Covering Ag since 1981. The faces, places, markets and issues of dairy and livestock production. Hard-hitting topics, market updates and inspirational stories from the notebook of a veteran ag journalist. Contributing reporter for Farmshine since 1987; Editor of former Livestock Reporter 1981-1998; Before that I milked cows. @Agmoos on Twitter, @AgmoosInsight on FB #MilkMarketMoos
“The next six months will be better than the last six months with a better milk price,” said Dr. Normand St-Pierre of Perdue Agribusiness speaking at a meeting of dairy farmers this week. Global milk production is down 1% year-to-date, global skim milk powder stocks are low, and the world in general is short on butterfat, he said.
In fact, milk and dairy products are experiencing spot shortages in U.S. retail and foodservice channels. Kraft-Heinz, for example, is reporting sustained demand for cream cheese with sales up 35%. Reduced butter production vs. year ago has met increased drawdowns to bring cold storage stocks well below year ago.
On the CME spot market on Dec. 14, butter was pegged at $2.06, with high sales on two loads at $2.10. Nonfat dry milk crossed the $1.60 mark and stood at $1.64/lb, pushing Class IV milk futures solidly into the $20’s with a 12-month average of $20.21 as of Mon., Dec. 13.
Class III milk futures moved well into the $19s across the 12-month board with December and January topping the $20 mark Monday (Dec 13) fueled by the strength of a rising block-Cheddar price, pegged at $1.94/lb Tuesday, Dec. 14 and steadily rising whey prices pegged at 71 cents/lb. The caveat is the 500-pound barrel cheese price is moving more slowly, pegged at $1.67/lb Tuesday — 27 cents behind the 40-lb block price.
St-Pierre sees the milk check butterfat price averaging $2.30 over the next six months, and he thinks it could actually go higher, while protein should average $2.80. Mid-December milk checks will price November butterfat at $2.15 and protein at $2.75. Nonfat solids are also higher, and other solids are almost double the historical average, driven by the robust whey sales.
A more conservative USDA World Supply and Demand Estimates (WASDE) report on Dec. 9 forecast higher prices for butter, cheese and whey with NFDM unchanged in 2022, but current trends suggest this report could revise upward in January, although much hinges on consumer responses to inflationary pressure in their buying habits. The report did nudge the 2021 All Milk price average to $18.60, buoyed by yearend strength. The WASDE report forecasts a 2022 All-Milk price of $20.75, which some analysts believe to be a low-end projection given current market indicators.
If current futures market levels are realized, these higher trending milk prices should help dairies keep pace with rising input costs. In addition, risk management tools and margin coverage options will help sync both sides of the milk price / feed cost equation in this inflationary environment.
Overall, domestic demand is strong but challenged by spot shortages and higher retail prices. As global prices are also rising, U.S. exports have continued strong even in light of overseas transportation disruptions.
Risk management will be important, despite uptrending dairy product and milk prices because costs for feed and other inputs are also rising, and the effect on demand down the road from inflationary pressures and global uncertainties is difficult to forecast. One caveat that is mentioned by market analysts is China’s large purchases of whole and skim milk powder on global markets over the past six months have accumulated a stockpile that could reduce China’s purchases in the coming year.
Still, the Global Dairy Trade (GDT) biweekly internet auction on Tues., Dec. 7 moved higher on all products with the GDT index up 1.4% from November 30 to its highest level since January 2014. The GDT butter price jumped 4.6% over the two week period to the highest levels since February, and most of that increase was in the nearest term delivery months. Skim milk powder (SMP) was up 1.3% to levels not seen in more than five years, with the strongest increase (+3%) seen on global SMP for delivery six months ahead in May 2022.
Dairy Margin Coverage Note: USDA announced last week that the Dairy Margin Coverage signups for 2022 enrollments began Dec. 13, 2021 through Feb. 18, 2022. Dairy producers wanting to update production history (up to 5 million annual pounds) by verifying 2019 milk marketings will receive supplemental coverage retroactive to January 2021 and ahead through 2023. This updated production history must be done first the local FSA office before enrolling 2022 DMC coverages. The new feed cost calculation using higher quality alfalfa prices is estimated to add 15 to 22 cents per hundredweight to previous DMC payments retroactive all the way back to Jan. 2020. FSA offices confirm receiving funds this week to finally do these retroactive feed-cost-adjusted DMC payments — automatically — very soon for all producers who were enrolled in the program for 2020 and/or 2021.
BROWNSTOWN, Pa. — What’s the real story with the availability of cream products and whole milk, especially in the population centers of the eastern U.S., and why the continued base penalties, base reductions, warnings of greater deductions on future milk checks — even for the base-obedient producers? Why the talk of overproduction of milk — especially in the Northeast and Mid-Atlantic region — when headlines are noticing a crimp in supplies?
A paradox, for sure.
One clue that makes this a true supply and demand situation — as opposed to purely a sign of supply chain disruptions — is the most recent USDA dairy products report showing 1.6% less butter was produced in October compared with a year ago, attributable to increased demand for cream and declining milk production.
The U.S. also exported more fat in the product mix than prior years.
In relation to this, October butter stocks, according to USDA NASS, are down 13% from September and 6% lower than a year ago after being double-digit percentage points higher than year earlier for the previous two to three years. The seasonal increase of 11.2% more butter produced in October than September was not as robust as previous years and it met an increased drawdown that has left cold storage stocks short heading into the holiday baking season in competition with cream product-making season.
While processor leaders from IDFA did a second Washington D.C. fly-in last week, talking with members of Congress about the trade disruptions, exports have continued strong and domestic shortages of milk and cream products are popping up all over the place – especially in the Northeast and Mid-Atlantic region.
It’s clear that trucking and worker shortages contribute, but it’s also clear the issues go beyond the frequently-cited packaging shortages, given the fact that bulk product is also becoming limited in foodservice channels.
So much so that the Dec.4 New York Times covered what has become a worsening cream cheese shortage in New York City. This pertains to the bulk cream cheese base that bagel shops purchase to tailor-make their own schmears. Consumers report retail packs of cream cheese in short supply at chain stores in New York while the bulk cream cheese base is tenuous for foodservice.
In both New York and Pennsylvania, shoppers confirm scarcity of cream cheese and other cream products while stores are placing limits on purchases. Reports from Boston indicate stores are “screaming” for half and half. Others observe that eggnog production is exacerbating already tight cream supplies, but acknowledge the issues are bigger than just the seasonal beverage production.
Fox News picked up the story Dec. 6 and 7. They interviewed NYC bagel shop owners to learn how they are navigating the problem. One owner talked about begging his vendors for product, then locating some cream cheese in North Jersey and driving 90 minutes in his own truck three times to transport a total of 2000 pounds of the schmear.
The Fox and Friends morning hosts checked with Kraft-Heinz, the parent company of Philadelphia Cream Cheese, conveying the company’s statement that they are seeing a 35% spike in demand for the product, which they then blamed on panicking restaurateurs stockpiling it.
“We continue to see elevated and sustained demand across a number of categories where we compete. As more people continue to eat breakfast at home and use cream cheese as an ingredient in easy desserts, we expect to see this trend continue,” Kraft-Heinz spokesperson Jenna Thornton told Fox News in a written statement.
Fox and Friends host Steve Doocy, who does a lot of cooking, chimed in that he can’t find cream products, and they all wondered out loud, what’s the deal with no whole milk in the stores?
Facebook responses to queries about what’s happening in different areas confirm many are having trouble finding half and half, heavy cream, cream cheese, even butter, and some reported spot depletion of whole milk or all milk.
A Pennsylvania store owner texted a note claiming he simply can’t get whole or 2% milk for his store.
A ‘Lunch Ladies’ group on facebook discussed numerous incidents of milk order shortings, delays and non-deliveries lasting more than a week, in some cases several weeks.
In both eastern and western Pennsylvania, shoppers are reporting purchase limits and limited or non-existent supplies of whole milk and cream products at major supermarket chains. (In my own shopping over the weekend, a Weis location just outside of Lancaster had a decent supply of milk, but only a few off-brand unsalted butter packages in the case. I was lucky to pick up the very last Land O’Lakes butter pack lingering way back in the corner. In the baking aisle, the canned evaporated milk shelf was bare.)
A reader from Virginia reached out to say her local Walmart was full with milk Saturday, but not a jug to be found Sunday.
An anecdotal report from a shopper in Florida, after stopping at two stores, found no half and half, no heavy cream, limited fluid milk, a buying limit on cream cheese – but “lots and lots of non-milk ‘milk.’”
Coffee houses are also randomly affected, with reports out of New York and New England. in the Twitterverse noting both real-milk and oat-milk shortages as people tell of stopping at multiple locations for morning lattes. Mothers were also tweeting frustration this week over limited supplies of infant formula in some areas.
Perhaps complicating the issue – waiting in the wings — is the foray of DNA-altered yeast-excrement protein analogs being tested in the supply chains of large global corporations – like Starbucks. A headline from three weeks ago read “Perfect Day’s Dairy-identical Alt Milk lands at Starbucks.”
Starbucks is among the multinationals testing Perfect Day’s DNA-altered yeast-excrement deemed as dairy analogs in select West Coast locations. The Perfect Day company claims to be “on a roll” with the brand valued at over $1.6 billion and recently raising $350 million in its admitted efforts to “remove cows from the dairy industry, without losing the dairy.”
One aspect of the Perfect Day ramp up is the company works B2B with processors, not making their own consumer-facing products. If other companies are experimenting with the goal stated by Perfect Day last year of 2 to 5% augmentation of dairy processing with the yeast-excrement protein analog by 2022, there’s a scenario in this to think about: These protein analogs may be deemed “identical” to whey and casein in processor application, but they do not bring along the healthy fats, minerals, vitamins and other components of real milk.
Could current chaos in cream markets and product availability be a glimpse of future disruptions by protein analogs as the B2B model seeks to dilute real dairy under the guise of cow climate action? That’s a story for another day, but it bears watching in the context of the current paradoxical supply and demand situation right now.
For its part, USDA Dairy Market News reported Dec. 1 that milk output was rising in the East, but demand was still beating it. Then the Dec. 8 report said Northeast milk production had flattened under the pressure of rising input costs and penalties on overbase production.
Specifically, USDA DMN cites steady to higher bottling demand and active cheese production schedules soaking up supplies.
“Cream demand is strong throughout the East,” the Dec. 1st report said. “Some market participants have noted that widespread logistical issues – including driver shortages and delivery delays – pose a greater hindrance to cream-based operations than the tighter cream availability, itself, at this point.”
