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2016: The year in review for U.S. dairy news

Progressive Dairyman Editor Dave Natzke Published on 12 December 2016
Year end review

Trending: Fluid Milk

trending

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Fluid sales improve

After decades of decline, fluid milk sales showed life in 2016, thanks in large part to Americans getting reacquainted with whole milk and a continuing move toward organic fluid products.

Monthly total packaged fluid milk sales held serve with year-earlier levels and, in some cases, even surpassed monthly sales volumes compared to the year before. Leading the resurgence in the conventional milk cooler was whole and flavored whole milk, which frequently posted volume sales gains of 5 to 9 percent compared to a year earlier.

However, those increases were offset by sales declines of low-fat and fat-free milk.

Thanks to increased supply in 2016, sales of whole organic milk posted monthly year-over-year increases of 9 to 29 percent, resulting in monthly overall organic fluid product sales increases of 2 to 14 percent.

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As a percentage of total fluid milk sales, organic fluid products grew to represent between 5.1 percent and 5.6 percent of sales volume.

Trending: GMOs

Trending GMO's

‘Dannon Pledge’ escalates U.S. GMO-free debate

In spring of 2016, U.S. yogurt maker Dannon announced it would stop including milk produced from cows fed with genetically modified (GMO) crops in its flagship yogurt brands, Dannon, Oikos and Danimals.

As part of the “Dannon Pledge,” the company said it would transition to using only milk sourced from herds fed non-GMO feed in those products in 2017, with a goal of completing the transformation by the end of 2018. The brands represent 50 percent of the company’s current volume.

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Dannon also targeted December 2017 as the date for nationwide labeling of any of its products containing GMO ingredients.

Dannon’s announcement drew the ire of several major U.S. agricultural organizations, including the National Milk Producers Federation (NMPF).

Later in the year, NMPF, along with the American Farm Bureau Federation, American Soybean Association, American Sugarbeet Growers Association, National Corn Growers Association and U.S. Farmers and Ranchers Alliance, called Dannon’s move toward GMO-free “marketing puffery” designed to mislead consumers for the sake of market share.

The organizations said a strategy to eliminate GMOs was a move away from sustainability and would result in long-term negative environmental impacts.

President Obama signs GMO labeling bill

Designed to head off state-by-state labeling initiatives, President Barack Obama signed into law a bill designed to create a national labeling system for foods made with GMO ingredients. The USDA has two years from the bill’s July 2016 signing to establish a national labeling system.

Under the law, food processors can disclose GMO data through package labels, use of a USDA-developed symbol, or a barcode or quick response code on packages that would allow consumers to access more information on a website through a smartphone app.

Dairy products and other products derived from animals fed with GMO crops will be exempt from any labeling requirements.

GMO-free feed premiums for milk starting in Europe

To meet growing demand for GMO-free dairy products in the European Union, Denmark-based Arla Foods said it would pay dairy farmer-owners a premium (about 50 cents per hundredweight) to increase production of milk from cows fed GMO-free feedstuffs.

Arla chairman Åke Hantoft said the move was meant to capture commercial potential and not a corporate stance on GMOs or other technology.

Arla’s GMO-free dairy products will be offered to U.S. consumers, but for now the dairy farmer premiums won’t cross the Atlantic Ocean. In March, Arla announced a joint venture with Dairy Farmers of America and eight U.S. dairy farmers to build a premium cheddar cheese production facility in western New York. It also has a cheese production facility in Wisconsin.

Trending: Immigration

Trending immagration

Heated political season results in no immigration reform

Dairy tried to keep immigration reform on the front burner, but political reality made congressional progress too hot to handle in 2016.

Republican presidential candidate and eventual president-elect Donald Trump used the campaign trail to call for a bigger wall, stronger border security and mass deportation of illegal immigrants.

In August, dairy and other agricultural groups joined a coalition, under the banner of the Partnership for a New American Economy (PNAE), with a goal of setting the stage for reforms in 2017 regardless of who won the presidential election.

Specific to dairy, the Wisconsin effort includes the Dairy Business Association (DBA) of Wisconsin and its affiliate, the Dairy Business Milk Marketing Cooperative.

According to DBA’s director of governmental affairs, John Holevoet, the campaign was designed to emphasize the need for immigration reform, highlight the positive impact of immigrant labor on local and state economies, and provide an opportunity to explore reform ideas.

Separately from PNAE, the NMPF remained engaged in the search for immigration reform solutions with other farm and food groups through its membership in the Agricultural Workforce Coalition.

A University of Texas A&M study, conducted in coordination with NMPF and released in August 2015, indicated 51 percent of all dairy farm workers are immigrants, and the farms employing them account for 79 percent of U.S. milk production.

