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Weekly Digest: Small changes coming to Dairy-RP

Progressive Dairyman Editor Dave Natzke Published on 29 April 2019

Digest Highlights

Dairy-RP changes noted in USDA Risk Management Agency policy updates for new crop insurance year

The USDA Risk Management Agency’s (RMA) livestock and dairy insurance policy handbooks and factsheets are now available for federal crop Insurance year 2020, which begins July 1, 2019.

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Included in the updates are enhancements and changes to the Dairy Revenue Protection (Dairy-RP) program. Those changes include:

• Reducing available coverage levels, removing the 70 percent and 75 percent coverage levels. This change probably won’t have much, if any, impact. Since Dairy-RP sales began in October 2018, dairy producers had overwhelmingly covered milk revenue at the 95 percent level. Through April 29, 2019, nearly 93 percent of the 22.8 billion pounds of milk were covered at that top level, about 7 percent was covered at the 90 percent level, and far less than 1 percent of all milk enrolled in Dairy-RP was covered at the 80 percent and 85 percent levels combined. Nobody has used the 70 or 75 percent coverage levels.

• Modified ranges for butterfat and protein to establish coverage to mirror expected milk components. Dairy-RP’s Component Pricing Option uses the component milk prices for butterfat, protein and other solids as a basis for determining coverage and indemnities. Under this option, a dairy producer may select the butterfat test percentage and protein test percentage to establish the insured milk price. The other solids test is fixed at 5.7 pounds per 100 pounds of milk. In the 2020 crop insurance year:

  • The minimum declared butterfat level is lowered from 3.5 to 3.25 pounds per 100 pounds of milk, making the range 3.25 to 5 pounds.

  • The minimum declared protein level is lowered from 3 to 2.75 pounds per 100 pounds of milk, making the range 2.75 to 4 pounds.

  • The declared butterfat test to declared protein test ratio is removed to simplify the process for dairy producers.

Additionally, the 2018 Farm Bill allows producers to enroll in the USDA RMA’s Livestock Gross Margin for Dairy (LGM-Dairy) or Dairy-RP simultaneously while participating in the Dairy Margin Coverage (DMC) program administered by the USDA Farm Service Agency (FSA).

Other policy information updates are available for LGM-Dairy, Livestock Gross Margin for Cattle (LGM-Cattle) and Livestock Risk Protection (LRP) programs.

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Market changes could impact 2019 DMC indemnity payments

Improving conditions on both the income and cost side mean dairy farmers could be getting more income from markets and less from the new DMC program.

We already know indemnity payments for producers covering their first 5 million pounds of milk production at the 95 percent level in 2019 will surpass premium costs for the full year. (Read: February margin ensures DMC payments will surpass 2019 premium costs.) March margins and estimated payments will be announced April 30. Watch Progressive Dairyman for an update.

Earlier this year, DMC payments had been projected to extend into October. However, recent increases in milk futures prices and declines in corn and soybean meal futures now push the forecasted monthly milk income over feed cost margin to $9.50 per hundredweight (cwt) this summer. As of April 26, the Program on Dairy Markets and Policy projected the margin to hit the top insurable level of $9.50 per cwt by the end of June.

Enrollment in the DMC program will begin June 17 at the USDA FSA offices. The April DMC margin will be announced May 31, so dairy producers will know expected payments for January-April 2019 even before they sign up for the program. Distribution of indemnity payments, retroactive to January 2019, is scheduled to begin July 8.

Sequestration deduction: It’s a little lower this year

The change isn’t large, but it’s something I missed reporting earlier this year: Sequestration deductions from federal farm payments (including the new DMC program) are lower in fiscal year (FY) 2019.

The sequestration rate for FY 2019 (Oct. 1, 2018-Sept. 30, 2019) is 6.2 percent, down from 6.6 percent in FY 2018 and 6.9 percent in FY 2017. For example, any gross indemnity payment calculated under DMC in FY 2019 will be reduced by 6.2 percent.

