Buy back and give? Sell cheap and dump? You decide.

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Cheese was loaded recently for Hunger Task Force, based in Wisconsin and part of the Feeding America network. Changes in USDA feeding programs are making Food Banks a more vital food access point for the poor. Farmers rise to the occasion when it comes to feeding the hungry. Dairy Pricing Association seeks to work continually with farmer funds to see that paying forward helps give back as times are very tough today on dairy farms across America. Facebook Photo: Dairy Pricing Association

Commentary, by Sherry Bunting, Farmshine, December 19, 2017

BROWNSTOWN, Pa. — Buy back and give? Or sell cheap and dump?That is the question.

“Just imagine what we could accomplish if there was a groundswell of farmers coming on board to fund this process to clear excess milk and dairy products and help others in need at the same time,” notes Amos Zimmerman of Dairy Pricing Association, Inc.

Zimmerman lives in Lancaster County, Pennsylvania and works with farmers here and in the Midwest on behalf of Dairy Pricing Association. He and others involved are excited about the organization’s track record and the new projects that are starting up that are funded by voluntary assessments. Dairy farmers sign up because they believe in the power of helping to clear the overloaded milk system of excess while helping people in need as the ultimate form of promotion.

Founded initially in Taylor, Wisconsin, the farmer-funded organization operates nationwide to help balance dairy plants across the country.

Dairy Pricing Association (DPA) does not disrupt the flow of milk. Instead, DPA uses the funds contributed by dairy producers to buy dairy products for donation to feeding programs in a way that has begun making a difference and has the potential to do even more.

Disappearance positively affects price, according to DPA literature. However, this is not milk ‘dumping,’ this is dairy giving. DPA’s activity in the marketplace is one that values the hard work of the dairy farmers while recognizing the pain and suffering caused by hunger in the world. DPA purchases dairy commodities and donates them for humanitarian purposes, for a two-fold benefit.

These and other donations show the heart of this dairy industry we are all proud to be a part of. Though it has been around for more than a decade, DPA is a lesser-known entity that is out there buying and donating milk and dairy products, not just at the holidays, but consistently throughout the year.

Buying excess dairy for donation is something Dairy Pricing Association has been expanding upon since its inception gathered steam in 2009 when a call to action by founder Robin Berg of Wisconsin led to a more systematic method. Farmers designate voluntary milk check assessments by signing up. Now others can also donate through a joint effort between Dairy Pricing Association and Hunger Task Force.

Tom Olson, DPA vice chair, tells of this history: “After the second meeting we could see that no one in the industry was going to help get this started. We were going to have to start this at someone’s kitchen table.”

With private donations for startup costs, Dairy Pricing Association, Inc. was born.

Today, their work is supported by dairy farmers who sign up to pay a voluntary assessment for the expressed purpose of buying excess milk and dairy products and channeling it to feeding programs that are the only option for poor consumers. The base of operations has expanded from the Upper Midwest into California and the Northeast as more farmers in Pennsylvania, New York, Ohio and Indiana have come on board to provide the necessary funding.

Dairy Pricing employee Amos Zimmerman of Lancaster County, Pennsylvania, is excited about the organization’s track record and the new projects that are starting up. In a phone interview with Zimmerman, Farmshine learned that dairy farmers can tailor the amount and purpose of their voluntary assessment to participate in this double-goal: To help clear the overloaded milk system of excess and help those in need as the ultimate form of promotion.

Every three months for the past two years, Dairy Pricing has been buying block cheese for donation to feeding programs. “We have gotten into a routine and the industry is starting to predict our purchases,” said Zimmerman. “We are changing things up and working on new projects for next year to start in January.”

One new project Dairy Pricing is working on is to satisfy the desire of the Central Pennsylvania Food Bank to have cheese donations coming every month of the year, not just at certain intervals, with the Food Bank paying half and DPA paying half.

“Central Penn Food Bank came to us to talk about a monthly arrangement,” Zimmerman said. With this in mind, Dairy Pricing is looking at a plan with Pennsylvania milk, processed in Maryland, but then cut to consumer package size by a Pennsylvania firm. DPA would purchase the cheese and Central Penn Food Bank would pay wholesale price for half of it, delivered in retail-size, pantry-ready.

Back on the bulk cheese purchases in the Midwest, recent loads of block Cheddar include one in October at 41,592 pounds, purchased by Dairy Pricing for donation to the Houston Food Bank for their needs after Hurricane Harvey.

