World Dairy Diary

The Dairy Product Price Support Program (DPPSP) and the Milk Income Loss Contract (MILC) program combined constitute nearly 80 percent of the dairy budget baseline over the next ten years, according to the Congressional Budget Office. However, the DPPSP has become an ineffective safety net for farmers, and has created an unintended outcome whereby the U.S. has become burdened with balancing the world’s milk supply.

The MILC program also has been ineffective in providing a safety net for farmers, and treats farms and entire regions of the country unequally. More specifically, it does not address the rise in volatile feed costs, and has not prevented the exodus of farms during its decade of existence. In 2001, there were 97,460 U.S. dairy farms, but by 2010, that figure was 62,500 – a loss of 36 percent of the nation’s dairy farmers, almost all of which were small to medium-size operations of 500 cows or less. This clearly demonstrates the inadequacy of the current program and the need for better dairy policy.

The policy proposals contained in the National Milk Producers Federation’s Foundation for the Future (FFTF) eliminate the DPPSP and MILC programs, and create a more efficient and effective safety net in the form of a Dairy Producer Margin Protection Program, the costs of which are shared by dairy farmers and the federal government. FFTF also establishes a Dairy Market Stabilization Program to prompt producers to respond more quickly to economic signals from the marketplace and at no cost to the government.

Existing farm programs, including the dairy title within the Farm Bill, are expected to undergo further cuts as part of the new federal budget deal passed by the House and Senate. FFTF was created to achieve better economic protection for farmers, while also yielding a budget savings – compared to current baseline spending levels – precisely because farm safety nets are going to shrink in the future. The Congressional Budget Office says FFTF will save $166 million over the next five years, at a time when Congress has now pledged to cut more than a trillion dollars from federal spending.

America’s dairy farmers and processors commended the USDA for including a light blue circle depicting a serving of “Dairy” – milk, cheese, or yogurt – next to the dinner plate to illustrate how to build a healthy eating plan, including a serving of dairy at every meal.

“Dairy foods are rightfully being recognized — from the school house to the White House — as an important part of everyone’s diet,” noted NMPF President and CEO Jerry Kozak. “USDA’s new MyPlate, the simple visual metaphor of a serving of dairy products alongside a plate, says it’s vital to consume three servings of low-fat and fat-free dairy foods every day.”

Other dairy industry leaders similarly applauded the new graphic. “Knowing what we do about dairy’s ability to reduce the risk of conditions like osteoporosis, hypertension, and type 2 diabetes, we think it’s exciting that dairy is highlighted individually,” said Jean Ragalie, R.D., president of National Dairy Council. “The location of dairy on the graphic really helps it stand out as an essential part of a healthy eating plan,” she added.

“Milk provides a unique package of nine essential nutrients and dairy foods are a substantial contributor of many nutrients that are important for good health,” offered Vivien Godfrey, CEO of the Milk Processor Education Program. “We are firm believers in the importance of ‘pouring one more’ serving of dairy, and this tool will be a fresh reminder to all Americans as they sit down at their tables with their families.”

Dairy contributes beyond the glass, as well. A serving of nutrient-rich, low-fat or fat-free milk, cheese, or yogurt has, on average, at least as much protein as an egg. In fact, dairy foods contribute 18 percent of the protein to the American diet. Simple steps, like adding lower fat cheese to a veggie sandwich or topping a baked potato with fat-free plain yogurt can give any meal a nutrient boost.

Americans currently average about 2 daily servings of dairy foods, while USDA’s dietary guidelines encourage 3 daily servings of low-fat or fat-free milk and milk products for adults and children nine years and older. This underscores the importance of a direct, visual metaphor like the MyPlate tool in relaying this guidance to a population being urged to get more nutrients per calorie at every meal.

“We’re delighted that this new education tool makes it clear that milk and other dairy products are important for a nutritious diet,” said Connie Tipton, president and CEO of the International Dairy Foods Association. “It highlights how beneficial a serving of dairy at every meal can be and helps to educate people about dairy’s role on the table and in the American diet.”

