Dairy situation analysis: What’s up with milk production?

Posted on July 26, 2021 by Agmoos

Record high milk growth vs. record high losses, dissected

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By Sherry Bunting, both parts of a two-part series in Farmshine, July 2021

The dairy industry continues to wait for USDA to provide details on three areas of dairy assistance already approved by Congress or mentioned as “on the way” by Ag Secretary Tom Vilsack.

The fly in the ointment, however, is the record-high 2021 milk production (Table 1) and accelerated growth in cow numbers (Table 2) at a pace the recent USDA World Agriculture Supply and Demand Estimates (WASDE) expect to continue into 2022.

USDA is reportedly looking at production reports — up vs. year ago by 1.9% in March, 3.5% in April, 4.6% in May — to determine how to assist without adding fuel to expansion that could threaten late 2021 milk prices in the face of rising feed costs and a worsening western drought. (The latter two challenges could temper those forecasts in future WASDEs.)

May milk production a stunner

U.S. milk production totaled 19.9 billion pounds in May. This is a whopping 4.6% increase above 2020 and 2018 and a 4.1% increase over May 2019.

Let’s look at year-to-date. For the first five months of 2021, milk totaled 96 billion pounds, up 2.3% vs. the 93.8 billion pounds for Jan-May of 2020, and it is 4.4% greater than the 91.9 billion pounds of Jan-May milk produced in pre-pandemic 2018 and 2019. Of the four years, only 2020 had the extra production day as a Leap Year.

Milk per cow was up 3% over year ago in May. Compared with 2019, output per cow is up 2.2%, according to USDA.

Cow numbers vs. 2018 tell the story

Milk cows on U.S. dairies in May 2021 totaled 9.5 million head, up 145,000 from May 2020’s 9.36 million, up 172,000 from 2019’s 9.33 million, and up 83,000 head from 2018’s 9.42 million.

Counter to the national trend, Pennsylvania had 48,000 fewer milk cows than May 2018 — dropping 30,000 into 2019; 10,000 into 2020, and 8,000 into 2021.

Elsewhere in the Northeast and Southeast milksheds, among the 24 major monthly-reported states, New York had 4000 more milk cows in May 2021 than 2018, Vermont 8000 fewer. Georgia dropped 1000, Florida 12,000, and Virginia 11,000. In the Central states, Illinois was down 10,000 head.

The total decline in cow numbers for the 24 lesser quarterly-reported states, the collective loss in cow numbers is 59,000 head from May 2018 to May 2021

Accelerated growth is coming from three key areas where major new processing assets have been built or expanded.

In the Mideast, where the new Glanbia-DFA-Select plant became fully operational in Michigan this spring, there is a net gain of 32,000 cows for 2021 vs. 2018, Ohio’s cow numbers that had been declining 2018-19, began recovering in 2020-21. Indiana had 18 months of substantial growth, and Michigan returned to its growth pattern in 2020. Taken together, the Indiana-Ohio-Michigan region had a loss of 8,000 cows heading into 2020, but gained a whopping 40,000 cows over the past year.

In the Central Plains, where new plant capacity is starting up this spring and summer — Minnesota, South Dakota and Iowa, combined, added 40,000 cows May 2018 to May 2021.

In the Southern Plains, where joint-venture processing capacity continues to grow, Texas has continued full-steam-ahead, gaining 87,000 cows from 2018 to 2021, along with 29,000 added in Colorado and 17,000 in Kansas. New Mexico regained earlier losses to be 2000-head shy of 2018.

The growth patterns in these regions somewhat mirrored dairy exits from other areas — until Jan. 2020 (Table 2). The past 17 consecutive months of year-over-year increases in cow numbers leave the U.S. herd at its largest number in 26 years (1995).

However, the assumption that ‘dairy producers are okay because the industry is expanding’ ignores several essential factors. The playing field has become more complicated and inequitable. There are four main factors at play. We’ll look at them one at a time.

Ben Butler of South Florida posted this photo that went viral on Twitter April 2, 2020 of milk being dumped in Florida because there was no home for it. A few days later, he tweeted photos of milk gallons also being donated to Palm Beach County families in need. Challenges abound in the dairy supply chain. The unofficial tally of milk dumped in the Northeast and Mid-Atlantic region the first week of April 2020 was north of 200 loads, with additional reports of 130 loads dumped in the Southeast. Meanwhile, stores were not well stocked, most were limiting purchases and foodbanks were getting more requests as over 10 million people were newly out of work.

Factor #1 — Milk dumping and base programs

A year ago in April and May 2020 — at the height of the Coronavirus pandemic disruptions — the dairy industry saw dumping of milk, stricter base programs and bigger milk check deductions. Producers culled cows, dried cows off early, changed their feeding programs, even fed milk in dairy rations.

But milk production still grew, according to the USDA data.

Some cooperatives and milk buyers, like Land O’Lakes, had base programs already in place and triggered them. Others made changes to prior programs or implemented new ones.

Dairy Farmers of America — the nation’s largest milk cooperative, largest North American dairy processor and third-ranked globally by Rabobank — quickly implemented a new base program in May 2020, seeking 10 to 15% in production cuts from members, varying by region, with overage priced on ‘market conditions.’

It is difficult to assess the ‘equity’ in these base programs and the cross-layers among producers between and within regions, or to know how these ‘bases’ are being handled presently. When questioned, spokespersons say base decisions are set by regional boards.

Meanwhile, product inventory and pricing schemes affect all regions, and milk rides between FMMOs in tankers and packages — with ease.

According to USDA, the 11 FMMOs dumped and diverted 541 million pounds of milk pooled as ‘other use’, priced at Class IV, during the first five months of 2020, of which 350 million pounds were in April alone. This is more than three times the ‘other use’ milk reported by FMMOs during the first five months of pre-pandemic 2019 (171.4 million pounds). By June, the amounts were double previous years.

Of this, the largest amount, by far, was the 181 million pounds of ‘other use’ milk in the Northeast FMMO 1 during Jan-May 2020, comprising one-third of all the dumped and diverted milk pooled across all 11 FMMOs in that 5-month period.

In the Southeast milkshed, the Appalachian, Florida and Southeast FMMOs 5, 6 and 7, together pooled 88 million pounds of ‘other use’ milk in the first five months of 2020. The Southwest FMMO 126 had 106.2 million pounds of ‘other use’ milk; Upper Midwest FMMO 30 had 46.1 million pounds; Central FMMO 32 had 36.7 million pounds; Mideast FMMO 33 had 30.7 million pounds; California FMMO 51 had 28.9 million pounds; Arizona FMMO 131 had 21.7 million pounds; and Pacific Northwest FMMO 124 had 1.3 million pounds.

The dumping had begun the last week of March 2020 and was heaviest in the month of April. Producers also saw deductions as high as $2/cwt. for balancing costs, lost quality premiums, and increased milk hauling costs. Unaccounted for, were the pounds of milk that had reportedly been dumped on farms without being pooled on FMMOs.

All of this against a backdrop of pandemic bottlenecks and record-high March-through-August imports of butter, butteroil, milkfat powder, and blends — adding to record-high U.S. butter inventories and contributing to the plunging Class IV, II and I prices vs. Class III (PPD).

Meanwhile, not only did production growth in key areas move ahead, so did strategic global partnerships. Just one puzzling example in October 2020, after eight months of deflated producer milk checks, depressed butterfat value, burdensome butter inventory, record butterfat imports, and a plunging Class IV milk price that contributed to negative producer price differential (PPD) losses, Land O’Lakes inked a deal to market and distribute cooking creams and cream cheeses — Class II and IV products that use butterfat — from New Zealand’s Fonterra into United States foodservice accounts.

The New Zealand press reports were gleeful, citing this as a big breakthrough that could be followed by other of their cheeses entering the “huge” U.S. foodservice market through the Land O’Lakes distribution.

Factor #2 — Class price wars and de-pooling

As reported in Farmshine last summer, dairy farmers found themselves in uncharted waters. As Class IV prices tumbled from the get-go with all of the ‘other use’ dumping and diverting, butter inventory building as butter/powder plants tried to keep up with diverted loads at a disruptive time, the USDA Food Box program started drawing products in the second half of May, and really got going by July 2020.

Cheese, a Class III product, was a big Food Box winner. The cheese-driven Class III milk price rallied $7 to $10 above Class IV, and massive volumes of milk were de-pooled by Class III handlers, which has continued through May 2021.

Reviewing the class utilization reports, an estimated 80 billion pounds of Class III milk normally associated with FMMOs has been de-pooled over the past 26 months.

At the start of this ‘inequitable’ situation, academic webinars sought to explain it.

“We’re seeing milk class wars,” said economist Dan Basse of AgResource Company, a domestic and international ag research firm in Chicago, during a PDPW Dairy Signal webinar a year ago.

He noted that under the current four-class pricing system, and the new way of calculating the Class I Mover, dairy farmers found themselves “living on the edge, not knowing what the PPD (Producer Price Differential) will be” (and wondering where that market revenue goes).

“A $7.00 per hundredweight discount is a lot of capital, a lot of income and a lot of margin to lose with no way to hedge for it, no way to protect it, when the losses are not being made up at home as reflected in the PPD,” Basse said in that summer 2020 webinar.

What does this have to do with year-over-year milk production comparisons?

Two words: Winners. Losers.

Some handlers, and producers won, others lost — between and within regions.

Here’s why all of this matters from a production comparison standpoint: Dairy economists — Dr. Mark Stephenson, University of Wisconsin, and Dr. Marin Bozic, University of Minnesota — are both on record acknowledging that USDA NASS uses FMMO settlement data, along with producer surveys, to benchmark monthly milk production.

So, on the one hand: How accurate are these data for comparison over the past 26 months, given the inconsistent FMMO data from dumping, diverting and de-pooling?

On the other hand: Did the negative PPDs and de-pooling, resulting in part from the 2018 Farm Bill change in the Class I Mover, allow Class III handlers to capture all of that additional market value and use it to fuel the 2020-21 accelerated milk growth for regions and entities connected to the new Class III processing assets?

Factor #3 — New dual-processing concentrates growth

Accelerated growth in cow numbers is fueling record production in 2021. It is patterned around ‘waves’ of major new processing investments in some areas, while other areas — largely fluid milk regions — are withering on the vine or growing by smaller margins with fewer cows.

In the 24 major milk states, production growth was even greater than the All-U.S. total — up 4.9% vs. year ago. In part one, the breakdown was shown vs. 2018.

Here’s the breakdown for just the 12 months from May 2020 to May 2021 — a time in which the industry dealt divergences that created steep losses for some and big gains for others, while FMMOs became dysfunctional.

In just one year, over 40,000 cows were added in Indiana, Ohio, and Michigan, combined, and milk production was up in May 2021 by 12.6, 3.2 and 5.1%, respectively. The draw is the massive new Glanbia-DFA-Select joint-venture cheese and ingredient plant that began operations late last year in St. Johns, Michigan. Sources indicate it reached full capacity this spring. Add to this the 2018 Walmart fluid milk plant in Fort Wayne, Indiana and other expansions in Ohio and Michigan.

Ditto for the Central Plains, where new cheese and ingredient line capacity became operational this spring and summer. Supplying these investments, Minnesota grew production 6%, South Dakota 14.6%, and Iowa 6.2% over year ago.

Number two Wisconsin grew by 5.6% in May 2021 vs. year ago.

Milk production was up 5% in number one California, even though cow numbers were down by 1000 head, and dairy farmers in a referendum voted recently by a slim margin to keep their quota system. They are also dealing with a devastating drought that news reports indicate is now impacting both the dairies and the almond growers.

Then there’s Texas, where growth continues to be a double-digit steamroller, up 10.8% in May 2021 vs. 2020 — pushing New York (up 4.2%) to fifth rank.

The Southern Plains has had several strategic investments, starting in Texas and New Mexico (up 6% vs. year ago).

In Colorado, where production was up 5.3% in May, DFA’s joint ventures and strategic partnerships with Leprino, Kroger and others have fueled growth.

Kansas grew milk production 7.3% vs. year ago. In 2018, a state-of-the-art whole milk powder and ingredient plant became fully operational in Garden City, Kansas. The plant was to be a joint-venture between DFA and the Chinese company Yili but ended up as a joint-venture between DFA and 12 of its member farms that are among the 21 Kansas dairies shipping milk to it.

DFA’s Ed Gallagher gave some insights on this during a May 2021 Hoards webinar. He said, “We went through a period of investing in powder plants in the U.S. It seems like there is a follow-the-leader approach when deciding on investments, and it goes in waves. The industry just completed a wave of a lot of investment in Class IV manufacturing plants, and now… it’s flipping to Class III.”

Looking back on the Class IV ‘wave’ 2013 through 2018, there were several times in those years that Class IV beat Class III, leading to FMMO de-pooling, but not to the extreme extent seen in the past 12 months as Class III now beats all other classes, including Class I, leading to negative producer price differentials (PPDs).

Gallagher sees Class III and IV prices “coming together” in the “next period of years” because the ‘wave’ of capacity investment has flipped from Class IV to III. He predicted more Class III capacity will be added.

Are these past 26 months of PPD net losses for producers the industry’s answer to, in effect, increasing processor ‘make allowances’ without a hearing?

The average PPD value loss (see chart) across the seven multiple component pricing FMMOs was $2.57 per hundredweight for 26 months, which began with implementation of the new Class I pricing method May 2019 through the most recent uniform price announcements for June 2021 milk.

Applying a conservative 5-year average PPD (prior to Class I change) for each FMMO, only the few gray blocks on the chart represent ‘normal.’

This means even positive-PPDs show margin loss for farm milk pooled on FMMOs. In fact, the CME futures markets as of July 14 show August through December divergence between Class III and IV above the $1.48 mark, indicating Class I value loss and negative PPDs or smaller positive PPDs could return after barely a two-month reprieve.

Many handlers that don’t pool on FMMOs also use the uniform prices as a benchmark.

This $2.57 net loss for seven MCP FMMOs across 26 months represents almost a doubling of the current make allowance levels.

Current USDA make allowances and yield factors add up to a processor credit of $3.17 per hundredweight on Class III and $2.17 on Class IV. This already represents 11 to 25% of farm milk value, according to 2018 analysis by John Newton, when he was Farm Bureau’s chief economist.

Why is this important? Because we are already seeing additional margin transfer from Class I to Class IV as the industry moves to blended beverages that mostly use ultrafiltered (UF) milk solids. Blends using whey would fall under Class III.

