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
HARRISBURG, Pa. – The legal battle continues for NoBull Solutions LLC partners Rusty Herr of Lancaster County and Ethan Wentworth of York County. Both Pennsylvania men have been jailed in their respective county prisons since April 10 and 11, respectively.
They were arrested for contempt of court after failing to respond to a May 2023 contempt order and failing to comply with a 2021 investigative subpoena seeking the name and address of NoBull’s custodian of records as well as the names and addresses of all members, managers, and other persons who direct its activities, according to the recently unsealed docket 325-MD-2021.
Herr and Wentworth will have served their 30-day commitments by this weekend (May 10 and 11, 2024).
According to counsel Robert Barnes, Esq. of Barnes Law LLP, a Petition for Writ of Habeas Corpus has been filed with the Pennsylvania Supreme Court after a Commonwealth Court Judge denied their motion for immediate release and unsealed the docket in two separate actions on April 29, 2024.
Barnes maintains that certain procedures must be followed in a civil contempt action.
“To our knowledge those were not followed here. Wentworth and Herr were not given an opportunity to purge contempt in order to secure their release from prison – an essential requirement of civil contempt, which makes this de facto criminal contempt – a violation of Pennsylvania law,” Barnes states in an email response to Farmshine.
Even though the 30-day sentences will have been completed as they wait for the State Supreme Court to hear their appeal, Barnes says his office will “pursue the appeal to restore proper jurisdictional basis and to force the state agencies to adhere to the Pennsylvania Constitution and the Administrative Procedures Act.”
Former Pennsylvania Department of Agriculture counsel and current staff attorney with the Penn State Center for Agricultural and Shale Law Brooke Duer, Esq. told WPMT-Fox43 that the now unsealed docket shows the “civil processes for contempt are all there and were followed.”
The April arrests stemmed from prior actions by the State Board of Veterinary Medicine, which led to a Feb. 2020 complaint filed by the Pennsylvania Veterinary Medical Association (PVMA) one month before the Covid shutdown.
The PVMA alleged that Herr and Wentworth continued practicing veterinary medicine by ultrasounding other farmers’ cows in connection with NoBull’s breeding management service. PVMA asked for contempt charges through Commonwealth Court as part of that 2020 complaint.
The Department of State initiated its investigation in early 2021, issuing a subpoena order for the names and addresses of custodian of records and all parties involved in or directing activities in the business.
Both men failed to comply with the subpoena or to challenge it, according to the now unsealed docket.
“Some of us thought this had more-or-less gone away,” said Duer in the televised interview on May 2. “So, it’s kind of surprising. All of a sudden it’s back on again?”
Duer said there is no evidence that the men responded in any way or represented themselves since 2021.
(Prior dockets show they did represent themselves in prior State Vet Board actions, Herr in 2010 while he was still milking his own dairy herd, and Wentworth in 2018 while he was employed as an AI technician by Select Sires.)
“They had not only a few opportunities to come forward and prevent this kind of an outcome, but those opportunities were multiple…,” said Duer.
According to the unsealed documents, a Commonwealth Court judge signed “Orders to Commit” on October 6, 2023, which resulted in the April 2024 arrests.
The more immediate question is: Were they given the opportunity to purge the contempt at the time of arrest and incarceration, as would appear to be the process with civil contempt, according to an ACLU – Pennsylvania guide to contempt proceedings.
The deeper questions center around the future: What will happen next in terms of a level playing field for smaller farms looking to gain the benefits of integrating ultrasound into breeding management, but are not large enough to have employees trained to do it or vet practices willing to station their vet techs at small farms to do it.
Of the NoBull customers who have contacted this reporter, nearly 90% want this integration, while they still intend to maintain their veterinary relationships through regular herd checks.
The Department of State says veterinary medical practice is further defined by the State Vet Board through adjudications.
The PVMA says a pregnant / not pregnant ‘diagnosis’ is a food safety concern because the not-pregnant diagnosis can involve recommendations for hormone treatments, or recommendations for culling open cows for the beef market.
PVMA also maintains that pregnancy diagnosis “by any mode or method” is veterinary practice. Yet blood and milk sample testing for pregnancy by other companies has been used and celebrated in Pennsylvania since at least 2015.
Several dairy trade magazines have published articles over the past 12 years about the differences in the laws between states and the trend toward laypersons doing ultrasound as the machines are widely available, and the technology has improved. A 2007 USDA survey of (larger) dairies in the West showed that nearly one-third (31.7%) of those performing pregnancy diagnosis used someone other than a veterinarian via ultrasound for breeding purposes. That was 17 years ago.
At least one Pennsylvania dairy producer reports that a veterinary practice places vet techs as employees on larger farms for training, and they do those ultrasounds to provide timely information between herd checks at a discount.
A January 2024 Progressive Dairy articleby a Genex consultant examined how integrating ultrasound with breeding management is revolutionizing reproduction on U.S. dairies that are faced with the need for swift information to make economic decisions in a highly competitive, tight-margin dairy business.
Small dairy farmers continue to contact this reporter wondering what they can do about this. “How can we help?” they ask.
Virtually all of them continue their relationships with their veterinarians for regular monthly herd checks, in addition to having NoBull do ultrasound in connection with breeding service to achieve those same efficiencies in between.
HARRISBURG, Pa. – Add North Carolina to the list of states with confirmed detections of bird flu in dairy cattle.
While the USDA APHIS website had not yet updated its daily listing at 4 p.m. on April 10, the North Carolina Department of Agriculture and Consumer Services issued a press release at noon stating: “The National Veterinary Services Laboratory has detected Highly Pathogenic Avian Influenza (HPAI) in a dairy herd in North Carolina.”
This would bring the total to 19 dairy herds in 8 states: Texas (9), Kansas (3), New Mexico (2), Michigan (1), Idaho (1), Ohio (1), North Carolina (1), and South Dakota (1). (South Dakota was added to the list after Farmshine went to press)
“This is an evolving situation, and we are waiting for more diagnostics from NVSL and will work collaboratively with our federal partners and dairy farmers in North Carolina,” said Agriculture Commissioner Steve Troxler. “It is important to note the FDA has no concern about the safety or availability of pasteurized milk products nationwide.”
Introduction of HPAI A(H5N1) to dairy cattle has been shown to be by migratory birds, and USDA epidemiological studies show it may also be spreading between cows.
USDA, in fact, reported on April 5 during a UN Food and Agriculture Organization (FAO) virtual meeting of scientists that they “have not seen any true indication that cows are actively shedding the virus and exposing it to other animals, or that it is replicating within the body of the cow — other than within the udder.”
This is why lactating dairy cattle are the focus of multiple state orders in recent days regarding restrictions, testing, and quarantine of interstate dairy cattle movement.
“The virus might be transmitted from cow to cow in milk droplets on dairy workers’ clothing or gloves, or in the suction cups attached to the udders for milking,” Dr. Mark Lyons, USDA Director of Ruminant Health, shared during the international meeting, according to a University of Nebraska Medical Center (UNMC) report.
The UNMC report also noted that dairy cattle are frequently transported from the southern parts of the country to the Midwest and north in the Spring. They are floating the possibility — without naming specific herds or locations — that all affected cows may trace back to a single farm. In fact, the confirmed positives in Idaho, Michigan, Ohio and now North Carolina are on premises where cattle had previously been brought in from Texas.
“The virus appears to replicate in mammary tissue, so those cattle that are not lactating do not have a high viral load for transmitting the virus,” noted Dr. Luley in the CDE call.
According to the epidemiologic data released by USDA, she said, the early cases, especially in Texas, New Mexico, and Kansas, show that HPAI was predominantly introduced by wild birds.
“For a few other detections, including in Michigan and Ohio, the main source seems to be the movement of animals from other states,” said Luley.
To prevent spread to dairy cattle in the Keystone State, the Pennsylvania Department of Agriculture issued an Interstate and International Quarantine Order on April 6 for the restriction of movement and pre-movement influenza testing of dairy cattle from states where HPAI has been detected in dairy cattle.
When asked how the Pennsylvania Order compares to what other states are doing, Dr. Luley said “ours is the most stringent. The goal is preventing the spread of this condition into our state — to proactively protect the animals in our state to the best of our ability.”
In short, the Pennsylvania Order applies to dairy cattle, not beef cattle. It restricts all movement of dairy cattle into the state for any reason from farms where HPAI has been detected.
Furthermore, dairy cattle coming into Pennsylvania for sale or show, must do pre-movement testing if they come from a non-affected farm in a state where HPAI has been detected. Those states to-date are Texas, Kansas, New Mexico, Idaho, Michigan, Ohio, and now North Carolina and South Dakota (updated by APHIS April 11).
This should be consulted before movement of cattle from other states into Pennsylvania, to be sure the appropriate restrictions and pre-movement testing are applied.
Dairy cull cows from any state with a positive case, even if coming from a non-affected farm, that are destined for Pennsylvania slaughter facilities, are not subject to pre-movement testing if the animals are slaughtered within 72 hours of entry. However, they must go directly to a slaughter plant and cannot be commingled with other cattle at an auction center.
Calves under one year of age are considered low risk and are exempt from pre-movement testing at this time.
Pre-movement testing must be done through a laboratory in the national network, and the results must accompany the shipment. Acceptable test samples for non-lactating dairy cattle, such as bred heifers, are nasal swabs; however, the only acceptable test sample for a lactating animal is a milk sample. Again, this is because the mammary system is where HPAI viral replication is being seen.
“At present, the disease has not been shown to affect beef animals,” said Luley about why the Order is written only for dairy cattle.
She gave examples of how the Order is being implemented:
If a producer wants to import a group of bred heifers from Texas, and they come from a farm that had a confirmed positive, those heifers would not be allowed to come to Pennsylvania. If they come from a non-infected herd in Texas, they would need pre-movement testing with the farm’s veterinarian overseeing the sampling and the analysis done by a national network lab.
If a producer in Ohio wanted to move cull dairy cows directly to a slaughter facility in Pennsylvania, if they are coming from a currently unaffected farm in that state, no testing would be required. But, if they are from an affected farm in that state, those cull cows would not be permitted to come to a Pennsylvania slaughter facility.
If a producer from Virginia, where there have been no detections of HPAI, wanted to ship fresh heifers to Pennsylvania, there would be no requirement to test because no infection has been detected to-date in that state, so there is no movement restriction and no pre-movement testing requirement.
There are no quarantine orders on milk movement at this time; however, this would change if HPAI were detected anywhere in Pennsylvania. If that occurs, the state would enact its “Temporary Order Designating Dangerous Transmissible Diseases” provision, now amended to include “Influenza A Viruses in Ruminants.”