By December 8th, USDA DMN reported that eastern handlers were working to secure milk spot loads from other areas as local supplies are tight, noting that eastern cream supplies are “tight to extremely tight,” and some dairy processors reported very limited spot load availability.
The report also sought to explain the cream cheese shortage in retail and foodservice channels, noting multiple factors, including “logistics bottlenecks, labor issues and supply shortages at manufacturing facilities.”
While the report indicated stepped up butter production this week, one Pennsylvania milk hauler observed two empty silos and no trucks to be seen at the Carlisle butter/powder plant at the start of this week, which is unusual.
Related to cream cheese production in Northern New York, producers there say they were told plant worker shortages this fall meant less processing of their milk. This resulted in multiple occasions of having to dump milk that could not be processed, but the incidents were deemed “overproduction” with producers footing the bill.
Meanwhile, USDA DMN indicated more outside milk coming East to meet processing needs.
At the same time, dairy producers from multiple cooperatives in the Northeast and Mid-Atlantic region confirm they are still incurring stiff penalties on over-base milk. While some of the penalty levels have softened a bit from earlier highs, most are still being held to their base levels, or in the case of DFA, the Northeast and Mid-Atlantic producers are still being penalized for milk that is above 88% of their base.
This means in the face of reduced supply vs. strong demand, DFA continues its 12% reduction in base allotments that became prevalent, especially in the Northeast and Mid-Atlantic region, at the start of the pandemic.
Furthermore, producers with other cooperatives report they have been warned to expect further deductions on their milk checks this winter – even if they did not exceed their bases — because there is still “too much milk,” they are told.
Attempts to gain further insights on the situation from major milk cooperatives and USDA went unanswered at this writing, so stay tuned for updates.
H. Louis “Lou” Moore of State College, Pennsylvania, died peacefully Nov. 9, 2021 at the age of 91. His official obituary is as humble as the man. A man who spent his life loving and supporting his family, his wife of 69 years, Jane, their five sons, four grandchildren and two great grandchildren, it read.
Lou was also a man who touched many lives in his long career. He spent 57 years as a Penn State extension ag economist and educator, retiring professor emeritus in 2011.
Beyond Pennsylvania, Lou touched the lives of countless freedom-loving agriculturalists as they emerged from the communist regime of the former Soviet Union.
He spent time year after year, over more than two decades, in Eastern Europe. There, he worked intensively to help the farmers and educators understand the fundamentals of marketing, of markets, of economics, of agriculture, food, supply and demand, profit and loss, trade and currency.
Through the faculty exchanges, he brought many here to learn too. Each visit, he would take them to New Holland Sales Stables to see beef cattle “price discovery” — auction-style. He’d bring them to the former Livestock Reporter office where I spent the first 17 years of my journalism career. He wanted us to explain how we put the market news package together each week. Every detail. I’ll never forget the questions about the USDA teletype where market reports came through day and night.
As we talked about the cattle markets, the teletype would start tapping and they were confused. Lou just smiled and conveyed to us that they just could not understand how we could receive and trust this government price information. That’s when we would explain that we also visited the four cattle auctions in our county at the time – the bellwether of the eastern seaboard. We would record the weights, grades and prices, talk to the buyers, read through the USDA reports from Joliet, Peoria, Omaha, Sioux City, Sioux Falls, St. Josephs and write a parallel analysis of the trade each week. We explained that USDA market reporters meet to do correlations annually and that they take their job of objective market reporting quite seriously. Those were the days of price discovery — available every day of the week.
Lou was someone I learned from as I heard him deliver market outlooks at numerous winter meetings every year from day-one of my career in January 1981 when my first newspaper assignment was covering the Lancaster County Cattle Feeders Day at the Farm and Home Center — all the way through 2015, when he came back for a post-retirement encore presentation at the annual Fulton Bank ag seminar. Lou was the man I looked forward to hearing from and talking with at these meetings during most of my 40 years in ag journalism.
He delivered hundreds of outlooks in the days before instant news and 24-hour news cycles, making his lists, producing the charts and graphs, and delivering the straight deal – the information farmers were looking for to plan the year ahead.
Even when high-powered economists flew in from NCBA’s Cattlefax or a Midwest university, it was Lou’s outlook the farmers came to hear. He gave it to them straight, always starting with the macro-economic figures, and narrowing into the ag commodities to the target of projected prices for the coming year.
Sprinkled into the deal were tidbits from articles he’d read and current events and pearls of wisdom a casual observer might miss. When giving an outlook in an election year, he made a note on the slide. “It’s the funny season,” he’d say — a polite way of indicating that election years were wild card years and wild things could happen.
When talking about commercial disappearance of meat and milk, he’d remind in an offhand way, that the figure is mostly driven by production because everything that gets produced, disappears. The question is where did it go and at what price? What were the sales?
He would sprinkle in stories from his trips overseas to former communist countries. So casual and interesting they were that we asked him to occasionally write about them in the Livestock Reporter. He’d write about the rich black soil of Ukraine, about the unrealized production powerhouse potential of that country and many other emerging former Soviet countries, about the people, the food, the hardships, the small steps in trying to establish themselves in a new age of freedom, without the context for it — something that we in America take for granted and may have lost the context for as well.
During an interview a few years after his retirement in 2013, Lou said the potential of these countries was still marred by the struggle of decades under communist rule. He told of how difficult it was to restructure a functioning economy out of the ruins of centralized communist control. He talked about the inefficiencies of the large centralized dairies, the depressing big gray block buildings that lay vacant or continued fragmented as the people began anew with a few cows here and a few there, harvesting grasses from the roadsides for feed and selling extra milk to neighbors.
He described an almost primitive, start-over-from scratch emergence with a very important missing ingredient – trust and communication. This was something that had to be re-discovered. After years of communist control, years of hearing the sound of the trains in the night taking food grown in these countries out of these countries and leaving families there hungry, they had to re-learn how to take what they grew and produced, value it, trade with each other, how to communicate value, to discern it, convey it, how to understand supply and demand, how to publish and communicate market value in common terms of understanding, how to trust each other party to party after decades of centralized control.
Lou would write of the foods enjoyed in these countries, the ways in which gratitude was shown. When meeting some of his exchange groups on their visits to the cattle auction or the Livestock Reporter newspaper office, their respect for Lou was obvious. Here was a man who they could see was giving them the straight deal. He didn’t pretend to know things he didn’t know. He gave them his knowledge and insight and urged them to think critically for themselves.
Lou was never earnest or self-impressed in his delivery of a market outlook. His infectious smile and good-natured character let you know that he’d done his homework and was sharing his best assessment of how the numbers lined up – always quick to point out a few possibilities on the margins that could push things one way or the other.
Lou was a man who didn’t seek the limelight, nor did he want a lot of attention on himself, but that didn’t mean he’d refrain from making a dry outlook entertaining.
One year at the Pork Congress, he showed up at the Lebanon Valley Expo Center wearing a pink pig-eared cap. We learned later it was auctioned for a tidy sum to benefit the youth events and scholarships by the Pork Producers Council.
Another year, he tried to describe for the farmers the persuasions of emerging vegan animal rights activists. It was the 1990s, and the concept was still a bit foreign to many. He started his outlook that year telling of his drive down 322 from State College seeing a car pulled over along the road with two people looking down at something laying on the ground. He pulled over thinking someone was hurt, only to find that they were proceeding to give CPR to try and resuscitate…. a ground hog. Well, in a room full of farmers, you know how that story played out. Even he had trouble staying straight-faced for that one. But the point was made.
Lou also made the rounds at the annual seminars put on by ag lenders, and was always a guest at Fulton Bank’s winter seminar.
In February 2012, a few months after retiring from Penn State, Lou was honored and roasted at the Fulton Bank seminar. It was a surprise. He was presented with a Senate Citation for honorable service, awards from the Governor and Lieutenant Governor.
The CEO of Seltzer’s Bologna presented him with a 27-lb “baloney” — tongue in cheek as Lou gave what he thought was his last market outlook right after the keynote speaker, a weatherman, talked about how the technology had improved for looking at big picture events, but the investments in day-to-day weather forecasting had been lacking.
A 27-lb baloney between an economist and a weather forecaster and you know the life of a forecaster means taking it on the chin sometimes. But Lou loved it. He was all smiles in the straw Amish hat with a Penn State logo across the center, another gift that day.
Lou Moore touched the lives of people in Pennsylvania and around the world – students, farmers, faculty. Many benefited from his deep knowledge, quiet insight, honesty, clarity, generosity and infectious smile.
Lou was born in 1930 in Ellerslie, Maryland. He earned his B.S. and M.S. in ag economics at Penn State in 1952 and 1956, where he served 57 years and retired professor emeritus of agricultural economics in 2011, but was spotted giving outlook presentations a few times after that, as recently as 2015.
In the 1970s, Lou started the first educational programs in agricultural futures markets so that farmers could understand them. In 1990, he began the intensive extension work throughout Eastern Europe in cooperation with the USDA and the Copernicus Society of America. His work included training hundreds in extension. In 1997, he started a 13-year USDA faculty exchange program that brought faculty from the former Soviet Union to the United States for intensive marketing training. He and his colleagues raised nearly $1 million to support this program.
Throughout his career, Lou wrote hundreds of articles and delivered hundreds of ag market outlooks. He worked closely with county extension educators, farmers and people from all aspects of agribusiness.
A life member of the Penn State Alumni Association, Lou also appeared regularly on WPSU-TV’s “Weather World” program and its predecessor, “Farm, Home and Garden.” He was honored with many awards, including the PennAg Industries Association Distinguished Service Award, the USDA Faculty Exchange Award, the Outstanding International Spirit of Extension Award, the W. LaMarr Kopp International Achievement Award, and the Bankers’ Association 56 Year Service Award.
Lou and Jane lived in a restored, 200-year-old log barn outside of State College. When I started the Milk Market Moos column in Farmshine in 2006 as an outgrowth of a series on milk marketing vocabulary, I received an email from Lou just to let me know he enjoyed reading the column, describing it as interesting, informative, and just the right assembly of valuable information. It meant a great deal to me coming from him.
I am thankful to have known Lou, to have read and heard some of his experiences. He led an exemplary life in the quiet service of others as an agriculture educator — teaching market fundamentals some of us didn’t fully realize we were learning, and he enjoyed learning from the farmers, respecting the many hats they wear as professionals producing food and often remarking that as he talked with farmers at these meetings, hearing about their plans, it in turn informed his analysis.