Looking ahead, DFA now owns most of the former Dean Foods’ Class I fluid milk plants since May 2020. New manufacturing synergies are undeniable, considering the direction of dairy checkoff’s fluid milk revitalization plan emphasizing these dairy-based-and-blended beverages and ‘dual-purpose’ processing facilities.

Dairy + Almond is a Live Real Farms beverage made by DFA and was launched through DMI’s Innovation Center with checkoff funds paid by all dairy farmers. The milk in this beverage is not priced as Class I, though it competes in the dairy case and is being promoted as a “Purely Perfect Blend.”

As low-fat UF milk solids are blended with other ingredients in a manufacturing process to make new combined beverages, the result is a competing beverage, and the milk in the beverage drops from Class I to Class IV.

Meanwhile, these beverages cost more at the grocery store, and the ingredients are not part of the USDA end-product pricing ‘circle’. Therefore, no new make allowances should be requested because processors are already getting a reduced class value, and a higher margin.

DMI’ vice president of global innovation partnerships, Paul Ziemnisky, gave some insights into this “future of dairy beverages” — and how it ties into new processing plants investments during the virtual Pennsylvania Dairy Summit in February.

Ziemnisky went so far as to say new processing facilities will “need to be built as beverage plants able to handle all kinds of ingredients” for the blended products of the future. In essence, he said, the future of fluid milk is “dual purpose” processing plants.

DMI’s usdairy.com website touts the checkoff launches of ‘blended’ dairy-‘based’ beverages — key to DMI’s fluid milk revitalization plan. Not flavorings, these blends dilute milk out of Class I, the highest farm-level pricing, and mainly into Class IV, the lowest. The resulting beverages compete in the dairy cooler with Class I fluid milk. Screen view

While 11 of the top 24 states had milk production increases of 5% or more in May, the 13 states with increases below 5%, or negative, are mainly located within traditional Class I fluid milk marketing areas: Florida, up 0.5%, Georgia up 2%, Virginia down 2.3%, Illinois up 1.9%, Arizona, down 0.5%, Washington, down 0.9%, Pennsylvania and Vermont both up 1.8%, and New York up 4.2%.

Idaho and Utah, up 2% and unchanged, are outliers and largely unregulated by FMMOs. Some beverage assets are coming to that region in the form of ultra-filtration and aseptic packaging, including a plant renovation to make Darigold’s FIT beverage. Additionally, a new Fairlife filtration membrane plant was opened near Phoenix, Arizona in March, and Kroger is doing filtration and aseptic packaging in Colorado.

Meanwhile, Pennsylvania is often described as a ‘fluid milk state’ with a Milk Marketing Board setting minimum prices for fluid milk, and a string of independent milk bottlers that figure prominently in their communities.

Ranked fourth in milk production in 2006, Pennsylvania was passed by Idaho in 2007. By 2016, Michigan had pushed Pennsylvania to sixth. The very next year, in 2017, Texas leapfrogged both Pennsylvania and Michigan. Now, Minnesota has pushed the Keystone State to eighth.

How does the future of dairy affect traditionally ‘fluid milk’ states like Pennsylvania, or the Southeast for that matter?

New dairy-‘based’ beverage innovations can be made anywhere and delivered anywhere, often as shelf-stable products. Most are not Class I products unless they meet the strict FMMO definition which was last spelled out in the USDA AMS 2010 final rule.

For now, this also includes the Pa. Milk Marketing Board. Executive secretary Carol Hardbarger confirms that the 50/50 drinks are not regulated under PMMB, which generally uses federal classification, but that a legal interpretation of the Milk Marketing Law with regard to blends may be in order.

The 50/50 blends are already in some Pennsylvania stores and elsewhere in the Northeast, which is the second phase of the ‘undeniably, purely perfect’ marketing plan for fluid milk revitalization.

Factor #4 — USDA, industry coalesce around climate

Ag Secretary Tom Vilsack has been outspoken from the outset about using and aiming every available USDA program dollar in a way that also addresses the Biden administration’s strategies for equity, supply chain resiliency, and climate action.

Speculating a bit as to why USDA is taking so long to announce details about already funded dairy assistance, it could be that Sec. Vilsack is looking at the fit for ‘climate impact.’

Paid around a million a year in dairy checkoff funds to serve 4 four years as CEO of the U.S. Dairy Export Council — between prior and current Ag Secretary posts — Vilsack understands the future plans of the dairy industry’s checkoff-funded proprietary precompetitive alliances on a global scale.

Vilsack has been privy to the DMI Innovation Center’s discussions of fluid milk revitalization through ‘dual purpose’ plants and blended beverages. He is no doubt looking at the accelerating growth in milk production that is occurring right now for ways to tie dairy assistance to measured climate impacts in the net-zero file.

Producers on the coasts and fringes of identified growth areas have a target — fresh fluid milk and other dairy products produced in regional food systems for consumers who have a renewed zeal for ‘local.’ Fresh fluid milk will have to find a path outside of the consolidating system and cut through the global climate-marketing to directly communicate fresh, local, sustainable messages about a region’s farms, animals, environments, businesses, economies, jobs and community fabric.

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NY Senate Ag hearing: Ag law attorney (and farmer) shares her concerns for family dairy farms

Posted on March 17, 2021 by Agmoos

Session 2 of the February New York Senate Ag Committee listening tour via zoom found Lorraine Lewandrowski sharing her concerns for family farms and face-to-face, virtually, with Senator Jabari Brisport, who sits on the Ag Committee. “Rural New York has been viciously neglected,” she said. “Senator, I heard your words as you led a rally in New York City calling for New York’s dairy farms to die. Your exact words: ‘Let dairy die the death it needs to die’… I will not forget your cruel words directed to the working farmers of this state whom I know and love.”

By Sherry Bunting, Farmshine, March 12, 2021

ALBANY, N.Y. — “Danger knocked on New York’s doors when the World Trade Centers went down. Hunger knocked hard on our doors during Covid,” said Lorraine Lewandrowski, agricultural law attorney and dairy producer near Herkimer, N.Y., during one of New York State Senate Ag Committee’s recent hearings organized by Senator Michelle Hinchey, chairwoman.

Lorraine Lewandrowski at a dairy summit in Albany in 2018 before Covid relegated such events to the virtual zone.

Lewandrowski has been a tireless advocate and activist for dairy and livestock agriculture, making connections in all sorts of ways for the people of her beloved farmscapes of New York and the greater Northeast.

“Our food model is based on faraway sources while we throw our rural communities away,” Lewandrowski told the New York senators. “Farmers here are asking for crumbs. The big money is in the port capacity being ramped up for imports.”

In her testimony, Lewandrowski detailed several key issues facing dairy farmers and rural communities in the Northeast. Other farmers and dairy producers, along with representatives of farm organizations, farm markets, Farm Credit, FFA, urban food programs, and academia, were also on the hearing docket.

Describing dairy farmers as ‘price takers’ without real bargaining power, Lewandrowski called the milk pricing formula “broken and antiquated and in need of investigation.”

One of the biggest surprises for New York State Senators was Lewandrowski’s request that the state legislature legalize whole milk in schools.

“Make it legal for a New York State student to have a glass of fresh whole milk – a beautiful food from a beautiful land,” she said.

During questions, senators expressed their surprise about this and indicated a real desire to do something about it at the state level, despite the federal government’s heavy-handed USDA National School Lunch rules. If more states took action, perhaps the tide could turn.

On the milk pricing system, Lewandrowski pointed out that since May of 2020, the current pricing formula “has extracted billions of dollars” from dairy farmers’ milk checks, and she urged the committee to investigate how this is impacting New York State dairy farmers. She urged them to look at Farm Bureau’s work on this topic.

With ongoing concerns about market transparency and competitiveness, she referenced a 2019 GAO report requested by U.S. Senator Kirsten Gillibrand, looking at dairy cooperative consolidation and what this means for New York.

Referencing a ‘cow islands’ map produced a few years ago by Dr. Mark Stephenson, Lewandrowski said milk production is rapidly consolidating with more cows located on fewer and ever-larger farms in fewer regions.

“Thirty-thousand and 100,000 cow operations have arisen, some in dry regions. Contrast ‘cow islands’ with the emptied-out New York farmscapes,” she said, lamenting a Cornell report “Green Grass, Green Money” citing over 3 million acres of abandoned farms and former grazing lands in New York even though “New York equals powerful rainfed landscapes.”

Lewandrowski stressed that farmers need more lending and financing options and resources to understand new “ecosystem markets.” She indicated state legislatures can take the lead in helping prepare farmers for the future with allocation of informational and financial resources to navigate new ideas and income streams. Her fear, she indicated, is that a centralized approach will create winners and losers across regions and farm sizes.

In making her most impassioned point of the day on communications with New York City, Lewandrowski said: “We want to speak, as farmers, with the New York City Council and urban leaders. Why can’t we have a Jacob Javits Center Farm Show, a farm show like they have in Paris, or an office for New York’s farm groups in New York City or an online hub to connect farmers with urban groups looking for speakers?”

She talked about the screening of the dairy-focused Forgotten Farms film a year ago, just before the Covid pandemic. So many rural urban connections were made, but the linkages between rural New York and urban NYC need to continue and be constant.

Rural trauma was her final thought for the committee. As an agricultural law attorney, Lewandrowski sees so many concerning and desperate cases.

She bluntly addressed Senator Jabari Brisport of Brooklyn, who is a new member of the NY Senate Ag Committee, about his own comments as a vegan activist, and the damage such comments do to New York’s own rural farmers.

“Rural New York has been viciously neglected. When farmers come to my office and tell me they feel dead, I worry,” said Lewandrowski. “This is directed to Senator Brisport: Senator, I heard your words as you led a rally in New York City calling for New York’s dairy farms to die. Your exact words: ‘Let dairy die the death it needs to die.’ Two hundred miles away, I was dealing with a woman who found her son hanging dead in the barn, too ashamed to speak of his death.

“Senator Brisport, I will not forget your cruel words directed to the working farmers of this state whom I know and love,” Lewandrowski said candidly. Dairywoman Tammy Gendron of Willet also referenced concerns about Sen. Brisport’s activism against dairy and livestock production in her comments later in the session.

During questions, Senator Brisport apologized for his word choice of “death” when speaking about dairy at the vegan rally, but he stated that as a sitting Senator on the New York Senate Ag Committee: “I don’t believe dairy should exist, just as I don’t believe any animal agriculture should exist, so you can count me as a ‘no’ vote on any whole milk in schools…”

He also noted one of his focuses is farm workers and asked for more details on collective bargaining from Lewandrowski’s testimony. He was keying-in on worker bargaining and totally missing the point that farmer-owner-operators have little bargaining power as cooperatives they own are consolidating and joint-venturing as processing entities.

Lewandrowski provided information about antitrust interpretations and consolidation in the industry to massive corporations that prevent farmers from collectively setting a good price for their milk.

Basically, she said, “we should be looking at revitalization and re-regionalization of our food production and processing facilities, so we have smaller cheese plants or vegetable processing or meat processing, where the farmers have a choice with competition for their product. We have lost so much of the food processing in New York. This committee could really help with that by making financing available to revitalize regional processing and brands to serve our Big Apple and our other cities.”

Senator George Borrello thanked Lewandrowski for her comments and passion. “Dairy in NYS is a very different business… 90% or more of our farms are family run businesses. Therefore, you will see these animals treated much more humanely. If we lose our dairy farms that are handling animals in New York State, we are going to be relying on farms elsewhere. The demand is not going to go away, so why don’t we ensure it’s from our farms in New York State,” said Borrello.

Senator Alessandra Biaggi took hold of the issues of whole milk in schools and communication between rural and urban New York. Much back and forth brainstorming ensued.

“There’s a lot to action in what you have shared,” Biaggi pointed out, citing first the unbelievable fact that whole milk is prohibited in schools.

“I thought you were joking,” the Senator said.

Lewandrowski talked about the 30,000-signature petition (over 24,000 online and over 6,000 by mail) that had been submitted to USDA and members of Congress, and she gave some of the background in regard to the Dietary Guidelines for Americans (DGA).

“Whole milk is a really tremendous product, and it is our most local product, fresh and produced 365 days a year,” she said.

When asked about the fat, Lewandrowski noted that the DGAs don’t reflect the current science on milkfat and saturated fat, in general, and especially for children.

“The fat is not very high. In reality, it’s standardized to 3.25% fat. Skim milk and 1% and 2% are not much behind that, but dairy as a whole product provides better satiety… so children may eat less junk food, and it may be easier to digest,” Lewandrowski noted. “As farmers in the Northeast, our best aspect is that we are local and produce fresh whole milk.”

Biaggi also stressed that one of the best things about New York is the Upstate being “full of possibilities, if we invested in it.”

She asked: “How did we get to a place where we’ve essentially abandoned the farms, the Upstate?”

Identifying the issue as cultural, pointing out how the cities in France are so proud of their rural areas, Lewandrowski asked the NY Senate Ag Committee to help facilitate connections between rural farms and urban leaders.

“I think there’s a real desire in our urban areas to learn more, so we ask for the committee to help us tap into that,” said Lewandrowski, citing many of the farm-city events she has taken part in, but looking for structural connections that continue and have meaning at the policy level.

Biaggi said this is one of the most important areas for the future of New York State, bridging the Upstate / Downstate, especially where food and agriculture are concerned.

Regulatory issues, workforce and lending resources, as well as gaps in the food system and examples of how locally produced food was diverted to nonprofits for giving during Covid were other major topics highlighted during the hearing.

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From USDA to checkoff, no one in farmer’s corner

Posted on April 17, 2020 by Agmoos

By Sherry Bunting, Farmshine, April 17, 2020

BROWNSTOWN, Pa.– From the fortress of the USDA to the ivory towers of the dietary command to the branches of the checkoff government-speech machine and the centralized, globalized food system ‘partners’ in between — No one is in the farmer’s corner. Not even the people paid by the farmers to be in their corner.

This much is crystal clear by now in the collapsing markets and stark realities laid bare by the COVID-19 pandemic.

The curtains have been opened.

And the usual players do what they do.

They pat themselves on the back, converse about their insights from within their echo-chamber, and lecture those who would dare call attention to the sight before us or deviate from the script.

Over the last week, dairy checkoff newsletters have bragged about what they are doing for dairy demand amid the deepening crisis; how DMI is “adjusting to move more dairy.”

Yep, the bulk butter and bulk cheese and bulk powder plants in growth areas are moving more dairy — right into the already bursting at the seams cold storage inventory warehouses.