Without those workers, U.S. dairy farms will not be able to thrive, let alone survive, according to NMPF chairman and Missouri dairy farmer Randy Mooney.

Yet another dairy group, the American Dairy Coalition (ADC), called for creation of a state-based visa program, allowing individual states to address their immigrant labor needs.

According to Laurie Fischer, head of ADC, the idea was first developed by the Cato Institute in 2014 in an effort to break the federal political gridlock; it would allow states to create a database of businesses, identifying the number and type of workers needed. Annual worker quotas would be established, and states would have the authority to regulate length of visa, as well as renewal provisions.

Existing undocumented workers would not count against the quotas. Workers would not be eligible for state welfare programs or obtain voting rights. States would have discretion as to whether the worker could bring a spouse or family.

Federal approval would be required before states could establish individual programs.

U.S. Supreme Court split on Obama immigration initiatives

The U.S. Supreme Court split 4-4 on the Obama administration’s executive actions regarding illegal immigrants, leaving the programs blocked by a lower court’s order and likely ensuring more legal action to come.

President Obama created the Deferred Action for Child Arrivals (DACA) program in 2012, allowing children of illegal immigrants born in the U.S., enrolled in school or joining the military, to stay.

In November 2014, President Obama rolled out a second round of deferrals expanding DACA and adding Deferred Action for Parents of Americans and Lawful Permanent Residents, which allowed parents to stay in the country in an effort to keep families together.

Combined, the programs had the potential to impact up to 5 million people, enabling them to obtain work documentation without offering firm legal status.

However, 26 states sued the federal government (United States v. Texas), challenging the constitutionality of the Obama administration initiatives. A federal district court in Texas granted an injunction in February 2015, putting the programs on hold.

Trending: Lawsuits

No dairy year would be complete without a few lawsuits. Some of those settled in 2016 had roots established several years ago.

Trending lawsuit

Cooperatives Working Together herd retirement

Lawyers representing the NMPF and major dairy cooperatives ended five years of litigation surrounding the “herd retirement” component of the Cooperatives Working Together (CWT), agreeing to settle the lawsuit for $52 million.

The lawsuit (Matthew Edwards, et al. v. National Milk Producers Federation, aka Cooperatives Working Together, et al., Case No. 11-cv-04766), initially filed in September 2011, was a consolidation of multiple similar lawsuits filed in several courts.

Defendants named in the consolidated suit were NMPF, Dairy Farmers of America, Dairylea, Land O’Lakes and Agri-Mark. The case was granted class-action status in 2014.

CWT was created during a period of growing milk supplies and declining prices, culminating in historically low farmer milk prices in 2009. Under the herd retirement program, CWT announced invitations for dairy producers to submit bids to sell their dairy herds and cease milk production in an attempt to bring milk supply in closer balance with demand. CWT conducted 10 herd retirements between 2003 and 2010.

An initial lawsuit was filed by the California-based animal rights organization Compassion Over Killing, upset with CWT’s program to send excess dairy animals to slaughter. The suit expanded with allegations of artificially raising milk prices.

Under the preliminary settlement agreement, a decision made without admitting guilt and to end mounting legal costs, NMPF must make two $26 million payments into an escrow account.

How much of that makes it to dairy product consumers is yet to be calculated. Lawyers representing the plaintiffs have until mid-October to file for legal expenses. In similar lawsuits, lawyers have received approximately one-third of the total settlement.

EPA violated farmer privacy in CAFO information release

In a unanimous ruling on Sept. 9, the U.S. Court of Appeals for the Eighth Circuit said the EPA violated the personal privacy of tens of thousands of farmers when it released names, addresses and other information concerning CAFOs. The ruling in American Farm Bureau Federation (AFBF), et al. v. EPA, et al. found that personal contact information for CAFOs should have fallen under a Freedom of Information Act (FOIA) exemption for private data.

The lengthy legal battle stemmed from the 2013 EPA release of CAFO database information to three environmental advocacy groups under FOIA requests.

The database included the names of farmers, ranchers and sometimes other family members, home addresses and GPS coordinates, home telephone numbers and personal emails.

In its ruling, the Eighth Circuit appeals court recognized farm families usually live on the farms they own, noting that EPA’s disclosures could facilitate unwanted contact and harassment by the FOIA requestors and others.

Northeast antitrust lawsuit settled …

U.S. District Court Judge Christina Reiss approved a $50 million settlement agreement in a seven-year-old Northeast dairy antitrust lawsuit, spawning two new potential lawsuits related to the case.