To honor Lou’s memory donations can be made to State College Area Meals on Wheels or the H. Louis Moore Program Endowment in the Department of Agricultural Economics, Sociology and Education at Penn State University.
50-year crisis cited, but no mention of 50-year low-fat regime’s role
By Sherry Bunting, Farmshine, November 5, 2021
WASHINGTON, D.C. – “Half of the U.S. population is pre-diabetic or has type II diabetes, and one out of almost every three dollars in the federal budget goes to healthcare, with 80% of that spending on treatment of preventable chronic diseases,” said Senator Cory Booker (D-N.J.), chairman of Senate Ag’s nutrition subcommittee as he and ranking member Mike Braun (R-Ind.) began the hearing on the state of nutrition in America Tuesday, Nov. 2.
Calling the situation a crisis, senators and witnesses cited statistics that have worsened over the past 50 years.
“Our healthcare costs today are 20% of GDP. In the 1960s, it was 7%. It has tripled in 50 years,” said Sen. Braun. In 1960, he said, 3% of the population was obese. Today it’s over 40%, with more than 70% of the population either obese or overweight.
“More shocking,” said Booker, “is that 25% of teenagers are pre-diabetic or have type II diabetes, and 70% are disqualified from military service” — with the number one medical reason being overweight or diabetic.
Witnesses and senators blamed the “epidemic” on a food system designed to solve 20th century problems of ending hunger by investing in cheap calories – especially carbohydrates. They indicated that 21st century goals should be focused on designing a food system that delivers nutrition and makes the nation healthier.
“We want to rethink the way we approach food and nutrition policy. Our lives literally depend on it,” said Sen. Booker, “This nutrition crisis we face is a threat — the greatest threat to the health and well-being of our country and a threat to our economic security and our national security.”
That’s why Senators Booker and Braun recently introduced bipartisan legislation to convene public and private stakeholders in what would be the second White House conference ever to be held on food and nutrition. The first was convened in the late 1960s, when then Senators George McGovern and Bob Dole formed a select nutrition committee in a time of food shortages and high prices.
That time-period was also when the precursor to the Dietary Guidelines was established, which by the 1980s had become the official and now notorious Dietary Guidelines cycle.
While Tuesday’s hearing continually hit this notion that 52 years later we have all of these devastating statistics, it was interesting that there was zero mention of the Dietary Guidelines. Those words were not uttered by any senator or any witness at any point in the over two-hour-long hearing.
Another item that did not pass through any lips Tuesday was the acknowledgment that 52 years of the low-fat dietary regime has prevailed and has progressively tightened its hold over school diets even as these statistics, especially on youth, have worsened into crisis-mode.
The closest anyone got to mentioning dietary fat was when Senator Roger Marshall (R-Kan.), a doctor by profession, asked witnesses if they thought the CDC missed an opportunity to do public service announcements about “nutrition and building up our own immune systems” during the COVID-19 pandemic.
He talked about volunteering in the ICU and ER of a south Kansas hospital in the spring of 2020 when COVID was sweeping the land.
“There were eight ICU beds and 11 patients, all in their 50s, and all had diabetes or pre-diabetes. Immediately, I called the CDC and said, ‘this virus is going to assault this country.’” He observed that our rates of morbidity and mortality are higher with this virus than some other countries because almost half of the population is diabetic or pre-diabetic.
Sen. Marshall voiced his frustration: “We’ve had a year and a half of this virus, and I thought this might be an awakening for this country, that if we had a better, healthier immune system, that’s how you fight viruses.”
One of the five witnesses — Dr. Dariush Mozaffarian of the Tufts University Friedman School of Food and Nutrition Policy – responded to say that alongside developing vaccines, treatments and guidelines for social distancing, “the huge additional foundational effort should have been to improve our overall metabolic health through better nutrition. So, every time we talk about vaccines, social distancing, mask wearing, why aren’t we talking about nutrition?”
“Everything we need to know about nutrition I learned from my mother and my grandmother,” said Sen. Marshall. “We need to be using our medical assets for nutrition education. Doctors need to understand that Vitamins D, A, E and K are fat-soluble vitamins, so we need to be drinking our whole milk and looking at these general concepts.”
This was the hearing’s only – and subtle — reference to dietary fat. It was the only, but quiet, nod to any suggestion of the impact of federal government restrictions on the diets of children during school hours while their rates of obesity and type II diabetes continue to rise to epidemic proportions. Not one witness or senator delved into this topic in any substantial way.
Throughout the hearing, that seemed to focus on a new paradigm in food and nutrition, there were also strong references to a key part of the problem — the food industry is controlled by a handful of large multinational corporations providing nutrient-poor, addictive and ultra-processed foods.
“Farmers answered the call of a growing population and issues with malnutrition 50 years ago. Through innovation, agriculture makes more from less and works to protect our soils along the way. We’ve made progress but are still geared to address caloric intake, not the content of the calories,” said Sen. Braun.
He focused his comments on the healthcare industry being the place to make new investments in nutrition as a preventive solution and indicated SNAP purchase restrictions are in order.
Dr. Angela Rachidi, doing poverty studies at the American Enterprise Institute said putting SNAP program restrictions on sugary beverages and incentives for purchasing fruits and vegetables would be positive steps to show SNAP is serious about nutrition. She referenced studies showing that three of the five largest purchase categories with SNAP dollars are sweetened beverages, frozen prepared meals, and dessert items.
Mozaffarian was the first of the five witnesses. He did not mention his Tufts University “Food Compass” project by name, which was published three weeks ago, nor did he mention the $10 million grant received three weeks ago from USDA to develop a “cultivated meat industry,” including assessment of consumer attitudes and development of K-12 education on cell-cultured meat.
“We are on a path to disaster,” he said, calling type II diabetes America’s “canary in the coal mine,” on which the U.S. spends $160 billion annually.
Describing current food and nutrition policy as “fragmented and inefficient,” Mozaffarian said: “Nutrition has no home, no body for focus or leadership across the federal government.”
Mozaffarian’s six recommended government actions paint a picture of a centralized national structure and authority for food and nutrition policy with emphasis on integration of research, the healthcare system, programs like school lunch, and ramping up new innovation startups entering the food system.
He stressed his belief that a “real national strategy” is needed, one that “reimagines the future food system.” He said the science and tools are already available to do this, to integrate into existing programs and make changes – fast.
Perhaps the “tools” Mozaffarian was referring to are within the new Tufts Food Compass he helped create, which ranked “almondmilk” and “soymilk” ahead of skim milk and far ahead of whole milk. It also puts chocolate milk and some types of cheeses near the bottom of the ‘minimize’ category, along with unprocessed beef.
In fact, the only high-scoring dairy product found in the ‘encouraged’ category was whole Greek yogurt. Cheerios and sweet potato chips ranked higher than dairy products, including the whole Greek yogurt.
Also testifying was Dr. Patrick Stover of Texas A&M’s Agri-Life Center. He noted the public’s “lack of trust” in nutrition science.
He stressed that the nation’s land grant universities are “a network of extraordinary resources, a national treasure” that benefits from having public trust but lost federal investment levels over the years.
Stover said Texas A&M is now launching an institute for advancing health through agriculture as well as an agriculture, nutrition and food science center for non-biased research on the human, environmental and economic success of proposed changes.
He supports a “systemic approach to connect people to food and health,” an approach that involves everyone from farm to consumer. He said Agri-Life is positioned to lead such an effort through the land grant university system.
Stover noted scientists involved in the precision nutrition initiative at the National Institutes of Health are starting to understand how individuals interact with food in relation to these chronic diseases.
“One size does not fit all,” he said.
Witnesses Dr. Angela Odoms-Young, director of Food and Nutrition Education in Communities at Cornell, as well as Dr. Donald Warne, director of public health programs at the University of North Dakota School of Medicine, both talked about the cultural aspects of food. They referenced differing experiences of populations separated from lands and cultures where food was accessible and how certain demographic populations are being targeted by fast-food advertising that is leading to higher rates of chronic diet-related diseases among native Americans and people of color.
Poverty and reliance on cheap highly processed foods was part of that discussion.
“Poor diets and overconsumption of calories are a major crisis,” Dr. Rachidi stressed as a former deputy commissioner of New York City social services overseeing the SNAP program. “Nutrition assistance programs have mixed success” providing food security but also contributing to the problem of poor nutrition.
She said current nutrition policies lack a cohesive strategy. On the one hand harsh restrictions in some programs and no restrictions in others.
“We have to acknowledge the reality, the billions we spend to improve food security are used in a way that is a major contributor to poor health,” said Rachidi.
At the conclusion, chairman Booker stressed his belief that there is a misalignment of government.
“The farmer’s share of the consumer dollar from beef to broccoli has gone down 50% in a food system where everyone is losing,” said Booker. “We are losing the health of our country, seeing the challenges with farmers and the disappearance of family farms, the issues of food workers, what’s happening with animals and the environment. Let’s not be fooled. This is not a free market right now.”
He noted that farmers are “stuck in mono-cropping” without incentives to move to more regenerative agriculture. “We love farmers. They aren’t the problem. We have to figure out a way to align incentives with policy decisions because it is out of whack.”
Asked by Booker to give a ‘business perspective,’ ranking member Braun concluded that the best place to implement a solution is to do it where the most money is being spent on the problem and that is the healthcare system. Food is a bargain, which addresses hunger, “but we need to reconstitute the quality of the calories,” he said, putting the emphasis on the nutrient density of foods.
MADISON, Wis. – “It is impossible to overstate the impact Dieter Krieg and Farmshine have had on the dairy industry in 42 years visiting dairy farms and dairy events across the United States. His interviews with top dairymen and dairy leaders have implanted ideas of change to almost all his readers at one time or another over the years,” writes Carl Brown of F.M. Brown Sons, who nominated Dieter for the National Dairy Shrine Hall of Fame Pioneer Leader award.
“Dieter has been a trailblazer in dairy journalism and occupies a special place in supporting and educating dairy producers and youth. I personally realized the impact that Farmshine was having during one of our Dairy Science Club spring trips,” writes Dale Oliver, Penn State Dairy and Animal Science assistant teaching professor in a letter of recommendation.
“Our group traveled to Arizona to visit some of the leading dairies in that state. One producer wanted to know (the students’) opinions about a recent article published in Farmshine. It was at that point that our students gained a perspective that this publication was not just reaching dairy producers in Pennsylvania but had begun to develop a much broader following,” Oliver said.
Yes, Dieter is known for thought-provoking editorials. A free press is not something he takes for granted, having left Communist East Germany with his family at the age of 10 for freedom in the United States.