In such a scenario, a quarantine would be set up for an affected farm to work with animal health officials and their veterinarian to show appropriate biosecurity measures to qualify for a 30-day milk movement permit. With that permit, their milk could go only to a processing plant.
“The viral sequencing matches the circulating strains in the (migratory bird) flyways,” said Luley. “We can impose a quarantine, but we can’t apply it to migratory waterfowl, so that risk remains, and it is the reason why biosecurity is our best tool.”
USDA Wildlife Service biologists Tom Roland and Kyle Van Why said their winter surveillance of migratory waterfowl and raptors in the Susquehanna watershed, for example, shows the virus is here in these populations, but at lower numbers than last year.
Even though starlings and pigeons are not good transmitters of the disease, they do carry it, and the numbers of these birds are high, so they bear watching.
Roland said that with restrictions on how to handle migratory birds, including resident Canadian geese and vultures, farmers should contact the national hotline at 1.866.487.3297 to work with the Wildlife Service for case-by-case strategies to manage and mitigate bird use of the farm. They have tools that are not generally accessible.
Dr. Hayley Springer, Penn State extension veterinarian, said opportunities are available to help dairy farms build their own biosecurity plans. In-person open houses are being held across the state at county extension offices, check with yours.
“Everyday biosecurity is the first line of defense, and effective for Influenza A,” said Springer. Biosecurity Kits to assist are available from CDE.
According to Dr. Luley, one dairy farm in Pennsylvania reported signs that met the case definition closely enough to undergo the HPAI testing protocol, which thankfully turned out to be negative.
Dairy farmers seeing signs in their herd should contact their veterinarian. Clinical signs of HPAI in cattle, which the American Association of Bovine Practitioners this week announced it will rename as Bovine Influenza A, include:
1) a sudden drop in feed intake with concurrent decreased rumination and rumen motility;
2) a subsequent marked drop in herd level milk production with more severely affected cows having thickened milk that almost appears like colostrum or may have essentially no milk at all; and
3) changes in manure, especially tacky to dry manure.
CDC confirms one worker in Texas recovered with mild symptoms; Cow-to-cow transmission ‘cannot be ruled out’, biosecurity paramount
By Sherry Bunting, for Farmshine’s April 5, 2024 edition
WASHINGTON — Detections of highly pathogenic avian influenza in dairy cows — HPAI A(H5N1) — have expanded to 13 herds in 6 states as of Wednesday, April 3: Texas (7), Kansas (2), Michigan (1), New Mexico (1), Idaho (1), and Ohio (1).
Some states, including but not limited to Nebraska, Idaho and Utah have begun issuing import permit requirements for cattle and/or restrictions on non-terminal and/or breeding cattle coming from specific areas. These instructions are available from state authorities, not USDA APHIS.
In addition, the CDC reported April 1 that a worker on a Texas Panhandle dairy, where HPAI was detected, has tested positive with mild flu symptoms, mainly conjunctivitis (pinkeye), and has recovered. The only other human case in the U.S. was a poultry farm worker in Colorado in 2022.
CDC ‘current situation’ screen capture April 3, 2024 at 4:30 pm ET
According to the CDC, their “human health risk assessment for the general public remains low. There continues to be no concern that this circumstance poses a risk to consumer health, or that it affects the safety of the commercial milk supply because products are pasteurized before entering the market,” and milk from infected animals is to be discarded.
New detections of the virus have not changed the primary belief that HPAI A(H5N1) is ‘seeded’ by migratory wild birds (emphasis on waterfowl and by association, vultures).
Cow-to-cow transmission questioned
Complicating the question of potential cow-to-cow transmission, it was reported that the two confirmed herds in Idaho and Michigan had recently received cattle from other states where HPAI A(H5N1) was detected.
APHIS officials stated on March 29 that, “Spread of symptoms among the Michigan herd also indicates that HPAI transmission between cattle cannot be ruled out; USDA and partners continue to monitor this closely and have advised veterinarians and producers to practice good biosecurity.”
During the April 3 Center for Dairy Excellence (CDE) industry call attended virtually by 189 people – the first such call to occur weekly on Wednesdays at Noon – the Pennsylvania State Veterinarian Dr. Alex Hamberg was asked: How is it being transferred?
Just minutes before the call, Dr. Hamberg had received word that a western Ohio dairy herd had tested positive, which he said “is a little too close for comfort.”
Still, his overall calm and practical demeanor comes from having dealt with Pennsylvania’s poultry industry that is well-acquainted with avian influenza at times through history since the early 1990s, and most recently in 2022-23.
“We’re operating under the bird-to-cow, largely waterfowl, migrating ducks and geese, and focusing on using biosecurity measures to keep them away from cattle,” said Dr. Hamberg. “They excrete virus in large amounts.”
He talked about the poultry farm pattern in Pennsylvania in 2022-23, which also suggests wild bird to farm transmission vs. farm-to-farm spread.
“There is some evidence that could suggest this could be cattle-to-cattle, but this would be novel and relatively new to the world,” said Hamberg, airing his doubts. “As we build a better picture of what it looks like and how it moves through a population, we can do more to protect our cattle. Either way, brush up your biosecurity plans.”
On transfer to people, Hamberg said: “What we know with this virus – as seen in birds – it can infect people, but rarely. Several dozen have been infected worldwide (over time), but what we don’t see is person-to-person transmission or concern for consumers.”
He noted that the Texas dairy employee confirmed positive this week makes two farm workers in history: “one from cattle and one from poultry.”
Wild waterfowl still the focus
The investigation so far has looked at a wide variety of data and didn’t find any common links, other than wild migratory waterfowl, said Dr. Hamberg, and it’s the same strain of the virus in these waterfowl in the Pacific and Central Flyways.
He also noted that the poultry industry’s experience has been that songbirds and starlings “are not effective transmitters. We’re focused on waterfowl.”
Dr. Hamberg advised:
1) Keep a close eye on your cattle,
2) Ramp up your biosecurity,
3) Keep wild waterfowl away from ponds and standing water,
4) Keep cattle fenced off from water where wild waterfowl congregate,
5) Keep outdoor waterers clean and free of wild waterfowl,
6) Clean up roadkill and manage mortalities.
Penn State extension veterinarian Dr. Hayley Springer also mentioned roping off areas where wild bird feces proliferate to keep tractors from running through it between feed commodities and barn entry.
“There is no definitive evidence that this can move from cow to farm birds or vice versa, but still work on biosecurity to keep those populations separate on the farm,” said Hamberg. “If we get a case in cattle in Pennsylvania, we would quarantine that farm, with a minimum set of standards to ensure movement on and off farm does not cause increased risk to other farms in the community.”
For example, a quarantine may mean milk off farm might be permitted to go to a specific plant following specific biosecurity restrictions such as last stop on a run for the milk truck or feed truck – things of that nature. A quarantine would permit milk off the farm only for pasteurization. Such permits would be case by case IF a dairy herd in Pennsylvania would have detected HPAI A(H5N1).
Bottomline, said Hamberg, this virus deemed to be affecting cows is “remarkably unremarkable, and there is no evidence that it has become mammalian-adaptive,” he said. “Usually when we see spillover events, the transmission between animals tends to be very poor. There is no specific mutation identified in this strain to be mammalian adapted, and it is still unclear what that looks like going forward.”
Hamberg said department guidelines for cattle movement and biosecurity would be forthcoming for Pennsylvania and to find them at www.centerfordairyexcellence.com along with other resources, including advice from Dr. Hayley Springer, who gave practical tips for minimizing waterfowl risk on dairy farms.
Two days earlier, in the April 1 webinar put on by NMPF and attended virtually by around 1000 people, veterinarians noted that while HPAI is believed to be introduced by migratory wild birds, veterinarians do not yet understand the mode by which it entered dairy cattle systems for the first time in history, nor do they know how it may or may not be transferred between cows. (Listen to NMPF’s Jamie Jonkers who moderated the webinar discuss it on a podcast March 28.)
Investigations look for multiple ‘pathways’
It’s important to note that veterinarians are operating off the premise that they want to understand the entirety of the situation to be sure other pathways are not involved in the underlying illness in dairy cows causing decreased lactation, low appetite, and other clinical signs.
Toward that end, federal and state agencies continue to conduct additional testing in swabs from sick animals and in unpasteurized clinical milk samples from sick animals, as well as viral genome sequencing, to assess whether HPAI or another unrelated disease may be underlying any symptoms.
Dr. Mark Lyons, National Incident Health Coordination Director at USDA’s Ruminant Health Center, noted on the NMPF webinar that while HPAI A(H5N1) has been detected through the sampling, he suggested that it might not be the only disease or factor at play.
“I don’t think we have a clear picture to say that HPAI is causing the illness we’re seeing displayed in these cattle. I think there’s still a chance that we might be seeing multiple different pathways playing out,” said Lyons, adding that additional sampling needs to be done with the expertise of producers, industry persons, and veterinarians.
Because lateral transmission has been recognized, but the mode of transmission is unknown, biosecurity measures are the most proactive approach producers and industry personnel should be focusing on to protect herds, said Lyons.
When asked if the disease is being found in non-lactating animals, Lyons said that he was unsure of how much testing, if any, had been done on non-lactating cattle because it has been lactating animals that have exhibited clinical signs.
On movement and biosecurity
While Dr. Lyons said USDA has no plans to ban or restrict cattle movement at this time, it is recommended to limit movements as much as possible and to test any animals destined for movement to be sure they are clear of HPAI at the time of movement. Animals moved should be quarantined.
USDA and its partners are now advising veterinarians and producers to:
1) Practice good biosecurity,
2) Test animals before necessary movements,
3) Minimize animal movements, and
4) Isolate sick (and new) cattle from the herd.
In the NMPF webinar, veterinarians said the focus of biosecurity should be protecting the dairy, preventing exposure to cattle and calves, and precautions for caretakers and veterinarians, including:
1) Manage birds and wildlife on the dairy,
2) Delay or stop movement of animals,
3) Quarantine animals for 21 days because the incubation period is unknown,
4) Clean and disinfect trailers and equipment,
5) Delay or stop non-essential visitors,
6) Those who do come into the operation should wash hands, change clothes, clean boots, or use disposable boots,
7) Any equipment coming onto the farm should be disinfected before entering,
8) In “abundance of caution”, on farms where HPAI A(H5N1) has been confirmed or is suspected, milk intended to be fed to calves or other livestock (including pets) should be pasteurized or otherwise heat-treated,
9) The recommendation for caretakers and veterinarians working with confirmed or suspected animals is to wear gloves, N95 masks, eye protection and monitor themselves for respiratory or flu-like symptoms.
