Digest Highlights

Borden Dairy granted use of cash collateral

Borden has been granted consensual use of cash collateral for another 30 days in its voluntary reorganization proceedings. This authorization, granted after a Jan. 23 hearing, enables Borden to continue operations and honor obligations in the normal course of business, according to a company press release.

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Dave Natzke
Editor / Progressive Dairy

Borden is continuing to work with its lenders and will participate in a mediation in the coming days to develop a strategy for the company to exit bankruptcy. The next court hearing is scheduled for Feb. 24.

"We, along with our legal and financial expert consultants, are confident that Borden will accomplish our goal of longer-term stability. We have now had two very positive court hearings, and we feel encouraged that this momentum will help us reach faster alignment with our lenders," said Borden CEO Tony Sarsam.

Borden filed for bankruptcy on Jan. 5 (read: Borden Dairy initiates Chapter 11 bankruptcy proceedings) and was subsequently allowed to pay “critical vendors,” including dairy farmer milk suppliers. (Read: Update: Bankruptcy court allows Borden to pay milk suppliers.)

According to information submitted to the court by Jason Monaco, executive vice president and chief financial officer of Borden, approximately 67% of Borden’s total raw milk purchases are sourced from five dairy cooperatives, with the remaining 33% sourced from 262 independent family dairy farms. Borden is the sole purchaser of milk from 259 of those independent farms and is one of the largest purchasers of milk from the other three independent farms.

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Dairy State voters key in 2020 elections

Although it seems like 2020 presidential candidates have been campaigning since 2016, selecting finalists who will appear on the November ballot officially begins with the Iowa caucus, Feb. 3. Information from the National Milk Producers Federation (NMPF) shows the importance farmers and rural voters in major dairy states could have on the election outcome in November.

Read: Dairy Defined: Which Farm Voters Hold the Key to 2020? The Ones Milking Cows.

According to the NMPF analysis, dairy farmers find themselves unusually concentrated in states with large numbers of electoral votes and in swing states, compared to producers of other agricultural commodities.

A presidential candidate who wins the five biggest milk-producing states (California, Wisconsin, New York, Idaho and Texas) would gain 136 electoral votes, more than half the total needed to win the White House. Winning the top five growers of the most-valuable crops – corn (Iowa, Illinois, Nebraska, Minnesota and Indiana) and soybeans (Illinois, Iowa, Minnesota, Indiana and Nebraska) – in comparison, would only get 52 votes.

The top five cattle states (Texas, Nebraska, Kansas, California and Oklahoma) garner 111 electoral votes. Top wheat states (North Dakota, Kansas, Montana, Washington and Idaho) hold 28 electoral votes. Other ag products tend to be highly regional or have most of their production in a limited number of states.

Separate from total electoral votes, dairy producers are also located in critical “swing” states – the ones that aren’t deeply Democratic or Republican and might make the difference for a candidate.

The NMPF analysis looked at two lists – the top eight U.S. dairy states and the eight closest states in the 2016 presidential election. As U.S. politics has become increasingly polarized on urban-rural lines, dairy farmers find themselves living in swing states where big cities and small towns collide.

Wisconsin, Michigan, Pennsylvania and Minnesota – three states that flipped the White House to President Donald Trump in 2016 and another state that came very close – are all top dairy producers.

February Class I base: $17.55 per cwt

As expected, the February 2020 Federal Milk Marketing Order (FMMO) Class I base price weakened to $17.55 per hundredweight (cwt), a $1.46 decline from January. Nonetheless, it’s still $2.25 more than February 2019.

The FMMO Class I base had topped $19 per cwt in both December 2019 and January 2020.

Waters of the U.S. replacement announced

A replacement for the “Waters of the U.S.” rule should make it easier for farmers to navigate federal and state water regulations, according to dairy and agricultural organization leaders.

Released by the EPA and the Department of the U.S. Army Corps of Engineers, the Navigable Waters Protection Rule was released Jan. 23. It replaces the Obama administration’s 2015 Waters of the U.S. rule, which redefined and greatly expanded the scope of federal water protections. In an order signed in 2017, President Trump instructed the EPA and the Army Corps of Engineers to revisit Waters of the U.S. and clarify the scope of federal jurisdiction.