The first load of blocks were purchased in 2016, when 30,588 pounds were bought at $1.65/lb for the Hunger Task Force in Milwaukee. That was followed by a $1.90/lb purchase of 41,604 pounds in December 2016 for Hunger Task Force and 41,860 pounds at $1.65 in April 2017 for Hunger Task Force. In July 2017, 39,662 pounds were purchased at $1.61 for Ruby’s Pantry in North Branch, Minnesota, followed by the October purchase of 41,592 pounds at $1.84/lb for the Houston Food Bank of Houston, Texas.

Dairy Pricing will be trying to do both the bulk purchases in the Midwest and the new programs in the Northeast and Midatlantic region, with the money available through dairy farmers’ voluntary assessments, according to Zimmerman.

Similar milk balancing through cheesemakers for feeding programs has also been happening in the Midwest, including recent milk to cheese through Lynn Dairies to The Community Table in Eau Claire, Wisconsin.

Another new startup project is coming about through inquiries by dairy farmers wanting to be involved in dairy donations through Christian Aid Ministries, based in Ephrata, Pa.

“They only handle powder because it goes overseas,” said Zimmerman. People who want to be involved in that project can sign up for a voluntary 15-cent/cwt assessment.

The powder project will be 100% whole milk powder to a host of oversees destinations where hunger is prevalent.

“Whatever we buy or donate, it has to be the whole milk product, not just the skim,” says Zimmerman, who spends his days on the road talking to farmers and attending meetings. He does a conference call with farmers every Monday night, attracting 100 to 150 people, and he serves as the boots-on-the-ground contact person for Dairy Pricing here — covering the whole East Coast and spending time in Ohio, Indiana, Kentucky, Virginia and Wisconsin.

He also works with farmers and farm groups on the side to help them with local processing start ups and other marketing solutions. He has been involved in the dairy industry his whole life, working as a herdsman for dairy farms since he was 18 and known for his curiosity in always looking for information about how the dairy industry works with a keen interest in the processing side.

“I’ve always had an interest in it, and since the marketing system is going the way that it is, people are having to find different routes to their consumers,” said Zimmerman, adding that “local consumers come to us all the time wondering how to support local farmers.”

This has become a difficult direct line within an increasingly national and global marketplace. Processing investments are the tough part of this task.

.“I can’t stress enough how important it is for dairy farmers to be informed to make better decisions,” Zimmerman says.

Since Dairy Pricing Association expanded to the east with its producer voluntary assessments, the very first milk donation was to New York for hurricane victims in 2012. When surplus milk is available over holidays, Dairy Pricing pulls gallons for donation, including donations last year to feeding programs in Washington D.C.

“None of what we do is to get the credit for doing it,” said Zimmerman. “We are doing this because it needs to be done.”

In fact, a bit more credit for doing this work could help get more of it done. As farmers learn more about what DPA is doing, more voluntary milk check assessments could accomplish an even greater impact.

Zimmerman noted that since Dairy Pricing balances the bottling of White Gold Milk and Chocolate Gold here in the East at California standards, this is the brand they typically pull from the wholesale supply for donations of fluid beverage milk. This utilizes both fresh fluid milk and powder to arrive at the higher solids content of the milk, including a 3.5% fat profile for whole milk instead of the minimum standard of 3.25%.

“What we can accomplish hinges on signups,” said Zimmerman. “The more we get the word out, the more interest we see. In 2014, we could hardly talk to farmers, prices were good. But that’s when we should be jumping on board to fix things before they get bad again.”

A ubiquitous figure in local dairy circles, Zimmerman gets calls every day from farmers in trouble thinking of selling their cows. “This problem is deeper than the milk prices,” he says. “It is the whole structure that is at risk that could destroy the infrastructure, even in Lancaster County.”

The typical voluntary assessment signup is 10 cents/cwt. But can be as little as 5 cents/cwt or as high as 30 cents. To specifically participate in the whole milk powder donations through Christian Aid overseas, a 15 cent/cwt level is required. (See form at the end of this story).

“It is all a donation, and farmers can cancel at any time,” Zimmerman explains, stressing that this assessment cannot be used to replace the 15-cent promotion checkoff nor the 4-cent CWT deductions taken off milk checks by member cooperatives.