Oliver notes that, “Dieter is a humble, caring man who does not seek attention, although he readily provides publicity to others.”
Surprise! There are more pictures and publicity on these two pages than Dieter may be comfortable with, but each one illustrates a connection that can be multiplied many times over — stretching far beyond the few examples here from the NDS awards dinner. In fact, if you ask him what he has enjoyed most as a publisher, Dieter will tell you it’s the people.
Ever since the June NDS announcement of the 2021 Pioneer recognition, we have been hearing from some of those people — readers, producers, advertisers, colleagues, and former interns who credit Dieter as a mentor, “taking a chance” on them, “giving them a start” that blossomed into careers today that continue that network, touching the lives of others in the dairy industry.
The response has been so overwhelming, we can only capture the essence of so many responses.
From the paper paste-up and wax-board days to the digital era, Dieter continues Farmshine’s mission of rising each week to cover farming and agribusiness as the first and likely only weekly dairy-focused newspaper with over 13,000 subscribers nationwide.
In his letter of recommendation, former Pennsylvania Holstein Association executive director Ken Raney explains that, “Dieter has ‘done it all’ for Farmshine, he is the editor, feature writer, advertising manager, layout, etc., as the paper has grown. His personal approach to stories has created friendships all over the world. Farmshine not only has current dairy information but features successful dairymen of all types, so readers can garner new ideas.”
Ken also describes Dieter as we know him, “an unassuming enthusiast who welcomes ideas, looks for innovative ways to share the dairy industry story and has been a leader in print media, before many publications of this type were available.”
Writes Stephanie Meyers of Merck, “I was Dieter’s first Farmshine intern in 1989. I stopped by the NDS reception to congratulate him and thank him for giving me my start in dairy journalism, communications and marketing. I’m so thankful he hired me and for teaching me the ropes of dairy journalism and encouraging me to pursue my dreams of a career in dairy communications and marketing. It’s a joy to see him recognized for his many contributions to the dairy industry and for his commitment to telling the stories of dairy farmers.”
Josh Hushon of Cargill writes of what it meant to also be an intern with the paper. “This award is so well deserved. Dieter took a chance on me as a summer intern before anyone else was willing. I was 19 at the time, didn’t really know what I was going to do in life, and had a minuscule portfolio of writing. Despite what I didn’t have, Dieter saw what I did have, which was a passion for the dairy industry and work ethic developed on our farm. He opened the first door for me and I am eternally grateful for that.”
Giving back what he learned, Josh seeks to mentor others and wrote a blog a couple years ago after looking back on his own career path and pointing out moments when the right mentor came along with the right opportunity at the right time.
“One of those mentors is Dieter Krieg, who I recently reconnected with through the Holstein Foundation. He was a huge mentor early in my career as I was learning how to be a storyteller and communicator,” writes Josh.
Andrea Haines echoes these sentiments. Today she operates her own business, ALH Word and Image, and she also looks back on her pivotal internship with Dieter at Farmshine.
“I am forever thankful for Dieter and the opportunity he and his family provided me early on in my career. Finding an ‘internship’ within Farmshine for two summers really taught me how to write, edit, piece together a newspaper (wax-adhered layouts), and most importantly, how to network with people of the dairy industry. I will never forget the many rides in Rudolph (the famed 730,000-plus mile Oldsmobile) and long nights putting together the newspaper,” Andrea recalls.
Karen Wheatley, another intern with a career in the dairy industry notes “Dieter was my mentor too, and the man who got me interested in ‘really’ writing!”
Former Lancaster Farming editor Andy Andrews notes that, “Dieter has been the voice of dairy agribusiness for four decades! He is the publisher and editor the industry has come to rely on; great reporting and fearless with his observations. Dairy farmers have been blessed with his hard work and ‘udder’ devotion.”
Dairy producers also express their appreciation, and friends recount stories. Dave Bitler of Berks County, Pa., notes that he has always been very proud to call Dieter a friend. Recalling the summer of 1973, Dave writes: “We milked together at Dr. Carl Troop’s south of Quarryville. I always enjoyed Dieter’s company and his sharing about his family’s history in Germany and their coming to the United States. Looking back on my life back then as a new high school graduate, I was probably annoying, but Dieter was always kind.”
John and Linda Kisner of northern Pennsylvania write their thoughts as Farmshine readers. Linda recalls Dieter driving through a local town and stopping for gas, seeing the paper that had pictures of their triplet calves on the cover. “He looked us up, came out and took pictures (in Rudolph). Dad loved it.”
“Sometimes it just takes someone in a position to shine a light on certain issues,” adds John. “I think being independent with his own publication has allowed him the opportunity to do that a few times over the years. Where would we be without that sort of initiative?”
Another Pennsylvania farmer, Jeremy Meck, recalls being in 4-H with Dieter as one of the CowsRus 4-H leaders. “I remember learning that he had a small barn and milked a few cows. Even though he was the editor of a great farming newspaper, he still woke up every morning to milk cows before work,” writes Jeremy. “He is a role model for the industry.”
So many more thoughts have been written, but this one brings us back full circle. You see, Dieter wanted to be a dairy farmer, to follow in his father’s footsteps. As his father and brother moved the dairy from Pennsylvania to Florida and grew it to over 500 cows in the 1970s, Dieter wanted to find a farmer to work for in Pennsylvania and maybe find a transition situation where he could work toward having a smaller farm of his own. He confesses that was the reason he took that first newspaper job as editor of the farm page in the Pennsylvania Mirror.
What better way to meet farmers and build connections?
In his last semester at Penn State in Dairy and Animal Science, Dieter had taken a creative writing course because he did enjoy writing letters to family still in Germany, and he enjoyed writing about life on the farm (which later became a popular Farmshine column).
Right off the bat, he innovated that farm page in the Pennsylvania Mirror using a photo of a barn and placing various ag news stories on the side of that barn.
“I was told it wasn’t normal newspaper style, but my goal was that people would not overlook the farm page,” Dieter recalls. To this day, Dieter loves creating page layouts and using big pictures.
It was a hit, and he was a natural, and he found that he loved the job. So the job that was taken originally to meet and connect with more farmers to potentially work into a farm management position turned out to be the calling he was born to follow, which led him to blaze a trail for a weekly all-dairy newspaper in 1979 — no small feat.
After 42 years, what has he loved most? You guessed it: the people. While there is satisfaction in writing the stories and putting the finished product together, for Dieter, it’s really all about the people.
Like agriculture, the newspaper business has its ups and downs, and getting started meant many years of long hours putting the paper together and much travel gathering news and stories. When he looks back, even those early 100-hour weeks, though trying, were enjoyable. Sitting at a banquet, for instance, isn’t really work when you enjoy it, he says.
The mission of Farmshine, he says, always was and still is to get the word out, to tell the story, to cover the issues.
When he looks back at how it all came together, Dieter told the NDS awards dinner crowd, it is obvious God’s hand was working through it because all the pieces came together even before he realized Farmshine would be born. He expressed sincere gratitude for all who had a hand in it, including those who saw something in him to encourage along the way.
In her letter, Mary Shenk Creek of Palmyra Farms notes that, “Dieter and his staff address all aspects of the dairy industry from commercially producing milk to the purebred sector and including alternative niche market opportunities. They do a wonderful job of highlighting individuals and unique accomplishments to shine a light on the personal side of our industry. Dieter is not afraid to tackle controversial issues and takes great effort to show an unbiased report while allowing editorials that stimulate thought.”
She sums up what so many feel, including me, having worked with Dieter on staff and in the later years as a freelance Farmshine contributor…
Mary says it so well: “The things I admire most about Dieter are his energy, enthusiasm and dedication. He is relentless in his commitment to serving agriculture and the dairy industry.”
Thank you Dieter for being a dairy journalism trailblazer, for starting Farmshine, the unique weekly all dairy newspaper 42 years ago, for shining a light, telling the stories, building connections, and touching the lives of others through the news, and so much more.
MADISON, Wis. — A picture of the future of dairy was painted with a boastful sort of “insider” arrogance by dairy checkoff leaders on the second day of the World Dairy Expo during DMI’s ‘tanbark talk’ on transformation. It left me both shocked and uninspired, exasperated.
The very next day, a message of light and inspiration was presented in a meeting hosted by American Dairy Coalition (ADC), talking about inspiring loyal consumers as part of a discussion on the viability of America’s dairy farms in the face of rapidly launching confusion via plant-based and lab-grown lookalikes.
Without necessarily challenging DMI’s assumptions about Generation Z and the “future” of dairy, ADC’s guest speaker, a consumer-packaged-goods expert, painted a different picture. From the marketing surveys shared, it appears that future consumers, those under 23 years old today, are much more apt to be brand loyal than their Millennial parents.
The question is: Who is inspiring loyalty to milk, whole milk, real milk, real dairy, real beef, real animal protein? Not DMI.
DMI wants to take your checkoff dollars down into the darkness of the gaming world. Their guest speaker and futurist collaborator talked about the Gen Z gamers, the immersive learning, the tik tok generation.
One comment made me cringe. “It’s something parents and grandparents don’t like, but it is good for dairy,” said futurist Bob Johansen about the dark world of gaming that has, in his opinion, claimed the perspectives and choices of the next generation.
Repeating the platitude of “meeting consumers where they are”, the DMI presentation left this reporter in a bit of a shock. Do we really know where consumers are? Who is telling us these things and what is it really based on? So much more enlightening was the next day’s presentation about “inspiring loyalty” by reminding consumers about “what they love.”
I believe most dairy farmers want to inspire consumers to what’s real in life instead of being sucked into the unreal and confusing world of gaming.
Where are my thoughts going and what did you miss in the DMI panel at Expo? Not much, really. I heard the DMI dairy transformation strategist suggest that she “likes saying milk has 13 essential nutrients,” but that she thinks it will be so much “cooler to identify, annotate and digitize the 2500 to 3000 metabolites in milk and then be able to pair them to products and brands in the personalized app-driven diets of the future.”
That’s right folks, DMI paints a picture of future diets digitized by apps and algorithms to match up to the individual metabolic needs and desires of consumers. In other words, they won’t really know WHAT they are consuming, just a mix-and-match of elements as presented by global processing corporations that are “all-in” for this future of food confusion.
DMI is in the self-fulfilling prophecy business. They aren’t meeting consumers where they are. They aren’t inspiring consumers to be better, eat better, and enjoy dairy. They are touting USDA dietary policy to the point that even their fellow GENYOUth board members and collaborators are, in some cases, promoting the competition.