Few if any reports from states with these large plants indicate any milk dumping whatsoever.

Butter inventories were already 25% higher than year ago heading into the COVID-19 pandemic and cheese inventory was already growing too.

Reports indicate such fully functioning cheese and whey or powder plants are running full tilt, while a shopper has to store-hop through three or more establishments to find a package of butter, walk into Walmart and see rows of empty cheese racks, try to walk out of a Walmart or Sam’s Club with two gallons of milk and be forced to give one back.

Other supermarkets aren’t much better, except for the smaller family-owned markets. Pictures and texts continue to pour in, while our leaders assure us that the purchasing limits are really lifted.

Go to Kroger’s website (a DMI partner) and see their explanation of why they’ve raised the price of milk. It’s because there is a shortage, they say, while farms all around them are forced to dump milk. Just six weeks ago, a Kroger executive I spoke with said, ‘no we can’t raise the price of milk — it was $1.25/gal pre-COVID (not in PA of course but elsewhere).

I was making the point that we have loss-led and commoditized this deal long enough. Please respect the milk. “No,” I was told, “raise the price? How is that going to sell more milk?”

What is Kroger doing today (and Walmart and other heavy hitters for that matter)? NOW, they are raising the price, even canceling some orders without much to spare, as they are being asked to stop limiting sales.

Meanwhile farmers are forced to dump milk.

As the commodities crash with barrel cheese at around $1/lb and butter headed there too, are the food system heavy-hitters holding back to buy that higher-priced inventory on the cheap just to turn it around and charge more?

We are getting to see how the system works — how the losses and consolidation of a decade or more are threatening our farms and food security. But leaders and policymakers are still convinced this system is the best, and thanks to new stricter rules coming on animal proteins and fat, it’s about to get better, more diluted, and void.

Take the DMI update in the ADA Northeast newsletter from April 6, how proud they are of the “seven ways checkoff is working for you during COVID-19” and how they are “adjusting to move more dairy”, how GENYOUth is “keeping the meals flowing to students”, while in reality the real school chefs and lunch ladies — even bus drivers — are out on the front lines figuring it out for real on their own every day; how proud they are that the National Dairy Council “sorted through milk myths.”

Now that last one is a doozie. Here’s one of the seven ways checkoff is working for you: “National Dairy Council is among the expert organizations to debunk claims that milk can help ward off coronavirus.”

Remember the news about milk and it’s immune-building properties? Even Hoards Dairyman noted milk was “flying off the shelves” as consumers sought the health benefits and comfort of milk.

Remember how DMI tells us “you can’t educate people to drink what you want them to drink?” How “we want to move people away from the habit of reaching for the jug and toward the new innovative products?”

It wasn’t even a week after fluid milk sales skyrocketed 40% that the National Dairy Council helped debunk some of that immune-building “myth” in Reuters story.

And yes, rest assured, DMI is talking to “your (their) partners” to get them to “move more dairy”.

So here’s the clincher. Watching the President’s daily COVID-19 press conference Wednesday evening (April 15), it really hit home, bringing together so much of what I have seen and heard over the past few weeks and the months and years before that.

Agriculture Secretary Sonny Perdue was part of President Trump’s daily presser Wednesday, and I was hopeful when he went to the microphone that he would talk about impact to food and agriculture during the COVID-19 pandemic.

He told Americans that “Our food system is strong, resilient and safe,” despite the bare shelves and limits on purchases that people are seeing in supermarkets.

“In the United States, we have plenty of food for all of our citizens,” Perdue said. “I want to be clear, the bare store shelves that you may see in ‘some’ cities in the country are a demand issue, not a supply issue.” (Huh? At least he didn’t phrase it the way Pennsylvania’s Ag Secretary does, saying in a PDA public service announcement to radio and television stations that store limits, bare shelves and dumped milk are a ‘hoarding issue”, and saying in a dairy industry conference call: “this is what happens when people hoard food.”

No Mr. Secretaries, this is not hoarding and it’s not a ‘demand’ issue, it’s a centralized, consolidated, globalized food industry structure issue.

Back to Sec. Perdue’s moment before the American people… Perdue said simply that there has been a large shift from people eating in restaurants and fast food businesses, and now eating at home, which has spiked in the last few weeks and placed a high demand on grocery stores.

“Our supply chain is sophisticated, efficient, integrated and synchronized, and it’s taken us a few days to relocate the misalignment between institutional settings and grocery settings.” Perdue said.

Bingo. The accelerated creation of this machine over the past decade has been designed by government policy from the flawed dietary guidelines, to the government speech farmers are forced to pay for, to the mergers and acquisitions and antitrust behaviors, to the globalization and centralized decision-making, to the erosion of local/regional milksheds and foodsheds.

Yes, Mr. Secretary, that sophisticated, efficient, integrated, synchronized food supply chain has moved our country closer to cow islands and food deserts and fracturing of regional food security.

Some of the best minds in agriculture economics are seeing it. Consumers are waking up to the realization of what that means when the chips are down. They are watching their communities’ farmers dump milk, depopulate poultry flocks, send milk herds to slaughter.

This pandemic has peeled back the band-aid covering gaping wounds inflicted for years, and now when it is open and bleeding for all to see, the Secretary reassures the nation that this big beautiful bountiful ag food system simply needs to “relocate a misalignment.”

Tammy Goldammer, a cattle rancher friend of mine in Missouri put it bluntly in a social media post after listening. Here are some of her words:

“Production Ag People?

Did you happen to listen to US Ag. Sec. Perdue’s comments today at the Rona Update press conference? Were you reassured about your occupation of raising the highest quality protein sources to feed the world?

Did you find it interesting that there was no mention about “producers” and what is going on with what they raise to feed people?
1. There was no mention of the killing of millions of ready to harvest chickens and turkeys…to leave them to compost.
2. There was no mention of the dumping orders for milk and the orders to let cows go dry and to sell the dairy cow herds.
3. There was no mention of the shuttering of ethanol plants and the resulting depletion (no supply) of by-products utilized in the livestock feeding industries.
4. There was no mention of the Mercantile Exchanges and the crashing commodity prices for livestock, dairy and grain futures.
5. There was no mention of the bankruptcies and insolvencies of feeders who grow the nation and the world’s protein sources.
6. There was no mention of the sucking sound to the south of the beef cattle industry.
7. There was a mention there are a few “slaughter” plant closures due to Covid-19 being detected in some employees.
8. There was a mention that our nation’s food supply is abundant and there should be no fear about food availability.
Do you all like math? Mr. Perdue? Your commentary today to assure the American public was absolutely “void” of speaking to the producers/people who produce what you stated is in good shape and rest assured there are no shortages.
To say I was “stunned” at your “void” on the big picture, well, let’s say I was totally bewildered.”

But never fear oh sophisticated, efficient, integrated and synchronized food system, President Trump followed the Perdue comments with news that there is $15 billion in tariff money left in Sec. Perdue’s charge to help farmers who were targeted and he gave the Secretary the go ahead to use it.

Later this evening, word came that the government will begin buying milk and meat. Yes, as mentioned by Pennsylvania’s own Secretary in his PSA ‘stop hoarding food’… ‘food banks need the food’… ‘we have a system…’

Yes, the integrated centralized system is the proper channel while communities take care of their own with whatever resources they can muster. Good people in communities like mine right here in Lancaster County, Pa. are buying milk, giving it to the needy or seeking processors (for pay) to process milk headed to manure pits so it can be donated, only to bump up against that integrated system.

Kudos to those businesses in the community who are buying milk to give to the needy or stepping up to allow their smaller processing plants get milk ready for food banks before it is wasted.

The efficient, sophisticated, integrated, synchronized food system is not. But it will when the price is low enough and the government starts buying.

-30-

‘Milk Baleboards’ are a ‘thing’, with a website!

Posted on February 21, 2019 by Agmoos

Producers unite to send clear message to policymakers and consumers, website takes it to the next level.

Nelson Troutman (above) is a dairy farmer. He has made 20 Milk Baleboards and offers these DIY Tips with illustrations at the end of this story.

By Sherry Bunting, from Farmshine, Friday, Feb. 22, 2019

RICHLAND, Pa. — Nelson Troutman has been making the ‘Milk Baleboards’ since January. The Berks/Lebanon County dairy farmer came up with the idea after the Pennsylvania Milk Marketing Board listening session in December.

“It’s very important that the bales all have the same message: ‘Drink Local Whole MILK — 97% FAT-FREE.’ Don’t try to get funny with it. You could take the ‘local’ off and just focus on the ‘whole milk,’ but mainly to have impact, we want the bales to have the same message,” he said while painting bales in his shop during my visit last Saturday morning to the farm where he and his wife Mary live and which is now rented to a young couple for their dairy herd.

He still farms the land he has lived on his entire life, and he makes the feed for that herd and his son’s herd nearby. (In fact his daughter in law Renee wrote about whole milk recently, with a historical twist!)

Nelson has made 20 Milk Baleboards so far (check out his DIY tips at the end of this story). And he has seen new ones pop up from others following suit.

He has had 10 phone calls from fellow farmers as far away as New York, and has talked to so many more at meetings — out and about. He tells them: “Put a bale out… unless you are satisfied with your milk price.”

Did he think it would take off like it has? “No I didn’t,” he says. But he’s glad to see others joining in and hopes to see it catch on even more.

Retired agribusinessman Bernie Morrissey of Robesonia has been doing all he can to get other agribusinesses to put them out. In addition to Morrissey Insurance having one on their property along Rte 272 north of Ephrata, the Milk Baleboards are popping up along other main routes like 23, 322, and 422, to name a few.

“Our advertising checkoff dollars just didn’t seem to be doing a very good job these past 10 years. They have been promoting fat free and low-fat 1% milk and the fat free yogurt — not much whole milk,” Nelson relates.

“After the listening session with the PMMB, some of us were talking. We thought it was time to do something different, something like letting consumers know whole milk is 97% fat free,” he said further. “We didn’t come up with a plan that day. We were thinking about a billboard, but that was far too expensive. We thought about portable signs.”

Then over the weekend after that December meeting, he looked around. “I thought to myself that I already have the perfect thing: A wrapped hay bale! So, I painted one. I set it in the pasture at our crossroad. We farmers have silos, wagons, barns and sheds we can paint signs on.”

Lots of feedback has come in, and it seemed no one knew whole milk was 97% fat free. Some said “why are we drinking 2% milk, when whole milk tastes so much better?”

Nelson observes that young and older people said they never thought about how much fat or nutrition is in milk. “It seems so sad how people are misled by our checkoff dollars, our doctors and medical people — and our federal dietary guidelines committee.”

He admits that people are easily confused. To be sure, the bales are attracting attention, leading to questions.

While it started out as a way to send a clear and unified message to consumers and especially policymakers, Nelson said the information is so surprising to people that it offers educational opportunities.

That’s why R&J Dairy Consulting invited Nelson and Bernie to a meeting of dairy farmers last Friday to see what could be done to use this teachable moment.

The group decided to purchase a website domain — 97MILK.com, and direct people there to learn more: What is whole milk? How does it compare? What is Real Milk, Local Milk?

The website can help unite these efforts, and bring additional excitement to the project. For example, at the meeting organized by R&J Consulting, their marketing manager Jackie Behr said when she asked peers what questions they have about milk, she ended up with a whole list.

“Let’s use this opportunity to educate consumers and help them make a good choice,” she said. The group decided to start out with key simple answers to frequent questions. Many businesses and people are pulling together in various ways that it is impossible to name them all here. That will come in a future Milk Baleboard update.

Jackie at R&J, with some help from others, got the website 97milk.com up and running within seven days. This includes a facebook page @97Milk, so check it all out!

Want to make a Milk Baleboard? Here are Nelson’s DIY tips:

1) Keep the message the same: **Drink Local Whole MILK — 97% FAT FREE** (or now that there is a website, omit ‘Drink’ on a Round Bale and put the website 97MILK.com top or bottom.)

2) Get the right paint! Rustoleum Ultra Cover 2X paint and primer.

3) Use the small foam brushes and buy extra. This paint doesn’t wash out, so they can’t be re-used. Foam brushes can be turned for thick or thin letters.

4) Wear gloves, this paint will be with you a while if you don’t.

5) Before painting, sketch out a guide with a pen.

6) 97% is the largest and in making the percent-sign, put the circles parallel to each other and the slanted line in between to keep it straight.

7) Find the middle and that’s where the “I” in Milk goes, then build on that.

8) Letters are placed every 2.5 inches for “Local Whole,” and adjust others accordingly.

9) Spray paint onto foam brush, then apply to bale in strokes from the bottom to the top of each letter.

10) Alternate between colors (Blue/Red or Black/Red).

11) Make the letters broader and thicker for the word MILK, in all capital letters.

12) Follow your guide and use paint to even things out as you go.

13) Paint will dry faster and better, with fewer runs (in winter) if painting in sunshine or with a heater running in the shop.

14) Sit them on a pallet for better visibility on property you have along roads and set back from intersections.

Summer memories and milk margins

Posted on July 16, 2018 by Agmoos

Author’s Note: Amazing how even more true this piece from 2016 rings today in 2018. This “Growing the Land” column was originally published two years ago in the July 20, 2016 edition of the Register-Star in New York’s Hudson Valley. Indeed, it is still timely today, two years later, as summer memories are still grand and dairy farm milk price margins are still poor — and as a society we continue to incrementally lose the soul of our food, which we may not even fully appreciate or realize is happening.

By Sherry Bunting, originally published July 20, 2016 Register-Star

The fresh flavors of summer are in — sweet corn, tomatoes and, of course, ice cream. In fact, July is National Ice Cream Month, and it is certainly hot enough for some extra frozen goodness.

Summer foods bring back summer childhood memories: Celebrating first pickings with a dinner of simply sweet corn and sliced tomatoes. Or an ear of sweet corn for breakfast — no sugar required.

And then there were those summer evenings when Dad would get in just before dark, singing: “I scream, you scream, we all scream for ice cream!” Off we’d go to the nearby ice cream shop where the number of flavors made our heads spin and the homemade goodness left us smiling.

So much goes into producing these simple pleasures we may take for granted. I recently ran into a cousin of mine attending an event I was covering for the ag papers at a dairy farm in southern York County, Pa., that had been in two branches of our family four generations earlier. He had grown up in Baltimore and now lives on a nearby small farmette that had stayed in our great uncle’s family, renting a little crop ground to a neighbor.