In addition, others can also donate through a joint effort with Hunger Task Force. (See form at the end of this story).

DPA notes at their website that when milk is in great supply, many loads are sold at up to $3 per cwt below the Class III price. “When this happens, this cheap milk goes into storage as cheese or powder and starts to pile up,” according to DPA. “We need to have a fund to buy at these times to keep the system from being overloaded.”

Through Food for the Poor and Christian Aid, exporting to 17 countries overseas, the need is great for all the whole milk powder that can be supplied and as well for domestic use through Feeding America for soup kitchens and feeding the homeless here in the U.S.

The point is for the dairy product to go to people who could not get it any other way except through donation, not to take a sale away from a store. It is estimated that for every semi-trailer load of whole milk powder exported or used in domestic soup kitchens, eight tanker loads of milk are removed from the overloaded system.

Because the program is voluntary, producers can follow the progress of what DPA is doing, and can continue their contributions or cancel at any time.

Whether it is tens of thousands of gallons of milk or tens of thousands of pounds of cheese, DPA has steadily increased its benevolent presence from coast to coast as more farmers sign up to be involved.

Who are DPA members? They are dairy farmers from coast to coast shipping their milk via nearly every cooperative and direct milk plants. These dairy farms span the milk marketing and handling system across the U.S.

According to the DPA website, farmers funding Dairy Pricing Association with their voluntary assessments include shippers to Agri-Mark Inc. in New England; Associated Milk Producers in Minnesota, Clover Farms Dairy in Reading, Pa., Cloverland Farms Dairy in Baltimore, Md., Cooperative Milk Producers in Blackstone, Va., Dairy Farmers of America, Dean Foods, Farm First Coop in Wisconsin, Galliker’s Dairy in Johnstown, Pa., Grassland Dairy Products in Wisconsin, Guggisberg Cheese in Ohio, Horizon Organic based in Colorado, King’s Kreamery in Lancaster, Pa., LaGranders Hillside Dairy in Wisconsin, Lancaster Organic Farmers Cooperative and LANCO-Pennland, both based in Hagerstown, Md., Land O’Lakes, Lynn Dairy in Wisconsin, Maryland-Virginia in  Reston, Va., Mount Joy Coop, Mt. Joy, Pa., Nasonville Dairy in Wisconsin, National Farmers Organization headquartered in Ames, Iowa, Organic Valley, Prairie Farms based in Illinois, Smith Foods in Ohio, Westby Cooperative in Wisconsin, and former DMS shippers in New York and Pennsylvania.

 

Current dairy prices are not sustainable for the future survival of dairy farms and the rural communities and businesses that rely on them. At the same time, we read about the concerns of food insecure Americans as well as staggering numbers of war refugees and victims of disasters and famine throughout the world.

If our industry builds a storehouse of dairy goods that end up pressuring farm milk prices lower, and if growing numbers of people here and abroad are unable to access dairy nutrition without assistance, what better way to meet the needs of both than to voluntarily, consistently and strategically provide this assistance?

When the storehouse of goods is channeled to the needy through farmer-funded purchases in a way that helps to balance the market, America’s farm prices can improve and the food-security of our nation in the future can be assured.

The government and the industry do not have a plan that adequately addresses either of these concerns. This is why DPA exists as a way for farmers to help themselves by helping each other and helping those less fortunate at the same time.

Dairy Pricing Association is not funded by the government, nor is it funded by processors or marketers. Participation in DPA funding cannot be used to replace the 15-cent federally mandated promotion checkoff or the 4-cent CWT assessment. Nor can it  replace new deductions showing up on milk checks in the current marketing environment.

However, DPA attracts new farmers every day because the mission is funded by dairy farmers who believe that sitting back and doing nothing but complain is not an option. They want to take the future by the horns and move forward.

Through membership donations in the form of 5-cent to 15-cent per hundredweight (some even give 30 cents/cwt), farmers are joining together through DPA to strengthen the organization’s ability to place orders for finished dairy products from processing plants and once the order(s) are filled, donating the product for humanitarian purposes.

The possibilities of this concept are only limited by the funding available, and that means dairy farmers, themselves, can make the difference. Unlike the marketing and balancing fees that are being increased on dairy farm milk checks, the Dairy Pricing Association assessment is completely voluntary, simple, direct, farmer-run and built from the ground up to help dairy farmers help themselves, help each other and help children and families who know real hunger throughout America and the world.