When asked about the safety of infected cows destined to be culled, Dr. Lyons said cows exhibiting signs should not be sent to slaughter. He noted that, “in an abundance of caution,” milk samples should be used to screen animals from affected herds before moving a cow to slaughter, whether or not signs are being shown.
With the strength of the federal meat inspection process, “we have no reason to believe the meat would be unsafe, and we have not found any virus presence in meat tissue. But, out of extreme caution, we want to do testing or limits. There are already parameters and buffers in place not to send sick animals into the slaughter system,” said Lyons.
Experiences on affected dairies
APHIS reports that affected animals have recovered after isolation with little to no associated mortality reported.
Dr. Brandon Treichler, quality control veterinarian for Select Milk Producers has witnessed infected herds and has been in contact with others dealing with the disease firsthand. During the NMPF webinar, he shared the signs and symptoms of what they have experienced.
Initial signs are consistent among all the herds. Farms that have the monitoring capability to test conductivity in overall milk will see a spike because of the immune response occurring, he said.
Initially cows rapidly go off feed, stop ruminating or stop showing signs of chewing their cud, and their milk production is suddenly gone, he explained, noting that what milk they do have is thick and resembles colostrum. Not all four quarters are always affected this way, which is a curious finding in how the disease presents.
Other symptoms vary. Some cows have firm, “tacky” manure, which could be a secondary issue from dehydration or cows not being able to regulate fluid. Other cows exhibit systems of diarrhea. Various respiratory symptoms have been reported with the most common being clear nasal discharge and increased respiratory rate. Fevers have been reported in some herds while others have not.
Secondary infections are also coming in behind the original HPAI A(H5N1), perhaps accounting for variability in reported symptoms.
Most severe cases are shown in older and mid-lactation cows, with some severe cases happening in first lactation or in fresh cows. There has been very little evidence of it impacting dry cows or young stock.
“That’s not to say they aren’t being affected, but the most obvious signs are decreased rumination and loss of milk production, so the signs might not be observed in non-lactating animals,” said Treichler.
This could also be why it doesn’t seem to be affecting beef animals whether cow/calf or feedlot. “It’s not to say they aren’t being affected at all, but it’s hard to see these severe cases in these (non-lactating) groups,” he said.
“When people are talking about the 10-20% of the herd involved they’re talking about these severe cases. My personal clinical impression is that much of the lactating herd is impacted by this because when you look at things like rumination and milk production, they’re down overall on a herd level,” said Treichler. “At some point most of the cows in the herd are being impacted by this, so you’ll have mostly subclinical cows.”
The reported production loss estimates range from 4 to 20 pounds/cow/day to 10 to 30 pounds/cow/day.
The worst of the cases appear to be within the first week of the outbreak. Affected cows begin to go back on feed within a few days, and herds go back to pre-infection milk production and SCC levels within a month of the initial outbreak. Some cows will recover, but there are some that will not recover, especially if secondary infections follow.
While cows might show clinical signs of mastitis or abnormal milk, it is not a mastitis pathogen that can be treated traditionally. It does not respond to antibiotics.
Additionally, abortions are being observed in herds that have been through the process, probably not due to the virus, but most likely from high fever in the immune response or metabolic stress that the cows went through. Future fertility or cyclicity problems could be expected.
“Please don’t hesitate to report to your veterinarian. I know it’s scary, but it will help the whole industry if we can find out about it and learn from each case,” said Treichler.
Responding to a question about what treatment plans are working for sick cows, Dr. Treichler said supportive care includes keeping them hydrated and treating any obvious symptoms from secondary issues, and treating for fever if there is fever.
There is much yet to learn in this rapidly evolving situation. Biosecurity efforts are the best course to follow as more testing and epidemiological study is underway to understand all that is a part of it.
This week, we look at the third C: ‘Competition’: If schoolchildren are offered whole milk, will it significantly impact butterfat supplies, raise butter prices, and compete with the industry’s cheap milk cheese-focused future?
Every winter conference for the past few years has had at least one speaker telling dairy farmers that fluid milk sales are declining because Americans are eating more of their milk instead of drinking it.
Fair enough. Cheese is the future, and the industry wants to make more of it. Lots more of it. So much more cheese, in fact, that inventory is growing. Analysts at conferences put up slides with the words “Export or perish!” in large font.
Yes, U.S. Dairy wants to export more cheese, including mozzarella. U.S. Dairy wants to export more butter and cream products. U.S. Dairy wants to export more of the higher-value products. (And we want to sell more cream to the upscale coffee houses and downscale McCafe drinks we adults get to choose while junior sips a paltry half-pint of fat-free chocolate milk, sugar water, in the back seat. What’s wrong with us?)
This map shows the over $7 billion in new processing coming online between now and 2026. “There’s a lot of cheese on this map,” said IDFA CEO Michael Dykes, presenting at the Georgia Dairy Conference. This slide has also been popping up in other industry conference speaker powerpoint decks this meeting season. IDFA data
The industry also wants to take milk down to its molecular level – to turn the jug of milk into ingredients at the start — to make new function-targeted products for the beverage space outside of Class I parameters within an increasingly Class III dominated processing infrastructure.
Toward that end, new processing capacity won’t convert milk to traditional products, leaving elements to be marketed as ingredients. Instead, these new state-of-the-art cheese and ingredient plants start by taking milk apart to the ingredients-level to be used in making health beverages, bars, and other products, as well as to make cheese.
At the Georgia Dairy Conference in January, IDFA CEO Michael Dykes mentioned IDFA’s support for the Whole Milk for Healthy Kids Act, giving attendees a QR code to weigh-in with their Senators.
Later in his presentation, he noted that a shift to more fat in school milk would make a 3% impact on the butter supply.
“I’m a believer that the markets work, when you take it one place, you make a difference and change it someplace else. Those are the things we can work through,” said Dykes.
So, we reached out to Calvin Covington, a former cooperative CEO who is intimately familiar with component pricing as it became part of the Federal Milk Marketing Order (FMMO) system over 20 years ago. We asked his thoughts on how increasing fat in the school milk supply would impact butter.
“Increased Cheddar cheese production has used millions and millions of pounds of butterfat. No one complains about this. Doesn’t the dairy industry want to increase demand for all milk components?” he replied and sent forth his own calculations, providing a spreadsheet showing his estimates of milk used in schools and the additional fat that would be needed for all of that milk to go completely to 3.25% (whole) milk.
Covington ran the numbers, moving methodically through assumptions on Table 1 to conclude the impact of shifting from a school milk fat percentage of 0.5% (half fat-free and half 1%) all the way to 3.25% (whole milk) would have a small impact on the butterfat supply — raising the school milk’s usage of butterfat from 0.25% of total butterfat production at the current national average fat test of 4.11% to being 1.47% of total butterfat production at the average 4.11% fat test.
Using the identified assumptions, Table 1 shows estimates on school milk volume and use of butterfat under today’s fat-free and 1% low-fat milk requirement compared with a scenario in which all school milk pounds were at 3.25% fat as standardized whole milk. Provided by Calvin Covington
He estimates public schools use 9.72% of all fluid milk, and for the purpose of the spreadsheet exercise, he assumed that half of those school milk sales are currently fat-free and half are 1%. If that is the case, then going to 3.25% (whole) milk for all pounds of school milk sales, the additional fat that would be needed is almost 114 million pounds, he reports.
“This should be a non-issue,” Covington concludes, using estimates that are based on all of those school milk pounds moving to 3.25% fat.
The more likely scenario, however, is that schools would implement a more gradual increase in fat percentage. If it mirrored the national average for fluid milk sales at 2% fat, the increase would be smaller initially. Using Covington’s chart and assumptions, the additional fat that would be needed if school milk fat content averaged 2% is closer to 84 million pounds, going from using 0.25% of total fat production to 0.9% of total fat production.
Not all schools will choose to offer all milk at 3.25%. Some may offer 2% milk, which has also been banned since 2010 and would be given regulatory relief under the Whole Milk for Healthy Kids Act.
Even if 3.25% fat milk is universally offered, some schoolchildren will continue to choose low-fat milk, as they did in the Pennsylvania trial, where the preference was 3 to 1 for whole 3.25% over low-fat 1%.
While a potentially higher fat content in school milk is being scrutinized for its impact on butter and butterfat, the impact of aggressive increases in cheese production is ignored. This speaks a bit to industry priorities.
“As butter and cheese consumption increase, processors do not argue against the increase because utilizing more fat would increase the fat price,” Covington observes, wondering why anyone would be concerned about the impact on butterfat supply if children get to choose whole milk while not being concerned about the impact on butterfat supply in any other sector.
“An increase in fluid milk sales, in schools, or anywhere, benefits all dairy farmers. With all things being equal, it would shift milk from Class III and IV to Class I, which is a (normally) higher milk price,” Covington explains. “If Class III or IV need more milk to replace the loss to Class I, more money would need to be paid by Class III and IV milk buyers, again, helping dairy farmers.”
So, what is the current status of butterfat production and usage?
The national butterfat average is 4.11%. A decade ago, it was 3.69. From 2011 to 2022, total butterfat pounds produced on farms in the U.S. grew by 2 billion pounds from 7.3 billion to 9.3 billion. That’s a butterfat volume response to a price signaling demand.
Where’s it all going? Around 20% goes to butter production, 8% to ice cream and frozen desserts, 10% in fluid milk sales, and close to 50% is used in cheese production. And then there is this growing market for cream used in coffee drinks.
Meanwhile, dairy producers out West report receiving a letter from a large cheese plant, putting in a new base program at 1.5% over base.
Another producer in an unregulated state in the West reported receiving a letter from his cheese plant stating they will reduce the butterfat multiple in their cheese milk payment, beginning April 1. The reason, according to the letter, is the farms are making too much butterfat, and the plant is having to buy condensed solids (skim) to pair with the additional fat or sell the extra fat as excess sweet cream at a loss.
During the FMMO hearing, fluid milk bottlers complained that the higher fat and component levels in milk today are more costly for them to deal with, that they must move the excess cream at a loss, and they have to clean the separator more often because of ‘sludge’ buildup. (I kid you not, one witness called it ‘sludge.’)
Processors have petitioned USDA with multiple proposals to get regulated minimum prices down to their definition of a ‘market clearing’ level that then allows them to add market premiums to attract new milk. Read that sentence again.
Who would be paying those premiums to grow milk supply? Not the processors. It would be revenue coming out of the regulated minimum price benchmarks for all farmers, including farmers that are not growing, to then get added back in by the processors wherever they want to direct growth.
