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Weekly Digest: Dairy leader urges government cheese drawdown

Progressive Dairyman Editor Dave Natzke Published on 09 January 2019

Digest Highlights

Head of ADC urges government cheese drawdown

In an open letter to President Donald Trump, American Dairy Coalition (ADC) Chief Executive Officer Laurie Fischer has called for government action to reduce surplus cheese inventories. Based on latest USDA estimates, about 1.4 billion pounds of American, cheddar and other types of cheese are sitting in cold storage throughout the U.S.

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“With the price of milk at a record low, it is necessary that this surplus be liquidated to jump-start the industry,” Fischer wrote. “It is estimated that 40 million Americans struggle with hunger and food insecurity. Stored dairy in the form of cheese provides an excellent source of nutrition for families who do not know where their next meal will come from.”

Due to retaliatory tariffs, U.S. cheese exports to Mexico are down 10 percent, and exports to China have dropped 65 percent. As a result, Fischer said U.S. milk prices are down nearly 40 percent over the last four years.

“We, the dairy farmers of the United States, are in a crisis,” Fischer wrote. “As each week passes, an increasing number of hard-working dairy families are going out of business. Many of us feel helpless, and we struggle to support our families — some have even required food stamps to put food their tables. We very much appreciate your recent assistance, but we need milk prices to rise. We want to become profitable, but due to the uncertainty created by lingering retaliatory tariffs, we only see a slight — if any — rebound anytime soon.

“If this isn’t bad enough, the industry faces onerous and costly dairy regulations, as well as a shortage of workers — making it hard to find a way each day to stay in business,” Fischer wrote.

Dairy-related programs remain suspended

USDA programs and reports impacting dairy farmers remain suspended during the ongoing partial government shutdown.

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  • USDA Farm Service Agency (FSA) centers remain closed and employees are furloughed.

  • Rules to implement the Dairy Margin Coverage (DMC) program, approved in the 2018 Farm Bill, could be delayed. Congress mandated the USDA to establish rules and an enrollment period within 60 days after the bill was signed into law, Dec. 20. The USDA will be unable to begin the implementation process until fiscal year 2019 funding levels are set.

  • Release of November’s Margin Protection Program for Dairy (MPP-Dairy) calculations, originally set for late December, have not been released. The next scheduled MPP-Dairy margin report is scheduled for Jan. 31.

  • Affecting other dairy risk management tools, daily sales of Dairy Revenue Protection (Dairy-RP) policies are suspended. The next scheduled sales period for Livestock Gross Margin for Dairy (LGM-Dairy) policies is Jan. 25.

  • Monthly USDA Foreign Agricultural Service reports on November ag exports covering dairy products, dairy cattle and hay, scheduled for Jan. 8-9, will not be released.

  • Potentially impacting dairy and feed markets, scheduled USDA National Ag Statistics Service (NASS) and Economic Research Service (ERS) reports will be delayed. Those include the monthly World Ag Supply and Demand Estimates (WASDE), Crop Production and Grain Stocks reports, all set for Jan. 11.

  • Upcoming dairy reports facing potential cancellation or delay include Cold Storage (Jan. 22), Milk Production (Jan. 23) and cull cow slaughter (Jan. 24).

MPC seeks MFP payment application deadline extension

With the partial government shutdown continuing, California’s Milk Producers Council (MPC) has asked U.S. Rep. Jim Costa (D-California) to press the USDA for a deadline extension to make sure dairy farmers negatively affected by trade wars and retaliatory tariffs have adequate time to apply for payments.

Announced last September, the original application deadline for Market Facilitation Program (MFP) payments was set for Jan. 15, 2019. However, local USDA Farm Service Agency (FSA) centers remain closed, and USDA appropriations have lapsed due to the shutdown, noted Geoff Vanden Heuvel, MPC director of regulatory and economic affairs.

Announced in two installments, dairy producers are eligible to receive 12 cents per hundredweight (cwt) in MFP payments. The payments are based on annual milk production history filed with FSA.

Producers need only sign up for MFP payments once. However, those who failed to enroll prior to the USDA shutdown will have to wait until FSA offices are reopened and funding is reauthorized.

Read: USDA announces second round of trade mitigation payments and Need cash? Get to FSA office for MFP payments.

According to MPC’s latest newsletter, Costa prepared a letter to USDA Secretary Sonny Perdue, seeking to extend the application period to a date 30 days following the restoration of appropriations and reopening of FSA centers.

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Editor’s note: At the Progressive Dairyman Extra deadline, Perdue announced the application period for MFP payments would be extended for a period of time equal to the number of business days FSA offices are closed. A specific deadline will be determined once the government shutdown ends. 

Peterson to head House Agriculture Committee

With the 2018 election changing the majority party in the U.S. House of Representatives, leaders of the House Agriculture Committee have swapped positions during the 166th Congress.

As the majority party, Democrats have selected U.S. Rep. Collin Peterson (D-Minnesota) as chairman of the committee. Peterson previously served as House ag committee chair in 2007-11 and served as ranking member in 2011-18, when Republicans held the House majority.

Former committee chair U.S. Rep. Mike Conaway (R-Texas) takes over as ranking member.

With the change, Democrats will also assume a majority of ag committee seat. Complete membership of the ag committee and its subcommittees has not been announced.