The question is: Do farmers want to gain strength by joining together voluntarily to buy back their own excess for giving to people less fortunate?

Or do they want to continue to allow the system to do the incomplete job it has been doing – bound by its Federal Order rules that allow dumping but not giving, and costing farmers ever-higher deductions from their milk checks to “balance” the excess through below-class sales that create market-depressing inventory or by dumping milk down the drain at a cost to the farmers?

Hats off to the givers. May their vision and efforts continue to multiply.

To learn more about Dairy Pricing Association, Inc. and to acquire forms for milk check pledges, call Tom Olson at 715.284.9852 or 715.299.1332 or Amos Zimmerman at 717.872.1464  or email dpainc@ceas.coop. Visit DPA online at visit dairypricing.org and follow on Facebook @dairypricing. Ask about national producer conference calls.

To learn more about Christian Aid Ministries, the vehicle for a new farmer-funded Dairy Pricing Association, Inc. project of whole milk powder donations for hunger assistance worldwide, visit christianaidministries.org and dairypricing.org

Find out more about what they are doing, and then decide if your farm can help make a positive two-fold impact on markets and hunger. See below the forms for farmer milk check deductions and for non-farmer donations.

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Electronic trading brings anonymity. Understand how CME dairy spot markets function

By Sherry Bunting, Reprinted from Farmshine, February 9, 2018

CHICAGO, Ill. — The CME dairy spot markets have been evolving since arriving in Chicago after a tumultuous past on the Green Bay Cheese Exchange, writes Ronald K. O’Brien, II, a dairy market risk specialist and geostrategist. He is director of global derivatives for Interfood, multidimensional global dairy risk managers using physical and financial global dairy markets to offset internal sales and inventory risk.

CME(RonOBrien).jpgRecently, Farmshine interviewed O’Brien to better understand from a trader’s perspective how the dairy spot markets function since the transition from live floor trading to electronic trading in the second half of 2017. We also gained insights on some differences between the global and domestic trading platforms.

This conversation matters because the daily price at which those 15 minutes of CME trading close — whether bid, offer or trade — helps set pricing for the weekly USDA National Dairy Product Sales Report for cheese, whey, butter and nonfat dry milk (NFDM), which in turn sets the monthly commodity prices that are plugged into the Federal Order formulas that form the basis for how dairy farmers get paid for their milk.

O’Brien points out that markets are based on the “who” and the “what.” That’s as much true about CME dairy spot markets as it is about cattle auctions. People want to know, in the moment, where the auction is going in price, but also who is buying and who is selling, to infer a sense of market demand and resistance at those positions.

“Fundamentally, we have the same participants on the dairy spot markets, and it is still like coming to an auction,” says O’Brien of how bids, offers and trades occur on the electronic platform today, just like when it was live on the floor of the Chicago Mercantile Exchange (CME). “The difference, now, is the anonymity. This requires you to participate if you want to know what is going on. This brings a little more interest to those 15 minutes of spot trading.”

The anonymity also creates a situation where the largest market leaders know more because they know the buyer or seller once a trade is completed; whereas before, others outside of that transaction could observe and speculate based on which brokers were trading.

O’Brien observes that when the CME dairy spot markets traded live on the floor, analysts would not precisely know who was buying and selling; however, they knew the brokers and who they typically bid or cleared for.

CME(lastOpenOutcryDAIRY)For example, in past years, the largest physical producers and end users in the United States would regularly use the same clearing broker for their spot transactions, resulting in the majority of market participants acting on this inferred knowledge in real time. A single bid or offer from certain brokers would set distinct levels of support and resistance, and this was coveted as the most prolific dairy information of the day.

The electronic platform “made this all disappear,” says O’Brien. “Spot traders know who is trading when a transaction is complete, at the end of the auction, if they are involved in that transaction, but they have no clue about who else was involved during the session.”

Thus, he says, “it is now more difficult to sense how strong the support is or how heavy the resistance because (with electronic trading) you don’t know if the buyer in a session was the largest end user, or your grandmother taking a position.”

In fact, anyone with eligible product in a warehouse, a CME auction account and a funded futures account can sell on the CME dairy spot market.

This is different from the Global Dairy Trade (GDT), which is run by Fonterra of New Zealand. In the GDT biweekly internet auction, not just anyone can bring product to that exchange. “They have to be vetted and approved to offer product on the GDT, and selling is limited to processors,” O’Brien notes.