Cheap milk is the name of the game, while at the same time, dairy farmers are being challenged to grow to meet the future ‘demand gap’ to fill $7 billion in new processing investments that will become operational over the next few years.
Dairy analysts tell how milk production expansion to meet this investment will not be as easy to do and will take longer than in the past because of the shortage in replacement heifers.
We’re at a standoff, so to speak.
Dairy producers have bred beef-on-dairy to bring margin back to their farms after 10 years of dairy margin compression. This strategy has been a good hedge against overproduction of milk in the era of sexed-semen, and it has helped protect farm balance sheets by reinforcing the value of the cattle as collateral.
So, what tool will be used now to drive consolidation and growth in dairy? Dykes told Georgia producers that, “Sustainability will be one of the biggest drivers of consolidation we’ve seen in a generation. Why? Because it’s going to take investment, and it’s going to take scale. We need to figure it out, to measure it, verify it, account for it, not double count it. We’re going to need investments to make sure we have the infrastructure.”
He said sustainability will become the gateway for exports where countries have mandates and carbon taxes for purchased ag products.
So, here we are back at the question about milk supply, butterfat supply, skim supply and school milk. Wouldn’t whole milk sales to schools offer a much-needed tug on the demand side to help shift some milk away from this runaway, market-depressing, buildup of excess cheese production that elicits the powerpoint headline: ‘Export or perish?’
Just think, if the fluid milk sales to schools increased as they did in the Pennsylvania trial by 52%, or even half that, by 25% as more kids choose milk instead of refusing it, market principles could work — gaining something in one place to affect it someplace else.
Meanwhile, the industry can do some soul-searching and adapting amid the double-speak. If more milk, fat and components are needed, then farmers need to be able to make a living milking cows and producing fat and components.
Is the problem not enough milk? Or too much milk? Not enough fat? Or too much fat? Not enough skim? Or too much skim? Or is the problem rooted in making sure milk can be bought cheap and that farmers are forced to find revenue in other ways, such as carbon monitoring?
Let’s get it straight please.
On the horizon, we see: Checkoff-funded fluid milk innovations for new beverages that identify and separate specific milk molecules for specific benefits (sleep drinks, energy drinks, immune function drinks, specific protein type drinks)? More on that in Milk Molecules Initiative Part I and Part II
EAST EARL, Pa. — The status of the Whole Milk for Healthy Kids Act, S. 1957, has 17 Senate sponsors from 13 states, including 12 Republicans, 4 Democrats, and 1 Independent.
Even though both NMPF and IDFA have shown support for the measure, a bit of resignation can be sensed — riding the overwhelming House vote as enough progress for one legislative session. After taking bows for the performance of the bill in the House, representatives of both NMPF and IDFA – while speaking at winter meetings – have indicated a prevailing view that Senate opposition to S. 1957, is a big barrier.
They say they are working to get the science in front of the Dietary Guidelines Committee, which has been tried before – over and over.
The DGA committee operates under a USDA that does not want whole milk options in schools or SNAP or WIC. This same USDA is proposing to remove chocolate milk options from schools, except for senior high students, and is proposing to reduce WIC milk by 3 gallons per recipient per month. This same USDA projects 20 billion more pounds of milk will be produced in the U.S. by 2030, according to IDFA CEO Michael Dykes, presenting future trends at the Georgia Dairy Conference in Savannah.
Seeds of doubt about the whole milk bill are being sown among farmers. Some asked me recently if their co-ops will lose money on the deal.
This week we look at the second C: ‘Consternation’ — a fancy word for fear.
“What will they do with all of our skim?” farmers asked me at a recent event. Is this something they are hearing from a milk buyer or inspector?
Here are some facts: Whole milk sales move the skim with the fat — leaving some of the fat through standardization, but not leaving any skim. Therefore, an increase in whole milk sales does not burden the skim milk market.
Surely, the practice of holding schoolchildren hostage to drinking the byproduct skim of butter and cream product manufacturing is a poor business model if we care about childhood nutrition, health, and future milk sales.
Furthermore, the market for skim milk powder and nonfat dry milk is running strong as inventories are at multi-year lows in the U.S. and globally.
Cheese production, on the other hand, is what is cranking up, and it has been the market dog for 18 months. Like whole milk sales, cheesemaking uses both fat and skim. But cheesemaking leaves byproduct lactose and whey, and it can leave some residual fat depending on the ratios per cheese type.
Things are pretty bad for farmers right now in cheesemilk country. Some tough discussions are being had around kitchen tables. The 2022 Ag Census released last week showed the dire straits for farmers nationwide over the last five years as the number of U.S. dairy farms declined below 25,000, down a whopping 40% since 2017.
Wouldn’t an increase in whole milk sales through the school milk channels help pull some milk away from rampant excess cheese production that is currently depressing the Class III milk price, leading to price divergence and market dysfunction?
While there is no one data source to specifically document the percentage of the milk supply that is sold to schools, the estimates run from 6 to 7% of total fluid milk sales (Jim Mulhern, NMPF, 2019), to 8% of the U.S. milk supply (Michael Dykes, IDFA, 2023), to 9.75% of total fluid milk sales (Calvin Covington, independent analysis, 2024).
If even half of these sales became whole milk sales, it could modestly positively impact the amount of excess cheese being made even as processors say they plan to make more cheese because people eat more of their milk than are drinking it. (Fig. 1)
Meanwhile, the cheese price is under so much downward price pressure that there is a $2 to $4 divergence of Class IV over Class III causing farmers to lose money under the ‘averaging’ formula for Class I milk. In many parts of the country, farmers lose additional money when the milk that is used in Classes II and IV is depooled out of FMMOs.
Without the ‘higher of’ pricing mechanism that was in place from the year 2000 until May 2019, Class I can fall below the higher manufacturing price, removing incentive to pool, which leaves pooled producers with smaller payments for their milk and leaves the decision about what to pay depooled farmers up to the processors after they’ve succeeded in reducing the benchmark minimum by depooling.
Ultrafiltered (UF) milk represents 2.4% of fluid milk market share, having grown by more than 10% per year for four years with sales up 7.7% in 2023 vs. 2022, according to Circana-tracked market data shared by Dykes.
UF milk is also cheese-vat-ready-milk with capability to remove not just the lactose but also the whey as permeate at the front end for use in distilleries that are now funneling lactose into ethanol production in Michigan and whey into alcoholic beverages in Michigan and Minnesota.
Processors want farmers to do “a tradeoff” to decide how much revenue comes to their milk checks and how much goes to processing investments for the future. The future is being dictated by where we are in fluid milk consumption relative to cheese production.
This is one reason IDFA and Wisconsin Cheesemakers, as well as NMPF, had proposals asking USDA to increase the processor credits (make allowances) that are embedded in the dairy product price formulas. IDFA and Milk Innovation Group also put forward other proposals to further reduce regulated minimum prices.
We wonder with these new processing investments, how is it that the make allowances are too small? Only bulk butter, nonfat dry milk, dry whey, 40-lb block Cheddar and 500-lb barrel cheese (yellow not white) are surveyed for the circular class and component price formulas. Everything else that doesn’t meet CME spec for these specific product exchanges is excluded.
This means the costs to make innovative new products and even many bulk commodity-style products, such as bulk mozzarella, unsalted butter, whey protein concentrate and skim milk powder, can be passed on to consumers without being factored back into the FMMO regulated minimum prices paid to farmers.
If market principles are applied, processors wanting to encourage more milk production, to make more cheese, would pay more for the milk – not less. But when the margin can be assured with a make allowance that yields a return on investment, all bets are off. Cheese gets made for the ‘make’ not the market.
We saw processors petition USDA in the recent Federal Milk Marketing Order hearing to reduce the minimum prices in multiple ways so they can have the ability to pay market premiums to attract new milk. This would be value coming out of the regulated FMMO minimum price benchmark for all farmers to get added back in by the processors wherever they want to direct it.
Cheese is in demand globally, and the U.S. dairy industry is investing to meet this. Dykes told Georgia producers that processors want to grow and producers want to grow. He wasn’t wondering what to do with all of the skim when he asked: “Where will the milk come from for the over $7 billion in new processing investments that will be coming online in the next two to three years?”
This is happening, said Dykes, “due to market changes from fluid milk to more cheese production (Fig. 1). There’s a lot of cheese in those plans. With over $7 billion in investment… These are going to be efficient plants. You’re going to see consolidation. If you are part of a co-op, you’re going to decide how much (revenue) comes in through your milk check and how much goes into investment in processing for the long-run, for the future. That’s the debate your boards of directors will have.”
Even the planned new fluid milk processing capacity is largely ultra-filtered, aseptic and extended shelf life, according to Dykes.
“That’s the direction we are moving,” he said. “We are seeing that move because as we think about schools, are we still going to be able to send that truck driver 20 miles in any direction with 3 or 4 cases of milk 5 days a week? Or do we do that with aseptic so they can store it and put it in the refrigerator one night before, and get some economies of scale out of that, and maybe bring some margin back to the business?”
As the Class III milk price continues to be the market dog, we don’t see milk moving from Class III manufacturing to Class IV, perhaps because of the dairy processing shifts that have been led by reduced fluid milk consumption.
Allowing schoolchildren to have the choice of whole milk at school is about nutrition, healthy choices, future milk consumers, and the relevance of fresh fluid milk produced by local family farms in communities across the country. Having a home for skim does not appear to be the primary factor affecting milk prices where Class III is dragging things down.
Bottomline, dairy farmers should have no consternation (fear) over what processors are going to do with “all of that skim” once they are (hopefully) allowed to offer schoolchildren milk with more fat.
Next time, we’ll address the third ‘C’ – Competition – If kids are offered whole milk in schools, will it reduce the butterfat supply and impact the industry’s cheese-centered future?
A final note, just in case the question about ‘what to do with all that skim’ still bothers anyone… What’s wrong with animal feed markets for skim milk powder? Protein is valuable in animal health, there are livestock to feed, and people spend major bucks on their pets too. Did you know dog treats made with nonfat dry milk powder, flour and grated cheese are a thing?
That idea got a good laugh from those farmers when I suggested it.
However, Cornell dairy economist Dr. Chris Wolf noted recently how China’s purchases are what drive global skim milk powder and whey protein prices, and that much of that market for both is to feed… you guessed it… Pigs.
EAST EARL, Pa. — While decades of scientific debate in terms of childhood health and nutrition is the curtain opponents hide behind, the anti-animal agenda is the top hurdle for the Whole Milk for Healthy Kids Act in the Senate.
