PepsiCo has been a GENYOUth partner for seven years. In 2018, PepsiCo not only paid its “hero” sponsorship of $150,000 for the event, they gave an additional $1 million for the purchase of 45 additional mobile breakfast carts and the Espanol version of FUTP60.

According to the only piece of the 2011 MOU that can be found, the NFL, NDC, and GENYOUth have agreed not to use FUTP60 “as a vehicle to sell or promote products or services.” But it is clear that the NFL and other corporate partners, like Pepsi, have brand recognition.

How is dairy’s brand recognized? Hats are tipped at the Gala to “America’s dairy farmers” as the founders who launched the platform. But they are hog-tied by generic promotion and exclusion of the full nutritional value of their product — whole milk, real butter and real cheese — within the government straight-jacket.

GENYOUth was created while Tom Vilsack was Secretary of Agriculture (below). According to cross-posted blog entries between DMI and USDA near the end of 2009: “The USDA discussed in September (2009) a plan to develop the Memorandum of Understanding (MOU) between USDA, the NFL and DMI to allow USDA programs and Fuel Up to Play 60 to collaborate and collectively tackle the critical issue of children’s health.”

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Former Secretary of Agriculture Tom Vilsack, who is currently CEO of the check-off funded U.S. Dairy Export Council (USDEC), is photographed in 2011 with young people during Superbowl week in Dallas, Texas, after the signing of the 2011 GENYOUth MOU — 18 months after USDA first discussed the plan for the MOU with the National Dairy Council and a year after NFL commissioner Roger Goodell says Tom Gallagher of DMI approached him. 2011 USDA photo

When former President Bill Clinton was invited to speak about Vilsack at the 2017 Gala where Vilsack was presented with the 2017 Vanguard Award, Clinton, a vegan, talked about every entity in the “diverse partnership” that he was celebrating — except for America’s dairy farmers.

He talked about how children receive 40 to 60% of their calories from drinks in school. He talked about turning the obesity epidemic around by everyone taking responsibility in that area. He talked about how Vilsack’s leadership with Michelle Obama, made beverages and snacks abide by the fat-free rules, including school vending machines. He talked about how Vilsack was instrumental “under the radar… working for a healthier generation of kids before coming to USDA and before the launch of GENYOUth.”

Meanwhile, the more the government’s direction squeezes healthy fat from the diet, the more the obesity figures in children continue to grow.

This year, at the 2018 Gala, GENYOUth CEO Alexis Glick thanked each partner. “We give a heartfelt thank you to our founding partners America’s dairy farmers and the National Football League and the players association,” said Glick in a YouTube video of the November Gala. She had previously thanked longtime partners Land O’Lakes and Domino’s while also acknowledging Mike and Sue McCloskey (fairlife) as well as Leprino and Schreiber.

“I say to our farmers: You had a dream. And we have been blessed to be part of that dream. You gave us life. You believed in us. And can you believe we are standing here today on the cusp of the 10-year anniversary of FUTP60?” she said.

“And we extend an extra special thank you to PepsiCo,” Glick continued. “The generosity of your vision, your resources, your team, time and talent have changed our organization.”

In accepting the Vanguard Award on behalf of PepsiCo, CEO Albert Carey said: “We’ve had a wonderful partnership with the NFL over the years… doing things together like the Pepsi half-time show and Gatorade sidelines. We have had ads and retail programs for both of our brands,” he said.

“But the one NFL program our team noticed probably 10 years ago, or maybe 9 years ago, is one we have admired and wanted to be part of and that was Play 60,” said Carey, careful not to include the Fuel Up (dairy) part of the Play 60 tagline.

Carey said “you guys are doing a fantastic job inspiring kids… using football role models.”

He went on to say that PepsiCo wanted to be part of the program because of the importance of kids being active.

“But we also believe at PepsiCo that we need to provide healthy products for our consumers,” said Carey. “Some of you may be familiar with our mission ‘performance with purpose.’”

He described this as “getting great business performance while also serving others… on the part of the environment… or many other ways, but this one particular way is about providing healthier foods for our consumers.”

Carey said he thought PepsiCo had done a pretty good job at this over the past several years, “but we haven’t talked about it much. You see some obvious things like Pepsi zero sugar, Gatorade Zero,” he said. “But you don’t hear much about Bubbly Sparkling Water, Life Water, Quaker oat milk, and we just bought a company called Bare Snacks and our Kevita Kombucha products (probiotic drinks).”

He mentioned that the Quaker oat beverage, which he personally called “oat milk” but in reality this product is labeled “oat beverage for cereal, smoothies, coffee and more”. It is being launched this month and will be in stores by March.

The PepsiCo website mentions these products as part of the company’s commitment to further the World Health Organization goals of alternative products to reduce saturated fat consumption and reduce greenhouse gas emissions, thereby improving global environmental and nutritional sustainability.

Carey said the “oat milk” and bare snacks and probiotic drinks are part of PepsiCo goal of “converting its portfolio to healthier foods for the future.”

In fact, PepsiCo is also in development of so-called non-dairy ‘cheese’ and ‘yogurt’ snacks through its “Nutrition Greenhouse Accelerator program, including the purchase of Health Warrior, which PepsiCo said in an October 2018 Food and Beverage article “is a nutrition-forward trailblazer that can provide great insight into high value categories and consumers while benefiting from our expertise and resources to bring plant-based nutrition to more people.”

Meanwhile, the GENYOUth program bestowed the 2018 GENYOUth Vanguard Award on PepsiCo for its seven years of partnership and its commitment to give an additional $1 million, which PepsiCo’s Carey said would fund Play 60 in Espanol as well as 45 new mobile school breakfast carts, bringing PepsiCo’s cart total to 100.

It will be interesting to see what may appear on these carts in the future, given the new oat beverage, plant-based probiotic drinks, and other “Nutrition Greenhouse” products emerging in the PepsiCo portfolio.

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Who is empowering whom? PART ONE: Dairy check-off’s GENYOUth thin on milk.

AUTHOR’S NOTE: They call it “the dairy farmers’ youth wellness program” because it has been depicted as the brainchild of the National Dairy Council… But GENYOUth — including its flagship Fuel Up to Play 60 (FUTP60) — is thin on milk and threatens to steal even more demand as future milk drinkers are steered away from nutritious whole milk products. Meanwhile, the anti-animal and environmental NGO’s (non-governmental organizations) have been infiltrating new billionaire “sustainability” alliances poised to profit on the main course, while dairy farmers bow-down in hopes of crumbs. This is Part One of an investigative multi-part series.