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Sequestration was a scheme developed in the 2011 Budget Control Act to help Congress balance the federal budget, setting automatic budget caps on discretionary spending and making deductions to meet those caps.

USDA extends deadline for MFP crop production certification

The USDA has extended the deadline for producers to certify 2018 crop production eligible for payments under the Market Facilitation Program (MFP).

Citing heavy rains, snow and flooding, which prevented producers from certifying 2018 acres, the USDA’s FSA extended the deadline to May 17. It was previously set for May 1.

MFP pays producers negatively impacted by retaliatory tariffs on U.S. agricultural exports. The MFP provides payments to producers of corn, cotton, sorghum, soybeans, wheat, dairy, hogs, fresh sweet cherries and shelled almonds. FSA will issue payments based on the producer’s certified total production of the MFP commodity multiplied by the MFP rate for that specific commodity.

Producers can certify production by contacting their local FSA office. The original application deadline was Feb. 14, 2019.

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

USTR: European Union unfairly targeting U.S. dairy exports

The U.S. Trade Representative’s (USTR) office has denounced what it calls the European Union’s (EU) anti-trade agenda against common-name food products, including dairy products. In its annual “Special 301 Report,” which identifies alleged abuses by U.S. trading partners, the USTR rejected EU policies that block U.S. dairy companies and others from using common names such as fontina, gorgonzola, asiago and feta cheese.

“The EU pressures trading partners to prevent all producers, other than in certain EU regions, from using certain product names,” read the report. “This is despite the fact that these terms are the common names for products and produced in countries around the world.”

U.S. dairy organizations charge that the EU’s actions infringe on the rights of U.S. producers and imposes unwarranted market barriers to U.S. goods.

“Europe has disadvantaged the U.S. dairy industry for too long by abusing geographical indications (GI) policies,” said Tom Vilsack, president and CEO of the U.S. Dairy Export Council. “We face unfair barriers around the world because of Europe.”

Vilsack urged the USTR to prioritize securing binding commitments from America’s current trading partners to prevent future GI restrictions. The market access preservation commitments secured with Mexico as part of the U.S.-Mexico-Canada Agreement, he said, provide a positive precedent to build upon.

Jim Mulhern, president and CEO of the National Milk Producers Federation, also urged the Trump administration to take into account the lopsided dairy trade imbalance between the U.S. and Europe in formulating policies to tackle the EU’s predatory attacks on U.S. dairy exports.

Europe sent $1.8 billion in dairy goods to the U.S. market in 2018 but only imported $145 million of U.S. products, even though America is a major dairy supplier to the rest of the world.

“Trade is supposed to be a two-way street,” Mulhern noted. “America’s struggling U.S. dairy producers deserve a lot better than the current one-way trade relationship with the European Union whereby they sell us a billion dollars of cheese each year while erecting walls to our ability to compete head to head with them overseas.”

Lawsuit challenges Iowa’s new trespass law

That didn’t take long: A coalition of animal rights advocates filed a lawsuit challenging the constitutionality of Iowa’s new law designed to protect farmers from unlawful trespass. The lawsuit was filed in the U.S. District Court for the Southern District of Iowa, the same court that struck down a previous version of the law last January.

Iowa’s new Agricultural Production Facility Trespass Statute was signed into law on March 14. It creates a criminal offense for agricultural production facility trespass when a person involves the use of deception to obtain access to a facility not open to the public with the intent to cause physical or economic harm or to injure a facility’s operations, property or persons. A person who commits agricultural production facility trespass is guilty of a serious misdemeanor for a first offense and an aggravated misdemeanor for a second or subsequent offense.

Plaintiffs include the Animal Legal Defense Fund, People for the Ethical Treatment of Animals (PETA), Center for Food Safety, Iowa Citizens for Community Improvement and Bailing Out Benji. The coalition is represented by Public Justice, the Law Office of Matthew Strugar, the ACLU of Iowa, Justin Marceau and Alan Chen of the University of Denver Sturm College of Law, and in-house counsel for the plaintiff organizations.

