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2012: A year in review

PD Editor Karen Lee Published on 07 December 2012


Drought devastates U.S. Corn Belt



Extreme to severe drought conditions blanket much of the country by the end of June, with more than 50 percent of the corn crop in Illinois, Indiana, Missouri, Kentucky and Tennessee rated as “poor” to “very poor.”

By August, the USDA stepped in to offer assistance to 1,628 unduplicated counties across 33 states designated as disaster areas – 1,496 due to drought.

The worst U.S. drought in the last 50 years left a profound impact on American agriculture. With skyrocketing costs for livestock feed and other inputs, dairy producers are losing about 32 cents on every gallon of milk, according to the USDA.

This was the fourth time agriculture was devastated by drought in the last 100 years. It most resembled the drought of the ’50s because of its high heat and lack of rain. Its rapid onset and concerns about nitrates and mycotoxins – especially aflatoxin – had growers and producers remembering the ’80s drought.

To aid struggling producers, the USDA allocated existing funds to states experiencing exceptional and extreme drought. It also opened land enrolled in the Conservation Reserve Program (CRP) to emergency haying and grazing, lowered the interest rate for emergency loans and worked with crop insurance companies to provide more flexibility to farmers.


“The 2012 growing season is a harsh reminder of the economic realities of drought and the vulnerability many livestock operations have not experienced since 1987 to 1989,” said Bill Mahanna, nutritional sciences manager, Pioneer.

He continued, “This growing season will challenge the best of producers and their consultants. The survivors of this disaster will undoubtedly be better prepared to adapt should the unthinkable occur … a continuation of the 2012 drought. This is particularly important for larger herds, which require a significant forage footprint.”

In the same article, Mahanna explained that multiyear droughts typically require a persistent El Niño or La Niña. Lower Pacific Ocean temperatures (La Niña) played a role in previous droughts. At the time of his writing in late summer, he said weather experts were seeing a move to an El Niño sometime this fall. That El Niño watch has since been cancelled and, according to the Climate Prediction Center , neutral temperatures are now favored through the Northern Hemisphere winter 2012 to 2013.


Election dominates national politics

  • President Barack Obama was re-elected to a second four-year term.
  • Partisan dominance of both chambers of the U.S. Congress holds through the election.
  • Seven supporters of the Dairy Security Act will not return.

One would be remiss not to mention the election of 2012. From local referendums and state offices to U.S. congressional seats and the presidency, the November 6 ballot was the most-talked-about news item of the year. Billions of dollars were spent to either keep the status quo or shake things up. When all the votes were counted, America re-elected its president, Democrats maintained control of the Senate and Republicans held onto majority in the House.


After the election, the International Dairy Foods Association (IDFA) did point out in a release that the House Agriculture Committee will see significant changes next year as the Democratic committee leadership suffered several losses.

Dairy policy could be affected due to the changes because seven supporters of the Dairy Security Act will not return, yet nearly all who supported the Goodlatte-Scott alternative were re-elected. This could have an effect if the farm bill is not resolved before the end of the year.


Farm bill fails to come up for a vote

Last November, House and Senate agriculture committee leaders developed a bipartisan, bicameral proposal for the supercommittee; however, the committee announced it would not be able to reach an agreement before its deadline. This action (or inaction) meant a formal process of reauthorizing the farm bill would take place in 2012.

The Senate Committee on Agriculture, Nutrition and Forestry and the House Agriculture Committee held hearings on the bill throughout spring.

On June 21, after considering more than 70 amendments, the Senate approved the passage of the farm bill with a 64-to-35 vote. A few weeks later, the House Agriculture Committee easily approved its version of the farm bill, but House leaders have held off on bringing it to the floor for a vote.

Without sufficient votes to pass a one-year extension of the 2008 Farm Bill, the House of Representatives adjourned in August and the 2008 bill expired on September 30.

Currently in a lame duck session, Congress has one last chance before the end of the year to take up the 2012 Farm Bill. If it fails to pass the bill, the process will begin again in 2013.