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Depicted above is the illustration used to promote and glorify the 2018 GENYOUth Gala that was held at the Ziegfeld Ballroom in New York City on Nov. 27. The “superheroes” sponsors are listed further down on the 2018 GENYOUth Gala website. PepsiCo was the “hero” sponsor at $150,000. Champion sponsors of $100,000 each were UnitedHealthcare, Corteva Agriscience, Inmar and fairlife. So-called “defender” sponsors included Domino’s, Ecolab, Jamba Juice, Land O’Lakes, NFLPA, SAP, Leprino Foods, Schreiber, Ameritrade, RBC Capital Markets and Omnicom Group, each of which gave $50,000.

By Sherry Bunting, from Farmshine, Friday, January 11, 2019

BROWNSTOWN, Pa. — How serious is the National Dairy Board about improving fluid milk sales? We see some renewed emphasis on this lately, but our most important sales — those to children in school — threaten to steal even more demand from the future as we lose future milk drinkers with the forced service of only fat-free and 1% low-fat milk in the school lunch and breakfast programs.

Recent studies show that children and teenagers in the poorest demographic of the U.S. population are leading the epidemic of obesity and diabetes. One study by University of Michigan Health System, for example, revealed that for every 1% increase in low-income status among school districts, there as a 1.17% increase in rates of overweight/obese students. Researchers used data collected from mandated screenings that began in Massachusetts schools in 2011, and the percentage of overweight/obese students was compared with the percentage of students in each district eligible for free and reduced school lunch, transitional aid or food stamps (SNAP).

The meals these students receive at school are their best two options for nutrition and satiety all day. There are few restrictions for cheap, high-carb, high-fructose-corn-syrup foods and beverages that can be purchased with SNAP cards, so what will they find at the end of the day for their hunger at home? Soda pop and Dollar Store snacks.

What role is the National Dairy Council and its GENYOUth program playing?

The GENYOUth collaboration is aimed at making “a lasting difference in the lives of children.” That sounds great, but what have been both the intended and unintended lasting consequences?

Certainly, there is a long list of dairy research projects funded by the NDC. That’s a good thing.

But where the rubber meets the road, GENYOUth and its flagship program Fuel Up to Play 60 (FUTP60) are aimed at promoting a “healthy lifestyle” that focuses on 60 minutes of physical activity daily and consumption of fruits and vegetables, whole grains and lean protein “including low-fat and fat-free dairy.”

For nearly 10 years, the dairy checkoff has parroted the Dietary Guidelines on dairy service to children (and adults) when it comes to institutional feeding — the largest category of the food economy and the place where seeds are planted for lifelong choices based on nutrition education and flavor.

Let’s look at how GENYOUth was launched in 2010.

At the Nov. 27, 2018 gala in New York City, NFL Commissioner Roger Goodell stated that GENYOUth was the concept of Dairy Management Inc (DMI) CEO Tom Gallagher. Gallagher today serves as chairman of the GENYOUth board.

In a YouTube video of Goodell’s remarks — before handing the coveted 2018 Vanguard Award to PepsiCo CEO Albert Carey — Goodell stated that Gallagher came to him with the idea for GENYOUth 10 years ago, which was then “founded” in 2010 as a partnership between the National Dairy Council (NDC) and the National Football League (NFL).

In fact, in its 2014 Progress Report, GENYOUth’s beginning is described as making “cultural shifts” in school nutrition and exercise, stating further that, “Through signing a six-way Memorandum of Understanding (MOU) between the National Dairy Council, the National Football League, and the U.S. Department of Agriculture, Education, and Health and Human Services, we have created a productive synergy that has made the sky the limit for GENYOUth.”

According to a report at its website, genyouthnow.org, the foundation seeks to “convene leaders in a movement to empower America’s youth to create a healthier future.”

The 2018 GENYOUth Gala in New York City was billed as “honoring America’s everyday superheroes” and the Vanguard Award, as mentioned, went to PepsiCo.

But let’s go back to the second gala on Dec. 7, 2017 aboard the Intrepid in New York City. Former U.S. Secretary of Agriculture Tom Vilsack — who now serves as CEO of dairy checkoff-funded U.S. Dairy Export Council (USDEC) — was presented with the Vanguard Award that year.

The GENYOUth website cited “Vilsack’s accomplishments for dairy farmers” under President Obama — for having “legislated to improve the health of America’s kids.”

More specifically, the Vilsack accolades stated that he partnered with First Lady Michelle Obama on her “Let’s Move!” initiative — “alongside GENYOUth to improve the health of America’s children.”

These words show the partnership the NDC / DMI has had with the Obama / Vilsack administration on shared goals of promoting exercise and low-fat / high carb diets for children and youth.

According to the former GENYOUth foundation website before it was revamped to genyouthnow.org, the Vanguard Award presentation to Vilsack was described in January 2018 as follows:

“Sec. Vilsack helped pass and implement the Healthy, Hunger-Free Kids Act to help combat child hunger and obesity by making the most significant improvements to U.S. school meals in 30 years.”

What was included in these “significant improvements” in 2010?

For starters, America’s schools were forced to offer only fat-free flavored milk and only 1% or fat-free white milk, while the screws were tightened on the requirement that less than 10% of a school meal’s calories could come from saturated fat and by reducing the total number of calories in a meal served to children at school, while at the same time putting both program and promotion emphasis on plant-based meals containing scant lean protein.

This means that not only are dairy producers prohibited from putting their best and most nutritious foot forward with future milk drinkers at school, the schools are forced to serve butter substitutes and imitation cheese or cheeses that are diluted with starch to decrease the amount of calories the students receive from fat).

During the Pennsylvania Dairy Summit in February 2018, keynote speaker Nina Teicholz, author of The Big Fat Surprise — without realizing the significance of her statement — put these USDA / GENYOUth ideas to shame. She stated:

“The fat we eat is not the fat we get. The idea that 60 minutes of exercise can make up for a bad diet is disingenuous. You can’t exercise your way out of a bad diet.”

And Teicholz backed up her statement with facts, studies and charts.

Her 2014 book details her 10-years investigation, revealing the lack of sound science to support low-fat diets. Not only are new studies bearing this out, old studies were found to have been “buried” by the National Institute of Health (NIH) and American Heart Association, because they did not support the fat-heart hypothesis of Ancel Keys.

GENYOUth and FUTP60 not only dutifully “followed” these government guidelines but in reality worked alongside the Obama administration to develop them and further the reach of this low-fat dogma.

The implementation of those school milk rules have cost dairy farmers plenty in lost milk sales. Losses so steep that they drove the gradual declines in fluid milk consumption (see Fluid Milk Timeline chart below) plunging downward like a rock from 2010 through 2017 (most recent full-year figures)

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Timelines don’t lie. As we look at this fluid milk timeline, we can see the layered effects of government dietary policy, USDA requirements for fat-free milk (2010), that move occurring alongside the creation of GENYOUth (2010) and some reversal in whole milk trends moving higher after Nina Teicholz’s book Big Fat Surprise made the cover of Time magazine. Meanwhile, the past decade has also been one of FDA non-enforcement of milk’s standard of identity, allowing plant-based alternatives to take hold and proliferate. 