I had brought my then 94-year-old grandmother to the farmer-meeting. My cousin Tom decided to come over also — curious to see the place as a modern dairy farm that had some historic significance to our family.

I was there just doing my job.

Before the farm tour, the event gave farmer-attendees a run-down of the latest business improvement resources for managing below-cost milk prices and updates on various regulations.

Unlike my cousin, I had spent my high school and college years working for nearby dairy farms — milking cows, feeding and caring for livestock, running equipment; beginning later a career as an ag and markets reporter. I was accustomed to the farm life my cousin had not experienced.

Having a deep appreciation for local farmland around his current home, he attended this first-ever farmer meeting and found it to be an eye-opener.

“How do they keep doing it?” he asked. “It sounds like they have to interact with a lot of regulations and governmental departments to get it all done.”

He was also surprised by the number of young people at the meeting, whereas I had many times witnessed the passion of next generation farmers — their love for bringing new life into the world and their dedication to nurturing life, which in turn produces for the rest of us a bountiful harvest.

He just shook his head in wonder. Why do they do it? Why do they carry-on this time-honored tradition of feeding the world? Why do they do the hard work for an often thankless society? And how do they keep pushing forward through daily chores and challenges when the prices they receive for their products are often below what it costs them to produce it?

This is certainly the case for dairy farmers over the past 12 to 18 months. (2018 update: that situation is going on 4 years now). Their farm-gate milk price has dropped 40 percent below 2014 levels and is roughly where it was 40 year years ago, while the input costs continually increase.

There are roughly 2 million farms of all kinds and sizes in the U.S., but less than 40,000 of these farms are dairy farms. The dairy farm sector may be small in number, but they represent the largest economic driver in dairy states like Pennsylvania and New York, where they account for half the cash farm receipts in the state, and one job is created in the greater community for every 9 dairy cows on nearby farms. Nearly half of those jobs are related to dairy farming and the service and supply sector, and the other half related to dairy processing and other downstream aspects of the dairy economy.

Dairy farms are often a linchpin for the infrastructure relied upon by all farms in a region.

In these tough economic times, dairy farmers are exhausting credit lines, spending their savings, borrowing on the equity of their land and looking for other work to add to their already busy days — just to pay the bills for the goods and services that are associated with feeding and caring for the cows, servicing and keeping up the equipment, and other aspects of economic revenue generated throughout the community by the production of milk.

If milk prices don’t turn around soon, more dairy farms will be lost. (That was in 2016… Fast forward to 2018, the rate of dairy farm loss has accelerated even more, in some areas these sell-offs are up 30% this year)

Families who have expanded their dairy operations in the past five to seven years — when industry and government asked them to produce MORE milk to fuel what was a rapidly growing yogurt industry in the Northeast at that time — now find their investments at risk because of the low prices paid for their milk today.

A reported oversupply of milk, globally, has depressed the commodity markets on which the federally-regulated milk prices are based in a globalizing industry. Regionally, dairies are also losing access to markets for their milk in the Northeast U.S. as consolidation at the dairy retail, processing and marketing levels continues at a rapid pace. (This hit an unprecedented level in 2018, though this was written in 2016).

What can consumers do to support the agriculture and dairy farms that support their communities?

1) Thank a farmer, when you have the opportunity, and if you have questions about food and farming, don’t rely on ‘Google.’ Go to the source: Ask a farmer, visit a farm.

2) Buy local, whenever possible. Read labels, look at plant codes (check them out on whereismymilkfrom.com and @findmymilk on social media). Supporting local dairies is a sustainable step every consumer can take. Look for other label clues about milk origin, such as the PA Preferred label in Pennsylvania. To earn that label, the milk is not only bottled at a Pennsylvania plant, it must come from a Pennsylvania farm.

3) Realize that dairy milk is nature’s ultimate protein drink, containing up to eight times more protein per serving compared with plant-based beverages that falsely call themselves ‘milk.’ In addition, the amino acid quality of dairy protein is unsurpassed among the fraudulent beverages that steal milk’s good name. Dairy milk is also a natural source of calcium and other essential vitamins and minerals with no added sugar, thickeners or other additives found in those plant-based not-milk beverages. And the truth is known, that full-fat dairy is good for us!

4) Realize how the local economy depends on local dairy farms and how 97 percent of U.S. dairy farms, regardless of size, are owned and run by families.

5) Understand that farmers are passionate about the dairy life — caring for the land and animals but they also need to operate the farm as a business. For example, they adopt new technologies, just like other businesses, as they strive to navigate the devastating price cycles. If farms are not profitable, their ability to continue to the next generation — investing into the local economy, jobs, environmental stewardship, open-space beauty, and fresh food security benefits — can not continue here for the rest of us to enjoy.

A former newspaper editor, Sherry Bunting has been writing about dairy, livestock and crop production for over 30 years. Before that, she milked cows. She can be reached at agrite@ptd.net.

CAPTION for photo

July 12 was Cow Appreciation Day, and while we may think about the cows when we have delicious, nutritious dairy foods, we may not have a full appreciation for the farmers who are truly appreciating their cows — caring for them through all types of weather and markets. No matter the size or management style of farms today, 97 percent are family-owned and operated. New generations of young farmers, like Justin Pavlot of New York, are passionate about what they do, and dedicate themselves to this work, even as they navigate an uncertain economic future with today’s depressed milk prices. Sherry Bunting photo

Will ‘local’ focus stem tide of milk displacement?

Posted on April 5, 2018 by Agmoos

Harrisburg Dairies, Schneider’s Dairy step up for milk from at least 9 of 42 dropped Pa. farms

(Author’s note: Farmers whose milk has been displaced in 8 states are in various stages of determining their futures. Some are exiting the dairy business, a few have been picked up by cooperatives, or as in the case of this story, by processors. Some are resorting to marketing milk with brokers at much lower prices. In addition to PA Preferred, Tennessee’s legislature is working on a state label for milk.)

By Sherry Bunting, Farmshine, March 30, 2018

BROWNSTOWN, Pa. — In the days following the “Save Pennsylvania Dairy Farms” town hall meeting in Lebanon March 19, some breakthroughs came for 9 of the 42 Pennsylvania farms notified by Dean Foods that their contracts will end May 31.

Harrisburg Dairies, based in Harrisburg, picked up 5 (possibly 9) of the 26 farms let go by Dean’s Swiss Premium plant in Lebanon.

Schneider’s Dairy, based in Pittsburgh, picked up 4 of the 16 farms let go by the Dean plant in Sharpsville.

Both Harrisburg Dairies and Schneider’s Dairy source their milk through direct relationships with local family farms, and they use the PA Preferred logo on their milk labels, signifying it was produced and processed in Pennsylvania, which also means the state-mandated over-order premium paid by consumers is passed back through the supply chain.

“It really made the decision for us, when it came to needing our milk supply to be independent producers that we can have a direct relationship, monitor and inspect ourselves,” Alex Dewey told abc27 News, Harrisburg about the PA Preferred label and their decision to add five of the displaced farms to their Pennsylvania-sourced milk. Dewey is the assistant general manager of Harrisburg Dairies.

Likewise, Schneider Dairy president William Schneider told Clarion news that, “We really didn’t need the milk, but… these people were going to lose their livelihood. I didn’t want people to be out on the street, so we did what we could.”

Both dairies appear to have chosen their 4 and 5 farms based on hauling routes and proximity to their respective plants.

Meanwhile, the situation is in limbo the remaining 12 farms in western Pennsylvania, along with the handful of Ohio and New York producers, affected by volume adjustments at Sharpsville and New Wilmington as well as 21 in eastern Pennsylvania affected by volume adjustments at Dean’s Swiss plant in Lebanon.

In addition, producers affected by these notices in Indiana, Kentucky, Tennessee and the Carolinas are also currently still seeking markets. A few in the Southeast have made plans to sell, but overall, there are still about 100 dairy farms displaced by Dean’s system-wide consolidation and Walmart’s new plant coming on line in May in Fort Wayne Indiana.

Some other marketing factors are emerging.

For example, the Dean Sharpsville plant continues to notoriously bring in loads of milk from Michigan. The company confirms that the 90-day notices sent Feb. 26 to over 100 dairy farms in 8 states, did not include Michigan.

The Sharpsville plant was referenced specifically in the December Pennsylvania Milk Marketing Board (PMMB) hearing where the Pennsylvania Association of Milk Dealers and Dean Foods requested a significant reduction in the producer over-order premium to its lowest level in 17 years. This change to a 75-cent mandated premium went into effect for wholesale and retail milk price minimums January 1.

At the time of the hearing, both John Pierce and Evan Kinser of Dean Foods testified that retailers are getting accustomed to bargain-priced milk elsewhere with documented retail milk prices offered to consumers in other states as low as 87 cents per gallon. Kinser testified that this new reality made Pennsylvania’s high state-minimum retail milk price an increasingly attractive destination for milk bottled elsewhere.

Kinser had further testified that the pressure from the increasing influx of out-of-state milk was making it difficult for milk produced in Pennsylvania to compete for retail (and apparently farm level) contracts.

Kinser also indicated that the mix of milk sourcing at the Sharpsville plant, in December, was already much different than the mix at the Swiss Premium plant in Lebanon. With Sharpsville close to the Ohio and New York borders, the plant has been sourcing milk from Ohio and New York for some time, but also increasingly from Michigan and Indiana.

In fact, at the December PMMB hearing, Kinser’s much-redacted testimony warned of Pennsylvania milk becoming displaced and that the new and lower 75-cent over-order premium level is “already a compromise that represented the highest level the current economic conditions can sustain.”

Kinser warned that if the premium were any higher than 75 cents, Dean Foods would be forced to renegotiate its contracts with suppliers to change the mix of milk used at ALL of its plants within the state in order to compete for contracts with packaged milk coming into the state from plants beyond Pennsylvania’s borders.

Even though the PMMB granted Dean’s request to lower the mandated premium to 75 cents, it appears the mix of milk is being renegotiated anyway as part of the company’s milk supply chain consolidation process as the volume adjustments at Pennsylvania plants have fallen primarily onto Pennsylvania farms.

Also emerging in the marketplace is the increased occurrence of brokered milk. This trend began in 2013 as producers across the Northeast and Mideast have dealt with contract losses in the fluid market at smaller levels than seen today.

Great Lakes Milk Producers is an example of a recently organized group of producers from Ohio, Michigan and Indiana, which is organized “like” a cooperative but markets milk as single-source loads through a broker.

Part of the drill is getting the milk qualified with farm audits and certifications as single-source loads that can be matched up to spot needs from cheese and yogurt plants to even, at times, the Dean plant in Sharpsville, Pennsylvania, the Southeast in the summer, and potentially even the new Class I Walmart plant in Fort Wayne.

Marketing through a broker can mean a long haul in a long market with changing conditions. This option makes milk quality a mandate without a premium.

As 27 farms in Indiana continue to seek a market, it is unclear whether brokering with Great Lakes Milk will become an option. The size of the displaced Indiana family dairy farms fits the single-source criteria, ranging 300 to 1500 cows and collectively represent an estimated 20 million pounds per month of displaced milk volume let go by a Dean plant in Indiana as well as Louisville, Kentucky.

“This is a huge issue for our state right now with an overwhelming impact,” said Indiana Dairy Producers executive director Doug Leman at a recent annual meeting in Indianapolis about the 27 farms with displaced milk scattered around the state. “Conversations are starting to happen, and we are planning a meeting for these farms. But just because Dean is not buying this milk, does not mean that the consumer demand has gone away. We have to let the dust settle and go through the milk shuffle.”

Among the recently affected Indiana farms is the sixth generation Kelsay Dairy Farm, operated by brothers Joe and Russ Kelsay and milking nearly 400 cows near Whiteland. Joe Kelsay was the milkman for last year’s Indy500.

“We are exhausting all contacts and connections with cooperatives and plants,” said Kelsay in a phone interview. “Several told us they are not in a position to take any additional milk, some are doing some checking, and we do have a couple meetings scheduled. We are cautiously optimistic.”

When asked if the new Walmart plant will pick up any of the Dean dropped farms, Leman said the plant’s supply has been locked up with a percentage coming from undisclosed dairies doing contracts directly with Walmart and the balance being single-source loads via third parties.

“We can’t tell Walmart where to get the milk, but we are letting them know to check with these farms,” said Leman. “Some are within 50 miles of the plant.”

Kelsay doesn’t blame either Dean or Walmart for the market loss his family and others are experiencing. “This is a difficult time, but we can’t fault one company or another for doing their best to run their businesses,” he said.

Meanwhile, in Pennsylvania, town hall meetings were held (and reported in last week’s Farmshine) to raise public awareness. Ag Secretary Russ Redding wrote to Dean Foods asking for contract extensions.

But Dean has indicated its problem with excess volume will begin before these contracts end.

“We explored all our options before we made this decision,” noted Reace Smith, Dean Foods director of corporate communications. “At this time, we can’t extend the contracts further. As a fluid milk processing company, we are unable to store milk long-term.”

The timing is difficult with spring flush and spring decisions around the corner.

“We’re all in limbo right now,” said Agri-King nutritionist Bob Byers in a phone interview. He works with 25 farms, serving in the affected area of western Pennsylvania for 20 years. He notes that affected farm families have only so much time to make decisions like what crops to plant, what fuel and supplies to order. These decisions revolve around whether or not they will be milking cows after May 31.

“There is a timeline involved to unwind a multi-generational dairy farm with inventories of cows and feed and with a team of employees to think about,” says Kelsay. “If there is no one to purchase our milk, how can we continue? What happens here has a significant impact on our team of employees, and their families, as well as our hauler, nutritionist, equipment and feed suppliers – our whole web of contacts. We do a lot of business with a lot of people.”

Byers notes that this is the worst of times in the dairy business that he has seen in his 20 years and that it definitely affects local jobs and businesses.

“Local people want local milk,” he said. “That is the only thing that will help these local farms at this point. Media attention will help get that message in front of consumers, and in front of companies like Walmart.”

CAPTIONS –

PA-preferred

Alisha Risser of Lebanon posted this photo of Harrisburg Dairies’ milk displaying the PA Preferred label signifying the milk was produced on Pennsylvania farms. The Rissers were part of a town hall meeting in Lebanon reported in last week’s Farmshine, and they are one of five farms whose contracts were dropped by the Dean Swiss Premium plant in Lebanon that will be picked up by Harrisburg Dairies.