Appeals court upholds Indiana Right to Farm Act

While the Iowa trespass law faces legal challenges, the Indiana Court of Appeals ruled that the state’s Right to Farm Act still protects farmers against nuisance suits, according to Brianna Schroeder, an attorney with Janzen Ag Law, Indianapolis, Indiana. Attorney Todd Janzen and Schroeder represented the Indiana Agricultural Law Foundation (IALF) in the case (Himsel v. Himsel, Case No. 18A-PL-645).

The case involves a farm family who received county and state permission to build new hog facilities on their existing farmland. After the facility was populated with hogs in October 2013, a group of area neighbors filed a lawsuit, alleging the farm was a nuisance, was being operated negligently and caused odors that constituted a trespass.

A trial court initially ruled in favor of the neighbors, allowing the case to proceed to trial. The IALF, Indiana Pork Producers Association and Hendricks County filed briefs in support of the farmers and asked the trial court to reconsider. The court reversed its initial order, this time entering judgment in favor of the farmers. The neighbors appealed to the court of appeals.

On appeal, attorneys for the farmers argued that the neighbors knowingly built their homes in an agricultural area, and that Indiana law preserves farmland by protecting farmers against nuisance lawsuits even if the modern farm arrives after the neighbors had already settled into the area.

The neighbors argued the farmers failed to meet the Right to Farm Act’s requirements because they had built their homes before the hog farm existed. The neighbors also argued the odor from the farm was a “trespass,” and that the county was negligent for siting the barns too close to the neighbors’ homes. Finally, the neighbors alleged that the act violated the Indiana and U.S. constitutions by providing privileges to farmers that did not apply to their nonfarming neighbors.

The Indiana Court of Appeals rejected all arguments from the neighbors, who now have 45 days to petition the Indiana Supreme Court to accept transfer of the case.

DFA announces startups selected for 2019 Accelerator Program

Dairy Farmers of America (DFA) announced the companies participating in the 2019 DFA Accelerator program. These companies will engage in a 90-day immersive program. Startups in two verticals – ag tech and dairy food products – will work with leaders from DFA, CoBank, Sprint and other industry experts and mentors to create strategic, long-term partnerships.

The companies selected for the program will receive mentorship, connections and resources to help accelerate their growth. The 2019 DFA Accelerator class is:

  • Bezoar Laboratories: The company’s current innovation is a patent-pending probiotic for cattle that, when paired with nitrate, decreases their methane production by 50 percent, while providing additional benefits.

  • Cattle Care: Using video cameras, the company detects, recognizes and tracks every cow as well as business processes and makes decisions for the farmer about the treatment of a particular cow or a whole barn.

  • Healthy Cow: An ag-biotechnology helping dairy farmers to produce more wholesome, natural and nutritious milk, while simultaneously reducing their dependence on antibiotics and hormones

  • Labby: An artificial intelligence-powered smartphone platform for food and agro analytics

  • Brooklyn Buttery: This company offers convenient products for home cooks to turn up the flavor on their dishes using sustainably sourced ingredients.

  • Numa: The company makes all-natural, sweet, chewy milk treats with six natural ingredients and 4 grams of protein.

  • RifRaf: This company offers ricotta cups that are 1 part cheese and 1 part unexpectedly delicious flavor.

Midwest Dairy elects leadership

Allen Merrill, a dairy farmer from Parker, South Dakota, was re-elected chair of Midwest Dairy during the organization’s annual meeting held in conjunction with the Western Dairy Forum in Phoenix, Arizona.

Elections for the corporate board officer team also were held. Charles Krause, Buffalo, Minnesota, was re-elected first vice chairman; Dan Hotvedt, Decorah, Iowa, was re-elected second vice chairman; Lowell Mueller, Hooper, Nebraska, was re-elected secretary and Barb Liebenstein, Dundas, Minnesota, was re-elected treasurer.  end mark

Dave Natzke
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