Bob Gray for the Northeast Association of Farm Cooperatives addressed these losses on a dairy policy forum panel in Washington exactly one year ago on January 8, 2018. Gray said: “For the last six years (2010 through 2016 data), we have not been able to sell 1% milk in the schools.”

He noted that in just the four years from 2012 to 2015, dairy producers had “lost 288 million half pints of sales to schoolchildren because of this move, alone.” And those losses continued through 2016 and 2017 and into 2018, despite the small move by the Trump administration to allow 1% flavored milk back into schools.

This is an uphill battle to turn around — what with all the fat-free and low-fat promotion and the fact that schools are already aligned with processors that prefer to keep the fat-free pipeline going.

In addition to GENYOUth honoring Secretary Vilsack with the 2017 Vanguard Award, the National Dairy Board provided him a checkoff-funded salaried position as CEO of USDEC, where his rallying cry has been to get export sales to 20% of expanding total milk production while Class I sales as a percentage of total milk production declined to below 20% by the end of 2017.

Remember, experts at various dairy market forums throughout 2018 have made the point that exports do not raise farm-level milk prices because they are “commodity clearing markets.”

But maybe that is the point.

If fluid milk consumption erodes as a percentage of milk production, the cost of milk to processors is reduced for the many other products competing globally for export sales to increase. Meanwhile, a pipeline for fat-free milk sales keeps the cost of milkfat for other products from accelerating in the farm milk check.

The highest-value class under the Federal Order pricing scheme is the shrinking piece of an expanding commodity-dairy-production-for-export pie.

Meanwhile, the past decade has been one of FDA non-enforcement of milk’s standard of identity, allowing plant-based alternatives to take hold and proliferate.

One can argue that the National Dairy Council — whether simply following USDA’s lead or by working alongside USDA to lead — has played right into the hands of GENYOUth ‘friend’ PepsiCo / Quaker.

Remember, Quaker was a company that DMI specifically partnered with a few years back, but the milk part of the Quaker Oatmeal promotion never really materialized, just like we don’t see the milk part promoted in any of the NFL’s Fuel Up to Play 60 spots. But the NFL is joined at the hip to PepsiCo with side-by-side logos during televised games.

Now, just six weeks after receiving the 2018 Vanguard award from GENYOUth, PepsiCo is launching its own Quaker Oat beverage.

In fact, PepsiCo CEO Albert Carey had the audacity to do a brief sales-pitch for what he called “our new oat milk” in his remarks after NFL commissioner Goodell handed him the highest GENYOUth award on behalf of the NFL and the National Dairy Council.

We’ll dig into that in future parts of this investigative series.

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FARMSHINE Editor: ‘You should know what’s going on behind your back.’

16998665_1877802419128042_6866585577837346794_nBy DIETER KRIEG

This editorial by Farmshine editor and publisher Dieter Krieg, appeared in the January 4, 2019 edition of Farmshine and is republished here with permission.

The fact that most of you have never heard of GENYOUth is reason to suspect that its goals are dubious and very likely not in your interest. The non-profit was founded in 2010 by the National Dairy Council (NDC) and the National Football League (NFL). So, in the nine years since GENYOUth came to be, have you heard of it?

We discovered it in late 2017 … and not in a good way. On the contrary, we were appalled! All the more so because we had never heard of it. And surely the “dairy folks” at NDC, and its sister organizations, including ADA, UDIA, NDB and DMI would have had contact information for Farmshine. Indeed they did and do, regularly sending us “silly” stuff which is almost an insult to dairy farmers. Need an example? Turn to page 22, and see what DMI considers worthy of good news for you dairy producers.

In 2016, GENYOUth held its first “gala”… meaning they held their first very fancy gathering at one of the fanciest places this side of Paris. Internally, they patted themselves on their collective backs, but outside of their boardrooms and ballrooms, not a word. Were they — and are they — trying to keep their agenda out of your sight? Or, were you at the Waldorf-Astoria Hotel in December, 2016, for the inaugural high-class gathering of GENYOUth.

Don’t feel bad if you weren’t invited. Only a very select few dairy farmers (like maybe just one) gets to attend.

We suspect that dairy farmers are kept away and in the dark about it all because if they knew the truth … if they saw and heard what’s going on … there’d be a revolt. And that’s exactly what we need!

It wasn’t until December of 2017 that we were tipped off about the GENYOUth gala that had been held that month.

Once again, it was held in New York City, this time aboard the aircraft carrier, Intrepid — about as exotic a venue as you can find in the Big Apple. We’re sure it was nice, as well as shameful. We looked into it and concluded in short order that GENYOUth does not have the interests of America’s dairy farmers in mind. Not in the least. Not at all.

If our exposure of the 2017 GENYOUth gala accomplished anything at all, it’s this: We actually received a news release of the event this past year (2018). In typical DMI-NDC-ADAUDIA-NDB-USDEC fashion, the news release is full of praise for itself. It appears completely unedited on page 18, if you’d like to read it.

By the way, not mentioned in the GENYOUth report is where and when it was held. For the record, it took place on November 27th at the Ziegfeld Ballroom on 54th Street in
Manhattan. It bills itself as “New York City’s premier special events venue.” There’s really nothing wrong with that in itself.

What’s disturbing is that these galas feature some very heavy hitters with very deep pockets and they’re all united to promote, push and publicize skim and low-fat milk.

Their absolute mission is to change the culture of milk consumption. Down with whole milk; raise a glass of skim instead.

If you’re okay with that, then fine. If not, then it’s time for you to raise your voice.

Again, if you haven’t already read the GENYOUth article on page 18, please take the time to do so. You should know what’s going on behind your back. And don’t be surprised if you come away feeling like you’ve been stabbed in the back.

Shame on DMI, NDC, ADA, UDIA, NDB, USDEC for betraying the mission dairy farmers entrusted you with!

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Homemade ads about milk reveal and surprise community

By Sherry Bunting, published in Farmshine, Friday, January 4, 2019

“Everything helps… Anything helps,” said Nelson Troutman. The Pennsylvania dairy farmer gave consumers in his area an early Christmas gift, and this gift of knowledge keeps giving in the New Year.

Frustrated by the forced emphasis on low- and non-fat milk promotion and seeing the need to draw attention to the simple healthy truth about milk, while planting the seed that consumers can ask for local milk, Troutman came up with his own promotion idea.

On December 11, he painted a wrapped round bale with the words “Drink LOCAL Whole MILK 97% FAT FREE!”

Then he placed the round bale in his pasture, where it is visible at the intersection of Wintersville and Stouchsburg Road near Richland, in the Lebanon/Berks area of Pennsylvania.