‘This is the face of the dairy crisis’

Posted on April 3, 2018 by Agmoos

(Author’s note: Look for an update here soon about developments since this town hall meeting on 3/19. As of 3/31, in eastern Pennsylvania, 9 Lebanon County dairy farms have been picked up by Harrisburg Dairies, 2 have been picked up by a cooperative and 2 have decided to exit the dairy business, leaving 2 Lebanon County farms and 11 Lancaster County farms still seeking a market. In western Pennsylvania, 4 of the 16 farms have been picked up by Schneider’s Dairy based in Pittsburgh, leaving 12 still needing a market for their milk.)

Emotional town hall meeting in Lebanon, Pa. draws over 200 people urging contract extensions for Dean’s dropped dairies

By Sherry Bunting, Farmshine, March 23, 2018

LEBANON, Pa. – “Family is a treasure for all of us here, and we have a family crisis concerning our dairy farms,” said Randy Ebersole, a local car dealer whose family has been part of the Lebanon community surrounded by dairy farms for generations. He moderated a “Save Pennsylvania Dairy Farms” town hall meeting about the 26 Lebanon and Lancaster County dairy farms that received 90-day milk contract termination letters from the Lebanon Swiss Premium plant owned by Dean Foodd on March 3.

The meeting drew 200 people to the Expo Center Monday (March 19) and was covered by three television stations and a host of other media.

State representatives Frank Ryan, Russ Diamond and Sue Helm also attended and spoke about their commitment to work with farmers on solutions.

Jayne Sebright, executive director of the Center for Dairy Excellence also attended, mentioning the Center’s resources for counseling and support as well as a joint venture with the Pennsylvania Dairymen’s Association to launch a “local and real milk” promotion by June Dairy Month.

Pa. Ag Secretary Russell Redding was not present, but Sebright said he will be sending a letter to Dean Foods in support of an extension of terminated contracts for 42 Pennsylvania dairy farms, the 26 in eastern Pennsylvania and 16 shipping to Dean plants in western Pennsylvania.

“This is the face of the dairy crisis. This is not fake news. This is real,” said Ebersole of the panel of three producers, a nutritionist, a veterinarian and a feed mill manager who shared their stories of the impact to the farms whose milk contracts will end May 31, 2018. This represents about half of the Lebanon plant’s daily milk intake.

The message of the town hall meeting was simple: Don’t blame or boycott Dean Foods because there are still another 40 local farms who did not get letters and are supplying the Swiss plant in Lebanon. But do, write, call or email support for a contract extension for these terminated farms until fall or winter.

And yes, drink more milk and eat more dairy products, especially locally-sourced dairy, knowing how it supports healthy bodies and healthy communities.

All told, Dean Foods ended marketing agreements with over 100 farms in eight states as the company says it adjusted its milk volume because of a supply and demand imbalance made worse by the trend among retailers, namely Walmart, to vertically integrate into bottling their store brands and compressing the supply-chain with consolidated intakes and wider distributions.

The emotional 2-hour meeting revealed community support for these farms by those who recognize how these farms touch many of its jobs and businesses.

Yes. A legacy is on the line here. And there were plenty of youth among the 200 attendees, many of them from local dairy farms where the future is uncertain due to the current dairy economics and especially for those in the families whose farms have been blind-sided by these 90-day termination letters.

One after another, people voiced their concern that 90 days is not enough time to find a new market at the worst time of year, ahead of spring flush, nor is it enough time for these families to unwind their businesses by selling cows, assets, even their farms and their homes to settle their lifetime investments in a way that allows these farm families to find a path forward.

“You will not find a more dedicated and hard-working people than dairy farmers,” said Ebersole. “They have invested their money, their time and their lives developing their herds and their businesses. We understand the world is changing, and that we are not an island, but what has not changed is the expectation of fair and reasonable treatment.”

A local pastor asked a blessing on the meeting and referenced Psalms 139 where David asks God ‘search me… and know my heart; test me and know my anxious thoughts. See if there is any offensive way in me and lead me in the way everlasting.’

The parallels of this passage to what these farmers are facing were obvious in the emotion that followed as each of six panelists told their stories and as others attending lent their support and as 8-oz chugs of Dean’s TruMoo milk and trays of cheese from the Lebanon County dairy royalty were enjoyed.

No one blamed Dean Foods.

Producers talked of a good relationship with the plant. They talked of how the letters completely turned their worlds upside down. They talked of how they have called eight to 10 other milk buyers in the region, none of them stepping up to accept new milk.

“Our cows are like our children,” said Kirby Horst of Lynncrest Holsteins, which has produced milk for the Lebanon Swiss Premium plant for 60 years across two generations. “The thought of 90 days and no market for our milk and no place for our cows to go… the thought of looking out at the pastures and not seeing the cows … I don’t know if I can handle that.”

The affected producers and the businesses that serve them stressed that with a little more time, they could do what is best for their families.

“Just like all the 26 farms affected in this community, our minds are missing right now,” said Alisha Risser. She and her husband have been shipping their milk to the Swiss plant for 17 years. She described how they worked full time jobs and saved and rented a barn before purchasing a herd and then building a dairy full time on their farm in 2001, when they began shipping milk to the plant in Lebanon.

“We have been lucky to have our passion be our job every day and to share this with our kids,” said Risser, her voice tinged with emotion as she described how her husband and youngest son bounce ideas off each other about the cows and the crops. “Our children wonder what future we have now. This is such a feeling of helplessness.

“We are proud of our milk that we produce on our farm, and we are proud of the Swiss Premium milk in our community,” she added. “We are just asking the community to support us with letters to Dean Foods to provide a contract extension until fall or winter.”

As milk pricing, promotion, regulatory environments and dietary guidelines are sorted out in the coming months, these farms are left without a milk market, without an opportunity to compete, to survive.

“God is always faithful, and we know we will be okay in the end, but an extension would allow all 26 farms here to make decisions for our families and our futures,” Risser said.

Ebersole added that, “These farms have developed their cow herds over a long period of time. They are rooted in our community. It’s not like a car dealership where you can just go to the Manheim Auto Auction and get in the business of selling cars.”

Indeed, a legacy is on the line in Lebanon and Lancaster Counties, as in other communities similarly affected.

“I am not sure how we are going to handle this going forward. We have put all we have into the farm. Nothing will settle like it should,” said Brent Hostetter, who received his letter a week after the other farms on his milk hauling route were notified. Hostetter and his wife have been shipping to the plant for 19 years.

“Our kids love the farm. It has been going three generations, and now I am not sure how we can see a fourth,” said Hostetter. Like the others, he said a contract extension would give them some time to figure things out.

He also encouraged the public to “support our Pennsylvania farmers” to buy local milk and to look at the plant codes.

Rick Stehr, a nutritionist and owner of R&J Consulting, directed some of his comments to the significant number of youth in the audience, saying that these farms are where the next generation learns morals, values, work ethic and the joys and failures of life.

“This is worth fighting for,” said Stehr, “worth fighting all together for.”

He noted that for every 9 milk cows in Pennsylvania, one job is supported in the related business infrastructure. In Lebanon County, alone, one job is supported by six cows. The impact is deep if these cows and farms are lost, he said.

“Each cow here produces $14,000 in revenue for our community,” said Stehr, “16% of U.S. dairy farms are located in Pennsylvania where the average farm size is 80 cows. We are not California or New Mexico. We are located well within a day’s drive from 50% of the U.S. population. It seems our location would be pretty good, and yet this is happening.”

The emotion was palpable as Stehr and others offered to do whatever is needed in terms of counseling and assistance through this.

Alan Graves, manager of Mark Hershey Farms, a prominent feed mill in Lebanon County, said 80% of the mill’s feed business is dairy.

“We have been in business 45 years and employ 55 people in this community,” said Graves. “This day is about the producers and how they affect everything else in our communities. Our mill employees and their families rely on these dairies for their jobs. We don’t make business projections for 90 days, we are out a few years in our projections.

“The extension these producers are asking for is a fair request,” he added. “They have spent their lives improving their cows and improving the product they produce. The thought of taking that away in 90 days is almost unjust.”

Ebersole described the community impact this way: “These folks write out checks to other businesses in our community. There has to be a check coming back the other way. In 90 days that will all stop.”

Dr. Bruce Keck of Annville-Cleona Veterinary Service talked about how the public is unaware of what has been happening over the past 30 days and the past 10 years of consolidation and change. He asked the three television stations represented to raise awareness.

“We want to bombard Dean Foods with letters and emails and phone calls,” he said.

“These dairy farmers are so invested in cows and equipment that they can’t just quickly turn around,” said Keck, who has worked with local dairy farmers as a veterinarian for 25 years and took over the practice started by his father in 1961. He understands the family business dynamics.

“Without an extension, these families will be forced to sell their herds, and even their farms, for a fraction of their worth in this environment,” said Keck, “and that will trickle down to affect truckers, nutritionists, equipment companies, feed mills, veterinarians and more. This is like asking a loaded tractor trailer to turn as fast as a speeding car. It’s not enough time.”

To communicate support for the farms facing 90-day termination of contracts, call Dean Foods at 214-303-3767, email dairydirectsupport@deanfoods.com, or mail a letter to Dean Foods, 2711 North Haskell Avenue, Suite 3400, Dallas, TX, 75204.

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Brent Hostetter, Lebanon County dairy producer: “I am not sure how we are going to handle this going forward. We have put all we have into the farm. Nothing will settle like it should.”

Alisha Risser, Lebanon County dairy producer: “We are proud of our milk that we produce on our farm, and we are proud of the Swiss Premium milk in our community. We are just asking the community to support us with letters to Dean Foods to provide a contract extension until fall or winter.”

Kirby Horst, Lebanon County dairy producer: “The thought of looking out at the pastures and not seeing the cows … I don’t know if I can handle that.”

Randy Ebersole, local car dealer and panel moderator: “This is not about blaming or boycotting Dean Foods. Please do the opposite, fill yourselves up with these dairy products.”

Dr. Bruce Keck, Annville-Cleona Veterinary Service: “Without a contract extension…This is like asking a loaded tractor trailer to turn as fast as a speeding car. It’s not enough time.”

Rick Stehr, R&J Consulting: “This is worth fighting for…worth fighting all together for.”

Alan Graves, Mark Hershey Farms: “These producers have spent their lives improving their cows and improving the product they produce. The thought of taking that away in 90 days is almost unjust.”

Rep. Sue Helm: “A group of representatives are writing a letter Dean Foods. We want farmers to stay in contact with us.”

Rep. Russ Diamond: “We wanted to get Pennsylvania milk into Pennsylvania schools but have been told that with the product stream in Pennsylvania, this is hard to do. This Pa. Milk Marketing Board issue is a hard issue to get to the bottom, and people get very protective of it.”

Rep. Frank Ryan: “Keep faith first and foremost and your sense of humor and talk with your bankers. This is emotionally draining and people want to run from it. There is a solution and we need to work together to find it.”

Bernie Morrissey, retired agribusinessman: “Dairy farmer Nelson Troutman got me involved in this nine years ago, and I have given up my retirement to work on this issue because it’s important to our farms. No matter who buys your milk, this is all connected… There are over 25 milk contracts from outside dairies selling milk in Pennsylvania while you guys are under the Pa. Milk Marketing Law. You have been shafted.”

Mike Eby, chairman National Dairy Producers Organization and former Lancaster County dairy farmer: “The media are our friends. We can work with the media to advertise our product in ways the (check off) promotion programs can’t.”

Seismic shifts in milk supply chain ahead: New Walmart plant triggers Dean’s cut of over 100 dairy farms in 8 states

Posted on March 9, 2018 by Agmoos

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By Sherry Bunting, from Farmshine, March 9, 2018

LEBANON, Pa. — He saw the mailman drive up and linger in the driveway, wondering if they were expecting a package. Moments later, his wife was standing there, holding a letter she had signed for.

The certified letter informed this Lancaster County dairy farm family that after 13 years of sending their milk to the Swiss Premium plant in Lebanon – along with decades of the farm’s milk in generations before them — the agreement with Dean Dairy Direct would end May 31, 2018.

The same story played out Friday among neighboring farms on the same hauling route to the same plant. And it was the same scene in driveways for approximately 120 dairy farms in eight states, including 42 in eastern and western Pennsylvania — around half of the Dean Dairy Direct shippers to three plants in the state.

Reace Smith, director of corporate communications for the Dallas, Texas-based Dean Foods, confirmed in a phone call Monday that against the backdrop of expanding raw milk production, and companies “asserting and expanding their presence in a market where consumers are drinking less milk (namely the Fort Wayne, Indiana Walmart plant where bottling begins this month) over 100 dairy farms in eight states received 90-day termination notices” from Dean Dairy Direct on Friday and Saturday, March 2 and 3 stating that their agreements will end May 31, 2018.

Smith confirmed that the over 100 affected dairy farms are in the states of Indiana, Ohio, Pennsylvania, New York, Kentucky, Tennessee, North Carolina and South Carolina.

“This affects all size herds and is not a large or small farm thing,” said Smith. While she was unable to supply specific information about the farms that were terminated, she said the widespread volume adjustments at multiple plants across four Federal Orders was necessary due to the new Class I plant (Walmart) coming online this month and the loss of a contract through a competitive bidding process (Food Lion).

Both market losses for Dean indicating structural change to the dairy industry as more retailers move into milk bottling in more centralized distribution models.

Sources in the various states confirm the affected farms range in size from less than 100 cows to over 1000 cows.

“This was an incredibly difficult decision. We tried very hard to avoid it and regret this decision had to be made,” said Smith. She indicated that Dean Dairy Direct field representatives are serving as resources to these producers and can provide a list of contacts for potential milk buyers. They are also offering counseling.

While the company will not provide a list of affected plants or a state by state break down in the number of farms or volume of milk affected, they have indicated that the state that may be hardest hit on a volume basis is Indiana.

In fact, the volume of displaced milk in Indiana, alone, has been estimated at over 20 million pounds per month, representing the under 100 to over 1000 cow size range but most of them milking 300 to 1000.

The affected Indiana farms shipped milk to the Dean plant in Louisville, Kentucky, which also terminated 22 Kentucky dairy producers, ranging from 50 cows to 250, according to Maury Cox, executive director of the Kentucky Dairy Development Council.

In Tennessee, Julie Walker of Agri-Voice near Knoxville has confirmed nine (now 10 confirmed) affected producers ranging 60 cows to 300, and numbers in the Carolinas are unknown at this time.