For this reason, the CME is more of a “natural and price transparent marketplace,” he explains.

He calculated the trade volume for the 12 months leading up to the change from floor trading to electronic trading, noting that 38,000 tons of 40-lb blocks and barrels were traded on the CME during the second half of 2016 and first half of 2017.

Trade volume on 40-lb Cheddar blocks has increased 16% and on barrels 38%. O’Brien points out that the amount is still relatively small considering that the U.S. produces 5.5 million tons of cheese annually, which is essentially priced off the CME session trades, bids or offers.

“We were trading 7/10ths of one percent of total cheese production on the CME spot market,” says O’Brien. Since the change to electronic trading, this has increased slightly to just shy of 1%.

The volume of CME spot butter trades, on the other hand, has increased 138%, while NFDM has been flat.

With more trades, one can argue that the CME spot markets have become a better price discovery mechanism via electronic trading, particularly for butter. For the 12 months prior to going electronic, the CME traded 1.44% of the total U.S. butter production, compared with trading 3.7% of total production in the past six months since going electronic.

“That is a dramatic jump in the price discovery for butter,” says O’Brien.

The CME spot market for cheese has some product specification differences from butter and powder. “It is a fresh cheese market,” O’Brien points out. “Sellers cannot bring product older than 30 days to the CME, so we can have 400 million pounds of cheddar in inventory, but if there are no sellers of fresh cheese, and if buyers have a need for fresh cheese, we get these massive short-squeezes.”

He notes that the CME could price fresh cheese at $1.60/lb on the spot market, but cheese that is 31 days old or older could be trading through normal distribution channels at discounts as great as 20 cents per pound.

In that sense, the CME gives dairy farmers hope — when they see Cheddar up 10 to 20 cents on the CME spot market — but then the rally erodes in real time as the “short-squeeze” on fresh product passes, and the CME spot market falls.

This volatility is often seen from week to week, and cheesemakers can get caught when their input cost for milk does not align with their output sales of cheese that is older than 30 days.

On NFDM, the product age window is 6 months, and for butter it is one year, making those spot markets more reflective of supply and demand in terms of stored product realities.

“We could have a better marketplace (for cheese), but at the moment, these are the boundaries that participants are forced to operate within, regardless of the increased volatility that results from them…volatility greases the track and gets things moving,” observes O’Brien.

His experience with dairy market risk over the past two decades gives him insights into many sectors of the dairy industry. He suggests that dairy farmers need to be aware of their options and be realistic about their cost of production.

“Everyone is in same boat (in terms of market risk), but for dairymen, it is different because they are mostly price takers, while physical trading houses and other market participants that have risk management departments can be price makers,” he says. “Physical traders incur risk when they can manage it, and if they cannot, they immediately offset it or avoid it altogether, whereas dairy producers make milk and work hard and do some things about risk on their inputs but neglect fixing the price of milk outputs.”

O’Brien notes that with the farm milk price based almost completely off the CME spot markets, this is also affected by delays. The CME spot market can be going up while the USDA weekly National Dairy Product Sales Report can be going down in the same window of time. Meanwhile, the CME spot dairy markets, especially on cheese, remain a “market of last resort” with limited participants on the processing side.

While there is increased activity of end-users coming to the spot market directly to buy — especially for butter — the spot market is mainly selling more product with the same participants. There are still a limited number of butter sellers — traders fulfilling contracts and a handful of processors that make butter.

The large processors and cooperatives focus on allocating the bulk of their sales for the year and make inventory based on those allocations. Global dairy traders, on the other hand, have ever-changing risk profiles, which forces them to buy, sell and arbitrage to survive.

“We don’t operate under the luxury of make allowances,” says O’Brien of the role of market participants such as themselves.

Meanwhile, market dynamics are changing in the cheese industry where cheese plants are being built as much for the cheese as for the whey stream valorization. This creates a supply of Cheddar barrels that can build up and are seldom exported.

U.S. processors continue to produce yellow Cheddar blocks and barrels, but few globally have the equipment to break down the barrels, so they are not exported. The industry makes what it wants — what milk is priced from — but is that reflective of the market?

There are certainly inefficiencies in the current commodity market pricing systems that underpin the Federal Order milk pricing. Can a case be built to improve this?