After all, whole milk is standardized to 3.25% fat content, making it virtually 97% fat-free — a point on the minds of consumers that milk labels and checkoff promotion have not been able to tap into.

“It was the cheapest and easiest thing to do, and I’ve gotten a lot of very nice and interesting comments,” said Troutman in an interview with Farmshine. “Today, I saw two ladies walking down the street. They had just passed the bale. I had no idea who they were. They saw me coming out the farm lane and waved. I am sure they were talking about the bale.”

Nearly three weeks after his round bale billboard was placed for the community and those passing through to see, Troutman said the gift keeps giving with new and continuing conversations.

“I am amazed at talking to people about this educational bale,” Troutman said Monday (Dec. 31). “People say to me that they did not know any milk is 97% fat-free, much less that the whole milk is 97% fat-free!”

Troutman uses their surprise at this revelation as a teachable moment.

“I explain that fat-free milk is 100% fat-free, 1% milk is 99% fat-free, 2% milk is 98% fat-free and whole milk — at 3.25% fat — is basically 97% fat-free. They are astounded,” he affirms. “So, I ask them what they thought any milk is, and they tell me that they never thought about it. When I ask them what they think the fat percentage of whole milk is, most answers were 10% to 20% fat. I actually had one man say he thinks whole milk is 50% fat! His wife made him drink 2% milk for that reason.”

So what is being gained with this message? Troutman gives an example. He said the man who confessed that he thought whole milk was 50% fat — upon hearing the truth — said he will never again drink 2% milk and has switched to whole milk while also being made aware of the local ties and how to find local brands.

What does all the milk confusion tell us about the success — or failure — of mandatory checkoff promotions? People are confused about so many things where milk is concerned. But the fat content should not continue to be one of their confusions. It is standardized and easy to demystify with a simple message, a simple sign, that opens the door to conversations that matter.

Troutman said he knows that the dairy farmers’ mandatory checkoff promotion organizations of American Dairy Association Northeast (ADANE) and Dairy Management Inc (DMI) — and even Allied Milk Producers — cannot advertise milk as 97% fat-free. He says there are government rules about putting this on the label or in a checkoff-funded campaign.

But, he believes it is high time for a grassroots promotion.

“We farmers can do this! It’s real education, and it sure beats the price of the milk mustache. Advertising is expensive, but we farmers have an edge. We live along roads and highways where we can put up signs, use our bales, silage bags, silos, barns, and wagons,” says Troutman.

“We also have friends that have agribusinesses in town that could use a sign. And there is Facebook, which is very powerful to the consume. We need the consumers in Pennsylvania to ask for whole Pennsylvania-produced milk at our restaurants, schools and stores,” he adds.

Troutman is definitely on to something, as people across the state and in other regions as well have complained all year on social media and at meetings and with photos of supermarket dairy shelves that whole milk is often not stocked to the density of the fat-free, low-fat and reduced fat milks.

In fact, as one producer in northern Pennsylvania noted recently, she has to order whole milk on ahead at her local store if she wants more than three gallons for an event. When asking the store manager why whole milk is not made more available in the dairy case, the store owner told her the reason is because it isn’t as healthy and contains too much fat!

Nelson Troutman’s simple idea is borne of frustration but with education and truth at its core, and it is easy to implement.

He says that dairy farmers are fed up with decades of their product being thrown under the bus by dietary guidelines and promotion restrictions leading people to believe — over time — that whole milk is full of fat. The labels do not even say 3.25% fat! And this has led to people having all kinds of inflated ideas about how much fat is in whole milk to begin with.

It is no wonder that even well-educated pediatricians mindlessly follow blindly the lies of omission — telling mothers to put their children on lower fat milks at age two because they falsely believe whole milk is more than 10% fat!

Troutman made his round bale sign and placed it in his pasture by a busy intersection to educate his community and to encourage other farmers and agribusinesses to use his idea to educate their communities.

“Maybe they want to do something on a bale or a wagon or a silage bag,” he said. “Everything helps… anything helps.”

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Global dairy thoughts Part 5: First half 2018 butter, milk, cream imports climbed!

Timelines show how domestic dietary guidelines, Obama/Vilsack school milk rules and ramped up low-fat and fat-free dairy promotion through GENYOUth and FUTP60 all laid the groundwork for declining Class I fluid milk sales to pave the way for flat pricing and increased exports (now coincidentally under the industry leadership of former Sec Vilsack). Then consumers learned the truth and began coming back to whole milk and butter and full-fat cheeses even while the government turns a deaf ear in regards to the rules about feeding our schoolchildren. So what did U.S. companies and cooperatives do to keep that milk price flat enough for the export market this year? They imported more butter, milk and cream in first half 2018!

By Sherry Bunting, originally published in Farmshine, September 7, 2018

BROWNSTOWN, Pa. — Let’s take a look at the overall global dairy trade balance of the U.S.

In gross numbers, the balance is positive, showing the U.S. is winning new market share on the side of exports over imports. But this tells only part of the story, ignoring the potential milk market impacts of substantial increases in imports of milkfat at this critical time during the first six months of 2018.

In June 2018, Global Dairy Thoughts Part 3 and Part 4 covered some of the Federal Order pricing impacts of rapidly expanding exports alongside a diminishing Class I utilization. While per-capita milk consumption has steadily declined since 1980, the total packaged milk sales held their own due to population growth.

globalthoughtspartfive-chart1That is, until we hit 2009-10, when the third and fourth layers (see Chart 1 above) were added to the lowfat-push — that consequently pulled total fluid milk sales into the bucket at the same time that exports began their rapid ascent.

Expanding export utilization hits Class I utilization with a double-whammy: Smaller piece in a bigger pie, even if consumption losses are stabilized. We’ll revisit that in a future part of this series on dairy policy and logistics.

In looking at imports and doing trend comparisons for farm milk prices, fluid milk sales, total exports, total imports and the large increase so far this year in imports of butter and butteroil as well as steady increases in imports of milk and cream (condensed, non-condensed, liquid, powder, sweetened, unsweetened), there are some correlations. (Chart 2 below)

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From 2005 forward, the national average all-milk price moved in patterns concave to the corresponding imports of butter/butteroil and milk/cream on the timeline. While the totals are not huge, we all know what “a little more” can mean on the supply side when it comes to milk prices.

In the first-half of 2018, for example,  the U.S. imported 12% more butter and butteroil and 11% more condensed milk and cream, according to the European Commission’s Milk Market Observatory published August 14, 2018. (Charts 3 and 4 below)

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globalthoughtspartfive-chart4

While the U.S. Dairy Export Council (USDEC) reports that first half 2018 dairy exports of milk powders, cheese, butterfat, whey and lactose topped 1.14 mil. tons to set a new record-high – up 20% from year ago, some interesting things were also happening on the import side.