Case in point this week, chef Carla Hall, a longtime board member of GENYOUth, who DMI leaders have touted over the past 10 years, is right now running Youtube videos teaching consumers “how to go plant-based without going vegan.”
And guess what? Hall is targeting milk for the ousting. She promotes almond, oat, cashew etc ‘milks’ and guides consumers on how to replace real milk with these fakes in their diets, their recipes, their lives.
When a Facebook post about Hall’s milk-replacing Youtube videos was posted by a New York dairy producer asking “why is this person on the GENYOUth board?” another dairy producer responded wondering if she really was on the dairy-farmer-founded and primarily funded GENYOUth board.
Yours truly, here, replied on Facebook with a simple “yes she is” accompanied by a link to the listing of GENYOUth board members and a screenshot of the page showing Carla Hall among the GENYOUth board member list. Within a couple hours of my comment on that post, I got a notice from Facebook telling me I had “violated Facebook’s community standards.” They called my comment “fraudulent spam” and deleted it!
Yes, my reply was deleted, and I was warned that if I continued my violation of Facebook’s community standards, action would be taken against me.
Wow, I thought, that’s out of left field, isn’t it? I simply showed the truth with a link and a picture that the plant-based beverage promoter is, in fact, on the GENYOUth board.
Yes folks, DMI wants you to believe that your future viability as dairy farmers relies on playing nice with the plant-based and lab-grown lookalikes – blending in with them – and losing your identity. After all, they say, just be glad your milk has 2500 metabolites that can be digitized and annotated!
They want you to believe that the gaming industry is “good” for dairy while acknowledging that it’s not so good for kids. They want you to partner in that world of unreality and confusion instead of being an inspiration of clarity and a champion for what’s real.
My question is: Do we want to be a beacon of light and inspire Gen Z? Or do we want to stoop to the level of this dark space to “fit in” or “be cool”.
In that space, are those teens and young adults even listening to our story? Or are we being drowned out by the bells and whistles of gaming as it sucks them in and drags them down. The entire gaming world is full of ambiguity and confusion, but this is what DMI and its futurist say the world is going to be, that it is a VUCA world, and we must accept it.
VUCA stands for volatility, uncertainty, complexity and ambiguity. It’s a sort of catchall phrase for what we all know. Yes, the world is crazy out there!
In that talk, DMI leaders said they hired futurist Bob Johansen to help them look at four models for the future of dairy from a range of possible scenarios. They chose the transformation model, and that is how they are transforming checkoff dollars.
“Accept it,” they say, Mr. and Mrs. Dairy Farmer, you must accept that ambiguous messaging is the name of the game for the future of dairy, one that assigns the attributes you are selling in a mix-and-match environment.
Farmers have been dealing with VUCA forever. We’ve long understood that markets are volatile, the future is uncertain, the industry is complicated, and yes, the world and its direction are certainly ambiguous.
However, must dairy farmers accept and enbrace this ambiguity in the messages they send to consumers about the milk they produce?
Should they be pursuing the digitization of 2500 milk metabolites as the way to pair dairy with certain brands and products to fit personalized diets and ignore the backdrop of confusion about what real milk and dairy are?
The first rule of marketing 101 is that ambiguous messages don’t work. They leave the impression that there’s nothing special about one choice over another.
They call it innovation, but it is really subjugation – the act of bringing farmers and consumers under domination and control.
They are asking dairy farmers to give away our precious wholesome true message about milk – especially whole milk — so that processors can mix and match protein sources as they see fit.
Of course, they tell us this is for sustainability’s sake and for saving the planet by keeping diets within planetary boundaries, but we all know the score: It’s about corporate profits and control of food… and land.
We knew that already, didn’t we? The dairy transformation strategy is to be the protein that processors choose to include by being the low-cost producer.
DMI isn’t interested in promoting whole milk or the nutritional value of whole milk as a superior choice. This is obvious no matter how ardently the outgoing DMI CEO Tom Gallagher repeats the mantra that DMI championed the return to full-fat dairy and whole milk.
He said this again during the World Dairy Expo discussion when New York producer Jay Hoyt stood up to say none of this “bright” transformation future is going to matter if we can’t promote and provide cold whole milk to kids. Gallagher’s response was that no one would be talking about whole milk if DMI had not been the leader on the full-fat dairy research and whole milk message. (What did I miss?)
The transformation strategy of DMI is to be a versatile, low-cost commodity that can be separated to blend and fit and filter its way into dozens of new products, that it has 2500 metabolites that can be digitized and annotated and then selected for personalized diets offered on iphone apps, that it ‘meets Gen Z where they are’ in the immersive learning world of gaming.
This is a game for sure. But who wins? Certainly not dairy farmers or consumers.
The transformation strategy has no place for promotion of 100% real whole milk and dairy, nor a clear message about what milk is, what it does for you. No place to remind consumers about why they love milk because they’ve helped over the past decade parrot USDA’s propaganda so that Gen Z doesn’t even know they love milk because they weren’t given whole milk – until grassroots promotion efforts started turning those tables.
If we all stand by and twiddle our thumbs — letting the global corporations make the decisions, control the narrative, bow to activist triggers, and define ‘where our consumers are’– by the time DMI and friends are done with dairy, it will be unrecognizable, without a clear message about the real milk diligently produced on our dairy farms.
MADISON, Wis. – A new and different – essentially vigorous — paradigm in milk marketing and promotion was the focus of an American Dairy Coalition discussion in Madison on Sept. 30th during the 54th World Dairy Expo in Madison, Wisconsin.
Bill Gutrich, senior director of food industry engagement-USA with Elanco Animal Health shared his insights and experience having spent his career in the consumer-packaged goods sector for global brands like Coca Cola, McDonalds and Samsung before coming into animal agriculture three years ago.
“We have a great product and producers do a great job, but we need to increase domestic dairy consumption, specifically,” said Gutrich to an in-person audience of over 50 people (flowing in and out of the Monona Room of the WDE Exhibition Hall). Another 30 people attending virtually online.
The ADC event attracted dairy producer thought leaders from east to west and generated follow up discussion and good questions. ADC CEO Laurie Fischer said the discussion is a starting point and hopes to see allied industries that are committed to animal agriculture join in on the bandwagon to shift the milk message, the animal protein message, in the face of the accelerated barrage of new plant-based and lab-grown lookalikes.
“We need a group such as yourselves to help us move forward,” said Fischer. “We are in this together.”
One statistic Gutrich shared that was quite revealing is that 51% of total sales in the milk section are fluid milk, but only 33% of the retail milk space is devoted to milk. On the other hand, he said, 9% of total sales in the milk section are plant-based non-dairy alternatives, but almost twice the space — 17% of the milk space is devoted to non-dairy alternatives because there are so many varieties.
With so many different brands and variations of non-dairy alternative products coming onto the market and ramping up rapidly, this supply chain effort is essentially crowding out real milk in a manner that is not consistent with true consumer demand.
Likewise, the anti-animal activists are small in number but loud in advocacy. In effect, the gap between perception and reality on messaging as well as shelf-space vs. sales is that smaller sales, smaller numbers flood milk’s space and take positive attention away from milk, but this is not necessarily by consumer choice.
If Gutrich had a magic wand, he’d likely look to make milk competitive in the total beverage market, to reframe the competition and look at milk’s share of all drinks instead of share of the milk aisle. For example, consumers love cold whole milk, so if the message puts that first, then already it is connecting with the most loyal sets of consumers and connecting to their ‘why’ to build growth from that solid point.
When innovation focuses mostly on sustainability, then fewer resources are devoted to getting the message right in connecting with what consumers want.
Gutrich’s insights and discussion are consistent with his role with Elanco engaging the food industry and connecting the food chain. He talks to companies and purveyors, and from those conversations, it’s clear, he said, the people attacking animal agriculture are from the outside, pushing in. They don’t want animal ag to exist, but these are not the people we need to connect with to build loyalty to animal protein.
As the son of a police officer, Gutrich said his personal mission is to elevate the level of respect people have for farmers, much like the efforts elevating respect for our country’s veterans and law enforcement.
He said it comes down to “inspiring consumer loyalty to animal protein.”
Having worked around talented marketers outside of animal agriculture, Gutrich said he has come into the animal protein sector seeing “how we market our beautiful, incredible products to consumers.
“Every dollar starts in the hand of a consumer over the counter,” he said, describing how good marketing starts with the ‘why’, not the ‘what’ and the ‘how.’
“What are the emotional needs you need to connect with?” he wondered aloud. “They will buy the why.”
Using a borrowed analogy of the Craftsman drill, he said the ‘what’ is the buyer wants a hole. The ‘how’ is the drill. But the ‘why’ is they want to do it themselves.
The ‘why’ is what wins customer loyalty and offers the potential for a premium, Gutrich explained, noting that the key is to identify the ‘why’ and attribute it, and then “own it. That’s what great brands do.”
For Starbucks, the ‘why’ is the whole coffee-drinking experience. For Mountain Dew it is the ‘energy.’
In the dairy sector, Gutrich gave the example of Sargento Cheese, where the ‘why’ is ‘The Real Cheese People.’
“What did Kraft do?” he asked. “They labeled their cheese ‘made without hormones.’ What does that have to do with my ‘why’?”
These types of labels introduce something scary to consumers, and it has been proven in surveys and market research that these claims have little to do with their ‘why.’
“What this actually does is undermine their trust in the brand and the category,” said Gutrich, “and in the long run it’s bad for both. People want to think about serving a rich protein food, and we’re talking to them about hormones.”
Good marketing talks about consumers. Bad marketing talks about products and processes, according to Gutrich.
“Loyalty is a feeling,” he said, explaining a successful strategy communicates with consumers about the why, not so much about the process, the sustainability. Yes, sustainability and processes need to be handled, but that’s not connecting with consumers on an emotional level about their ‘why.’
“Own your consumer’s ‘why’, don’t let your critics determine your ‘why,’” he said. “All great brands have critics, but they handle the criticism separately, and keep marketing to why people love them.”
Gutrich gave some vivid emotional-connection examples: “Don’t you love how butter melts on your raisin toast or your cold milk on your cereal?”
In another non-ag example, he showed how Michelin tires own the safety-why, Goodyear owns performance. They keep their whole message consistently on their consumers’ ‘why.’
“Protein is hot,” said Gutrich. “Why aren’t we owning protein?”
The peanut butter brands own protein, and people believe peanut butter to be higher in protein than it is.