The final rule will become effective 60 days after publication in the Federal Register.

According to a rule summary, provided by attorneys with the law firm of Michael Best, the new rule defines four categories of waters falling under federal jurisdiction:

  • Traditional navigable waters and the territorial seas
  • Perennial and intermittent tributaries to those waters
  • Lakes, ponds and impoundments of those jurisdictional waters
  • Adjacent wetlands that “touch” at least one point or side of jurisdictional waters or that are separated by a natural or manmade barrier which allows for direct hydrologic surface connection between the wetland and the jurisdictional water

The final rule also provides 12 categories of waters – many normally found in agricultural areas – that are excluded from federal jurisdiction, leaving management of those resources to individual states. Those categories include groundwater; waters that only flow in direct response to precipitation; many farm and roadside ditches; prior converted croplands so long as the land has been used at least once in the preceding five years for or in support of agricultural purposes; artificial lakes and ponds, including reservoirs and farm, irrigation and stock watering ponds; artificially irrigated lands, including fields flooded for agricultural production; and upland stormwater control features, among others.

“The days are gone when the federal government can claim a small farm pond on private land as navigable waters,” U.S. Ag Secretary Sonny Perdue said.

“Ultimately, the revision of this rule empowers the states to manage their waters in ways that best safeguard natural resources and local economies,” said American Dairy Coalition CEO Laurie Fischer.

Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF) applauded the new rule. “Today’s action puts an end to years of contentious rulemaking and will provide a common-sense approach to regulating waters of the U.S.” he said.

Environmental groups have already vowed to challenge the new rule in court.

A public webcast discussing the final Navigable Waters Protection Rule is scheduled for Feb. 13. Register for the webcast here.

Wisconsin governor seeks dairy aid package

Editor's note: Updated to include an announcement that a special session of the Wisconsin Legislature was set for Tuesday, Jan. 28. Wisconsin Gov. Tony Evers used his “State of the State” address to call for a special legislative session to consider ways to help struggling dairy farmers. Late Monday, the leader of the state Assembly, Robin Vos, agreed to reconvene a special session on Jan. 28, where bills will be introduced and referred to committee.

Evers proposed a package of up to eight bills estimated to cost about $8.5 million in the state’s 2019-21 biennium budget. Proposals specific to dairy included creation of a Wisconsin Initiative for Dairy Exports, with a goal of highlighting the “Wisconsin brand” while increasing U.S. dairy exports to 20% of the U.S. milk supply by 2024. The package would also contain grant programs for small dairy farmers and dairy plants seeking to diversify and create value-added products; steps to enhance education and assistance related to organic farming; creation of a farm-to-fork program, patterned after the farm-to-school program, to connect business and other entities that have cafeterias to nearby farms as a food source for meals and snacks; increasing mental health services and technical information available to dairy farmers by expanding the state’s farm center and boosting University of Wisconsin-Extension staffing; and creation of an Office of Rural Prosperity within the Wisconsin Economic Development Corp. to help people access programs addressing rural needs.

Tom Crave, president of the Dairy Business Association and whose family operates a dairy farm and cheese business near Waterloo, Wisconsin, noted DBA members had participated in a dairy day at the Capitol-lobbying effort a day prior to Evers’ State of the State address, Jan. 22.

“We appreciate that Governor Evers recognizes the importance of agriculture to Wisconsin and has called for a three-pronged plan to strengthen farming and our rural communities,” Crave said. “The governor and lawmakers of both parties clearly understand the significance of a vibrant farm economy to our state.”

“The decline in the number of Wisconsin dairy farms over the past four years has been staggering – in 2019 alone, Wisconsin lost 10% of its dairy farms,” said Wisconsin Farmers Union President Darin Von Ruden. “Wisconsin Farmers Union looks forward to working with Governor Evers and the legislature to advance both short- and long-term solutions to the current farm crisis.”  end mark

Dave Natzke