Could inclusion of more indexes built off more pricing points (products) bring better market transparency?

Meanwhile, the four basic commodities from CME to Federal Order set the allocation pricing barometer for dairy processing as well as both the spot milk and milk futures markets.

Looking overseas, O’Brien suggests that the countries of the EU “would love what we have in the ability to lock in a milk price for up to two years (via a mechanism like the CME futures markets). For the most part, farmers in Europe are paid on what milk-derived sales their co-op or processor can attain. Their pay price does not float with the market. But farmers in Europe have the intervention program — similar to the former dairy product price support program the U.S. eliminated in the 2014 farm bill,” O’Brien relates.

Volatility in the marketplace provides opportunities to manage risk, but it is easier said than done. For example, there must be access to funds to hold positions (through the margin calls when the market goes against their positions).

On the processing side, says O’Brien, “Deferred positions of just 5 months can move against you as much as 70% for products such as NFDM or Cheese and as much as 100% for butter.”

As for dairy farmers, he observes that there were opportunities during late 2008 to lock in $20 Class 3 milk prices during 2009.

“But most dairy farmers didn’t do this. A super majority operate without safeguards, eternally optimistic. Dairy production is not a pastime, and survivability is not certain,” he suggests. “The future is managing risk. The multinational companies do it, and traders do it. Successful farmers will have to do it also.”

Ron O’Brien can be followed @rko2milk on twitter and at milkfutures.com

Check out the final open outcry live CME dairy spot market auction from June 2017 here

 

 

check it out at https://www.youtube.com/watch?v=si2vVdOQemo&t=35s

 

Dairy market fluidity

041213FarmshinePage4.inddDairy market fluidity

By Sherry Bunting, Milk Market Moos, Farmshine, February 2, 2018

Picking up from the previous dairy export ‘Jeckyll and Hyde’ discussion… Let’s look at what has happened to the fluid milk market in the U.S.

There is a difference between Class I utilization declining and actual packaged milk sales declines. For example, the 2017 year figures are not yet in, but for the last reported month of November, USDA reports that packaged conventional fluid milk sales for January through November 2017 are down 2.1% from year ago and organic fluid milk sales are off by 0.2%.

While consumers are drinking less dairy milk on a per capita basis, Class I — as a percentage of all milk sold — is declining faster because the processing of milk into other growing dairy product sectors is increasing.

Some of the increase in these product sales reflects domestic growth, but the kicker is that as exports increase as a percentage of total milk production, Class I utilization as a percentage of total raw milk sales is pushed lower — even if consumers drink more milk.

Let’s identify how the markets are changing and how to value them back to the raw milk producer rather than laying blame for over production that leaves the farmers in the position of “deserving the price they get.”

Supply management is not the answer, nor is it at this point really possible. It is a distraction. We need to be looking at the dairy trade in a way that both prepares farmers for the future and prepares the industry for dealing fairly with producers.

Case in point. How concerned has the National Dairy Council and the dairy industry  been about the fraudulent use of the word ‘milk’ on plant juice labels? NMPF’s efforts to right this wrong came only within the past two years — and 15 years after these sales of fake milk started eating into the fluid dairy milk sales.

How serious have they been about the milk that our children drink in school? It is interesting that GENYOUth was “founded in 2010 as a partnership between the National Football League and National Dairy Council, convening leaders in a movement to empower America’s youth to create a healthier future.”

One example given at the GENYOUth website recognizes U.S. Dairy Export Council CEO Tom Vilsack for his accomplishments for dairy farmers while serving as Secretary of Agriculture under President Obama. In his current role, Vilsack’s salary is paid by DAIRY FARMERS via the mandatory promotion checkoff.

Specifically a December GENYOUth gala recognized Vilsack for having “legislated to improve the health of America’s kids. Under Sec. Vilsack, USDA partnered with First Lady Michelle Obama’s Let’s Move! initiative alongside GENYOUth to improve the health of America’s children. Sec. Vilsack helped pass and implement the Healthy, Hunger-Free Kids Act to help combat child hunger and obesity by making the most significant improvements to U.S. school meals in 30 years.”

school lunchThat is certainly a mouthful, considering that something else occurred in 2010-11. This was the very same year that schools were forced to offer only 1% or fat-free white milk and flavored milk could only be offered as fat-free!