The class-action lawsuit (Allen v. Dairy Farmers of America Inc., No. 5:09-CV-230) was initially filed in 2009. It alleged Dean Foods, dairy cooperative Dairy Farmers of America (DFA) and its marketing arm, Dairy Marketing Services (DMS) were involved in anti-competitive milk marketing conduct within Federal Milk Marketing Order (FMMO) 1.

Dean Foods agreed to a $30 million settlement in 2011. The June 7 ruling by Judge Reiss, in the U.S. District Court for the District of Vermont, finalizes a $50 million on-again, off-again settlement with DFA/DMS.

DFA agreed to the settlement without admitting wrongdoing.

Under the DFA/DFS settlement, which was subject to an April 29 “fairness hearing,” DFA will pay about 8,860 dairy farmers an average of about $4,000. The settlement creates dairy advisory council and farmer ombudsman positions to oversee future dairy farmer interests.

… but another headed to court

About 115 Northeast dairy farmers filed a new lawsuit against DFA and DMS, alleging violations of U.S. antitrust laws.

The plaintiff dairy farmers were among about 9,000 dairy farmers involved in Allen et al. v. DFA, but opted out of the settlement agreement.

The new complaint, filed Oct. 26 in the U.S. District Court of Vermont, summarizes previously alleged monopoly/monopsony activities in the northeast U.S. It further alleges DFA’s “acquisition appetite remains unsatiated” with the addition of multiple Northeast dairy processing facilities since the original antitrust lawsuit was filed in 2009.

The new lawsuit also alleges that DFA pressured members to accept the settlement.

Parmesan cheese lawsuits filed

Multiple class-action lawsuits were filed on behalf of consumers over revelations some grated Parmesan cheese products may contain higher-than-acceptable levels of cellulose fiber. Lawsuits naming Wal-Mart Stores Inc. and/or Kraft Heinz Foods Co. have been filed in federal courts in Illinois, New York, Missouri and California.

The FDA allows the plant-based fiber at levels of 2 percent to 4 percent in grated cheese as an additive to prevent clumping. However, Bloomberg News purchased and tested several major varieties of grated Parmesan cheese, finding cellulose levels of 0.3 percent to 7.8 percent.

Trending: MPP-Dairy

Trending MPP-Dairy

MPP-Dairy draws criticism

The Margin Protection Program for Dairy (MPP-Dairy), a safety net designed to protect dairy farmers during times of tight margins, drew mostly criticism throughout the year. Leaders of the NMPF pledged to try to fix it in the next federal farm bill.

Addressing NMPF delegates at the organization’s annual meeting in November, Randy Mooney (Missouri dairy farmer and NMPF chairman) and Jaime Casteneda (senior vice president of strategic initiatives and trade policy) primarily blamed Congress for the program’s shortcomings when the program was finalized in 2014.

According to the NMPF leaders, Congress adjusted the program’s feed cost index in monthly MPP-Dairy margin calculations, a change that effectively cut feed costs in determining margins by about $1 per hundredweight (cwt).

“I know there is a lot of skepticism,” Casteneda said. “Originally, we got the program right, but unfortunately due to consequences in Congress, it is not the program it was intended to be.”

Mooney said a special economic policy committee had been established to look into all issues related to MPP-Dairy, with a goal of formulating proposed revisions by March of 2017.

“There’s not an issue more important to us over the next couple of years than to get MPP fixed,” Mooney said. “I still believe it is the right program for dairy farmers, but it isn’t working as it was intended.” 

Indemnity payments

MPP-Dairy provided indemnity payments to a small number of participating dairy farmers in two 2016 pay periods. National average margins slipped to $7.15 per cwt in March-April and then fell to $5.76 per cwt in May-June.

The May-June payment rates (per cwt) calculated by the USDA’s Farm Service Agency at eligible insured margin trigger levels were:

 • $8: $2.24

 • $7.50: $1.74

 • $7: $1.24

 • $6.50: 74 cents

 • $6: 24 cents

 Of the $11.17 million distributed nationwide in that pay period, $5.71 million went to producers in three states – Wisconsin, Minnesota and Iowa – where farmers led the nation in selecting margin insurance coverages in the $6, $6.50, $7, $7.50 and $8-per-cwt ranges, and protected the largest volume of milk production.

 Changes proposed

Proposals to alter MPP-Dairy attracted a lot of attention but won’t likely see any congressional action until the next federal farm bill.

Among the proposals, Northeast U.S. lawmakers introduced legislation calling for state-level income margin calculations. H.R. 4896 would require the USDA to use monthly feed (corn, soybean meal and alfalfa hay) costs from each of the 50 states to calculate individual state-level margins. It would also require the USDA to consider energy, transportation and labor costs in its calculations.