Senate ag committee chair Roberts has worked his last farm bill

Senate Agriculture Committee Chair Sen. Pat Roberts (R-Kansas), who has worked on the last eight farm bills, announced he will not seek re-election in 2020.

Roberts, 82, served 16 years in the House followed by four terms in the Senate. He is the only two-time chairman of both the House and Senate Agriculture Committees in congressional history,

Court affirms California almond ‘milk’ ruling

It remains to be seen whether a federal court ruling may have any implications for efforts to prevent companies producing plant-based beverages from using “milk” on packaging and in marketing campaigns.

The U.S. Court of Appeals for the 9th Circuit affirmed a lower court ruling to dismiss a class action lawsuit in Painter v. Blue Diamond Growers. In the lawsuit, the plaintiff alleged an almond producers cooperative, Blue Diamond Growers, mislabeled its almond beverages as “almond milk” when they should be labeled “imitation milk” under California food labeling laws. The lawsuit also alleged consumers were likely to be misled into believing nondairy beverages were nutritionally equivalent to dairy without such labels.

The appeals court decision affirmed a ruling in the U.S. District Court for the Central District of California that the FDA has oversight on food labeling standards, and denied claims consumers would be deceived into believing almond beverages were nutritionally equivalent to dairy milk.

Meanwhile, an FDA comment period on development of rules addressing food labels – including the use of dairy terms on nondairy beverages and food products – closes on Jan. 25, 2019.

Read: FDA extends plant-based label comment period, contained in Progressive Dairyman’s Extra enewsletter, Weekly Digest, Nov. 19, 2018.

December Class III falls to 10-month low

With high cheese inventories and weaker cheese prices, the December 2018 federal order Class III milk price fell to $13.78 per cwt, the lowest since February. The 2018 Class price average, at $14.61 per cwt, was the lowest since 2010.

The December Class IV price is $15.09 per cwt, up 3 cents from November and at its highest point since September 2017. The 2018 Class IV price average was $14.23 per cwt, down 93 cents from a year earlier.

When the price of Class IV milk is higher than the price of Class III milk, the Class IV price becomes the basis for the skimmed milk price of Class I and Class II milk prices, notes John Geuss, dairy consultant and author of Milk Price, a blog reviewing factors that influence milk prices in Federal Milk Marketing Orders (FMMOs). This, in turn, can increase the "uniform" milk price above the Class III price, resulting in a higher Producer Price Differential (PPD) payment to producers. The PPD is larger in FMMOs with higher Class I utilization. In December, the PPD for the Northeast FMMO was $2.18 per cwt., while the PPD for the Upper Midwest, which has a very limited Class I market, was $0.30 per cwt. Read: 2018 Class and Component Prices.

Dairy margins ended December flat

With limited movement in milk and feed markets, dairy income margins were flat over the last half of December, according to Commodity & Ingredient Hedging LLC.

Nearby margins continued to reflect losses through the first quarter of 2019, but second- and third-quarter margins held up better. The forward curve continues to reflect optimism over improving fundamentals for milk supply and demand, with deferred futures holding a $3-per-cwt premium over spot prices, based on the September 2019 Class III contract. Thawing U.S-China trade relations are behind some of that optimism.

Excess cheese production continues to weigh on nearby futures, as cheese output through October exceeded 2017’s record-breaking volume by 2.5 percent, a period which saw U.S. milk production up only 1 percent. This preference for directing milk production toward cheese is also being reflected in monthly Cold Storage inventories. The USDA reported November butter stocks at a three-year low of 153.7 million pounds, but November cheese inventories of 1.35 billion pounds were up 7.5 percent from a year ago. While the October to November draw of cheese inventories was larger than average, overall cheese inventories remain abundant, putting additional emphasis on demand improvement in 2019.

Thanks to the government shutdown, we don’t know exactly what the milk income over feed cost margin was in November under the Margin Protection Program for Dairy (MPP-Dairy).

Wisconsin localizes manure runoff risk forecast tool

A new version of Wisconsin’s Runoff Risk Advisory Forecast will debut Feb. 1, offering farmers a more detailed and localized look at the threat of runoff before they plan to spread manure.

The runoff forecast provides maps showing short-term runoff risk for daily application planning, taking into account factors including soil moisture, weather forecast, crop cover, snow cover and slope. It is updated three times daily by the National Weather Service.

The first version of the forecast tool provided data by watershed basins. Now, the data will be based on a system using 4-kilometer grids, providing data at a finer scale and allowing farmers to look at conditions closer to home. Users can click on a statewide map to zoom in on their areas.

In addition to the precipitation forecast, the new version will also provide soil temperatures and saturation, based on computer models. And it will make it easier to find previous day snapshots, a tool that farmers often use to document adherence to their nutrient management plans.

CDFA accepting manure management project grant applications

The California Department of Food and Agriculture (CDFA) is accepting applications for grants under its Dairy Digester Research and Development Program (DDRDP) and Alternative Manure Management Program (AMMP). The deadline for submitting applications is April 3.

CDFA will offer $61 million to $75 million for DDRDP projects and $19 million to $33 million for AMMP projects. Individual grants are for a maximum of $3 million and can cover up to 50 percent of a project’s total costs.

For information, including a schedule of workshops for grant applicants, visit the CDFA Office of Environmental Farming and Innovation.  end mark

Dave Natzke
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