Unfortunately, this did not improve school lunch meal nutrition, and it has cost dairy farmers plenty in lost milk sales.

In fact, Bob Gray for the Northeast Association of Farm Cooperatives stated recently — during a panel of dairy producers and policy folks at a Congressional viewing of the New England documentary Forgotten Farms I attended in Washington D.C. earlier this month — stated the impact of the school milk issue on milk sales, surpluses and pricing.

ForgottenFarms2web.jpg“For the last six years, we have not been able to sell even 1% (fat) milk in the schools,” said Gray about being forced to sell fat-free. “We have lost 288 million pounds of milk in half-pints that were not consumed by schoolchildren because of this move, alone.”

But maybe this is the point.

If fluid milk consumption erodes as a percentage of milk production, the cost of milk to processors becomes less for the many other products that need to be more competitive globally.

Technology is driving some of these trends. New opportunities and new knowledge are improving efficiencies throughout the supply chain. But marketing direction often leaves more questions than answers when it comes to spending money dairy farmers are forced to pay for it.

Meanwhile, as Dr. David Kohl, Virginia Tech professor emeritus, pointed out as a speaker last week in Lancaster County, Pa., the advances in technology are driving production from an efficiency standpoint. What these advances do for agriculture is to help less productive farms improve yields. “Technology improves the bottom end and that creates surplus, said Kohl. “And that is why we need export markets.”

To my thinking, exports are to be keenly pursued, but pursued with a strategy that does not ignore the market profile of dairy sales here at home, especially when the highest valued product classification under federal price regulation for dairy — fluid milk — is being treated like the Cinderella sister with odds against her, while her sisters get ready for the Prince’s ball.

There are plenty of great innovations in dairy products and distribution — including export markets — that deserve our attention. However, while Cinderella is ignored in plain clothes in the increasingly cluttered dairy case full of fake substitutes, she deserves an invitation to the ball. And a glass slipper or two sure wouldn’t hurt.

Whole milk up, fat-free way down

USDA’s January estimated fluid milk sales report indicates that whole milk sales for the first 11 months of 2017 were up by 2.5% over year ago and November, alone was up 3.5%. Meanwhile lowfat and fat-free losses drove the entire category lower as nearly 12% less fat-free milk was sold compared with year ago, 6.7% less 1% and 2.8% less 2% milk. Similar patterns were revealed among organic milk drinkers with fat-free down almost 20% Jan. through Nov. while whole milk was up 6.2%.

Author’s Note: Re-inventing this Ag Moos blog for the times….  Milk Market Moos is a column I’ve been writing in Farmshine since 2003. Find some of it here, at Ag Moos, along with other dairy and beef market related stories, agriculture news, and, in between, the stories and images of the inspirational people of agriculture… but you can get it first, and you can get it all, in Farmshine Newspaper, just $15/year. Farmshine is a weekly newspaper published in Brownstown, Pennsylvania — now in its 39th year of publishing all-dairy, all-the-time.

Dairy Exports: Jekyll and Hyde

MilkMarketMoosHeader070914web.jpgDairy Exports: Jekyll and Hyde

By Sherry Bunting, Milk Market Moos, Farmshine, February 2, 2018

Talk to dairy farmers and industry observers about dairy exports and the response runs the gamut from enthusiastic full-court-press to cautious optimistic pursuit to a pessimistic skepticism about the profitability they bring to the table.

awGDC18-Day1-56.jpgNo matter where you are on the scale of good, bad or indifferent, exports are essential for agriculture and for dairy.

The hands of time do not turn backward on technology and progress, and so we are in a global market. If we want to be competitive in our domestic market, we need to also be competitive globally.

The food industry is increasingly served by global players and multinational companies that can source and supply from all corners of the globe. People would be surprised to learn how relatively small the transportation cost is in exporting ag commodities, especially further processed dairy products, overseas compared with cross country, on a per-unit basis.

If our ships are not arriving at other ports because we can’t compete, then other ships will arrive at our ports because we can’t compete.

That said, forward progress in supplying markets overseas needs to be pursued, not with reckless abandon finding ‘homes’ for excess milk, but with strategic thinking that includes the marketing and a consideration for the well being of our dairy farm sector.