“We own protein,” said Gutrich about animal agriculture. “But instead of owning it, we create confusing talking points about the ‘whats’ and the ‘hows’ instead of owning the ‘whys.’”
Gutrich noted that supermarket scanner data show how consumers vote with their dollars, but when producers are told that they must ‘own’ sustainability because 85% of consumers want to see it and want to prioritize climate impact in their food choices, the question becomes, how were those questions asked?
When consumers are questioned with an ‘aided awareness’ style of questioning, of course they will say yes. But that percentage drops to 9% when the question does not include ‘aided awareness.’
Among consumers under 23, the Generation Z, Gutrich shared surveys showing this generation to have a higher overall level of brand loyalty (68%) compared with millennials (40%).
“There’s hope,” said Gutrich.
On fluid milk sales, specifically, he observed the well-known saga of sales decline over time, and the steep decline since 2000, but he has a different perspective on it.
“The dairy industry did this to themselves with over 10 years of ‘buy my milk with no hormones,’” he said. “Instead of focusing on your consumer’s ‘why’, the industry opened this chasm of 13% for milk alternatives to climb in.”
He analyzed domestic consumption figures from 1950 to the present, noting that domestic consumption is the issue, and it’s where the focus most likely should be. When domestic consumption growth is put beside U.S. population growth, the sales growth ultimately shows that dairy has “lost its share of stomach.” This is looking at domestic data only, excluding export sales.
“Ultimately, this means we have work to do,” said Gutrich. “How do we get back to the 1950s?”
Well, there’s no time-machine; however, he had a positive message about this, stressing that the non-dairy alternatives “are not going to take us down. Milk is in almost 95% of households. Let’s worry about our own sales growth and not worry about the alternatives.”
Breaking out the percentages, Gutrich showed that 94% of households include milk, 42% have both milk and alternatives, 3% are exclusively plant-based, and 52% are exclusively milk.
A successful brand would look at that breakdown and say: “We want to grow our loyal customers and go after the people that are closer to the ones that love milk. We want to remind them why they love milk so much.”
But instead, there are all of these triggers in the way and all of these other conversations that move the message away from the consumer’s ‘why,’ – away from the ‘why’ of the loyal or closest to loyal consumers fluid milk can build from.
“If we can continue to do better on these triggers like animal welfare, environment, carbon footprint, that’s fine, but we make it worse by talking a lot about it,” he said. “Get the marketing right. It’s about balance. The packaging dynamics are also amazingly important.”
HARRISBURG, Pa. – ‘Turning the page’ was the theme for the annual Financial and Risk Management Conference where key takeaways about a changing dairy industry were presented.
The conference was hosted by the Center for Dairy Excellence Sept. 21 in Harrisburg.
Pennsylvania Secretary of Agriculture Russell Redding summarized his own thoughts: “I am still very positive about dairy, but dairy will change. It is changing,” he said.
The Center’s risk management educator Zach Myers set the stage for attending lenders, vendors, producers and industry talking about Dairy Margin Coverage and Dairy Revenue Protection and how these programs have worked (more on that in a separate article.)
Digging into the stress — the ‘change’ — was Marin Bozic, University of Minnesota associate professor of applied economics and dairy foods marketing, who also serves as facilitator for the Midwest Dairy Growth Alliance. He dug right into how and why, discussing some of the Federal Milk Marketing Order complexities, industry trends and pricing relationships. He made the case that more flexibility, competition and innovation are needed in the Federal Orders for a “level playing field” so winners and losers can “self-select.”
Bringing up the 89 organic producers Danone will drop from Horizon next year, Bozic said it is an example that, “One new farm in Indiana replaced 89 or 90 farms in the Northeast, and they can do that. There is nothing illegal about it. They could say they have a fiduciary responsibility to stakeholders and are minding their bottom line, but none of that helps you if 90 producers get dumped in a year.”
He pointed out the “social mission” of the cooperatives is to leave no member behind, so remaining an independent producer carries more risk today than in the past.
Bozic connected the dots to say the “primary function of the future for Federal Milk Marketing Orders — as an extension of the milk cooperatives — is to ensure market access for dairy producers.
“Market orders are there to ensure orderly consolidation at a humane pace,” he declared.
That’s a change from the central promise of the FMMOs today, which Bozic described earlier as “broken.”
“To navigate our businesses over the next year and longer,” said Bozic, “we have to count the passes and see the gorilla” — a nod to the visual exercise he had the audience participate in.
Bozic mentioned a few gorillas in milk. Gorillas in the FMMOs, in risk management, in dairy markets and in the macroeconomic situation – what else is going on in the world.
He showed graphs of what Producer Price Differentials (PPDs) looked like for the Northeast in 2020, the $4 and $5 negatives that represented cash flow bleeding, equity bleeding.
While the futures show the view out to the horizon over the next 6, 12, 15 months that would suggest there won’t be a repeat of that carnage, Bozic cited some of these risks, or gorillas, in the market and in world events that could represent shocks that can make the whole thing “go haywire again.”
Observing that the FMMOs are not the same today as when they were designed many decades ago, Bozic stepped conference attendees through the various long- and short-term impacts that reduce PPD, such as declining Class I utilization compared with increasing Class IV utilization and production.
“Orders were designed around the assumption that there would be plenty of fluid milk usage (as a percentage of total production), and we can just take it and designate it to be the highest and use those funds to make everyone whole,” said Bozic.
“The central promise of the FMMOs is that if your milk is as good as your neighbor’s, you get paid the same, so one farmer does not bid against another for market access and a good price,” he asserted. “That promise is now getting broken, not as much here, the East Coast FMMOs still have Class I.”
The next effect in the Northeast is the rise of protein tests. This impact comes through two channels where higher protein reduces PPD, the economist explained.
“Envision FMMOs as all processors paying into the pool and then taking from the pool. First they pay to the pool with classified pricing based on their respective milk solids. Class I pays on pounds of skim milk as volume, not on protein pounds,” he explained. “Even if sales are the same and the only thing that changes is protein, those (Class I) processors would pay the same amount (on skim) into the pool and take more money out (on protein) so there is less money remaining and a lower PPD.”
The second way higher protein production affects PPD is when the value of protein is lower in the powder than it is in the cheese. The butter/powder plant pays to the pool on nonfat solids price but takes money from the pool on protein price, “so that spread between the value of protein in cheese and powder also leaves less money for PPD,” said Bozic.
He explained the Class III price as an index of butterfat, protein and solids, in a straight formula that equals the class price. “When Class III price is higher than Class IV price, the predicted PPD for the Northeast Order declines,” said Bozic. “It’s almost linear.”
Conversely, when IV is above III, PPD goes up. “This has to do with paying the pool based on protein and nonfat solids, but when handlers take money out of the pool for components, everyone takes protein price leaving less money in the pool for PPD.
Bozic explained the demand shock to this system when the Food Box program “focused on smaller packages of cheese to put in every box. They didn’t take bulk powder and butter. So we went from a record low cheese price on the CME to a record high and no one expected this.”
The pull of 5% of the cheese supply for immediate delivery had everyone scrambling, said Bozic.
The amount of spare cheese available was not as high a volume as the government wanted to buy so cheese went from being long to short, and the price skyrocketed. This translated to an historically higher gap between Class III and IV prices as wide as $10 apart.
So why not just send more milk to make cheese? Bozic maintains that Class IV processing is accustomed to “balancing” fluid milk seasonality so there is extra capacity in that system.
Not so with Class III because those plants already run at capacity. “That’s the only way processors of commodity cheese make margin is to run at capacity, so when the demand shock came, and spare product was used up, there was no spare capacity and the price went higher. That was the main driver of negative PPD in 2020,” said Bozic.
Will it happen again? Bozic doesn’t foresee Food box programs with the same intensity in the future, but, “yes, it can happen, but I would say you need to have a pandemic in an election year. Don’t count on a program like this.”
The industry did ask USDA back in the 2008-09 recession to buy consumer packaged cheese instead of bulk commodities, so it could move instead of being stored to overhang the market later. That wasn’t working either.
“Now we understand that this other method disturbs PPDs so the dairy industry is united behind a more balanced approach,” said Bozic, describing the next iteration of purchases through the Dairy Donation Program will not be as aggressive in moving the markets by three orders of magnitude.”
Bozic said quick rallies and crashes impact PPDs also because of advance pricing on Class I based on the first two weeks of the prior month and announced pricing for the other classes at the end of the month.
Bozic explained why the change in Class I pricing was made: “The dairy industry wants to attract new distributors like Starbucks and McDonalds that are used to hedging their input costs. They don’t want to change prices every month. They want it to be what it is for a year, so the industry wants stable, predictable milk price costs to win favor with new distribution channels by making it easier for them to hedge.”
He said the new average plus 74 cents was designed to be revenue neutral. Looking forward, when Classes III and IV have less than $1.48/cwt spread, PPD under the new system is higher than under the old. But the most it can be higher is by 74 cents on Class I, which translates to 20 cents on the blend price.
“The best case scenario is to add 20 cents to the blend price, but when Classes III and IV are far apart “the PPD can go haywire. Bottom line, the upside benefit of the averaging method with 74-cent adjuster is limited but the downside risk is big,” said Bozic.
UPDATE: The comment period at the Federal Register has been extended an additional 30 days to December 2, 2021
By Sherry Bunting, Farmshineseries
WASHINGTON, D.C. — How should ‘cell cultured meats’ be labeled? That’s a loaded question considering how many unknowns surround the commercial production of these lab-grown lookalikes — starting with what are they, really?
USDA Food Safety and Inspection Service (FSIS) announced a 60-day comment period as part of its advance notice of proposed rulemaking in the Federal Register Friday, Sept. 3. The agency seeks “specific types of comments and information that will inform the process of developing labeling regulations for meat and poultry products made using animal cell culture technology.”
Comments are now due by Dec. 2, 2021 and must reference Docket FSIS-2020-0036.
They can be submitted directly here or by going online at the Federal eRulemaking Portal at https://www.regulations.gov and following the on-line instructions; or mail comments to Docket Clerk, U.S. Department of Agriculture, Food Safety and Inspection Service, 1400 Independence Avenue SW, Mailstop 3768, Washington DC 20250-3700.
In a press release, FSIS officials said ‘cell culture meat’ is a terminology the federal agencies use internally, but this is not necessarily the nomenclature to be used in consumer product labeling.
The actual Federal Register notice is lengthy, explaining that the labels for cell culture products fall under FSIS jurisdiction and “will be subject to premarket review under the same process as other special statements or claims. This will ensure that labeling for products developed using cell culture technology are not false or misleading, that labeling requirements are applied consistently as these novel products enter the marketplace, and that the label provides the necessary product information for consumers to make informed purchasing decisions.”