From the standpoint of the farms affected, Pennsylvania is hardest hit, and while the number of New York farms is unknown at this time, some may have shipped to Dean plants in Pennsylvania.

According to Jayne Sebright, executive director of the Center for Dairy Excellence, 42 Pennsylvania dairy farms shipping to three Dean plants in eastern and western Pennsylvania received notices Friday – representing half of the Dean Dairy Direct shippers in the state. This includes 26 producers in eastern Pennsylvania, including Lebanon and Lancaster Counties, as well as 16 in western Pennsylvania, where the Dean plants in Sharpsville and Erie also ended agreements with Ohio farms. The number of Ohio farms affected is unknown at this time.

“The (Agriculture) Department and the Center have been reaching out to other markets to see what capacity is available, but at this point we do not know of any with available capacity,” said Sebright. “We are working to support the affected farms as best we can. We are very concerned both about the future of the farms and the well-being of the farm families.”

Sebright noted that the Center is making additional resources available and recommending use of their Dairy Decision Consultants Program to evaluate options — both within and outside of the dairy industry. “This is a difficult situation to be in and we are concerned.”

In fact, the farm this reporter visited in Lancaster County Tuesday was already working to call every available market and neighbors who also lost their contracts were looking at everything they could think of. Four or five trucks go through the county picking up milk every day so they wonder if each one can find a market or if they are better off pulling their milk together to find a single-haul market.

The producer was thankful, at least, for being part of a dairy producer discussion group and thankful for folks like Dr. Charlie Gardner with the Center who leads the group.

Not only were the Pennsylvania dairy farms shocked to receive the letters, veterinarians, nutritionists, feed company and equipment maintenance folks are facing this loss with their farm customers as the news spread this week throughout farm communities and the greater dairy community.

In Indiana, where estimates are that over 20 million pounds of milk per month has been displaced, producers had already been on edge as the Walmart plant took shape in their state and they contemplated its milk sourcing.

“We are working with producers and contacting cooperatives and potential markets to try to work together to get through this thing,” said Doug Leman, executive director of the Indiana Dairy Producers. He has been in contact with affected producers, the Indiana Department of Agriculture, and the plants and cooperatives that provide markets for milk in the region.

“I’ve had calls not just from the affected producers, but from many other Indiana dairy producers sharing their concern and asking if there is anything they can do,” said Leman. “I’m encouraged by that, and I am encouraging our producers to keep their chins up through this difficult time in their lives, families and businesses in the hopes that we can work through this together.”

Leman said he does not want to blame Walmart because, wherever the first Walmart plant would have been located, this was coming. Indeed, Walmart has entered a trend among retailers to move toward bottling their own private label store brands (Great Value and Sam’s Club Member’s Mark) rather than contracting with Dean Foods.

“Walmart was coming to Ohio, Michigan or Indiana, and I still believe it is better to have the plant in Indiana because it offers opportunities,” said Leman.

While fluid milk consumption is on the decline for 15 years — although stabilizing with more consumption of whole milk last year — retailers notice that nearly every shopping basket going through their stores includes milk. They seek their own store brand loyalty as loyalty to their store and some of the retail price wars happening in states without loss-leader protection are evidence of this. As is the ability to pull premiums away from states that have loss-leader protection or a minimum retail price as in Pennsylvania, to “fund” price wars in other surrounding states without any loss-leader protection.

The dichotomy points to a need, perhaps, for a federal loss-leader threshold versus random state programs that can fuel the picking of winners and losers in today’s times of seismic structural change to the dairy industry from retail all the way through the supply-chain.

In short, the region would likely have been affected by Walmart’s decision to vertically integrate its Great Value and Member’s Mark milk brand for its stores in the region — no matter which state the plant had been located.

In fact, sources indicate potential sites to the south are being eyed for a second Walmart plant in the future, revealing a corridor strategy to this vertical integration of single-source, full-traceability, each-truck-one-farm model.

The Dean Dairy Direct letters of termination to dairy producers in the region were dated February 26, 2018, which was the same day as Dean’s 2017 earnings call where the company projected its strategy in brand and private label supply and to “right size” its milk volume and consolidate its supply chain to achieve a “flatter, leaner and more agile” company into 2019.

According to Smith, there are no official announcements of any plant closures at this time and none of the plants involved have released all of their shippers. Still, there remains concern that some of the plants that have released a larger portion of their farms are vulnerable.

“We still have a commitment to local milk,” said Smith about the volume adjustments. “There are many factors that impacted this decision. We are seeing surplus raw milk when the public is consuming less fluid milk, and we see companies asserting and expanding their presence in a market where consumers are drinking three gallons less annually, per capita, since 2010 while the U.S. dairy industry is producing 350 million gallons more milk annually than the year before.”

In addition to the overall imbalance Smith said that, “The introduction of new plants when there is an industrywide surplus forced us into the position of further adjusting our milk supply according to demand.”

As vertical integration of milk at the retail level leads to consolidation by the nation’s largest milk bottler – Dean Foods – the company has diversified into soft dairy product brands that are just starting out of the gate and were discussed in the Dean earnings call as well.

Specifically, the letter received by Indiana and Kentucky dairy producers shipping to the Louisville plant stated “two indisputable dynamics led to this difficult decision. First and foremost, a retailer’s new Class I fluid processing plant is coming online in the region, significantly decreasing our production as milk volume is moved away from our facility to this new plant.

“The second reason is bigger than all of us. The steady increase of raw milk production combined with the decrease of Class I fluid dairy consumption…” the letter stated.

Letters received by producers in the southern market as well as eastern Pennsylvania did not specifically reference the new Class I fluid processing plant built by a retailer (Walmart) as had the letter to Kentucky and Indiana producers serving the Louisville plant and western Pennsylvania and Ohio producers serving the Sharpsville plant.

Those letters received by farms further to the east and the south indicated the plants had “lost a portion of customer fluid milk volume to a competitor through a customer-bid process.” Sources indicate this may include both the Food Lion private label store brand and the Walmart Great Value private label in these areas as well.

The letters received by producers said further that Dean was “unable to lock-in enough new customer volume to offset this loss.” This is a function of the overall decline in fluid milk consumption and the new milk via large multi-owner, multi-site farms in surplus regions of the Mideast and Midwest.

One thing is also clear in speaking with producers, veterinarians, organizations and others in the industry, the farms that are facing this difficulty are largely well-managed and producing high quality milk. Many of them are young families representing the next generation. Many are progressive, with updated facilities and technologies as well as utilizing the resources available to them for continued improvement in all that they do to supply their communities with milk.

In these states affected, whole transportation routes were terminated, presenting both challenges and opportunities for a collective effort in dealing with these market losses.

Walmart will not reveal the farms they have secured to supply the plant, but it is widely known that some of the milk will come from the north, some from within Indiana, and that a processor in Wisconsin is handling contracts and in a position to balance the Walmart plant’s fluid needs that may or may not have involvement by cooperatives.

As in Indiana and other states, Cox said of Kentucky: “We, are contacting other potential markets for our producers and would like to meet with Dean Foods to see what more we can do for these producers and to have a better understanding about the future of the Louisville plant” (where both the affected Kentucky and Indiana producers shipped their milk.)

Some state dairy organizations, state departments of agriculture and other industry leaders indicate they want to let the dust settle and allow options to emerge as they adopt a patient mindset to look at potential options for their respective state’s producers.

In the meantime, all are reaching out to producers and urging producers to reach out to them, and to each other. In fact, right now, more than ever, the dairy community needs to be reaching out and talking about its future to higher levels of relationships beyond what has occurred in the past.

“We want to survive,” said the dairyman this reporter visited 15 minutes from my home in Lancaster County, Pennsylvania, just four days after receiving the letter.

Like others this reporter has spoken to, they have done everything the industry suggests to make their farm competitive. While a small farm whose milk shipped for generations to the Lebanon Swiss plant serving local stores and consumers, this young farm family had invested in the latest technology, produces milk with very high components and very low somatic cell counts.

But here they are, facing what 120 of all sizes face throughout eight states as vertical integration from Walmart and other retailers sends a ripple effect and seismic shifts throughout the supply chain.

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Dumped. Desperate. Delivered. But is it over?

Posted on April 20, 2015 by Agmoos

‘It will happen again if we don’t find a way to deal with this.’

By Sherry Bunting, Farmshine, April 17, 2015

FULTONVILLE, N.Y. — Ray Dykeman does not want to see anyone go through what he and his cooperative of 8 producers did this week. He cites the feeling of not knowing where to turn as the worst part of the “bizarre situation.” But as the group began their phone-tree of calls last week, and the Albany television news cameras rolled at the 950-cow Dykeman Dairy Farm to produce what became the number one ‘shared’ story of the week… things started happening that led to a reprieve.

The co-op of 8 had lost their milk market. They were given notice 4 weeks ago that April 15 was the last day they would haul their milk to New York City’s only bottler — as they had for 13 years. Less milk was needed by Elmhurst Dairy, and another entity had stepped in to supply — and balance — that need.

“When we first lost our market, we spent 14 days thinking we were getting something lined up with another buyer,” said Dykeman. “When that fell through, we were faced with literally 7 to 10 days of hecticness. There’s not a tremendous amount of options. That is the other hard part.”

Dykeman served as the co-op’s point man communicating with other co-ops, processors, government officials and the media.

The 8 farms, totaling near 3000 cows, were down to 7 days to find a new home for their 110 million pounds of annual milk. Staring them in the face was the real possibility of selling their cows and shutting their doors.

“What do you do in 30 days, in that amount of time?” said Dykeman, who has ownership in 3 of the 8 affected farms, including the 500-cow Envision Dairy, Amsterdam, owned by a consortium of 23 people with expertise in different aspects of dairying and forage, along with young dairy startups from Cornell. Envision Dairy was accepted by another co-op 10 days before cutoff. That lightened the load a bit, but the rest of the milk was still a long way from home.

“Even today, our 42 employees are looking at me saying what are we doing Thursday?” said Dykeman in a Farmshine phone interview late Tuesday afternoon. “We are 24 hours away from having no home for our milk, and I still am not sure how to answer them.”

Hope and support…

But he had hope. Fellow dairy producers and community members were calling and emailing. People were reaching out. He had had countless meetings and secured two buyers to each take a little of the milk. On Tuesday afternoon, he was waiting for an answer from a third processor considering taking half.

By late that evening, that contract was signed for a 3-month reprieve in time to make the nightly television news.

“Trucking our milk to 3 different places will be new for us, but we are able to use the same hauler and we are accustomed to high trucking costs — having hauled milk into New York City for 13 years — so we are very happy,” said Dykeman with an audible sigh of relief.

“I hope, going forward, we don’t let this experience go by the wayside because I honestly believe if we do not come up with a plan for this area, it will happen again and be potentially devastating,” he quickly added. “Just look at the investment farmers have. All that we have put at risk.

“I would much rather have someone say to me: ‘We really need you to go out of business. You are not needed in New York anymore, and you have a year to get out,’ than to be told all of a sudden there’s no place to send my milk,” he said.

Dykeman stressed that they have “no animosity toward any of the companies.” This is business to business, they realize. But what amazed them was the amount of public support.

“Everyone worked so hard to find a home for this milk: Our representatives and senators, the Governor’s office, the New York Ag Commissioner, other co-ops and processors. Local people wanted to take the local milk. It was a very difficult situation in which to find a solution, but the people we have dealt with in this were very helpful.”

Dykeman could not say enough about Sen. Chuck Schumer. “He was kind enough without a scheduled meeting to meet with a couple farmers while in Johnstown for another reason,” he explained. “He and the Commissioner both called this morning to express their relief in how things turned out.”

No easy solutions…

The 3-month reprieve gives the co-op of now 7 farms the breathing time to secure an annual contract. And Dykeman feels certain there will be more discussion in the industry on how to handle these things better in the future.

“Farmers generally want to go back to being farmers,” Dykeman shared. “This is not what we do. This is one of the reasons we farm. We grew up on farms and this is what we want to do — not doing the kinds of things I’ve been doing for the past few weeks.”

Dykeman said the silver lining is “seeing your community respond and be very helpful. I can’t even calculate the number of emails and phone calls I’ve had. In fact, I’ve had 5 calls try to buzz through while on the phone with you today,” he said Tuesday. “People want to help. But there are no easy solutions and it will happen again if we don’t find a way to deal with this.”

One of the ideas being tossed around is to pair extra milk with efforts to supply food banks, or to ask the government how to use the “demand buying” in the Farm Bill to alleviate the supply pressure coming to roost on a region despite the fact that the “national average milk margin” is not even close yet to triggering the national government purchases for feeding programs.

Players and perspective…

In contacting the New York Department of Ag and Markets on their role and perspective, emailed questions were requested, and Dave Bullard, assistant public information officer provided this statement in response: “Ag and Markets is working with local elected officials, including Congressman Tonko and Assemblyman Santabarbara, to assist the farmers in finding alternative processors and manufacturers for the cooperative. There is currently a surplus of milk due to strong production combined with lower sales as a result of reduced exports and a few other factors. This supply/demand imbalance has created a very challenging situation for all producers and processors.”

Similarly, a request for an interview with DFA was met with a request for emailed questions. In asking what DFA would like to report in terms of taking on one of the farms in the Pennsylvania situation a few weeks ago and the New York situation currently while also gaining additional outlet for member milk in the process, the emailed response from DFA’s spokesperson was, that “Every milk marketing organization handles regional market dynamics differently. One of the advantages of our cooperative system is that we work diligently to provide a secure market for our members’ milk. Our goal is to market our members’ milk in the most efficient and cost-effective way as possible. As we look to the future, the Northeast dairy industry is in an excellent position because of our proximity to major population hubs and our access to natural resources.”

Asked to define some of the biggest reasons for the oversupply of milk in the Northeast given that the Northeast has not grown by as wide a margin as the national average, DFA’s emailed response was: “For most of 2014 and into 2015, the Northeast marketplace has been in a challenging milk supply situation. Overall a generally weak demand and increased milk supply resulted in the need for additional milk movements around and beyond the Northeast. With plant closures (Farmland Dairies) and an overall weakening in demand from Class I and Class II customers, more milk than normal was placed in balancing facilities throughout our system and outside our geography. In the Northeast the loss of capacity in conjunction with the increase in supply resulted in the extra milk movements.”

Welcome to the squeeze chute…

When reviewing the larger decline in Northeast Class I utilizations versus the decline nationally — and seeing the effect as Eastern mailbox milk prices fall further behind their respective all-milk price while national average mailbox milk prices have atypically become higher than the all-milk price — it is obvious that the Northeast market is the new squeeze-chute when milk supplies nationally burgeon.