Even though the USDEC data dashboard continues to show total imports accounting for a flat line at 4% or less of the milk supply on a solids basis, while exports accounted for 16.8% in the first six months of 2018, there are some interesting aspects of the import picture related to ‘what’ and ‘when’.

According to the August 14 EC statistical report ranking top-10 importers and exporters of various dairy commodities, the U.S. ranked third in butter and butteroil imports, up 12% from year ago and not far behind China (1) and Russia (2) during the first half of 2018.

The U.S. also ranked fourth in imports of condensed milk and cream – up 11% compared with a year ago.

When butter substitutes, containing over 45% butterfat, are included in the butter and butteroil import total, as documented at the U.S. International Trade Commission (USITC) import monitoring website, the U.S. butter/butteroil total rises by more than 200% during the past three quarters (Sept. 2017 through June 2018) compared with the same nine months a year ago.

While half of the butter and butteroil imports came to the U.S. from EU countries, a majority of the other half came from Mexico, according to the USITC website listings under various Harmonized Tariff Schedule (HTS) codes.

In the condensed milk and cream category, 8% of U.S. imports came from the EU, according to the EC report.

Sifting through the tedious lists and multiple codes and combinations at the USITC website, it appears the U.S. imported quite a bit of condensed milk and cream from Mexico, a little from Canada (though less from Canada than a year ago), and the remainder from sources scattered around the globe — even China.

For the past nine months, Sept. 2017 through June 2018, the condensed milk and cream, unsweetened, category of imports was up 44% in powder or granular form compared with the same period a year ago, while milk and cream imports, unconcentrated, unsweetened, and still in liquid form, were up 22%.

Imports of sweetened condensed milk and cream were up 7% and mainly from Mexico.

Of course, the U.S. remains the top importer of casein and caseinates, even though those imports were down 15% from a year ago during the first half of 2018, according the EC report.

Doing the math on milk protein concentrate (MPC) imports for the nine months from September 2017 through June 2018 listed at the USITC site, MPC imports in both the 0404 and 3500 HTS codes, combined, were down 1.3% compared with the same period a year earlier.

On the other hand, imports of milk protein isolates (MPI) were up 31% from Sept. 2017 through June 2018 compared with the same three quarters a year ago.

Looking further into other categories, imports of “textured protein substance, including dairy” were up 40% for the past nine months compared with a year ago.

In the significant dairy-containing “food prep” categories — including infant formula and having various percentages of milk solids and butterfat — imports were up 7% during the past nine months compared with a year ago. In this particular category, including confectionary products containing significant milk solids, Canada was a primary source, along with EU countries as well as some of these imports coming from Chile and other South American countries.

Process cheese product imports were up 46% during the past nine months compared with a year earlier.

While U.S. imports of ice cream were down relative to year ago, the total when combined with import categories in other HTS codes for “edible ice containing dairy” tallied an import total that was up collectively by more than 200% over year ago during the past nine months.

To read Parts 1 through 4, click these links: Part 1, Part 2, Part 3, Part 4

And stay tuned for this series to continue as 2019 trends develop abroad and on the homefront.

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Global thoughts Part 4: As exports grow, who benefits from ‘new math’?

GlobalThoughtsPart4_Chart#2 (1).jpgBy Sherry Bunting, originally published in Farmshine, June 7, 2018 and examines the utilization of domestic Class I fluid milk vs. exported commodities during the worst three months of pricing at the beginning of 2018, but the trends show how FMMO pricing no longer provides the value to farmers for their milk as exports increase. Read Global Thoughts Part One, Part Two, and Part Three.

BROWNSTOWN, Pa. — U.S. dairy exports posted record-high 2018 first-quarter volumes (see Chart 1), representing 17.3% of U.S. milk utilization on a milk equivalent basis, according to the U.S. Dairy Export Council (USDEC). (Note, the average Jan. through Oct. was 16.3%, still a record high.)

This, against the backdrop of Class I milk utilization falling to 29% of Federal Order pooled milk but just 18.9% of total milk production in the first quarter of 2018 (Chart 2).

In fact, Federal Order pool reports for first quarter 2018 showed Northeast marketings 1.8% below year ago as pool receipts fell due to reduced production. At the same time, other FMMO pools recorded declines in pool receipts, which USDA confirmed by email were largely due to shifts in pooling or strategic despoiling to prop up Class I utilization percentages. (For example the pooled first quarter receipts in the Appalachian Order were up 6% while down 5.5% in the adjacent Mideast Order.)

globalthoughtspart4_chart#1The total “official” U.S. Class I utilization for 2017 was 26.1%, down nearly 10% from 35.9% in 2009, according to USDA figures.

However, the Northeast Market Administrator’s most recent bulletin (April) observed that the real percentage of total U.S. milk production used for Class I fluid sales in 2017 was just 22.3%!

Bob Younkers, chief economist for the International Dairy Foods Association (IDFA), analyzed fluid milk trends, reporting in February that the 2017 fluid milk losses, alone, represented 20 million fewer pounds (2.3 million fewer gallons) of milk sold daily – nationwide – in 2017 vs. 2016. In addition to the blow dealt to producer milk checks, Younkers points to how the fixed costs of bottling increase when spread across fewer gallons of milk sold.

Coming into 2018, not only have first quarter Class I sales declined 1.5% compared with first quarter 2017, the Class I utilization percentage fell by even more — down 2.5% below year ago — in part because exports grew to this new first quarter record of 17.3%.

Left unchecked, the current math trend shows that as U.S. exports reach the goal of 20% set by the U.S. Dairy Export Council (USDEC), the percentage of milk utilized in export sales will very soon equal and surpass Class I utilization as a percent of total milk production.

Who benefits from this new math?

If the current classified pricing system — and its Class I regulation — must continue, perhaps the growing export utilization should have its own class formula tied directly to export pricing and representing growth milk in the U.S. system so that the other 80% of milk pricing can be more stable and reflective of serving that large anchor-base of domestic consumption?

Survey the experts on this idea and they’ll tell you an export class for U.S. milk pricing is a non-starter because of trade agreements and WTO. But trade agreements are being renegotiated and others in the global markets have mechanisms in play.

Perhaps instead of going after Canada’s export class implemented because of expanded production due to higher consumer demand for fat, the U.S. could learn from what’s being done north of the border with this pricing mechanism to match exports prices and products to growth milk that goes into products strictly for export?

This is not an idea that goes against free trade, but one that recognizes the U.S. as a free-trader in need of fair trade leverage for producer pricing.

The U.S. must be competitive enough to have its products arrive at other ports, so that it can remain competitive enough to keep other products from arriving at its ports — where a large market for dairy already exists. In Part Three, we looked at some of the product differences.

 But there’s another catch to this romance with export markets. They can be unstable and unpredictable, and while we make more of the globally significant products today than in 2008, our product mix and flexibilities are different than other successful exporting nations.