As Secretary of Agriculture Sonny Perdue pointed out in his visit to Pennsylvania last week, America’s food security is America’s national security. Our farmers are the thin green line that, along with our military, keep our nation safe. After 9/11, the U.S. set out to be energy independent within 25 years and accomplished this in 10, according to a talk, given by Dr. David Kohl, Virginia Tech professor emeritus, in Lancaster County, Pennsylvania last Friday.

Just as our growing economy became at one point dependent on other nations for a portion of its energy needs, to its peril, we should take care that we do not become dependent in the future on other nations for our food.

A laughable thought, perhaps, but the rapidly consolidating agriculture industry needs its wide and varied base of family farms, small independent businesses, that support a varied and competitive rural infrastructure and provide the safety net of food security for American consumers through their independent pursuit of partnering with industry and academia to producer more, with less.

Kohl talked about how important trade is to American farmers, including the dairy industry, which currently exports 1 out of every 7 days’ worth of milk.

He made some observations about China’s agriculture. That Chinese interests purchase of Smithfield was largely to purchase the food safety protocols to ensure their food security. Here’s a statistic Kohl shared that got me thinking. He said that while there are 2 million farmers in the U.S., there are 314 million farmers in China.

“They are not taking on technology there as rapidly because there are 800 million people living in rural China and they need something to do,” said Kohl.

Just think about that for a minute. Technology is as essential to the future in agriculture as are our trade negotiations and exports; however, this statistic made me think about our rural youth both on and off the farm.

Dairy farming, like the hog business in the 1990s, is at a crossroads. Farmers, through their cooperative memberships, partnerships and other arrangements, own some of the largest and most aggressive processing assets that are strategically consolidating markets and distribution.

They hold in their hands their futures as individual small businesses — parts of the whole, contributors to a market, dairy farmers who not only are improving their own business acumen but continually improving how they manage their herds and possess a passion for what they are doing, a passion that is being called upon to directly market their farming lifestyle to consumers to counteract the negative attacks of anti-animal activists casting doubt wherever they turn.

U.S. Dairy Export CEO Tom Vilsack has set a lofty goal of getting U.S. dairy exports to 20% of production vs. the current 14. That would be nearly one and a half days’ worth of milk production out of every seven.

That sounds exciting, but when have we heard percentage of increase goals set for the fluid milk category? Could that incremental effort not also be exciting?
There are reasons why we are not seeing this, and in some respects, those reasons bring us back full circle to the export discussion.

Beverage milk is not exported on the scale that dairy commodities and dairy products are. Yes, DFA is among those exporting shelf stable milk to China for supermarkets, but this is not a globally traded product as are cheese, butter, and particularly dairy indgredients and protein powders.

While dairy processors eye up the opportunities and build inventories around allocated sales, and manage their risk with offsets, dairy farmers are in the price-taking position with the promise that if exports grow, they and their families can grow their businesses, without a serious discussion about the profitability in that proposition.

All of this to say, that the main market for U.S. farm milk is here at home as not only a beverage but also a growing number of dairy products finding good demand.
We are not New Zealand, which exports most all of what they produce.

The U.S. has, already, a strong robust customer base for cheese, yogurt, butter and a host of dairy products, as well as a sector of our industry (beverage milk) that needs our committed attention through dynamic labeling, comparative promotion vs. the imposters, consumer education about MILK, not how many situps and pushups to do each day. It needs people in charge who truly believe it is important, not an offhand remark by a checkoff-paid employee for U.S. DEC speaking at a conference, saying that fluid market is a dead horse as he proceeded to dig into the exciting team of horses (exports) waiting in the wings to save the day.

Having said all of this, it is imperative that U.S. dairy farmers be competitive to be involved in the global marketplace because it is here, with all of its pluses and minuses, but that does not mean we turn way from the prize in which the Federal Orders place high value and for which other products are taking over because we have, in effect, laid down and allowed the incremental loss of beverage milk sales.

But let’s examine the fluid milk dilemma further in the next edition.

Author’s Note: Re-inventing this Ag Moos blog for the times….  Milk Market Moos is a column I have been writing in Farmshine since 2003. It became a weekly feature in 2007. Find some of this content here, at Ag Moos, along with other dairy and beef market related stories, agriculture news, and, in between, the stories and images of the inspirational people of agriculture… but you can get it first, and you can get it all, in Farmshine Newspaper, just $15/year. Farmshine is a weekly newspaper published in Brownstown, Pennsylvania — now in its 39th year of publishing all-dairy, all-the-time.