The yogurt-magnet that strengthened the confidence of Northeast dairy farmers over the past few years has led to small but steady increases in production, and then in 2014, New York increased by more than 2% to re-take from Idaho its former position as the #3 milk-producing state. Meanwhile the Northeast milkshed, as a whole, was up just under 2% in 2014 compared with the national increase of 2.7%, and has backed off in early 2015.

No reason to sour on yogurt…

Yogurt production is one of the primary fall-guys for the current supply/demand situation reversal of fortunes in the Northeast. But further analysis is less clear on that pointed finger. Yogurt production was 741 million pounds in New York State in 2013 and 692 million pounds in 2012. The 2014 figures for the state will not be available until late May. The 2012 and 2013 totals, however, show New York yogurt production used around 12% of New York’s growing milk supply in both years as both the yogurt and the milk production grew simultaneously.

On a national basis, however, the total U.S. yogurt production figures are available at this time, and yogurt production grew from 4.42 billion pounds nationally in 2012 to 4.65 bil. lbs in 2013 to 4.74 bil. lbs. in 2014.

Furthermore, the April 2 Dairy Products report indicated that nationwide plain and flavored fresh (not frozen) yogurt production was up in February by 7.2% over year ago and nearly 12% higher than for January.

Context and common denominators…

The yogurt industry is known to be highly secretive and competitive.

Interestingly, 2009 is the last year in which the USDA reported monthly yogurt production on a state-by-state basis. Since 2010, those monthly yogurt production figures are only available on a national basis. This reporting change coincides with the timing of when yogurt production began to rise in New York State; so now, when it counts, there are no free and public records of production by state until 6 months after a year ends. It’s not that way for other substantial dairy products, and prior to 2010, those figures were available monthly without having to pay hundreds of dollars for an insider yogurt market publication to read insider industry estimates and trends.

In April’s central New York situation, like western Pennsylvania in February, rumors fly about reasons for farms to be cut from the shipping rolls of processors and small co-ops. Some folks wonder about the milk quality of those producers, or they may believe producers were expecting to be paid more money. But that’s the thing with rumors, there is but a shred of quasi-truth.

While some producers may find themselves in this situation through nitpicking on an inspection report or somatic cell counts that are a little too far north of 200,000, others may find themselves in this situation for merely asking a higher pay price when milk is short, but then staying with their processor on a handshake without the requested pay increase during the short-milk times only to find themselves on the other side of that equation — losing their processor when milk becomes long.

The bottom line in talking to various folks who’ve been through this in Pennsylvania and New York, the common denominators are: 1) the lack of warning, 2) the inability to prepare or negotiate or help problem-solve in advance of being flatly cut off, and 3) the loss being driven, at least in part, by the independents and small co-ops’ lack of reliable access to balancing assets — either owned or simply a standby buyer that will take a little milk for cheese or butter or yogurt or powder as producers balance the diminished and diluted Class I demand.

Looking ahead…

“Everyone in the industry was helpful to us, and we want to continue to work with them on solutions for the future,” said Dykeman reflectively.

Running in the background is some loss of confidence as producers deal with permanent and temporary loss of markets. One of the producers who survived the western Pennsylvania cutoff in March said in a phone interview this week, “crazy things are happening and people are being let go. Everyone is afraid to invest. Some of us already invested in our operations and are on our toes about losing our markets, and then we go to a local meeting where the speaker from Elanco tells us we need to increase production with rbST even though we are clearly in a region where more processors are requiring affidavits not to use it and people are losing their markets because of too much milk.”

At the end of the day, from the outside looking in, it seems the good beef price and current status of processors wanting to label products rbST-free are two strong signals folks could pay attention to in stabilizing demand. It’s also important to gauge the market direction in planning phases of growth. That growth is necessary here to sustain the dairy infrastructure and make farms that are not quite as surrounded by other farms attractive as a pickup. However, the two market loss situations in Pennsylvania and New York illustrate vividly that size does not matter.

As long as the Federal Orders put all the marbles of high value, pooling and provisions into Class I while that is the milk class that is dwindling in sales, size won’t matter. When milk is long, the milk guns will continue to point East and all size farms are vulnerable in the business of dealing with the push of supply through the squeeze chute.

Look for more on the Northeast market situation in next week’s Farmshine.

-30-

PENNSYLVANIA – Feb. 2015

Got Milk! But nowhere to go…

By Sherry Bunting, Farmshine, Feb. 27, 2015

WEST NEWTON, Pa. — What happens when no one will come for your milk? That’s a situation increasingly facing dairy producers in southwest Pennsylvania, given what has and is occurring in the proverbial tip of the iceberg: Westmoreland County.

It happened to Mike and Vicky Baker and six of their neighbors last May, and it is happening this week to 6 to 8 more producers in Westmoreland County, with the potential for additional shippers in surrounding counties to be affected as the calendar approaches the spring flush and schools letting out for summer.

For Doug and Janice Greenawalt, West Newton, Pa., the news could not be worse. On Saturday, February 28, the milk from their 40 cows will simply not be picked up.

Two other producers being terminated this week said they are selling or have already sold their cows. Two others said they have until March 31 to find new buyers for their milk. All received termination letters from Lanco-Pennland Quality Milk Producers Cooperative between January 30 and February 5.

“I’ve been on the phone all day, for days. I must have called dozens of dairies in the area since getting the notice on Jan. 30 that we were being terminated due to ‘hauling and marketing conditions.’ Our farm supports 3 families and we have 4 days to find a way to keep going,” said Janice Greenawalt in a phone interview with Farmshine Monday. As of Wednesday, they were still without a buyer for their milk come Saturday, and were looking at options for culling some cows and putting assets and energies to work raising cattle in a way that can yield some income for the farm and its families.

“All we know is that United Dairy has not renewed the contract with Lanco for our milk to be commingled, so Lanco could not sign for our milk after Feb. 28,” she explained. “Everyone we contacted to buy our milk says there’s too much milk around to take us. But some said they would have taken us … if we were larger.”

For Todd Ramaley, the story is similar. His farm is almost into Indiana County and about a 35 minutes’ drive (in a car not a milk truck) from the nearest Lanco shipper still shipping to Lanco. As of Tuesday, he said DFA was still looking at the possibility of taking the milk from his 40 cows “because it is really clean milk with SCC of 150,000.”

If his milk went to DFA, it would actually still go, physically, to the United Dairy, Inc. plant in Uniontown, several sources indicated, because United has a “swapping deal” with DFA, under which some of United’s milk goes to DFA’s plant in New Wilmington and some of DFA’s milk goes to United’s Uniontown plant.

When asked about the letters sent to six of its producers in Pennsylvania’s southwest corner, Lanco’s director of dairy operations Robert Morris explained how originally all the milk hauled by that hauler served Saputo Cheese in Hancock, Maryland.

“That plant closed in July,” he said. “But before that, those shippers ended up in our world when Saputo bought Jefferson Cheese. At that time, we were able to work an arrangement with United in Uniontown and hauler Wayne Harmon to commingle that milk on United’s independent routes. They were in charge of the Uniontown, Pa., Martins Ferry, Ohio and Charleston, West Virginia plants and would commingle some of our milk on the nearest truck.”

Morris noted the total milk of their six terminated farms is “roughly 250 to 275,000 pounds a month.”

According to Morris, United had apprised Lanco about losing a sizeable bottling contract through its system in January, and before cutting its own producers, would first stop receiving milk from outside sources. United set Feb. 28 as the last day they could commingle that milk. Lanco also received word through the St. Louis, Missouri milk broker that ran the commingling that United’s sizeable loss of sales would prohibit further commingling of Lanco milk in that region on their trucks.

Morris noted that Lanco is “still taking on new producers in areas where we have haulers close to our customer base,” and he noted the six producers they’ve let go are “small farms and out of our orbit, especially since Saputo closed the Hancock plant in July.

“Those farms were never charged the real cost of hauling their milk because United had picked up the trucking subsidy,” Morris stated. “With us losing the ability to commingle that milk, there is no way for us to haul it, or any market for us to send it to, where the hauling doesn’t eat up all the income.”

Requests from the affected producers to find a way to haul their milk for Lanco were denied.

Morris further explained that their milk from south of Williamsport, including Cambria County, Indiana County and Somerset County as well as Garrett County, Maryland — that had all flowed to Saputo in Hancock — is now going East to the Land O’Lakes plant in Carlisle. Some of it goes to Dairy Maid in Frederick, Md., and to HP Hood in Winchester, Va.

In areas where Lanco has hauling, they do commingle with the Maryland/Virginia co-op, but these fringe areas — like Westmoreland County — are an issue now without the Saputo cheese plant and considering the cut in volume needed by United at its Uniontown plant. Both Lanco and Maryland/Virginia have milk into Somerset County, plus Maryland/Virginia has milk in the Sugarcreek, Ohio region. The producers affected by the latest termination fall into a void — a pocket of milk between two higher-density dairy areas.

“We simply had too much milk at the Uniontown plant,” said Tom McCombs, milk procurement manager for United. “We had to cut back on the co-op milk, so we gave Lanco the notice.”

When probed further about the loss of Class I milk contracts, McCombs said that what United actually lost was its volume of sales that Save-A-Lot trucks would pick up at its Uniontown plant for their Pennsylvania warehouse “just down the road.”

“They did some redistricting with their stores, and that milk volume is now going to other warehouses,” he noted. This would include the warehouses served by United’s bottling plants in Ohio and West Virginia.

McCombs said the loss of volume going to the Save-A-Lot warehouse served by United’s Uniontown, Pa. plant leaves the company with the difficult task of deciding when and how to cut some of its own independent shippers that serve that plant as well.

“We have to make that decision in the next few days,” he said Monday. “It will be a tough situation to pick a load in an area that is not as flexible to get to our plants or other cheese plants.”

When asked about the milk swapping arrangement still ongoing with DFA, McCombs noted that, “We would not be accepting DFA milk, either, if we did not have the swapping agreement with DFA.”

He added that he expected the lost volume from the Save-A-Lot warehouse served by the Pennsylvania plant to come back in the fall “if things change.”

According to McCombs, United’s current 340 farms produce 36 million pounds of milk per month, and this total had increased by 850,000 pounds from December to January. “Our farms have not added cows, but they are producing a lot more milk per cow. It must be the good feed,” he said.

“Not only do we have more milk, but the Class I consumption is down. We have got to get milk back to consumers. The schools used to serve lowfat. Now they serve no-fat. They take the fat out of the milk, which takes the taste out of the milk, and people don’t want to drink it,” McCombs stressed, adding that the snow and low temperatures this winter are causing school closures. “We had five loads of school milk canceled and the balancing plants were all full. That snowballs on you.”

The Pennsylvania Department of Agriculture has received the quality records of the terminated farms, but not one of the producers has heard anything in terms of options from the state.

For shippers in Federal Orders 1 or 33, there are provisions for the market administrator to direct a cooperative to pick up the milk but be allowed to pass the full cost of marketing on to the producers. However, the shippers regulated under the Pa. Milk Marketing Board do not have those protections if their Class I market collapses.

That is what happened to Mike and Vicky Baker’s dairy and six others in the Westmoreland County region last May.

“We have a lot of independent processors in this western region,” she said in a phone interview Tuesday. She recounted her experience of losing their milk market last spring. In fact, her dairy and the others let go at that time were in the top seven for milk quality at the plant, and they lost their market anyway.

“We were able to get a good load of milk together at that time, so five of us are now with Land O’Lakes. It’s not cheap. We are paying $1.43/cwt in trucking costs,” she said.

The overarching problem, says Morris at Lanco, is that the Northeast and Mid-Atlantic market is “losing raw silo space” for weekends, holidays, and times of the year when Class I utilization is lowest. Add to this the 4% national decline in Class I sales to begin with, along with the reluctance of cheese plants to run at full capacity to build inventory, and the situation becomes one that producers throughout the region should be watching.

While some truckers report wait times at plants of 2 and 4 hours over the holidays, coop dispatchers note that was accomplished by dumping milk or just separating the cream and dumping the skim so that the trucks would not be waiting and so their turnaround times could be maximized on multiple routes.

Estimates of milk dumpage since last summer runs in the hundreds, but is anyone’s guess. DFA’s response to the question is to say it balances its member milk as it sees fit. Only certain types of milk dumping are reported to the Market Administrator, and that’s a story for another day.

For Todd Frescura, another of the six Lanco-terminated producers, the path forward will be different. He has talked with Horizon because there is demand for Organic milk that is reportedly in short supply. He is confident his fields will certify for three years of organic treatment due to the way his farm is operated for rotational grazing. But he will still have to wait one year for the herd to be certified.

“I guess I’ll cull the herd real hard, dry the cows I can, and maybe just milk 10 cows to feed calves for the neighbors and raise my heifers to be ready to produce organic milk in the future,” said Frescura.

But “going organic” is not an easy answer for most of the dairies affected now and in the future.

With the milk dumping last spring and summer and over the holidays, the concern is the independent bottlers will have a balancing problem once the spring flush hits and the schools let out in June.

Part of the problem is the reportedly large shipments of milk into Pennsylvania balancing plants from Michigan. DFA member-milk from Michigan takes precedence over non-coop milk, here, and DFA’s plants are full to the point where the cooperative is charging a 50-cent/cwt marketing fee. Land O’Lake’s fee also increased recently from 15 to 40 cents/cwt.

“My fear is that the producers losing a market this month are just the tip of the iceburg for what could happen in June,” Baker explains. “DFA has their own milk to fill their own plants.”

What will happen to the shippers for plants that are relying on 60 to 80% of their market in Class I? The verbal agreements bottlers have with DFA may not be good enough to carry their shippers through the loss of fluid sales at a time when balancing plants are full, production per cow is high and the schools are closed.

Baker notes that the annual Southwest Regional Dairy Days in Blairsville, Pa. next Thursday, March 5 will include a producer panel on this topic.

“We had already planned this on the agenda to talk about positioning our milk for the future,” said Baker. “But now we’re going to really talk about having good quality milk and how it may or may not matter in long run. Producers in that 40 to 50-cow and 100 to 130-cow range need to be aware of what they might have to do to make themselves more attractive.”

She said it matters beyond the farmgate because of the domino effect. “I am fearful for what this means for our infrastructure. As dairies leave, the service providers will have trouble staying for those that remain,” Baker noted. “Other pockets of milk in this state have more options than we have here because, here, we have an independent market, and DFA is the only balancer for that market, and DFA has more than enough of its own milk (from here and from beyond) to fill their plants.”