Would an export class allow pricing of growth milk — a percentage of the nation’s production or a percentage of production in high growth areas — to be aligned to the fluctuating global markets for globally-significant products with a margin to attract necessary investments in manufacturing flexibility and innovation? Such alignment could, at the same time, allow a more stable and profitable base price for milk going into dairy products for domestic consumption?

After all, we are increasing exports to levels that are approaching the falling Class I utilization percentages and yet NONE of the globally-significant products and/or prices are even used in the arbitrary U.S. Federal Order pricing formulas, to which location differentials are added to ensure the Class I price is always higher (more on this when we tackle logistics in a future part of this series).

As dairy exports become the new epicenter of U.S. marketing, a different light is cast on these regulatory pricing structures.

Let’s look at the differences between global and domestic pricing and trading platforms.

 For starters, price announcements to dairy producers in New Zealand are based on the actual value of global sales with producers buying shares of processing capacity for the quantity of milk they expect to produce. As milk falls short or exceeds those pegs, payout announcements are adjusted based on the relationship of the production to the sales.

In Europe, producers also see milk prices that reflect the value of what is sold not a formula like in the U.S. that leaves key products, prices and markets out of the math equation.

While Europe’s quota system has ended, the EU commission intervenes with purchases. Processors more nimbly shift between products to adapt to market changes. And if they miss in their projections — as they did in the shift to making more powder when the Russians stopped buying cheese and butter due to the economic sanctions — the EU commission intervened to buy and stockpile that powder to a degree that still is blamed for suppressing the global market for powder and holding back the U.S. milk price recovery.

In addition to differences in pricing, there are big differences between global and U.S. price discovery and trading platforms.

While the CME daily spot market in Chicago went electronic last year, the Global Dairy Trade (GDT) biweekly internet auction has always been an electronic platform.

The GDT engages more buyers and sellers, offers contract sales that are near-term and forward-looking to create what is essentially a 2-month ‘spot’ price, according to Bialkowski and Koeman’s November 2017 study at the University of Canterbury New Zealand of spot market design in relation to the success of futures markets.

They explain the GDT biweekly auction is a vehicle for Fonterra to market 30% of its production and to provide a global exchange for other sellers like Dairy Foods of the U.S. and Arla of Sweden.

The GDT auction includes many products and ingredients — from bulk cheese and butter to whole milk powder, skim milk powder, anhydrous milkfat powder, buttermilk powder, lactose powder, milk protein concentrate, rennet casein and occasionally sweet whey powder. Whey protein concentrate is another globally-significant product, which the U.S. makes and exports a lot of – but that price is never considered in the FMMO classified pricing scheme either.

By contrast, the CME futures markets provide a hedging opportunity for Class III and IV milk and futures markets for the four Federal Order pricing commodities: Cheddar, butter, nonfat dry milk and dry whey. The CME also operates a daily cash “spot” market primarily for three of the four Federal Order commodities – butter, Cheddar and nonfat dry milk.

The CME trades only those specific Federal Order commodities. It is thinly traded with few buyers and sellers, although volume has increased 1 to 3% in the past year since the change to an electronic trading platform.

As a spot market for hedging, Bialkowski’s analysis described the CME cash market as one that is less well-designed because daily ‘spot’ prices are market-clearing and used retroactively in government pricing formulas, with a pricing delay built in, while GDT auction contracts offer pricing points for delivery one to four months forward.

The biweekly GDT prices are always based on actual sales because all product offered is sold. And those sales are weighted to calculate a weighted average for each product as well as an overall weighted performance index for the dairy trade.

The CME spot market, on the other hand, pegs its daily spot prices on the activity occurring in the final moments of its 15-minute daily trading session.

As we saw on a few occasions earlier this year, a CME trading session had multiple loads change hands at specific prices, but the daily spot price was determined by a lower last-minute offer.

Access to the market is also different. CME traders must simply have product to sell and meet payment and delivery terms to buy. The GDT, on the other hand, has a more controlled process where buyers and sellers are vetted and approved by Fonterra of New Zealand because they run the platform.

How will the U.S. dairy industry adapt to competitively manage export growth and volatility? Are changes needed in the mix of commodity pricing and milk utilization formulas that govern the regulatory pricing structures?

If industry leaders want to focus on export market growth and bring home the message that dairy farmers must accept lower prices “because we are in a global market,” then why is the government involved in regulating prices on the shrinking piece of the expanding pie (Class I) and calculating component value from just four commodities while ignoring the globally significant products and their mostly higher prices?

This is new math and it is not adding up.

A national hearing with report to Congress would help examine new thinking and take a closer look at current regulatory pricing schemes. How is price regulation affecting milk movement and location? Do these schemes return enough component value to the farms? Are the arbitrary make allowances creating winners and losers? Would truly free market forces do a better job? Or if classified pricing is here to stay, should we be aligning milk growth in the U.S. with export market growth and price it accordingly?

In Part Five, we’ll look at U.S. dairy imports and why volume is not the only important factor.

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Eastern dairy industry has value-add soul-searching to do

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Talking candidly about dairy markets and trade were market experts (l-r) Tom Wegner, Land O’Lakes economist; Tom Roosevelt, founder and owner of West Chester-based Roosevelt Dairy Trade, Inc; and Matt Gould, owner of Philadelphia-based Dairy & Foods Market Analyst, LLC. Photos by Sherry Bunting

By Sherry Bunting, published previously in Farmshine, November 30, 2018

BAINBRIDGE, Pa. – “There is a long list of demands coming from consumers with unprecedented opportunities for milk,” said Matt Gould, owner of Dairy & Food Market Analyst LLC, based in Philadelphia. “Consumer demands are the key, and they are willing to pay for them.”

That was the good news. Gould said that Pennsylvania has an image to capitalize on, and part of that image is family farms working close to the land and animals — the iconic Lancaster County Amish-made image — for example.

But by the end of the forum, it was clear that how the state of Pennsylvania — and the eastern states in general — can tap into value-added dairy opportunities will require both individual and collective soul-searching.

The not-so-good news was the main substance of three hours with three dairy market experts at the annual Professional Dairy Managers of Pennsylvania (PDMP) Fall Issues Forum on November 14 at the Bainbridge Fire Hall in Lancaster County.

Each expert, in their own way, painted a changing and sobering portrait of the dairy market landscape. Producers in Pennsylvania, and the eastern U.S. in general, are not located where commodity processing growth is occurring to serve rapid growth for export and foodservice markets, but instead, exist in a market where declining fluid milk consumption is dictating the terms and leaving mainly the option of slow growth consumer niche markets that take time to develop and must be “continually fed.”

The experts noted that even though the Northeast is down to 30% Class I utilization, 87% of fluid milk sales is water that is expensive to ship, so, in a sense, the albatross around the neck of eastern dairy farmers is the fluid milk market needing farms nearby consumers, but at the same time declines in fluid milk sales are pressuring those farms.