To-date, FSIS has already provided for a “generic approval” of labeling features, statements, and claims based on “demonstrated prevalent industry understanding of the effective application of those features, statements, or claims and consumer understanding of labeling statements.”
However, the document also notes that there is currently “no widespread industry understanding of the labeling requirements for cell cultured meat and poultry products” and that “consumers have not yet had experience reading these types of labels.”
Furthermore, FSIS will have to determine a process for approving additional claims on the labels of these new and combined products.
The docket language suggests that FSIS already considers these proteins analogous as derivatives of the animals from which the original cells are sourced. But are they? Even scientists debate this assumption.
As billionaire-invested startups have joint-ventured with some of the world’s largest food processing companies, much money is being thrown at certain technology hurdles to avoid having to explain the unsavory aspects of the cell culture process to the public — as these lab-grown un-natural proteins inch their way closer to commercial market entry, especially on boneless products like ground beef and chicken tenders and patties.
The label rulemaking step comes two years after the FDA and USDA entered into a joint agreement to each take responsibility for different halves of the ‘cell culture’ process.
The March 2019 agreement came after a summer 2018 public meeting previously reported in Farmshine, for which thousands of comments and two petitions have been logged.
In 2018, the U.S. Cattlemen’s Association (USCA) filed a petition requesting that FSIS limit the definition of ‘‘beef’’ to products derived from cattle born, raised, and harvested in the traditional manner, and thereby prohibit foods comprised of or containing cultured animal cells from being labeled as ‘‘beef.’’ The petition similarly requested the same for the definition of “meat” and other common meat terms on labels.
In 2020, FSIS received a petition from the Harvard Law School Animal Law and Policy Clinic requesting adoption of a labeling approach that “respects First Amendment commercial speech protections” and specifically establishes “a labeling approach that does not require new standards of identity and does not ban the use of common or usual meat or poultry terms.”
This came after over 6000 comments were received on the U.S. Cattlemen’s petition.
In the current rulemaking docket, FSIS states that the comments came from trade associations, consumer advocacy groups, businesses operating in the meat, poultry, and cultured food product markets, and consumers with “most comments opposing the (cattlemen’s) petition overall; however, nearly all generally agreed that cultured meat and beef should be labeled in a manner that indicates how it was produced and differentiates it from slaughtered meat products.”
To some, that kind of interpretation would mean ‘cultured beef without the cow’; to others a better definition would be ‘un-natural beef grown from gene-edited, growth-hormone-promoted laboratory cell cultures.’
Here’s the problem. The lengthy Federal Register docket does very little to explain the real process by which cell cultured un-natural protein is designed and grown before it is harvested, processed and packaged.
The docket includes a description of ‘cell culture’ meat and poultry that fails to specify any of the characteristics, even those that are being questioned by experts in science journals – things that consumers should know and understand via crystal-clear differentiation.
For example, cell culture fake-meat comes from stem cells that are identified and separated from muscle tissue of cattle, pigs, poultry and certain fish. New “continuous cell lines” are being developed from these stem cells using “transformation” processes (gene editing) to make them “immortal.”
In other words, cells normally have a finite end to their growth, but continuous cell lines — under the right controlled environments — are ‘designed’ to keep dividing and growing, continuously, like a malignancy, without an end point.
Also, the ‘growth medium’ for these ‘cell cultures’ contains Fetal Bovine Serum (FBS), growth promoting hormones, and, when needed, antibiotics and fungicides. The controlled environment provides the exchange of oxygen and carbon dioxide akin to animal respiration, and the temperature must be warmed constantly to be the internal temperature of the bovine to keep the cells from dying. At a certain juncture in the process, the growing cells must be ‘fed’ amino acids and carbohydrates.
Reviews of chemical replacements for Fetal Bovine Serum (FBS) are mixed. Some showed the continuation of cell growth was not consistent. Others showed changes happened within the cells when the growth medium included artificial replacements for the FBS. Portions of the veterinary and medical industries also rely on FBS for culturing, and some reports indicate increased importation of FBS, already, for those uses.
Any label claims about nutrition, environmental footprint, possible changes to the actual cells due to the composition of the growth medium, and so forth, are all based on smaller-scale laboratory observation and scale speculation, while consumers have literally zero understanding of the process, and some scientists even question whether the nutrition profiles, taste and texture are similar enough to meet consumer expectations for real meat and poultry.
These are standards of identity issues.
Here’s the other key issue for USDA’s rulemaking on ‘cell cultured meat’ labeling… USDA Food Safety and Inspection Service (FSIS) only regulates the back half of the equation. In March 2019, the agreement between USDA and FDA was to “jointly oversee the production of human food products made using animal cell culture technology and derived from the cells of livestock and poultry to ensure that such products brought to market are safe, unadulterated and truthfully labeled.”
Specifically, this agreement delegates the oversight of cell collection, growth and differentiation to the Food and Drug Administration (FDA). Then, at the stage of “harvest” FDA transfers oversight to USDA’s FSIS, which oversees the cell harvest, processing, packaging and labeling of the products.
According to the FSIS rulemaking notice, the agency believes its current food safety and HACCP systems for real meat and poultry are already “sufficient” to be “immediately applied” to the harvest, processing and packaging of these lab-grown lookalikes and that they are only looking at this final labeling piece. This gives us a clue where the labeling is headed.
Specifically, FSIS seeks comments and information from stakeholders over the next 60 days regarding these key areas of the labeling process:
— Consumer expectations about the labeling of these products, especially in light of the nutritional composition and organoleptic qualities (taste, color, odor, or texture) of the products;
— Names for these products that would be neither false nor misleading;
— Economic data; and
— Any consumer research related to labeling nomenclature for products made using animal cell culture technology.
It will be difficult for true consumer advocacy groups (not meat and poultry industry trade groups who are mostly on board for the mix-and-match) to fully consider their views on the above questions. This is further blurred by the oversimplified FSIS description of the cell culture process that does not include any reference to specific characteristics.
For example, the definition does not mention hormones as inputs, it mentions ‘growth factors’. It doesn’t talk about continuously dividing cell lines, but rather ‘creating food’.
In another section, it doesn’t mention FBS, hormones, antibiotics as inputs but rather simply states: “cells are retrieved and placed in a controlled environment with appropriate nutrients and ‘other factors to support growth’ and cellular multiplication. After the cells have multiplied, ‘additional inputs such as growth factors,’ new surfaces for cell attachment, and additional nutrients are added to the controlled environment to enable the cells to differentiate into various cell types.”
The use of innocent code words belie the specifics.
Of course, states FSIS about the process: “Once produced, the harvested cells can be processed, packaged, and marketed in the same, or similar, manner as slaughtered meat and poultry products.”
Nowhere in this description does it mention the gene editing of the cells to get them to transform for continuous multiplication and growth, nor what evidence exists that consuming such cells is safe. Consumers will want to know what they might be consuming once the world’s largest meat processors begin to use cultured cells as real meat extenders, diluters and substitutes.
Nowhere in this description does it mention the hormones and growth promotants that are the necessary “growth factor inputs” because the cells are growing on their own without the animal’s body, designed by God, to provide the natural hormones for natural growth with natural end points.
Nowhere in this description does the docket mention other clear differences between ‘cell cultured’ un-natural protein vs. real natural meat and poultry. The description suggests they are ‘designer’ derivatives of the real thing, opening the door to claims of being more efficient with less environmental impact. Based on what? A reduction in cattle and other livestock numbers?
Like we’ve seen in dairy with plant-based fakes and lack of standards enforcement by FDA, these ‘novel’ products will get to do the more-than / less-than comparative marketing off the real natural standard while consumers assume all other aspects are equal – when clearly they are not.
Scientific journals such as Frontiers in Nutrition have published scholarly articles pointing out the speculation involved in what this process will look like at commercial scale and what impact it will have on the nutrient characteristics, especially micronutrients like iron and B12, that come from the animal’s interaction with its natural environment. (Even the scaffolds the cells grow on will have methods for stretching cell blobs to simulate movement.)
Some scholarly articles point out that even the environmental claims are suspect because land and water use comparisons for cattle are predominantly what is used in feed production. The lab-grown cell cultures will also have to be “fed”. But they won’t spend part of their ‘lifecycle’ grooming carbon-sequestering grasslands or contributing to planet health in the biogenic carbon cycle.
Furthermore, writes one scientist, the warming required for these cell cultures to grow in bioreactors also create CO2 emissions that are long-lived — potentially adding to the buildup of long-term GHG, whereas the methane emitted from real cattle is short-lived and in fact stable and declining when viewed on a total nutrients per animal basis vs. history. This means, what is seen as a reduction in CO2 equivalents for methane based on the short-term heat-trapping side could be more than lost on the long-term CO2 buildup side, a tough fix down the road.
The problem with climate and environmental label claims is that they are based on speculation about unknowns for un-natural cell culture proteins and are compared to only part of the real story about real natural livestock.
All of these unanswered questions should be part of any USDA FSIS rulemaking process on labeling. These proteins should be labeled as ‘experimental’ and ‘un-natural’ until processes are widely known and understood by scientists, agencies, industry and consumers.
In the Sept. 2 press release, USDA Deputy Under Secretary for Food Safety, Sandra Eskin, states that, “The (proposed rulemaking) is an important step forward in ensuring the appropriate labeling of meat and poultry products made using animal cell culture technology. We want to hear from stakeholders and will consider their comments as we work on a proposed regulation for labeling these products.”
Perhaps what USDA needs to hear from commenters over the next 60 days is that there is not enough public information about how these un-natural proteins are sourced, grown, and gene-edited — or their true nutritional and environmental profiles — to call them beef or meat with a simple qualifying statement few will truly understand.
Proponents of labeling cell culture proteins as meat because the cells are derivative are already whining to FSIS about how new labeling procedures or standards of identity would “stifle innovation.”
Individuals, businesses and organizations should be standing up for the consumer’s right to know what they are consuming and what production processes they are supporting – un-natural cell factories or natural meat raised by farmers and ranchers. There are also consumer health and nutrition questions on the FDA front end that the labeling needs to address accurately on the FSIS back end.
Just because the initial cells come from a cow or a chicken or a pig, doesn’t mean the un-natural ‘culturing’ process and resulting blobs of cells, once consumed, will behave in our bodies like — or contain the same properties as — natural muscle meat from a cow or a chicken or a pig.