-30=

Something different: My public comment on milk marketing rules

Posted on April 11, 2015 by Agmoos

My great grandmother grew up milking cows in East Berlin, Adams County, Pennsylvania, not far from the battle of Gettysburg. She loved to cook. She always smiled. She was seldom cross, but you knew she meant business when she said: “Now, mind!” She was practical and daring. She wore pants before it was fashionable for ladies to do so and pierced her ears when the younger generations were still wearing clip-ons.

Growing up, I heard Sadie Phillips say more than once: “Trust your gut and Be bold!” Today, I have decided to do just that. I am using my blog to carry the public comments I will submit to USDA on the due date Monday, April 13 regarding the FEDERAL MILK MARKETING ORDERS and how they are (or are not) fulfilling their purpose and the effect on small businesses (A Section 610 Review). I’ll get knocked around for this in some circles, I am quite sure. And this is certainly very long for anyone to read. But here it is. Have at it. Or, if you are so inclined after reading it, shoot me a message, note, or thumbs up if you want your name added before I submit officially to USDA on Monday.

April 11, 2015

RE: Comments on the Federal Milk Marketing Order Program

Dear Mr. Rex A. Barnes, Associate Administrator of Agricultural Marketing Service:

As a freelance ag journalist and market reporter for the past 30-plus years — as well as having as clients multiple small businesses and dairy farmer organizations for whom I do writing and photography — I get around the country and see firsthand what is happening to milk movement and dairy markets and the effects on dairy farm small businesses — as well as the small businesses that serve the dairy farms and the combination of jobs and revenue they provide to sustain rural economies.

Small businesses in the dairy industry — from the farm, to the service and supplies, to the processing, to the retailing — are in trouble. National Big-Business retailers and processors as well as national Big-Business cooperatives employ stables of milk accountants, attorneys and others in a centralized management model to re-shape the grid of milk movement within and between Federal Milk Marketing Orders (FMMO). Why would any small-business want to innovate in the fluid milk category when the two national Big-Business cooperatives (who work together through regional “marketing arms”) can come in and swoop the earnings away using FMMO rules to do so?

Yes, it has become increasingly difficult for the Northeast and Southeast milksheds to hold on to their Class I utilization in their respective blend prices. It is becoming more difficult to supply local milk beverage needs with a local supply of farm milk as the FMMO program of marketwide pooling actually facilitates the move to centralized models that displace milk from the local small businesses, local farms, local communities.

In effect, national Big-Business cooperatives are locking up regional balancing assets. By owning or controlling with full supply contracts most, if not all, of the dairy manufacturing in a region, independent bottlers and small co-ops find fewer options for selling extra loads to self-balance their local-to-local fluid market.

As a result, we are seeing individuals and small co-ops lose longstanding contracts with local bottlers in pockets all over the Northeast — especially in western Pennsylvania and central New York. In some cases, farms have been forced to sell their cows because they are now without a market at all.

These devastating effects have played out in other regions where small co-ops lost their markets to the Big-Business bottler and national Big-Business cooperative, and now this same effect is playing out in the Northeast — this time facilitated in part by complex FMMO rules.

The current FMMOs provide a needed structure and accountability in the buying and selling of milk. They also have the purpose of stabilizing prices through marketwide pooling. But opinions and analyses differ on whether the classification system — as it exists today — is stabilizing or instead contributes to price volatility. It also seems to detract from a competitive value being paid for manufacturing milk.

None of the above points are the actual defined purpose of the FMMOs. According to USDA, here are the 3 purposes of the FMMOs:

To provide for orderly marketing
To assure reasonable prices to both dairy farmers and to consumers
To assure an adequate supply of wholesome beverage milk to consumers

These 3 purposes (above) are not being realized in the current FMMO system.

A signal of DIS-orderly marketing is the fact that dairy farms within the Eastern markets are losing their access to milk marketing.

Milk produced in Georgia — that used to go to Florida — is moving North, while milk from Texas moves into Florida. Milk in Pennsylvania and New York is being displaced from its own milkshed by milk from Michigan. Milk from Illinois moves into Order 5 while milk from Kentucky has recently been trucked all the way to Texas, and vice versa. Truckers talk (more than tongue-in-cheek) about loads passing each other on the highways.

Both the Northeast and the Southeast are being chastised for having dared to increase their production. Farmers in Pennsylvania and New York are blamed for creating their own bottlenecks of surplus milk forcing tankerloads of milk to be dumped. Those ‘bad boy’ Eastern producers should not be growing their dairies. After all, that growth is throwing a monkey wrench into the planning of other regions to grow rapidly with eyes on filling the Eastern milk market deficit, using Class 1 sales in the East to sweeten the blend price paid to dairies that locate or relocate near huge dairy manufacturing plants in the West so those plants can enjoy the cheaper price paid for the milk they use to make dairy products.

The fight is on for the shrinking Class I piece of the milk market pie, when in reality other manufacturing uses have more value! In the process, consumers pay MORE for their beverage milk and farmers receive LESS. Farmers receive a shrinking percentage of the consumer retail dollar and a shrinking percentage of Class 1 sales. And yet…. the milk is all the same standard whether it goes in a bottle, in a cheese vat, a butter churn or a yogurt process. It’s all the same quality grade of milk!

As for current milk production growth. The truth is that the Northeast milkshed and the Southeast milkshed are not out-growing the needs of their areas. They are located in close proximity to consumer population growth, and their own milk production growth reflects an attempt to merely gain back some of their own formerly lost production that has weakened their infrastructure over the past 14 years for the farms that remain.

The Northeast milkshed and the Southeast milkshed are both deficit if just the milk within their borders is considered. My home state of Pennsylvania, for example, has lost 55,000 cows since 2002 and 100 million pounds of production.

Furthermore, leaders of states in the Northeast and Southeast milksheds — Pennsylvania, New York, Georgia, Kentucky for example — have implemented programs and incentives aimed at GROWING their respective states’ dairy small businesses.

The Governors and State Assemblies in these states have — in effect — said: “Our ag infrastructure of small businesses can’t stay in business here providing local jobs and revenue if you the local small business dairy farms don’t grow back to where you were!”

Now, the very dairy farms these incentives were implemented to uphold are cast aside as the milk is displaced from elsewhere.

The implementation of the Federal Orders has become short-sighted in the quest to simply “Assure an adequate supply of milk to consumers.” But what about the future when the small-business farms and infrastructure here in the East are so diminished they implode?

And look at the cost! Fluid milk consumption is down and we keep jacking up the price with all of these maneuverings. Maybe if a more localized model was respected and c MilkTruck#1 onsidered, farmers and consumers would both benefit.

The purpose of the Federal Orders needs to be more considerate of the long term. It should not be declaring the winners and losers, but instead provide a level playing field where the real costs of transportation are factored into the value of local milk to local markets.

The large and powerful market movers take over the grid and push regional suppliers — mainly small businesses that are central to their own communities — to the side. These entities bring milk into the community and then drain local dollars out of the community.

As a result, small dairy businesses are going out of business at an alarming rate. Independent dairy farmers, small and mid-sized, as well as small cooperatives, are getting notices that they are being dropped by local bottlers in my home state of Pennsylvania and north into New York and in Ohio. Young Plain-Sect farmers are finding out in the Southeast they can’t just start milking cows like their fathers did before them. There is no market, they are told, even though the Southeast is a milk deficit area. The Northeast is as well.

The small regional bottlers are being squeezed by the large national co-ops who own or control the balancing assets (through both ownership and contracts) within the Northeast, and Southeast.

So, when milk from members of the national Big-Business co-op is produced in the rapid (double-digit) growth areas of Michigan and Texas, for example, that milk takes precedence at the national co-op-owned and controlled balancing assets in the Northeast and Southeast — effectively pushing the local small business independent shippers and small regional co-ops out of the bottling plants and into situations where they don’t have a market for their milk.

The Walmartization of food retailing has infiltrated its way to the farm-level because local small businesses have limited access to the dairy product processing plants where they once sold extra loads at a discount in order to balance the fluctuations of the fluid milk market. The set make allowance that is built into the manufacturing class milk prices also encourages large single-product plants versus a market-savvy and nimble processing class that makes for the market.

In Pennsylvania, some bottlers are working together with local food banks to balance the ups and downs of the fluid market so they can keep their longtime shippers instead of giving them up to the national Big-Business co-ops who in turn broker the milk back to the plants it went to in the first place.

What do the Federal Orders bring to this mix or — should I say — mess?

First, It is currently too easy to move milk and get paid more for moving it the farthest!

As a result, dairy manufacturing plants are being built where there are not many cows. “If you build it, they will come.” But then they will also send their milk back East to get that juicy Class I utilization to boost their blend price and keep the cost of milk down for the large new manufacturing plants.

The small businesses of the eastern region need a method by which to have the local-ness of their milk count for something in this equation!! If the government is going to be so involved, then it needs to look at the big picture.

Currently, not enough incentive is built into the FMMO structure to give local-supply-arrangements and advantage in the fresh fluid milk beverage market based on the fact that milk flows in smaller circles and does not have to move so far.

While I am not an expert on how all of the pieces of the FMMO came to be, I do know that some of the fixes have created new and worsening problems.

My ask of the USDA AMS — as a small business and as a consumer — is 3-fold:

1) Please extend the comment period to allow for more time to comment. Dairy producers are waking up to some disturbing activity in the Eastern markets. More is becoming known about the current failures of the Federal Orders to uphold their intended purpose! Dairy farms — in increments of half-dozen to a dozen at a time — are getting notices RIGHT NOW that they must find another market or sell out their cows, their investment, their vocation, their family-living, their heritage.

More and more of these producers losing their markets are the highest quality milk producers! Their only fault is they are small businesses (40 to 1000 cows) or part of a small co-op (8 to 12 producers). A large iron fist is coming down in the eastern markets and blaming the bloodbath of farms forced to shut down, dump milk, and go out of business on “too much milk” in the East.

All the while, milk from Michigan in the north and Texas in the south is displacing local eastern milk in the balancing assets of the two large national-and-centralized co-ops that work together. Members first, locals last.

2) Before considering the addition of California to the current FMMO system, please hold national hearings to first evaluate and devise a new pricing formula. Consider basing it on 2-classes of milk: fluid and manufacturing as well as component values based on an array of products — and evaluate removal of the “set” make allowance. This could facilitate competition among various entities buying milk for a variety of manufacturing uses — instead of declaring the winners and losers via set make allowances that encourage large single-product plants that are not nimble nor responsive to changing market conditions.

This could also cut down on some of the gaming we see among balancing assets and lead to more actual marketing of dairy milk products rather than large output of products the market may or may not want because the set make-allowance assures a margin where pure scale is the key to profit and efficiency.

An example of this is the difference between skim milk powder – a uniform product with a standardized protein content – vs. nonfat dry milk (on which the make allowance for powder is based) which is a lower quality product and not uniform in that the protein percentage falls into a 4-point range. If the market wants SMP for its repeatability in a recipe but the make allowance is based on NFDM, the response in a downtrending market is to make more of the latter because the margin is guaranteed by a set make allowance, which further depresses the market.

3) Re-evaluate the purpose, relationship and actual function of transportation credits, touch-base provisions, diversions and other aspects of how milk is supplied so that a premium resides wherever local milk supplies local markets and wherever the regional infrastructure of dairy farms and businesses is upheld in the movement of milk within a Federal Order. Perhaps instead of using such credits and rules to facilitate the bringing of milk from far away, the fund would be better used to get local milk to local markets.

Local small businesses are being forced out of business rapidly. The Department needs to move quickly to establish a fund where processors pay in what would have been spent to bring the distant milk so those dollars are used in the local community or within the Order to offset the balancing cost of keeping local dairy farms on the rolls.

In short, perhaps it is time to use the Federal Orders for their intended purpose and break up the centralized stranglehold of the two national Big-Business cooperatives working together (even sharing attorney and milk accountant assets) by forcing them to stop painting their milk movements with a centralized broad brush – forcing them to more aptly consider local to local, regional to regional.

It is also worth mentioning here that some shifts in the gap between the USDA “all-milk” price and the “mailbox” price released months later are becoming apparent as the national mailbox price has been higher than the all-milk price while the Southeast, Appalachia, Pennsylvania, and New York mailbox prices are falling further and further behind the all-milk price than ever before. This may have something to do with the 6% reduction in Class I utilization in the Southeast in 2014 and the 4% reduction in Class I utilization in the Northeast in 2014. The national reduction in Class I utilization is 3% by comparison.

This reflects not only the raw milk movement but also the infiltration of packaged milk coming from outside of the Northeast and Southeast milksheds directly onto the shelves of large buyers like Costco and Walmart.

On a personal note — as a former milking employee, 34-year veteran ag journalist in dairy and beef, and an eater of dairy products and drinker of dairy milk in the Northeast — I have this to say about “free markets”…

Some are calling for the abolition of the “archaic Federal Orders.” I would be on that bandwagon in a heartbeat — favoring open markets over the continued use and misuse of rules and structure to supress a region’s own supply of dairy farms, small businesses and infrastructure — if I didn’t think the Federal Orders still have a purpose of accountability and to be a running record for what is happening.

However, if the current problems are not fixed to give local milk, supplied by small businesses a fighting chance, then perhaps the FMMO system should go. We have seen the loss of too many small business in the dairy industry where nationalized Big Business processors and co-ops used FMMO rules to their advantage to take over markets. Without a change in FMMO rules, this will continue and accelerate, and we will see more losses of small dairy businesses that sustain rural communities.

If the current problems are not fixed, small businesses may find they are better off in a totally free market, unencumbered by the structure and rules that are increasingly designed by the national Big Business operators to effectively put them out of business as they increase their own centralized national footprint.

Please do not add California until after the current issues with the FMMOs are fixed to a point where local is rewarded in the formula and small business is respected. Once California is added, it will be much harder to make new changes that benefit local small businesses fighting for survival in the East. Thus, the current areas controlled by FMMOs should have a chance to improve the rules before adding the state that has wanted to be state-regulated for decades and represents almost one-fourth of the total milk production in the U.S.

Thank you for your consideration,

Sincerely,

Sherry A. Bunting

To file your own comments with USDA, click here

Ag Moos

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Something different: My public comment on milk marketing rules

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Producers unite to send clear message to policymakers and consumers, website takes it to the next level.

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