In fact, the experts characterized the East as mainly a fluid and specialty market for dairy. Not the news many wanted to hear since a recent Pennsylvania Dairy Study suggested the Keystone State is a good location for a new cheese plant, and the Port of Philadelphia was tagged in the study as a vehicle to potentially capitalize on export growth markets.

Tom Roosevelt, founder of Roosevelt Dairy Trade, Inc., West Chester, said that commodity processing expansion is mainly associated with export growth and that is all being centered on the West and Midwest.

“A new cheese plant is not my first thought for Pennsylvania,” he said bluntly.

In fact, all three panelists agreed that the Keystone State’s hope is in building niche markets, and they offered these strategies: 1) branding the state’s image, 2) improving milk components, 3) marketing to consumers who have an emotional connection to where their food comes from and how it is produced, and 4) altering production practices — such as Organic, non-GMO and animal welfare labeling — to meet those niche demands.

They also preached the need for greater efficiency and market discipline, that producers here will increasingly see base/excess programs and will need to be using risk management tools and futures markets to get a ‘flat’ price because a ‘flat’ price is where the industry is headed in the midst of volatile global trade factors.

All three experts indicated that the deepening national and global dairy crisis won’t get better any time soon, and that Pennsylvania has some additional long-term challenges if it wants to retain and grow dairy.

Billed as a session to take dairy markets and trade ‘beyond the spin,’ the forum discussion was brutally honest. While disheartening, the information about what is happening here in the context of what is happening elsewhere is important for constructive ongoing discussions in Pennsylvania and other eastern states about the future of their dairy farms that are key to agriculture infrastructure and state and local economies.

When asked about the potential to change how milk is priced, Roosevelt said that there is no question the CME is thinly traded, but that electronic trading has brought in more activity. He said the USDA National Dairy Product Sales Report that provides the product prices for milk pricing formulas, is outdated.

He and Gould agreed that substantial changes to Federal Order milk pricing are not likely to happen because the investments of large companies (think Walmart, Leprino, etc.) rely on a “stable regulatory environment to protect their investments.”

Adding value

Gould challenged Pennsylvania’s dairy industry to instead focus on “value-added” processing and marketing instead of focusing on making more milk.

Tom Wegner, economist with Land O’Lakes said that, “Three years of tough markets would seem to be due for a price peak, but I don’t want to give any notion that it will get better soon. That is the impact of long milk. We are long on milk, and that will probably continue for a while.

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Tom Wegner, economist with Land O’Lakes, shows global milk production patterns during the PDMP forum on dairy markets.

“Your production of components here is more important to enhance milk checks than anything else,” Wegner said.

Roosevelt was particularly candid: “It’s tough to look at this part of the country and think you’ll have dairy exports. The real benefit you have here is in value-added.”

He gave the example of conventional nonfat dry milk selling for 85 cents a pound when organic powder is over $4.00/lb. (The flip-side of this proposition is the very high feed costs and other costs for organic production in which consolidation is also happening, so those producers also are having tough times.)

“It is hard for you to compete on a commodity level,” said Roosevelt from his experience trading dairy commodities at a ratio of 60% domestic use, including animal and pet feed makers, and 40% exports, noting the export trade really began in the past eight years.

“We do a lot of business with Land O’Lakes and Maryland-Virginia,” he said, “but we don’t move hardly anything into export markets out of the Northeast. The fluid market dictates things here in the East compared with the West and Midwest, where cheese is king.”

Roosevelt said the Midwest, Southwest and West are where dairy plants are doing line extensions, and new plants are being planned and breaking ground.

Global volatility

“These companies and cooperatives are going after the commodity big-volume markets to China and Mexico,” said Roosevelt. “If tariffs take those markets out, then it will affect you here because that milk moves down the line. When those markets move product out of the U.S., that means less competition for you here.”

The export markets are deemed the growth markets, said the experts, because domestic demand is declining in some sectors and offers only slow-growth opportunities in other sectors.

With the growth-focused U.S. dairy industry fueled mainly by exports, the volatility of the global market has forced more of the industry to use the CME futures markets to get the ‘flat price’ they want in their quarterly contracts, according to Roosevelt.

“As traders, we trade off the market price and use the futures to convert that to a flat price,” he said. “I would urge you to look at the futures to get a flat price. It’s a tool that will be increasingly important to all of you because, whether we like it or not, we are in a global market and futures are a way to reduce that volatility.”

Roosevelt’s bottom line was for producers to be as efficient as they can and look for the market that “gives you the value, whether it’s artisan or organic.”

Wegner echoed the advice on being efficient. He said the largest farms have the advantage of stretching their economies of scale and taking a longer view in this long period of long milk.

He gave a history of Land O’Lakes with its butter production dating back to 1921 and the eventual merger with Midatlantic here in the East.

“We aggregate demand also,” he said, a nod to Land O’Lakes’ Purina. “We want more of our members to buy more of our products, not just sell us milk.”

Explaining Land O’Lakes’ market-back philosophy, Wegner said the cooperative has put tools together that include traceability and are trying to put production discipline tools into that mix.

“We come to our customers with a farm-to-fork approach and send that back through milk production for an end-to-end view,” said Wegner. “Being farmer-owned is a great part of our background as we continue to grow markets.”

While Pennsylvania’s average herd size is 90 cows, most of the producers attending the forum represented farms with 300 to 1200 cows. Some of the questions lingering in their minds were: How many niches does a dairy market have? And what will it take to develop those in-roads to cover more milk and spread those opportunities beyond the small farm-store label at the end of the drive?

While niche-marketing connects producers and their location and practices with consumers who develop that emotional tie, Roosevelt said the dairy commodity supply-chain has been developing its own sets of practices and programs.

Supply-chain realities

“Traceability is a huge part of our business, and it is as important on the feed side as the food side working with customers like Cargill and ADM,” he explained, noting the huge increase in paperwork following every product delivery. Not only are there certified analyses, date processed, how processed and lot numbers, but in the case of whey, the buyer wants to know what type of cheese process produced the whey because each one has its own profile. He gave the example of whey from Swiss cheese being whiter and higher in protein.

He noted they are getting questions about organic and non-GMO whey, which will produce even more paperwork, and that the traceability aspect is moving back the supply chain to the farm level.

Wegner also talked about traceability. While he didn’t mention it specifically, both Land O’Lakes and DFA are trialing block-chain technology to follow product digitally through the supply chain. Walmart is driving full traceability and moving toward block-chain technology.

“Walmart is one of our biggest customers for butter,” said Wegner. “Just think of the traceability challenges of mixed loads with hundreds of producers.”

The National Milk Producers Federation FARM program was described as a way of consolidating groups of producers into blocks that are being evaluated to use approved practices.