Senator Roger Marshall (R-Kan.) is the prime sponsor of the Senate bill, and he is a medical doctor in obstetrics and is taking a beating from billboards sponsored by Physicians Committee for Responsible Medicine (PCRM) in his home state of Kansas. PCRM is a known arm of PETA. This tells us quite a bit, doesn’t it?
Meanwhile, the top 3 C’s facing the bill within the dairy industry, itself, need to be addressed.
1) Confusion… Will it really improve milk prices? Addressed in this article
2) Consternation (fear)… What will processors do with “all of that skim”? Addressed in Part II here
3) Competition… Will it reduce the butterfat supply and affect the ramp up in cheese manufacturing or other dairy products? Addressed in Part III here
Plus…. the Checkoff Commitments… Will it interfere with checkoff-funded Milk Molecules Initiative for new beverages that identify and separate specific milk molecules for specific benefits (sleep drinks, energy drinks, immune function drinks, specific protein type drinks)?
All of these questions are quietly floating around and sowing seeds of doubt, leading to analysis-paralysis, while the industry focus is on innovation and exports, not on fresh milk, or a healthy next generation of U.S. milk consumers.
All of these questions will be answered one at a time over the next several weeks, starting with the first “C”: Confusion.
“Will this bill really improve our milk prices?” was the question I was asked by a few farmers at a recent farm show. My response was to ask them if they are concerned about kids having healthy milk options they enjoy and if they are concerned about seeing further erosion of fluid milk sales, and losing another generation of milk drinkers?
I reached out to Calvin Covington, former milk cooperative CEO in the fluid milk markets of the Southeast and a primary architect of pricing milk by component yield even before Order Reform during his years with American Jersey Cattle Breeders.
Covington ran the numbers using 2023 average prices, and calculating pounds of milk, fat, and skim, utilization, and values, which yield a gross value of a hundredweight of milk being used for fluid processing at different fat levels.
“At a $3.00 Class I differential, a hundredweight of milk going for 3.25 fluid milk (whole milk as standardized), returns an additional 25 cents per hundredweight over skim milk,” Covington writes, noting that the difference will change based on different Class I differentials.
Even in the counties with small or zero location differentials on the map, the base differential of $1.60 per hundredweight is still included, which means at least a 13 cents per hundredweight difference.
Previously, Covington has noted in presentations that milk prices improve as the average fat level of total fluid milk sales increases. The current average of all sales, nationwide, stands at 2%. A few years ago, it was below 2%. A fractional change in either direction influences Federal Milk Marketing Order blend prices.
Fluid milk demand also plays a role in manufacturing class prices, affecting farmers in regions where prices are based almost exclusively on cheese.
That’s especially true right now as cheese production has been exploding, and the Class III milk price has been imploding, creating a wide spread below Class IV and pushing FMMO blend prices lower as milk is not moving out of Class III to the higher value Class IV. But the Federal Milk Marketing Law gives Class I dibs to attract milk. So Class I demand is relevant for cheese milk pricing too.
As whole milk sales have increased year-over-year, whole milk became the largest category of fluid milk sales in 2021. It is a bright spot in the fluid milk category.
In 2023, gains in whole milk sales and in lactose-free milk sales are credited with boosting the entire fluid milk category for year-over-year gains in back-to-back months of October and November. This helped flatten the year-to-date loss-curve on total fluid milk sales that had been running 2 to 4% lower year-over-year to be just 1.5% lower cumulatively at year end compared with 2022, according to USDA’s December estimated packaged fluid milk sales report, released in mid-February.
Still, there is ground to make up, as fluid milk sales volume in 2023 is 7.8% lower than pre-Covid 2019, when volume totaled 46.24 billion pounds, down 1.8% from 2018. Then, during pandemic lockdowns, milk sales stabilized, putting the total at 46.2 billion pounds for 2020, virtually unchanged from 2019. In 2021, fluid milk sales volume declined 4.1% to 44.3 billion pounds, followed by a 2.4% decrease in 2022 to 43.3 billion pounds, and now a 1.5% decline in 2023 at 42.6 billion pounds.
NMPF chart, Circana Inc. full-year 2023 data
Meanwhile, the big news reported recently is that plant-based fake-milk beverages saw sales decline by 6.6% in 2023, the second straight year of declines and the smallest sales since 2019, according to data from Circana Inc reported recently.
Real dairy milk sales volume of 42.6 billion pounds in 2023 is not only a much larger category than the lookalikes at 337.7 million pounds, real dairy milk outperformed lookalikes on a trend basis in 2023 — down just 1.5% vs. plant-based being down 6.6%.
By comparison, plant-based beverage sales volume in 2023 was a fraction of 1% (0.8%) the size of real milk sales volume.
Whole milk education and awareness have helped drive this result. Consumers are paying attention to food science, even if the Dietary Guidelines Advisory Committee, USDA (and FDA on labeling) continue to ignore it. Still, more education and freedom for children to enjoy milk is needed. The concern is that even though it is a smaller percentage loss, the 1.5% sales volume loss in the real milk category in 2023 represented 644 million pounds; whereas a 6.6% sales volume loss in plant-based beverages in 2023 represented 24 million pounds.
Speaking with a local milk bottler and ice cream maker recently – a producer handler – I learned he focuses on how his cows are fed to maintain their rolling average 5% butterfat during the summertime to make ice cream and satisfy consumer demand for whole milk. Their whole milk sales have skyrocketed, and this in turn, to the delight of the grocery store they are in, has helped boost sales of all fluid milk as a category in that store.
This has him thinking of doing a 5% butterfat, non-standardized, maybe even cream top, full-fat milk in glass bottles for the store. The store displays a 97 Milk banner at the entrance and 97milk.com website stickers at the dairy case.
Speaking with a manager at a different grocery store chain with stores in Pennsylvania and surrounding states, I learned their sales of whole milk have also increased by leaps and bounds in the past several years, boosting the entire fluid milk category by 14% at their stores throughout the region. They include the 97milk.com website and information in their sales circulars to their shoppers.
As for the schools — If even half of the schools offered a mix of milkfat choices as the Whole Milk for Healthy Kids Act would allow them to do, the amount of butterfat sold as Class I would increase. This would improve the fat side of the fat/skim pricing in the three Southeast Orders and Arizona. It would also help the Federal Order pool dollars reach after actual components are paid first in Multiple Component Pricing Orders everywhere else.
Total Class I fluid milk sales have dropped like a rock since Congress passed the Healthy Hunger Free Kids Act in 2010, which removed whole and 2% milk options from school meals, followed by USDA in 2012 further banning whole and 2% milk as a la carte or vending machine ‘competing beverage’ options in the Department’s Smart Snacks regulations.
Look at the graph above. It was shared as part of Dr. Mark Stephenson’s testimony in the recent USDA FMMO milk pricing hearing.
Improved total sales of school milk hold potential to increase total Class I fluid milk sales. A Pennsylvania school trial in 2019 showed a 52% increase in milk sales when whole and 2% milk options were offered. Students showed a 3 to 1 preference for whole milk over the 1% milk option.
When their options were expanded, more students chose milk instead of refusing it. Students were able to choose, and some of them continued to choose low-fat, and that’s okay! The Whole Milk for Healthy Kids Act is about choice.
A conservative estimate of a 25% increase in school milk sales can be anticipated if Whole Milk for Healthy Kids gets over the finish line in the Senate after its overwhelming passage in December in the House. That is half of the increase seen in the Pennsylvania school trial. If realized, a 25% increase in school milk sales equates to a little over one billion pounds of additional annual milk sales, which could raise the entire Class I fluid milk category by a little more than 2%.
This is based on the fact that kids aren’t just throwing away milk at school. Some are refusing to take the milk they are offered with school meals. This means sales are being lost.
Fluid milk sales declines will only get worse if USDA implements one of two draft proposals the Department announced a year ago. One would eliminate flavored milk from elementary and middle schools altogether. The other would require added sugar levels to be reduced dramatically in flavored milk at school. It’s widely known that when milkfat is retained in making chocolate milk, less added sugar is needed!
Demand for whole milk is beneficial on both the milk fat and skim sides of the equation because whole milk sales move the nearly-complete product – the skim with the fat — leaving some of the fat through standardization, but not leaving any skim.
The result of these options in schools could be even better depending on how many schools choose to exercise these options.
If the industry doesn’t supply what consumers demand, sales are lost. Schoolchildren are already the dairy industry’s consumers, and they will hold the purse strings in the future.
Just as the Dietary Guidelines Committee and USDA continue to ignore science on milkfat, we are all ignoring our nation’s schoolchildren and what they are telling us about why they are turning away from nutrient-dense milk at a time when the nutrients milk delivers – that we may think they are receiving — have never been more important.
When the Pennsylvania school trial ended after one school year, a 95% reduction in the average daily volume of discarded milk was recorded. The school Student Council did an environmental project to measure this by measuring the volume of milk thrown away in unopened and partly consumed half-pint containers.
Shouldn’t we be listening to what the young people are telling us? They are our future, after all.
In the meantime, consider this: Fresh fluid milk is the most notably locally-produced dairy product maintaining dairy farm relevance in regions and communities across America. What will the dairy industry look like five years from now, even one year from now? Maybe we should be asking the schoolchildren to answer that question.
As of Feb. 14, 2024, the Whole Milk for Healthy Kids Act, S. 1957, has 15 sponsors from 12 states as illustrated on this map. Graphic by Sherry Bunting
Farm Bureau economist Danny Munch closes FMMO hearing Jan. 30, 2024 with emergency request for USDA to return Class I ‘mover’ formula to ‘higher of’
By Sherry Bunting, Farmshine, Feb. 2, 2024
CARMEL, Ind. – Over 5 months and 500 exhibits have gone by in the nearly 50 hearing days since the long-awaited national hearing on Federal Milk Marketing Order modifications began Aug. 23, 2023. It ended Tuesday, Jan. 30th with a last-minute witness bringing forward American Farm Bureau’s request for an emergency decision by the USDA Secretary to restore the ‘higher of’ method for calculating the skim portion of the Class I ‘mover’ price.
This hearing went on longer than expected, and the implementation of any final decisions from a multitude of proposals in various areas of FMMO milk pricing are at least 12 to 18 months away under ordinary post-hearing processes, hence the AFBF request for emergency decision-making on the Class I mover to go back to the higher of.
“If USDA would implement this on an emergency basis, it helps with the confidence and perception piece of it. So, if there is a whisper of hope, to see that there will be a positive outcome coming soon, an optimistic change that is coming that fuels them. Do they see things getting better? Or are things going to stay the way they are? ” said AFBF economist Danny Munch while being cross-examined after reading into evidence the letter signed by Sam Kieffer, AFBF vice president of public policy.