It had been four years since the 2008 Farm Bill was passed and therefore time to draft a new bill. An impromptu proposal was put together last fall as part of the actions required by Joint Select Committee on Deficit Reduction (supercommittee). When the committee failed to reach an agreement, that proposal put forward by House and Senate Agriculture Committee leaders most likely became the basis for farm bill discussions in 2012.

The House and Senate agriculture committees held numerous hearings throughout the country, focusing on all facets of the farm bill, from rural communities and conservation to crop insurance and dairy programs.

The dairy title of the Senate’s Agriculture Reform, Food and Jobs Act of 2012 repealed the Milk Income Loss Contracts (MILC), Dairy Product Price Support Program (DPPSP) and Dairy Export Incentive Program (DEIP). Those programs were replaced with the Dairy Production Margin Protection Program and Market Stabilization Program. The plan is similar to the Dairy Security Act, introduced in the House by Rep. Collin Peterson (D-Minnesota).

The Senate approved the passage of the farm bill in June, and the focus shifted to the House of Representatives. The House Agriculture Committee approved its own version of the farm bill, but it never made it to the floor for a vote by the full House.

In August, there were not sufficient votes in the House to pass a one-year extension of the 2008 Farm Bill and therefore it expired on September 30.

As of press time, the farm bill has not been brought up in the House during its lame duck session. With this being the final opportunity for this Congress to address it, any failure to pass the farm bill would result in starting over next year.


California calls for better pricing

  • In a petition to the California Department of Food and Agriculture (CDFA), dairy farmers in the state claimed they were being shortchanged by the undervaluation of the state’s Class 4b whey factor.
  • The CDFA held a hearing in June to review the petition but decided not to change the state’s milk pricing formula.
  • On August 31, a group including several milk producer associations filed a lawsuit against the CDFA for the department’s refusal to bring California’s Class 4b price into better alignment with the Federal Milk Marketing Orders (FMMO) prices paid by cheese manufacturers around the country.
  • Throughout the fall, dairy farmers and supporters rallied at the state capitol to continue to pressure the CDFA for price relief. A second petition for CDFA to hold another public hearing was filed and denied. Informational meetings on the federal order system were also held.
  • Meanwhile, dairies in the region continue to shut down or re-structure due to this lower pay price, which is also coupled with high feed prices from the drought.

While the cows in California are happy, their owners are not. The state of California does not participate in the Federal Milk Marketing Order (FMMO), but instead has its own state order. As of late, the state order has a lower whey price compared to what dairy farmers in other states earn under FMMO.

It has been so low that two producer groups petitioned the CDFA, contending California dairy farmers are being shortchanged by the undervaluation of the state’s Class 4b whey factor, which applies to milk sold to California cheese manufacturers.

At a June 1 hearing, the CDFA decided against the change. In a statement, CDFA Secretary Karen Ross said short-term price adjustments were not long-term solutions for the dairy industry in California.

On August 31, legal action was filed in the Superior Court of California – San Bernardino County, stating that the CDFA failed to follow the law in refusing to bring California’s Class 4b price into better alignment with the prices being paid by cheese manufacturers around the country. This lawsuit was denied last month by San Bernardino County Superior Court Judge Joseph Brisco.

Shortly after the lawsuit was filed, Ross announced plans to form a group called the California Dairy Future Task Force. In late October, the newly formed 28-member task force composed of dairy producers, processors and cooperatives held its first meeting to address immediate and long-term challenges facing the state’s dairy industry.

Hundreds of dairy farmers and supporters have rallied at the state capitol throughout September and October to continue to pressure the CDFA for price relief. Three California cooperatives filed a second petition to CDFA this fall for a public hearing on an emergency basis to consider a change to the Class 4b pricing formula. The CDFA recently denied that petition.

In addition, informational meetings have been held to educate producers about the FMMO, resulting in California Dairy Campaign members calling on Congress to pass legislation to enable California to join the federal order.