“Members want to know ‘what’s in it for me?’’ said Wegner, “but the reality is that the FARM program contains a lot of the things we have to do to be part of the market.”

Not only are domestic commodity dairy sales being driven by large fast food chains that want to be sure a farm-level animal welfare issue, for example, doesn’t damage their name, the export markets have this concern as well where brands are involved.

Wegner noted that Pizza Hut is launching a new restaurant every 18 hours, globally, and the Yum brand, which includes Pizza Hut and Taco Bell, are opening new restaurants every 8 hours across the globe. He said that 80% of the menu items at these restaurants include dairy. They secure cheese from the U.S. and are concerned about capacity and traceability over the next three years.

For example, Leprino has 80% of the market share for U.S.-produced mozzarella, said Wegner, and their growth is more concentrated in states like Michigan, Colorado, New Mexico and California.

Trickle-down effect

With the commodity production for export and large chain foodservice sectors growing — and served mainly by the Midwest and West — Roosevelt maintained that this export growth is still very important to the East because “the benefit trickles down from the West.”

He said that, “The value of growing exports, for you, is that you will have less competition coming from the Midwest and West.”

What can alter that picture — overnight — is the impact of trade tariffs and trade wars with the top three countries for off-shore dairy trade, in order: Mexico, Canada and China.

He said the tariffs have had an incredible effect on lactose trade. Those customers can go to Europe. “There’s plenty of lactose in Europe and they are quick to fill the gap with a lower price,” said Roosevelt.

Another big trade item is permeate, which is 70 to 80% lactose with some protein left in. There are fewer global competitors in this market, but when the tariffs hit, product was “in the water” and fourth quarter contracts were being negotiated, resulting in buyers and sellers splitting the extra costs and new contract offers coming in on lower bids.

The bottom line on these two commodities, according to Roosevelt, is less market for U.S. lactose and a lower price on U.S. permeate.

As for nonfat dry milk powder, it goes all over, but primarily to Mexico, Canada and China, in that order. The “new NAFTA” and the trade war with China, combined, can have an impact on all three export destinations for nonfat dry milk.

Mainly, Roosevelt’s point was that trade uncertainty can create changes “overnight” that affect dairy, and that tariffs are bad for agriculture, in general, because they “create inefficiencies that stop the normal market dynamics from taking effect.”

Like every other economist at every other meeting, Wegner talked about how Europe “really put on milk” when the quotas were removed. He admitted that he was among those who didn’t believe it would happen. But it did. And this extra milk, said Wegner, resulted in stockpiled powder that drove prices down globally.

With some intervention and drought conditions affecting Europe, the EU’s growth this year was only 1.4% instead of 2.5%. But a 1.4% growth in Europe represents far more milk than the same percentage of increase in the U.S.

Growth challenges

Wegner explained that the U.S. is growing milk production at roughly 1% per year now, but that equates to 2 billion additional pounds of milk annually. At the same time 600 million fewer pounds are going into bottles for Class I sales.

“That is what is challenging our system,” he said. “We are seeing the cows come out of the system, but better cows are going back in. For things to get better, a lot more cows need to come out.”

With Land O’Lakes having a national footprint, Wegner observed the challenges of more milk coming on in some of the largest herds in the nation. While California is not growing year-on-year, Texas and the Southwest states are growing rapidly.

He noted that even though Michigan’s growth slowed this year, “Michigan is the poster-child for the hazard of growing ahead of the market,” said Wegner. “They doubled their production from 5 billion pounds in 2000 to over 10 billion pounds by 2018, and this drove their price $2 below everyone else because their milk has to move around.”

Wegner touched on the recent Pennsylvania Dairy Study and its finding that a new cheese plant or other new processing capacity could reduce hauling costs for producers and add value to farm level milk pricing.

“New processing is easy to do, but what do you do with the additional product?” he suggested. “We take a market-back approach at Land O’Lakes because if we don’t sell it or eat it, the product gets stored.”

Wegner called cold storage cheese stocks “very high” and he said that butter stocks were “a little higher than they need to be.” (Note that the USDA cold storage report the following week showed a record-high draw-down in butter stocks that may have improved the butter storage situation.)

Wegner also said that Mexico’s retaliatory tariffs, if they remain in place until a new trade agreement is signed, are already stagnating U.S. cheese production into storage – cheese that had been going to Mexico. (Cheese exports were down 9% compared with a year ago in September.)

The bright spots, he said, are the dairy ingredient markets. “But the Class III market, right now, is a dog.”

The Class IV market is improving as Europe works through its mountain of powder, bit by bit. That powder is getting close to two years old, and Wegner observed that the U.S. is selling fresh powder at a price advantage to buyers who want fresh.

Looking at some of the specific market impacts of the trade tariffs, Wegner stressed the “woefully underestimated” tariff-mitigation payments by USDA to dairy farmers, and all three experts agreed that these tariffs, and more that will potentially kick-in January 1st, are having very negative impacts on the U.S. dairy supply chain.

When asked how these impacts could be blamed for the lack of a price recovery when U.S. dairy exports have been record-high for January through September (most recent figures), the response was that producers should not expect higher export levels to improve farm-level prices because these export markets are largely “market-clearing” commodity markets.

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PDMP executive director Alan Novak opens the discussion to questions from the 60 dairy producers and industry representatives gathering at the Bainbridge Fire Hall on November 14 for the Professional Dairy Managers of Pennsylvania’s (PDMP) Fall Issues Forum focused on dairy markets and trade.

Also driving milk production and processing west are the incentives western states provide for new plants, new dairy operations, and growth of existing businesses. For example, the I-29 corridor of the Dakotas is an area that has lots of capacity, is building more, and has dairies, like Riverview, adding cows in a big way.

Indiana and Michigan are other examples of states becoming big dairy suppliers via Select Milk Producers and Fair Oaks. Colorado’s growth is fueled by Leprino, and Texas has multiple growth influencers, including line extensions by Hilmar.

Taken together, the U.S. has grown milk production by 17 to 18 billion pounds of annual production over the past five years, according to Wegner. That’s like adding another Pennsylvania and Minnesota to the nation’s milk load. Wegner said that boils down to 50 million more pounds of milk per day moving in the U.S. compared with five years ago.

Wegner also talked briefly about Land O’Lakes’ base/excess plans. “This is our way of putting some discipline into the discussion, which goes to our market-back approach,” he said. “We moved a lot of milk from our milkshed this year, and that long milk has a cost. At the same time, he noted that Land O’Lakes has been stripping and dumping milk here, that its producers are assessed to pay for that.

“We worked with DFA (Dairy Farmers of America) and DMS (Dairy Marketing Services) on this step to do cream salvage,” he added.

Land O’Lakes’ view of investing in processing is that the products have to be able to move along the value chain in order to produce more of them.

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