The letter stressed that FMMO reform is in step 5 of a 12-step process and a long way from a final rule. Meanwhile, the change in the Class I mover formula was intended to be revenue neutral to farmers, but farmers have lost over $1 billion in 56 months of implementation. This does not even include further losses from depooling of manufacturing milk when the Class I fluid milk price has been out of alignment in FMMO revenue-sharing pools.
“The comprehensive process of amending federal orders, though important, means dairy farmers remain stuck with current pricing regulations until USDA publishes a final rule,” Kieffer wrote in the letter Munch read into evidence. “The current Class I mover was a well-intentioned policy misstep that has reduced dairy farmers’ checks, with little relief in sight. Emergency implementation of the ‘higher-of’ Class I mover formula will help buffer against persistent losses associated with mistaken and outdated policies that have left dairy farmers struggling to make ends meet.”
Munch noted that members re-affirmed going back to the ‘higher of’ calculation in policy meetings during the AFBF National Convention last week, and they voted to make it a priority of urgency.
“Dairy farmers are facing closure. A lot of our members are facing the hard decision about whether to sell their cattle or not. That’s a little window into what our members mentioned last week,” said Munch.
The other reality that is setting in is the fact that large losses are mounting quickly again. The Class IV over III divergence is quite wide – ranging $3 to $4.00 per hundredweight – and the futures markets show it could be above the $1.48 per cwt threshold through the end of 2024.
Farmshine’s Market Moos columnist Sherry Bunting has updated the graph showing how the supposedly revenue-neutral change from the ‘higher of’ to an averaging formula for the Class I mover May 2019 through March 2024 will have reduced Class I value in farm milk checks over 59 months of implementation. This graph of cumulative and year-to-year losses does not include additional losses many farmers have incurred when manufacturing class milk is out of alignment with Class I, and is depooled, with the revenue excluded from the FMMO pools and benchmarks.
In fact, the Class I mover prices announced for January and February 2024 could produce well over $80 million in losses in just the first two months of 2024 once the pounds of Class I milk are sold and counted.
Munch also took the opportunity to remind everyone that when AFBF held the dairy stakeholders forum in Kansas City in October 2022, returning the Class I mover calculation to the ‘higher of’ was the main item that got consensus from every table in the room.
When the difference between the manufacturing classes exceeds $1.48 per cwt, then pooled producers receive less money for their milk under the averaging formula compared with the previous ‘higher of’ formula. When the difference between Class III and IV is $3.48, for example, that lowers the Class I price by $1.00 per cwt. In an FMMO with 75% Class I utilization, that’s a 75-cent loss on all of the milk, not just Class I. In an FMMO with 25% Class I utilization, that’s a 25-cent loss on all of the milk.
Even members of Congress have been doing the math and have talked about putting reversion language in the Farm Bill. They are aware of their role in putting what they were told was a “revenue neutral” change into the 2018 Farm Bill that IDFA and NMPF at the time agreed upon, while adding language that USDA could hold a hearing in two years to vet it for the future.
We are now nearly five years into this change, and it is just one piece of the hearing that just concluded, which included many proposed modifications from milk composition and price surveys, to make allowances and differentials.
Without emergency decision-making by USDA on the Class I mover piece, any potential changes from this hearing are a good 12 to 18 months away, depending on how the post-hearing processes move along, from post-hearing briefs due April 1st to rebuttles, draft decisions, comment periods, referendums, final decisions, and there are proposals that have asked for further delays after the process plays out to avoid “affecting” exchange-traded risk management instruments.
Dairy farmers are just looking for some relief and transparency for the future, according to Munch.
Meanwhile, IDFA and Milk Innovation Group (MIG) have opposed returning to the ‘higher of’ and have proposed several averaging methods for the Class I mover that would continually look backward to compare and change adjusters to make up past losses gradually out into the future.
Farmers have testified that this doesn’t help if it takes two to three years to get that money back after they’ve already lost the farm.
What it boils down to on the Class I mover is the industry wants to move toward more fractionation of milk, more aseptic and shelf-stable beverages, and away from fresh fluid milk. These are the products that can sit in a warehouse for 9 months and for which processors testified they do 9-to-12-month pricing contracts largely with foodservice and convenience stores. Fresh fluid milk already has advance pricing that aligns with the turnaround of that product so hedging on the futures markets is not typically done, and averaging is not needed.
When asked whether AFBF has looked at how the spread may continue in the future to make the averaging formula a loser for farmers, he said Class IV will likely persist above Class III, and yes, they expect the spread to remain large.
Earlier testimony by processor witnesses blamed these Class I formula losses on Covid disruptions, food box programs and large government cheese purchases, but as Munch pointed out, the driver of these losses is something else. When Class IV is over III, we don’t see it in a negative PPD, but milk is depooled, and the full extent of the depooling losses are incurred by farmers, they just aren’t easily enumerated.
“In 2020, the losses (in Class I value, alone, without including the impact of depooling) were over $700 million. In December 2023, the losses crossed over $1.05 billion as they have continued to add up,” said Munch. “The financial detriment is not solely due to a ‘black swan’ event. Some of our farmers were waiting to see if it showed markets shifting. Now, years later, this is still an issue.
“That’s another reason why we are asking for an emergency decision on this right now, and why it came up at our meeting at the convention last week,” Munch testified. “It was intended to be revenue neutral, but it has turned out not to be.”
During cross-examination, Munch also confirmed there hasn’t been much trust by producers to believe processors will replace the dollars they are asking to be removed from FMMO pricing by paying over-order premiums, instead.
“There is a lack of trust and not knowing where their price comes from. There has been a lot of concern about how their milk checks are calculated,” Munch related. “That’s one of the proposals that the American Farm Bureau put forward is more uniform, clear milk checks. There is a perception that things in milk checks have been manipulated. There is a perception of mistrust.
“If there are ways we can build back the trust, and if one of those ways that our farmers have targeted is switching back to the ‘higher of,’ then it’s easier for farmers to understand that calculation, and it has shown, in the most current of times, to be more advantageous to them.”
“It is my pleasure at 10:18 a.m. on 2024 January 30 to determine that this Hearing has ended,” said U.S. Administrative Law Judge Jill Clifton after 506 exhibits have been entered into evidence for and against 21 proposals in various areas of FMMO pricing modification during the 49 Hearing days that stretched over 5 months since its start on Aug. 23, 2023 in Carmel, Indiana. Screen captured from Hearing livefeed
The Whole Milk for Healthy Kids Act has moooved to the Senate. S. 1957 is identical to H.R. 1147. As of Feb. 21, 2024, the Senate bill has 15 sponsors from 12 states. This map shows what states have both Senators or one Senator signed on and which states have none. We need more cosponsors to get this bill out of the Ag Committee and onto the Senate floor for a successful vote. Will YOU call or write TWO? Map by Sherry Bunting
By Sherry Bunting, Farmshine, January 26, 2024 (Cosponsor data updated Feb. 21, 2024)
WASHINGTON — The Whole Milk for Healthy Kids Act is now up to the Senate, where more cosponsors are definitely needed to push it past some barriers and get it to the floor for a successful vote.
Senate bill S. 1957 is not a mandate for whole milk. This bill ends a mandate against whole milk, which is federally banned from schools (2% reduced fat milk is also prohibited. Only fat-free and 1% low-fat milk are allowed to be offered with meals or a la carte or in vending machines).
In December, Senator Debbie Stabenow (D-Mich.) blocked the unanimous consent motion by Senator Roger Marshall (R-Kan.). Marshall was seeking an immediate Senate vote on H.R. 1147 – Congressman G.T. Thompson’s bill – on Dec. 14, 2023, just one day after it was overwhelmingly passed in the House of Representatives by a bipartisan 330-99 vote. It was previously passed in the House Education Committee in a bipartisan 26 to 13 vote.
Marshall chugged a glass of whole milk and gave an inspiring speech about getting the bill to the President’s desk for Christmas. Sen. Marshall is a medical doctor, an obstetrician, and a member of the Senate Ag Committee.
“This is a slam-dunk for American families,” he said.
Sen. Stabenow played the role of the Grinch stealing the opportunity for immediate whole milk passage in the Senate on the heels of the overwhelming House vote as she objected to the unanimous consent request on Dec. 14.
But that’s not the end of this story, just the beginning.
An identical Senate bill, S. 1957, The Whole Milk for Healthy Kids Act was introduced in June 2023. It was read twice on the Senate floor and referred to the Senate Agriculture Committee, chaired by — you guessed it — Sen. Stabenow of Michigan. This means she is in a ‘gate-keeper’ position for this bill. If it doesn’t come before her committee, it will have trouble getting to the floor.
This is where we can help by raising the number of Senate cosponsors! There are 15 sponsors as of Feb. 21 (updated). We need to get to one-third or one-half of the Senate. That’s 35 to 50.
While news reports indicate Sen. Stabenow will retire after this term and is not seeking re-election, her legacy in caring about childhood nutrition and agriculture may be important to her. She stated on the Senate floor that these decisions about milk in school should be made by the scientific committees. She wants to “keep having these conversations.”
Let’s take her up on that by having conversations with our Senators to cosponsor S. 1957. The Dietary Guidelines Advisory Committee has for three cycles and over 15 years refused to consider the preponderance of sound evidence about the benefits of milkfat that the USDA keeps screening out of their deliberations process.
The DGA Committee is meeting right now for 2025-30 DGAs that seek to refine the current dietary patterns, not re-evaluate them. Even the DGA Committee in 2020 admitted their recommended dietary patterns are deficient in key nutrients that milk delivers.
Here’s the bottom line: S. 1957 was introduced in June 2023 by Sen. Marshall (R-Kan.), along with Senators Peter Welch (D-Vt.), Kirsten Gillibrand (D-N.Y.), Ron Johnson (R-Wis.), John Fetterman (D-Pa.), Chuck Grassley (R-Iowa), Cindy Hyde-Smith (R-Miss.), James Risch and Mike Crapo (both R-Idaho), Susan Collins (R-Maine), and Angus King (I-Maine).
Four more cosponsors have been gained, they are Senators J.D. Vance (R-Ohio), Jerry Moran (R-Kan.), Marsha Blackburn (R-Tenn.), and Mike Braun (R-Ind.)
As of January 24, 2024, S. 1957 has 14 sponsors from 11 states in the U.S. Senate. Of these 15, seven are on the Senate Ag Committee (Marshall, Hyde-Smith, Gillibrand, Fetterman, Welch, Grassley, Braun).