California farms continue to struggle with current prices. In September, The Fresno Bee reported that 28 San Joaquin Valley dairies have filed for bankruptcy in the past eight months – up from 24 in 2011 and 10 in 2010. California Dairies Inc . launched a crisis hotline through which its farmer members can receive confidential counseling.


Agriculture persuades DOL to withdraw updates to child labor law

  • On September 2, 2011, the U.S. Department of Labor (DOL) released proposed updates to child labor regulations aimed at safety concerns in agriculture-related jobs.
  • During an extended 90-day comment period, the department received more than 10,000 comments on the proposed rule from various stakeholders, including many members of Congress.
  • On February 1, DOL announced it would re-propose the parental exemption portion of its proposed rule. This re-proposal process will again seek comments and input as to how the department can comply with statutory requirements to protect children while respecting rural traditions.
  • On April 26, the department decided to withdraw the proposed rule – including provisions to define the “parental exemption” – dealing with children under 16 who work in agricultural vocations.

For the past several years, DOL has been reviewing the federal child labor regulations. In May 2010, the department issued final regulations that updated the child labor protections in nonagricultural employment. It then turned to modernizing the regulations governing employment in agriculture.

On September 2, 2011, the department released proposed updates to child labor regulations aimed at safety concerns in agriculture-related jobs. One rule would allow children under 15 to only work on their parents’ farm. Another would keep children under 16 from driving most power equipment. The new rules also would stop children younger than 15 from working near sexually mature livestock, including bulls and boars or nursing cows and sows.

The notice and comment period on this proposed rule was extended for an additional 30 days, and comments received during this period from the agriculture community prompted the department to announce on February 1 that it would re-propose the parental exemption portion of its proposed rule. The proposal now will include broader exemptions for children whose parents are part owners/operators of farms or have a substantial interest in a farm partnership or corporation.

A few months later, the department decided to withdraw the proposed rule dealing with children under 16 who work in agricultural vocations. The statement read: “The decision to withdraw this rule – including provisions to define the ‘parental exemption’ – was made in response to thousands of comments expressing concerns about the effect of the proposed rules on small family-owned farms. To be clear, this regulation will not be pursued for the duration of the Obama administration.”

Even though the decision was withdrawn, the late Ben Yale reminded producers in an article earlier this year that views on child farm labor are changing. As an attorney, Yale ran up against rulings that held that changing a tire on a tractor was not part of farming, nor was hauling feed from a site not contiguous to the farm.

“No longer can a farmer assume that he can have his children do whatever he wants on the farm and be free from federal or state regulation,” Yale cautioned. “It requires that each farmer take a proactive approach and learn what activities on his farm his children are permitted to do. Hiring children not under his control is generally prohibited.”

FDA keeps an eye on antibiotic use in the dairy industry

  • The FDA announced it would test 1,800 milk samples for 29 antibiotics and flunixin – half of which came from farms with known tissue residue violations.
  • Dairy producers are encouraged to participate in a voluntary quality assurance program developed by the beef checkoff.
  • Early in the year, FDA modified the extra-label use of cephalosporin drugs in cattle.

The year began with an announcement by the FDA that it will begin an assignment to collect and test milk samples from across the country. FDA investigators will collect 900 samples from farms that have had tissue residue violations in cull dairy cows and 900 cohort samples from dairy farms not known to have had previous tissue residue violations. Milk samples will be tested for 29 antibiotics and flunixin. The resulting data would be used to inform the ongoing Milk Drug Residue Risk Assessment.

Programs were developed to aid dairy producers in keeping meat or milk from treated animals from entering the food system. DHI-Provo offers an RxPlus drug tracking module that easily integrates into the DHI-Plus herd management system.

Through the beef checkoff’s Dairy Animal Care Quality Assurance (DACQA) program, dairy producers are encouraged to participate in the voluntary program to enhance and demonstrate quality animal care practices that ensure food safety and enhance consumer confidence in milk and beef products.

“As an industry, we’re under the microscope as never before in regard to this issue,” says Dr. Mike Apley, Kansas State University professor of production medicine and clinical pharmacology. “We have to be able to document what we are doing and develop treatment and management strategies and build protocols for animal care with our clients throughout the production system.”