Processors will be able to swap a percentage of this for that and barely change their labels if new standards or full descriptions are not used.
Labeling should not give the appearance that this is simply meat without the animal. Some would argue this is Frankenfood. Some would argue this is experimental protein that should have to go through rigorous safety tests on the long-term impacts to health and nutrition. But the climate urgency of the United Nations Food Summit this month is already alluding to fast-tracking these “innovations”, applauding Singapore and China for moving forward most aggressively… to save the planet of course.
Perhaps the question to ask is this: How will labeling clearly differentiate so consumers have a clear choice and farmers and ranchers have a real chance…
The dairy industry is facing this music on its own score with the FDA currently evaluating standards of identity for milk and dairy and looking at the new bovine DNA-altered yeast/fungi/bacteria excrement posing as dairy protein analogs without the cow. Through a process that is in some ways different and in other ways similar to cell culture proteins, the bioengineered yeast excrements are being called “designer proteins from precision fermentation.”
The latest marketing twist is to say the bioengineered yeast are “10 to 20 times more efficient feed converters than cows.” These proteins are already being marketed to global processors of dairy foods as ‘stretchers’ and ‘functional’ ingredients, even as ‘carbon footprint enhancers.’
The economic concern for producers on both counts – meat and dairy – is dilution of their products and captive supply price-control of their ‘markets’.
The concern for consumers is the long-term healthfulness and safety of these ingredients and the increased potential for global food control in the hands of a few, with China already figuring prominently in the protein concentration manufacturing industry, globally.
This labeling discussion is too important to ignore, too important to allow oversimplification. Some in the industry say we must encourage and work beside these new forms of food production to end hunger, control climate change and feed everyone in the future. But the foundation premises of these beliefs are not settled science.
The simple play here, by the tech sector to align and dominate the food industry, is to position these un-natural proteins as helpful analogs grown or cultured or fermented without the animals, that these products are needed to supplement animal-sources and reduce environmental impact of livestock, that climate change urgency requires regulatory fast-tracking, and that simple process-qualifiers on a label will differentiate it while making it palatable to consumers.
Will consumers be led to believe these “innovations” are in all other ways the same as the real thing… when in fact they are not?
WASHINGTON, D.C. — Federal Milk Marketing Orders, their purpose, performance, problems and solutions — including a recent change in the Class I fluid milk pricing formula — were the focus of a Senate Ag subcommittee hearing on ‘Milk Pricing: Areas of Improvement and Reform” Wednesday, Sept. 15 in the Capitol.
“We are in the midst of a modern dairy crisis, magnified by a Class I pricing change in the 2018 Farm Bill. The pandemic and economic downturn are not the only causes of this problem, but they did exacerbate it. This system cannot adapt to market conditions and thus is not fairly compensating our dairy farmers. The formula change is a symptom of larger problems in a system that is confusing, convoluted and difficult to understand,” said Gillibrand Wednesday.
She recounted the more than $750 million in producer losses when looking at the previous Class I fluid milk ‘mover’ formula that used the higher of Class III or IV manufacturing milk prices and comparing it to the current formula that uses an averaging method plus 74 cents.
The hearing was a first step Sen. Gillibrand had previously indicated in a press conference last June, when the full extent of dairy farmer financial losses was becoming known.
As the hearing got underway, Gillibrand observed that from 2003 to 2020 there has been a 55% decrease in the number of dairy farms in the U.S.
“We are using an almost 100-year-old system with the last reform 20 years ago, where dairy farms are not operating as they were then. We need to put the power back in the farmers’ hands.” said Gillibrand.
The power to make the issues known was in the hands of three dairy farmers making up the first panel — Jim Davenport, Tollgate Farm, Ancramdale, New York; Christina Zuiderveen, Black Soil Dairy, Granville, Iowa, and Mike Ferguson of Ferguson Dairy Farm, Senatobia, Mississippi.
This was followed by a panel with Dr. Chris Wolf, ag economics professor at Cornell University, Dr. Robert Wills, president of Cedar Grove Cheese and Clock Shadow Creamery, Plain, Wisconsin, and Catherine de Ronde, vice president of economics and legislative affairs with Agri-Mark cooperative based in Massachusetts with members in New England and New York.
One thing everyone agreed on, in differing degrees, is that reforms are needed in the Federal Milk Marketing Order System.
Testifiers agreed that a key purpose of the FMMOs is to make blended payments more equitable between producers supplying different classes and uses of milk.
All three producers agreed the FMMO system should continue, although they shared differing ideas about how reforms could improve it.
There was also agreement that the new Class I ‘mover’ formula is not adequate for changing and uncertain markets. They agreed that using the USDA rulemaking process is the way to make such changes to be sure all parties are heard.
However, the current change in the Class I ‘mover’, implemented in May 2019, was made legislatively during the 2018 Farm Bill, not through the USDA hearing process.
Ferguson, a 150-cow dairy producer in Mississippi said he supported bringing back the previous ‘higher of’ method while a longer-term solution can be considered through the USDA hearing process. He noted periodic reviews of the adjuster could also be helpful, and that the situation should be addressed in the short term.
He explained that the Southeast producers across FMMOs 5, 6 and 7, produce about 45% of the annual fluid milk needs of their growing population, and when supplemental milk has to be brought in, those Southeast producers pay the price to get it there. That was very difficult and costly when class pricing inversions happened last year for a prolonged period of time.
Davenport, milking 64 cows in New York observed that the Class I price was aligning better in the past few months, but “we’re not out of the woods yet,” on Covid-19, he said.
“The FMMO system has served farmers well but needs adjusted to reflect current product mixes and market swings,” said Davenport, adding that the fluid market is very important for smaller sized dairies and regional supply systems. He proffered the hope that Class I, long-term, could be stabilized by basing it on something other than the volatility of cheese, butter and powder prices.
“The rulemaking process USDA uses will work, it just takes time,” he said, adding that the Class I price should reflect how hard it is to supply the fluid market.
Zuiderveen, whose family has dairies totaling 15,000 cows in Iowa and South Dakota, said FMMO pricing for milk of the same quality should align and foster innovation and competition instead of consolidation. It should also be transparent and promote a nimble industry that can respond to changes, she said.
“Distortions can cause the system to become unglued,” she said, noting that if producers can’t anticipate which classes will participate in the pool and don’t know how that will drive their milk price, then they can’t manage their price risk effectively, losses become compounded, and this discourages risk management.
Zuiderveen and others noted a variance as wide as $9 per hundredweight was experienced in mailbox milk prices from region to region and neighbor to neighbor at intervals last year.
“That creates a sense of helplessness among producers,” said Zuiderveen.
Dr. Wolf noted multiple reasons for the negative PPDs and milk check losses under the new formula, including declining Class I fluid milk sales and increased milk components, but said the two biggest reasons for milk check losses under the new formula compared with the old formula were the large volumes of de-pooled milk that reduced FMMO pool funds as well as the Class I change itself.
Wolf explained multiple factors in the wide divergence between Class III and IV. A primary one was government purchases being tilted to cheese during that time. “This large divergence in butter and cheese prices meant that the Class I milk prices were lower than they would have been under the former pricing rule,” he said.
Ferguson noted that the government cheese purchases were intended to support dairy producers as well as the public during the pandemic, but it ended up having a “devastating effect on our fluid market,” he said, noting that a more balanced approach may have helped.
Through difficult times in the past, price alignments were more stable in large part because of the ‘higher of’ method keeping the Class I price above the blended price so no matter what was purchased, all farmers, supplying all classes of products, benefited more equitably.
Under the current formula, the pandemic cheese purchases helped support dairy producers, but also led to distortions that contributed to large differences in milk prices at the farm level.
Dr. Wills was the only processor testifying. He said the survival of dairy depends on being able to evolve on these pricing issues. “Farmers are only better off if the premium (shared in the FMMO pools) exceeds the value of other classes, and that’s inefficient,” he said, adding his opinion that FMMOs have outlived their purpose.
“The redistribution makes it appear that all farmers are winners, when the evidence shows pricing equity is being lowered,” said Wills. “I fear for the future of the dairy industry. The federally administrated milk pricing now functions opposite of its intent, resulting in higher prices for consumers and lower prices for farmers. It responds slowly, encourages inefficient trucking and promotes consolidation.”
Wills also mentioned the wave of competition from an array of plant-based and blended products as well as cellular agriculture and bio-engineered analog proteins, none of which are included in the FMMO pricing structure.
Wills brought home the reality for rural communities when small and mid-sized farms are lost. Near the end of the hearing, he responded to a question from Senator Roger Marshall (R-Kansas) asking what are his farmers’ biggest concerns, what do they talk about when he sits down with them for coffee at a restaurant?
“My farmers tend to be smaller producers,” said Wills, president of two Wisconsin cheese companies supplied by 28 dairy farms. “They are concerned about having continued access to markets as the industry continues to consolidate. Even in Wisconsin, where we have more competition than most places, it is hard to find homes for those dairies that are cut loose from big plants.”
As consolidation accelerates, he said, there is a trend toward plants not wanting to make multiple stops. “The impact of losing all of those producers … that 10% per year loss (over time) just hollows out our communities. There’s not a restaurant in town anymore to have coffee at,” said Wills. “We lost our hardware store, our grocery store. A lot of it has to do with our rural communities being hollowed out. The ability to maintain those small farms is also important for our communities.”
On program safety nets and risk management tools, Dr. Wolf noted that the Dairy Margin Coverage program has a very positive impact on small producers vs. large producers, and that the Dairy Revenue Protection and Livestock Gross Margin are aimed at bigger farms. He said farms with those programs in place were “in a better place” last year.
However, elsewhere in his testimony and in that of others, the risk management difficulties during the unusual price inversions were also mentioned, when the Class I pricing change was exacerbated by pandemic disruptions creating those misaligned conditions.
As for simply nationalizing the FMMO pooling rules or making them more rigid, Zuiderveen said this would lead to more processors staying out of the pool, and Wills said de-pooling is the pressure relief valve processors need.
With a nod to pricing delays that affect the transparency in sending market signals through the FMMO system, Wills said he found out that week (Sept. 13) what he will be paying for the milk he bought on August 1, and his producers who sold that milk to him were also just finding out what they would be paid. That’s six weeks after shipping the milk.
Wills said this kind of inefficiency makes it difficult to plan and compete in business.
Another positive to come out of the hearing was when Davenport brought up legalizing whole milk in schools, to which Chairwoman Gillibrand, Senator Marshall, a doctor, and a few other members of the Senate Subcommittee gave hearty verbal support.