We need the rest of the Ag Committee, including Ranking Member John Boozman (R-Ark.). If you live in Arkansas, contact him. If you live in Minnesota, contact Ag Committee Senators Amy Klobuchar and Tina Smith; in Illinois, Sen. Richard Durbin; in Ohio, Sen. Sherrod Brown; in Kentucky, Sen. Mitch McConnell; in Iowa, Chuck Grassley has already signed on, but Joni Ernst has not; in North Dakota, talk with Sen. John Hoeven; in South Dakota, Sen. John Thune; in Nebraska, Sen. Deb Fischer; in Georgia, Sen. Raphael Warnack; in New Mexico, Sen. Ben Ray Lujan; in Alabama, Sen. Tommy Tuberville; in Colorado, Sen. Michael Bennet; and in New Jersey, Sen. Cory Booker.
No matter where you live, contact your state’s two U.S. Senators. We need as many Senate cosponsors as possible, and we need Senators motivated to speak with Chairwoman Stabenow, to ask her to please stop putting the ego and agenda of Washington bureaucrats above the health and welfare of America’s children and the economic stability of America’s dairy farmers.
This bill is about choice. It is not a mandate. It simply allows schools to offer whole and 2% flavored and unflavored milk at school lunch and breakfast without financial penalties for exceeding outdated milkfat limits that are unnecessary or even harmful to children.
If we want children to benefit from the nutrition milk delivers, then we need to deliver the permission for our children to be able to choose milk they will love at school where they have two meals a day, five days a week, three-quarters of the year. That’s how they actually benefit from the complete protein and 13 essential nutrients milk delivers.
Let’s stay positive. We can’t afford to lose ANOTHER generation of milk drinkers and think we will still have a dairy industry in many parts of the U.S. The Whole Milk for Healthy Kids Act is an opportunity for dairy farmers to revitalize and renew fluid milk demand, but more importantly, it’s an opportunity for schoolchildren to choose milk they will love for life and health. It’s also an opportunity to drastically cut the amount of wasted milk in school cafeterias, a win for stewardship of resources and the environment.
A 2021 survey by IDFA showed that 78% of American parents who described themselves as voters, choose 2% or Whole Milk for their families as the most delicious and nutritious option, but their children can choose neither 2% nor Whole milk at school where they have two meals a day, five days a week, three-quarters of the year.
This survey is consistent with what a Pennsylvania school trial in 2019 showed. The students preferred Whole Milk 3 to 1 over the 1% low-fat milk. When 2% and Whole Milk were offered in the coolers, students consumed 52% more total milk and the average daily volume of discarded milk was reduced by 95%. This means more students took the offered milk instead of refusing it, and fewer students threw away the milk they took with their meals.
The Grassroots Pennsylvania Dairy Advisory Committee, under chairman Bernie Morrissey’s leadership, has launched a letter-writing and phone-calling campaign seeking cosponsors for S. 1957. They have put together the tools, but grassroots farmers and citizens must be the ones to carry it out and send the letters and make the calls.
We need to help Senate Ag Committee Chairwoman Debbie Stabenow understand this issue is about lifting the federal school lunch and breakfast ban that was placed on delicious nutritious whole milk in 2012 so that school districts, parents and students can make healthy milk choices that are enjoyed and not discarded.
This bill is not a mandate for whole milk. This bill ends a mandate against whole milk.
This is about options, choice, and a future for kids and dairy farms. Will YOU call or write your TWO?
Find the Washington addresses and phone numbers for your state’s Senators at https://www.senate.gov/ – Click the icon in the top left corner, select your state from drop-down menu to see how to contact them. Or look for your state in this printable directory.
For a more detailed letter, like the one sent by the Grassroots PA Dairy Advisory Committee to Senator Robert Casey, Jr. of Pennsylvania, click here.
For a simple phone message guide for contacting Senate Ag Committee Chairwoman Debbie Stabenow, Majority Leader Chuck Schumer and Minority Leader Mitch McConnell (and if in PA Senator Robert Casey) click here.
To email your Senators: Go to https://democracy.io/ – type in your address, city and zip code, click submit. Your two Senators and one Rep. will show up with red check marks. Click ‘Write to them.’ Then, on the next screen, write the body of your letter. If you want, you can start with who you are, where you live, what you do. You can also mention if you have school-aged children or grandchildren. Then copy and paste from the text below or write your own message simply asking your Senators to cosponsor S. 1957The Whole Milk for Healthy Kids Act
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RE: Whole Milk for Healthy Kids, S.1957 by Senators Roger Marshall and Peter Welch
I write to ask you to cosponsor S. 1957, the Whole Milk for Healthy Kids Act, to bring back the choice of Whole Milk in schools. This bill is not a mandate, it is about choice, so students can have the delicious Whole Milk option to benefit nutritionally from milk they will love. The House passed this in a 330 to 99 vote in December. We hope you will soon add your name to the list of cosponsors for the Senate. Whole milk is standardized at 3.25% fat (3.5% in Calif.). Systematic reviews of the scientific literature show milkfat should no longer be demonized by federal policies, especially for children.
Currently, 95% of U.S. schools are in the National School Lunch Program, which in 2012 made rules requiring only fat-free and low-fat (1%) milk be available to students during school hours. Since then, student milk consumption has declined drastically, and milk has become a most frequently discarded item. A 2021 survey showed 78% of parents choose whole or 2% milk for their families, but these options are restricted at school, where kids receive two meals a day, five days a week, three-quarters of the year. A 2019 school trial showed milk consumption increased by 52%, and waste volume decreased by 95%, when offerings were expanded to include Whole and 2% milk. More students chose milk, and fewer students threw away milk. That is a win for kids, dairy farmers and the environment.
This is a critical time to provide what milk delivers — complete protein and 13 essential nutrients. When students aren’t drinking the milk offered at school, they don’t receive its nutrition. In fact, the Dietary Guidelines Committee in 2020 admitted their recommended dietary patterns lack enough key nutrients, including three of the four nutrients of public health concern that milk provides: potassium, calcium, and Vitamin D, which is fat soluble.
Thank you in advance for helping bring the nutritious, delicious option of Whole Milk back to school lunch and breakfast by cosponsoring S. 1957.
EAST EARL, Pa. – In December, the House passed Congressman G.T. Thompson’s Whole Milk for Healthy Kids Act, H.R. 1147. This is a major milestone for this bill, which passed in the U.S. House of Representatives by an overwhelming bipartisan 330 to 99 vote.
Pictured are a few of the members of the Grassroots Pennsylvania Dairy Advisory Committee and others who joined them for a staff briefing at the Capitol last summer. The focus now is on the U.S. Senate. From left are Christine Ebersole, school nurse in Blair County, Pa.; John Bates, then executive director of The Nutrition Coalition; Nelson Troutman, Berks County dairy farmer and his granddaughter Madelyn, 2022-23 Lebanon County Dairy Maid; Congressman G.T. Thompson (R-PA-15), the champion and prime House sponsor of the Whole Milk for Healthy Kids Act; Sara Haag, 2023-24 Berks County Dairy Princess; Krista Byler, school foodservice director in Crawford County, Pa.; and Sherry Bunting, Farmshine contributor and volunteer advocate for whole milk in schools. Photo courtesy Maddison Stone
“The next stop is the Senate, and we are going to have to work hard to get the Senate bill (S. 1957) to the floor and passed. In Pennsylvania, we need to work on our Senator Bob Casey. We already have Senator John Fetterman as a cosponsor of the bill, but we need Senator Casey also,” says Nelson Troutman, Berks County farmer and originator of the Drink Whole Milk 97% Fat Free baleboards that led to the 97 Milk effort and 97milk.com
“We also need more Senators to cosponsor S. 1957 from across the country,” adds Bernie Morrissey, retired agriculture advocate from Robesonia, Pa. “We need dairy farmers, agribusinesses, organizations and citizens all across the country to reach out to their Senators to cosponsor this bill.”
The Senate bill has 14 cosponsors from 11 states as of January 20th. They include Republicans, Democrats and an Independent as follows: both Dr. Roger Marshall (prime sponsor) and Jerry Moran of Kansas, Peter Welch (prime cosponsor) of Vermont, Ron Johnson of Wisconsin, John Fetterman of Pennsylvania, both James Risch and Mike Crapo of Idaho, both Susan Collins and Angus King of Maine, Kirsten Gillibrand of New York, Cindy Hyde-Smith of Mississippi, Chuck Grassley of Iowa, J.D. Vance of Ohio, and Marsha Blackburn of Tennessee.
“Every state has two United States Senators. We want every dairy farmer, every organization and business calling their two Senators. If they are already a cosponsor, thank them. If they are not a cosponsor, please write to them, and use our sample letter (or the template at the end of this article),” Bernie explains.
(Find the Washington addresses and phone numbers for your state’s Senators at https://www.senate.gov/ – Click the icon in the top left corner, select your state from drop-down menu to see how to contact them. Go to the end of this article to learn about email options. Some additional resources can be found in a folder at https://qrco.de/WholeMilk-Info )
“We have written to Senator Casey (see letter at top) to let him know how important this is to us, to the children of Pennsylvania, and to the dairy farmers. We need more people, organizations, and businesses to write to him also. If this doesn’t work, it will be our own fault for not getting involved,” he stresses, adding that constituent phone calls and visits are also welcome.
“We must also contact Senate Ag Committee Chairwoman Debbie Stabenow of Michigan. It is important that she knows how vital this bill is to come through her committee to the Senate floor,” Bernie notes. (The call-in notice below was published in the Jan. 5 Farmshine).
The Grassroots Pennsylvania Dairy Advisory Committee asks organizations and agribusinesses to use the sample letter on this page as-is or tailor it to their state’s Senators and also send it out to all their members or customers asking them to each sign it and send it to their two Senators as well.
“Let us know if you did this,” Bernie continues. “We want to know: Did YOU contact your TWO?” (Email Sherry Bunting at agrite2011@gmail.com or text or call 717.587.3706 to confirm you contacted your two.)
“After all,” Bernie observes: “If the dairy farmer’s next generation of consumers – the children — cannot choose milk they will love, what is your future as a dairy farmer? And what is their future as tomorrow’s leaders?”
“Whole milk is nutritious and delicious. Science supports this choice. It’s up to each one of us to get it done.”