The FDA also announced that it would modify extra-label use of cephalosporin drugs in cattle. Effective April 5, veterinarians could continue to prescribe extra-label use of any cephalosporin as long as it is the same dosage, used through the same route of administration and in the same species as its FDA-approved label.

In addition, the FDA proposed a voluntary initiative to phase in certain changes to how medically important antimicrobial drugs are labeled and used in food-producing animals. Under this new initiative, certain antibiotics would not be used to enhance growth or improve feed efficiency in an animal. These antibiotics would still be available to prevent, control or treat illnesses in food-producing animals under the supervision of a veterinarian.

Exporters activate SCC limits for milk and milk products destined for the E.U.

  • In November 2011, the USDA agreed with the E.U. to begin certifying U.S. dairy farms that produce milk used for products or ingredients exported to the E.U. that have an on-farm average somatic cell count (SCC) of 400,000 or less.
  • Transition to the new program requirements was set for Jan. 1, 2012.
  • After March 31, 2012, all shipments of dairy products requiring an E.U. health certificate must comply with the updated certification program.

On November 21, 2011, USDA-AMS met with industry stakeholders to discuss the logistical details of the project and to review the stakeholders’ remaining questions. As a result of that meeting, USDA-AMS finalized the requirements of the “European Health Certification Program,” which would certify farms with an average SCC of 400,000 or less.

The effective date for beginning the transition to the new program requirements was Jan. 1, 2012. After March 31, 2012, all shipments of dairy products requiring an E.U. health certificate must comply with the updated certification program and must be accompanied by an updated Certificate of Conformance.

Dairymen could still legally sell Grade A milk in the U.S. if their herd’s average somatic cell count (SCC) is greater than 400,000, but their options would be more limited without some effort. Many co-ops said they would ask their farms to comply with the agreement’s lower SCC standards, rather than segregate milk supplies.

The Idaho State Department of Agriculture announced effective June 1 it would lower the current somatic cell count (SCC) tolerance of 500,000 to 400,000. It will be considered a temporary rule until it is finalized in the 2013 Idaho Legislative Session. The lower level would make all Idaho raw milk E.U.-compliant and eligible to export to the E.U.

Fluid milk sales continue to decline

  • USDA numbers show 2011 fluid milk sales at 53.2 billion pounds, a level not seen since the early 1980s.
  • Through the first five months of 2012, the USDA reports fluid sales are down 2.5 percent.
  • September 2012 packaged fluid milk sales totaled 4.29 billion pounds, down 5.2 percent from September 2011.

Per capita consumption of fluid milk in the U.S. has been declining for 40 years, but a 7 percent decrease in gallon milk sales at retail in January compared with January 2011 was a cold splash in the face, telling the industry it needed to address the problem, said Steve Maddox, a Burrell, California, dairyman and chairman of the National Dairy Board.

That same month, it was announced milk will be off the menu in 2012 at one of Ohio’s big urban jails, as the state’s counties continue to look for budget savings in what they serve to inmates. Inmates at the Summit County Jail in Akron who want milk will instead be offered a powdered breakfast drink that’s mixed with water.

On a better note, the USDA’s updated school meal standards continue to stress the nutritional benefits of low-fat and fat-free milk and dairy products. “The updated nutrition standards require that low-fat or fat-free milk remain a part of every school meal,” said NMPF President and CEO Jerry Kozak.

Nevertheless, September 2012 packaged fluid milk sales totaled 4.29 billion pounds, down 5.2 percent from September 2011. But adjusted for calendar composition, the numbers weren't quite that bad. With adjustments, September 2012 sales totaled 4.40 billion pounds, down 1.5 percent from September 2011.

Calvin Covington, a retired dairy cooperative CEO, wrote, “These numbers are not new to most in the dairy industry. They have been written and talked about. However, it seems the dairy industry has failed to make any significant response to turning fluid sales around. Do we fully understand the economic impact of declining fluid milk sales? Let’s not give up on fluid milk sales.” PD