Another proposal called for a refund of MPP-Dairy insurance premiums.

USDA did make changes to MPP-Dairy during the year: 

  • The enrollment period for the 2017 program was extended until Dec. 16, 2016, to allow dairy producers time to see how the milk price-to-feed cost margin outlook develops before they make coverage decisions.

  • Participating farms were allowed to update their production history when an eligible family member joins the operation. Each participating dairy operation is authorized one intergenerational transfer at any time of its choosing until 2018.

  • One change, implemented retroactively for all of 2016, ensured all herds enrolled in MPP-Dairy will receive catastrophic coverage at the basic $4-per-cwt margin level on 90 percent of their production history.

  • The USDA also codified a previous policy change giving dairy farmers the opportunity to pay their premium through additional options, such as a periodic milk check deduction handled by their cooperative.

Other Newsworthy Items

Other newsworthy items

Farm Program update includes tail-docking ban

The National Milk Producers Federation board approved changes to the National Dairy FARM (Farmers Assuring Responsible Management) Program, including early implementation of a tail-docking ban.

The updates, designed to strengthen animal care standards, will be implemented starting Jan. 1, 2017. The original plan called for a tail-docking ban to start in 2022.

Dairy processors had big plans

Dairy processors planned to start construction on more than $1.94 billion in U.S.-sited capital projects in 2016, according to Industrial Info Resources. Plans included more than 125 capital projects to build new facilities, carry out plant expansions or upgrade existing facilities.

Among the list of projects were a $100 million expansion of Chobani’s yogurt plant at Twin Falls, Idaho; construction of a $165 million Walmart fluid milk processing plant near Fort Wayne, Indiana; and a $30 million upgrade to Agri-Mark’s cheese manufacturing facility in Chateaugay, New York.

Milk drug residue incidence declines again

Dairy consumers are safer than ever when it comes to animal drug residues in milk. An FDA report, National Milk Drug Residue Database Fiscal Year 2015, summarized drug residue tests conducted on 3.615 million milk samples during fiscal year 2015 (Oct. 1, 2014 to Sept. 30, 2015). Of those, just 579 (0.016 percent) tested positive.

No animal drug residues were detected in dairy products headed for sale to consumers.

Land O’Lakes base program migrates to Midwest

Land O’Lakes Inc. established a structured base program in the Midwest to help balance burgeoning milk production levels with processing and marketing capabilities.

Under the program, members producing more than their “base” volume are charged any incremental costs (freight, market discounts) associated with marketing that milk in less profitable channels. Each member’s “base” is determined by his or her actual production history, with allocations renewed each September. The base cannot be purchased or sold.

The cooperative, with 2,014 dairy producers nationwide, established a base program in the West in 2008, adding a Northeast program in January 2016. While similar, each program is managed independently to account for regional supply-and-demand dynamics.

‘Small drone’ rules finalized

The U.S. Department of Transportation’s Federal Aviation Administration (FAA) finalized the first operational rules for routine commercial use of small unmanned aircraft systems (drones). Introduced June 21, the new rule takes effect in late August. It regulates drones weighing less than 55 pounds that are conducting non-hobbyist operations.

The rule’s provisions are designed to minimize risks to other aircraft and people and property on the ground. The regulations require pilots to keep an unmanned aircraft within visual line of sight.

Operations are allowed during daylight and during twilight if the drone has anti-collision lights. The new regulations also address height and speed restrictions and other operational limits. 

USDA to make another attempt to buy cheese

The USDA will offer to purchase another $20 million in cheese early in 2017 after the first offer fell short of its target.

The government cheese purchases – authorized under Section 32 of the Agriculture Act of 1935 – are designed to reduce a private cheese surplus while assisting food banks and other food assistance recipients.

The USDA originally announced an offer to buy $20 million of cheese – estimated to cover about 11 million pounds – on Aug. 23. However, only three companies offered cheese in the Sept. 9-22 bidding period, and the USDA announced purchases of 3.4 million pounds of shredded cheddar cheese at a total cost of $7.1 million. 

IFCN: Global dairy demand to grow 2.3 percent annually

Global demand for milk will grow at an annual rate of 2.3 percent through the next decade, according to the International Farm Comparison Network (IFCN) Dairy Research Network.

Driven by increases in population and milk per consumption per capita, IFCN’s 10-year dairy outlook estimates global milk demand will grow 25 percent by 2025. Meeting that demand would be equivalent to multiplying the annual production of New Zealand by 8.5. end mark

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