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To email your Senators directly, go to https://democracy.io/ – type in your own address, city and zip code, click submit. Your two Senators and one Representative will show up with red checkmarks. Click ‘Write to them,’ and on the next screen compose the body of your letter. First, say who you are and where you live/work/farm and mention if you have children or grandchildren in school, if you wish. Sample text about cosponsoring S. 1957 can then be copied and pasted from the template below:
———————————————————————————————————————-
Dear Senator,
I write to ask you to stand up for our children, parents, schools and dairy farmers by cosponsoring S. 1957, the Whole Milk for Healthy Kids Act, to bring back the choice of Whole Milk in schools. This bill is not a mandate, it is about choice, so students can have the delicious Whole Milk option to benefit nutritionally from milk they will love. The House passed H.R. 1147 in a bipartisan 330 to 99 vote in December. We hope you will soon add your name to the list of Senate cosponsors for S. 1957.
It is vital to have this choice. Whole milk is standardized at 3.25% fat (3.5% in Calif.). Systematic reviews of the scientific literature show milkfat should no longer be demonized by federal policies, especially for children.
Currently, 95% of U.S. schools are in the National School Lunch Program, which in 2012 made rules via the Healthy Hunger-Free Kids Act requiring only fat-free and low-fat (1%) milk be available to students during school hours. Since then, student milk consumption has declined drastically, and milk has become a most frequently discarded item. A 2021 survey showed 78% of parents choose whole or 2% milk for their families, but these options are restricted from their children at school, where they receive two meals a day, five days a week, three-quarters of the year. A 2019 trial at a PA school showed milk consumption increased by 52% and waste volume decreased by 95% when offerings were expanded to include Whole and 2% milk. More students chose milk, and fewer students threw away milk. That’s a win for kids, dairy farmers and the environment.
This is a critical time to provide what milk delivers — complete protein and 13 essential nutrients. When students aren’t drinking milk offered at school, they don’t receive its nutrition. In fact, the DGA Committee in 2020 admitted their recommended dietary patterns lack enough key nutrients, including three of the four nutrients of public health concern that milk provides: potassium, calcium, and Vitamin D, which is fat soluble.
Thank you in advance for helping bring the delicious option of Whole Milk back to school lunch and breakfast by cosponsoring S. 1957.
USDA’s cross examination reveals possible flaw in simulator model result
By Sherry Bunting, Farmshine, Jan. 19, 2024
CARMEL, Ind. — Shadow pricing, demand elasticity, commoditized loss of prior incentives, balancing cost, give-up cost, base differential, uniform differential, market-clearing price…
These terms ruled the day when the USDA National Hearing on Federal Milk Marketing Order (FMMO) proposals resumed in Carmel, Indiana this week after a more than four-week recess.
The hearing began in late August. It did not conclude by Fri., Jan. 19, so it will again recess until Jan. 29.
American Farm Bureau estimates that another 270 days of post-hearing processes must follow before a USDA decision could be implemented, and even this is subject to proposals that seek a 15-month delay between decision and implementation due to potential impacts on CME futures-based risk management tools, such as Dairy Revenue Protection (DRP).
This is far from over, and hanging in the balance is the Class I price calculation, now based on an averaging method, under which farmers have lost more than $1.02 billion since May 2019 vs. the previous ‘higher of’.
Testimony Tues., Jan. 16 included Dr. Mark Stephenson, retired UW-Madison dairy economist on behalf of Milk Innovation Group (MIG), made up of ‘innovative’ and branded fluid milk processors, including fairlife, HP Hood, Anderson-Erickson, Danone North America, Shamrock, Organic Valley, Aurora Organic, and Pennsylvania’s own Turner Dairy Farms.
Dr. Stephenson delivered his bombshell for MIG that was based on analysis he did using 2016 data in a simulator model, from which he made “certain discoveries.”
First, Stephenson suggested that fluid milk is shifting to become price-elastic vs. the long-held belief that fluid milk sales are price-inelastic. This was followed up by fluid milk processor representatives showing post-Covid fluid milk sales volumes declined as prices rose.
Stephenson cautioned USDA to refrain from setting regulated prices too high, saying this would reduce returns to producers by reducing total fluid milk sales.
This suggestion was challenged in cross examination. In fact, AFBF chief economist Dr. Roger Cryan noted the FMMO focus on fluid milk was originally partly predicated on its “public good” as a food staple, almost akin to a “public utility.”
In cross examination on Jan. 17, Stephenson also revealed he was paid by MIG to analyze the $1.60 base differential, and his work began before MIG finalized its proposal to remove the $1.60 per cwt. base differential all the way down to zero for all Class I milk, nationwide.
Currently, the $1.60 base differential is built uniformly into the Class I price for every regulated county across all FMMOs. The varied location differentials are added to the base differential and spread across the revenue-sharing pools.
Stephenson used the U.S. Dairy Sector Simulator Model (USDSS) to develop a map as though a “milk-dictator” could efficiently “move milk to its highest global use” through various constraints.
In the marginal value map result, Stephenson said the U.S. average value of the differences was minus-38 cents, indicating on a national average, it is more valuable (cost saving) to the model to have milk in a cheese plant than in a fluid plant in most counties. The range goes from somewhat more than $2 per cwt more favorable to a cheese plant (in red) to somewhat more than $2 per cwt more favorable to a fluid plant (in green) in the Southeast. From this “potent revelation,” Dr. Stephenson concludes that, “The model result bolsters the argument to not dilute the value of the $1.60 into the pool if that value represents a balancing cost for fluid and an opportunity cost (give-up) for manufacturing plants. Rather, require the fluid plants to pay the $1.60, but let the fluid plants pay that directly to the farms, cooperatives or manufacturing plants who supply the milk” to the fluid plant.
The map showed the incremental differences in ‘Class I minus Class III “shadow pricing,” across the country.
These marginal value differences, said Stephenson, reflect the opportunity costs of getting manufacturing plants to give up milk to fluid plants in the Central U.S., where milk production exceeds population vs. the cost to balance fluid milk markets in the East, particularly the Southeast, as well as in California and southern Nevada, where population exceeds milk production.
It was the questioning from USDA AMS administrator Erin Taylor on the ‘shadow pricing’ figures in various anchor cities that prompted Stephenson to concede: “You may have caught a major flaw in what I have done here, so I would want to look at this more carefully.”
Yes, he will be back to address such questions when the ever-lengthening hearing resumes on January 29.
Notwithstanding exposure of a possible flaw in the simulator analysis, Stephenson said the ‘market-clearing’ price is the target to aim at, and the system of setting regulated minimum prices “should err on the side of being too-low instead of too-high.”
He said processors will pay premiums in the breach of a ‘too-low’ minimum price, but there are few options for processors to deal with a ‘too-high’ minimum price — other than to opt out of regulation for manufacturing plants (de-pool), but that fluid milk plants have no ability to opt out. They are required to remain regulated by FMMOs.
“Manufacturing is by far the largest use of milk in our dairy industry,” he said, noting that Class I fluid use at 18% of total U.S. milk production (regulated and unregulated). Therefore, he said, manufacturing use should no longer be treated in the FMMO system as “the trailing spouse in the marriage.”
On MIG’s behalf, he introduced a new way of looking at the marginal value between Class III and Class I, and a mechanical change that could be made in how the $1.60 base differential is paid as needed directly to producers, cooperatives and plants that actually supply milk to Class I plants, instead of being paid to the FMMO pools.
The $1.60 became a uniform part of the Class I price in the 1999 Order Reform. About 40 cents of this $1.60 was included to represent the cost of farmers transitioning from Grade B to Grade A. The rest represents ‘give up’ costs from manufacturing to Class I and balancing costs to serve the fluid market.
Stephenson backed up MIG’s assertion that farmers don’t need any of this $1.60 base differential because virtually all milk produced today is now Grade A. During cross examination, NMPF attorneys brought up the cost farmers have to maintain Grade A status. Don’t their costs count here?
Undeterred, Stephenson suggested that these costs are accounted for in the classified pricing since all milk for all uses is Grade A, today. He said that USDA uses ‘minimum pricing’ as a tool so that the regulated price leaves space for voluntary premiums that processors can pay to “incentivize something else.”
“Being chronically above the market-clearing price creates a surplus product, which the market can’t clear,” said Stephenson. “Our dairy markets have always walked on a knife’s edge. Being plus or minus 1% on milk supplies can cause some pretty big swings in prices as the markets do attempt to clear that.”
As for removing the $1.60 uniform price differential either from the price or the pool, Stephenson said it is like “other premiums” that have become “commoditized.”
He likened it to the rbST premium and milk quality premiums, saying those premiums have also become “commoditized.”
For example, when farmers were first asked to give up rbST and sign pledges, a premium was offered. Now, that premium is not paid, he said, because the practice of abandoning rbST is now “commoditized.”
Likewise, said Stephenson: “Milk quality (low SCC) has improved so much that those premiums are not there anymore. They have also become commoditized.”
So, the better dairy farmers get, the more their incentive premiums — and even big chunks of their regulated minimum price — are at risk to be cannibalized by milk buyers because the farmers have now done what they’ve been incentivized to do, so they don’t need to be paid to do it.
MIG also seeks to stop NMPF’s proposal to tweak and raise location differentials across the Class I surface map, putting on the stand some of their members to show how unfair competition arises between independent bottlers and cooperatively owned fluid milk plants in the same region.
For his part, Stephenson noted the concept of pulling the $1.60 base differential out of the pool may discourage non-productive distant pooling.
This week was certainly eye-opening as MIG is all about the processor costs with zero regard for producer costs. They even put an HP Hood representative on the stand who included the $120 million recently announced for expanding the Extended Shelf Life (ESL) plant in Batavia, NY as a “balancing cost,” that somehow justifies giving back the base differential to processors even though processors can pass their costs on to consumers, whereas farmers cannot.
Under cross examination, Hood’s representative admitted that plant-based beverages are also bottled in those so-called ESL ‘milk balancing’ facilities, along with premium products like Lactaid.
Meanwhile farmers continue to incur costs associated with a whole host of improvements that were at one time incentivized. It appears the processors expect farmers to forgo being paid for those costs simply “because everyone’s doing it” and incentives are no longer needed.
The idea here is to deflate regulated minimum prices as much as possible in search of the elusive and not-well-defined Holy Grail: the market-clearing price.
Processors want cheaper milk, and they’ve got multiple proposals to accomplish that. They want to deflate the regulated minimum milk price to free up their ability to pay premiums for “something else.”
In fact, in his testimony, Stephenson admitted that as these costs and premiums are “commoditized,” space is freed up to “pay premiums for something else.”
What is the “something else” that processors will pay to incentivize after they potentially succeed in reducing the regulated minimum price in multiple ways through multiple proposals?
Are climate premiums the next thing coming once the milk price is deflated far enough? Will USDA buy what MIG and IDFA are selling?
Ag Moos 