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Temporary Northeast milk dumping request granted

Progressive Dairyman Editor Dave Natzke Published on 18 March 2017

Northeast Federal Milk Marketing Order (FMMO) Market Administrator Erik Rasmussen has authorized the temporary pooling of milk disposed or “dumped” at the farm or other non-plant locations during March 1–May 31, 2017.

In late February, Dairy Farmers of America, Inc. (DFA) requested pool handlers be allowed to temporarily dispose of surplus milk at a farm or non-plant location, while retaining the status of pooled producer milk. Cooperative milk handlers Agri-Mark, Inc. and Upstate Niagara Cooperative, Inc. submitted statements supporting DFA’s request.

Dumping requests

This is the sixth time over the past three years where similar requests have been made, as handlers deal with milk supplies exceeding demand and available plant processing capacity.

The most recent period during which temporary dumping at a farm was requested and authorized – Nov. 22, 2016 through Jan. 9, 2017 – there was zero pounds of raw farm milk requesting authorization, and modest volumes of excess milk reported as dumped at a plant.

In the flush period months of 2014, 2015 and 2016, large volumes of milk were reported “Dumped Milk Pounds Pooled.” The typical volumes in the category for FMMO 1 were 5-7 million pounds of milk per month. The January-March 2016 period of 2016 showed an average of 6.4 million pounds of milk per month.

Not only has the pounds of milk dumped increased, but the timing of the increase has started earlier in the flush season, according to DFA.

Production increasing

Citing growing milk supply and balancing stress, DFA’s request said 2016 milk production in states serving the Northeast FMMO (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont) increased about 2.6 percent, or about thirty-nine 60,000-pound tanker loads of milk per day.

January 2017 year-over-year percentage change in milk production for the three largest milk producing states (New York, Pennsylvania and Vermont) showed continued strong milk output.

The amount of milk pooled on the Northeast FMMO continues to increase and set new record highs. The total volume pooled during 2016 was 968 million pounds greater than the total in 2015; the volume pooled during January 2017 was 98 million pounds greater than the volume pooled during January 2016; the daily production per producer (DDP) set a new all-time record high in January 2017 (6,644 pounds), 6.6 percent higher than the DDP in January 2016.

The substantial milk production growth is occurring at a time when fluid milk consumption and milk processing capacity have been on the decline. While reduced processing capacity due to plant closures is somewhat offset by the expansion or construction of another plant, DFA’s Elvin Hollon estimated the marketing area has lost about 165 million pounds of monthly processing capacity since 2013.

Read also: Back in the pool: DFA seeks flexibility in Northeast federal milk marketing order and DFA withdraws Northeast depooling proposal

Entering 2017 flush production months, milk oversupply pressure is expected to increase. And, adding to the imbalance, there’s also concern over Canada’s policy effectively restricting markets to U.S.-produced ultra-filtered milk. Industry analysts estimate that manufacturers in New York alone are selling more than 300 million pounds of skim milk equivalent annually. If Canada’s policy remains in place, milk previously headed north of the border will need to find a market outlet in an already surplus situation.

January fluid milk sales dip

Declining fluid milk sales compound the problem, especially in the Northeast, where a higher proportion of total milk production is marketed in fluid products.

January 2017 total U.S. packaged fluid milk sales were estimated 4.18 billion pounds, down 0.8 percent from January 2016, according to USDA’s Dairy Market News. In the Northeast federal order, total January fluid milk products were estimated at 705 million pounds, down 2.5 percent compared to the same month a year earlier.

U.S. sales of conventional products totaled 4.03 billion pounds, down 1.1 percent from the previous year, while sales of organic products, at 228 million pounds, were up 4.7 percent. Organic represented about 5.4 percent of total sales for the month.

In the conventional milk aisle, whole and flavored whole milk sales were up 3.5 percent and 10.1 percent compared to the previous year, respectively. Sales of organic whole milk were up 12.5 percent compared to a year earlier.

Conventional and organic fat-free milk varieties had the largest sales declines compared to a year earlier.

The U.S. figures represent consumption of fluid milk products in federal milk order marketing areas and California, which account for approximately 92 percent of total fluid milk sales in the U.S.

What to do with excess milk?

Every federal order has provisions for dumping pooled milk, although generally those allowances pertain to quality or safety issues. Since the spring flush season of 2014, the FMMO 1 market administrator has allowed special provisions to deal with excess milk.

In some cases, the cream has been skimmed off and marketed, with the remaining portion either dried if it had a market or disposed of. In extreme cases, excess milk has been dumped into farm manure pits, saving on transportation and in-plant disposal costs.

In both cases and with proper documentation, the milk was pooled on the Northeast order, enabling farmers to receive at least some payment.

For pooled milk dumped on the farm, co-op members received the difference between the lowest class price and the blend price. For example, during April-August 2016, producer prices for dumped milk ranged between $1.38 to $2.32 per cwt. For milk that was salvaged for cream, payments averaged between $7-$8 per cwt.

Hollon said DFA was seeking to move milk to other regions of the country, but dairy processors in Lake States and the Upper Midwest are facing supply/processing capacity imbalances.

Provisions outlined

For milk handlers to pool milk disposed or dumped at farm or other non-plant locations, they must meet the following conditions:

• Handlers and/or their producers that utilize this temporary policy must have been pooled on the Northeast Order for all of their commercially marketed production for the months of May through October 2016.

• The milk must be picked up at the farm, measured and sampled for payment. The tanker test will be a weighted average of the producer tests.

• Notification should be given to the market administrator's office by the next business day, or as soon as practicable, when the milk is dumped. At pool time a separate list must be submitted of all producers whose milk was dumped along with the component tests of the applicable milk (if available), and the physical location and address of where the milk was dumped.

Any such requested dumps will be subject to audit verification as a condition to be included as pooled producer milk during the respective pool period. end mark

Dave Natzke
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