In an interview with Agri-Pulse last week, Senator Debbie Stabenow (D-MI), chair of the Senate Committee on Agriculture, Nutrition and Forestry, clearly indicated her belief that dairy policy would not move ahead of the 2012 Farm Bill.

“The only reason to even talk about moving it separately would be if there was agreement on a package. At the moment, there is not,” Stabenow said. “Frankly, I think, politically, it makes sense to move everything within the context of the farm bill.”

Her comments mirror those made by House Agriculture Chairman Frank Lucas (R-OK) in interviews earlier this year. Lucas said he would consider moving a dairy reform package ahead of the farm bill only if the farmers and processors are united. Currently, the National Milk Producers Federation and IDFA have differing points of view on the path forward for dairy reform.

“We’d like to move ahead with proposals where IDFA and NMPF agree, such as the need for new risk insurance programs and the elimination of the price support program” said Jerry Slominski, IDFA senior vice president of legislative affairs and economic policy. “But we support making our Federal Milk Marketing Order system less complex instead of more, and strongly oppose any new mandatory program to have the government intervene in markets to control milk supply as this would clearly hurt our industry’s ability to grow and create jobs.”

At the spring board meeting in April, the board members of IDFA’s constituent organizations endorsed a new package of dairy reform proposals and rejected NMPF’s policy package, Foundation for the Future. IDFA is now scheduled to provide a policy briefing on its proposals to the House Dairy Caucus on May 19.

“Through their representation on the Dairy Board, importers will be able to participate in the development of programs to expand demand for dairy products and dairy ingredients in the United States,” said Agricultural Marketing Service (AMS) Administrator Rayne Pegg.

The Dairy Promotion and Research Order (Dairy Order) states that, initially, importers will be represented on the Dairy Board by two importer members appointed by the Secretary of Agriculture. Thereafter, the importer representation on the Dairy Board will be reviewed at least once every three years, and adjusted to reflect the volume of imports relative to the domestic production of milk.

The length of a member’s term will be three years. In order to properly coordinate the terms of importers with those of dairy producer members and to stagger the two terms, initially, one importer member will serve a term ending Oct. 31, 2013, and one importer member will serve a term ending Oct. 31, 2014.

Importer nominees must be importers of dairy products and will be subject to the assessment to fund the National Dairy Promotion and Research Program. Such nominations may be submitted by individual importers of dairy products or by organizations representing dairy importers, as approved by the Secretary. Individual importers submitting nominations to represent importers on the Dairy Board must establish, to the satisfaction of the Secretary, that the person submitting the nomination is an importer of dairy products. Importer organizations must adequately represent importers of dairy products under the primary determining considerations of whether its membership consist primarily of importers of dairy products and whether a substantial interest of the organization is in the importation of dairy products. An importer means a person that imports dairy products into the United States as a principal or as an agent, broker or consignee of any person who produces or handles dairy products outside of the United States for sale in the United States, and who is listed as the importer of record for such dairy products. Nominations must be submitted by June 10, 2011.

The Dairy Board was established under the Dairy Production Stabilization Act of 1983 to develop and administer a coordinated program of promotion, research and nutrition education. The 38-member Dairy Board is authorized to design programs to strengthen the dairy industry’s position in domestic and foreign markets. The program is financed by a mandatory 15-cent per hundredweight assessment on all milk marketed commercially and a 7.5-cent per hundredweight assessment on milk, or equivalent thereof, used to produce dairy products imported into the United States.

In response to feedback from the agriculture community, EPA determined that this unintended result of the current regulations – which were designed to prevent oil spill damage to inland waters and shorelines – placed unjustifiable burdens on dairy farmers. To ensure that this outdated rule didn’t harm the agriculture community while the mandatory regulatory process proceeded, EPA had delayed SPCC compliance requirements for milk and milk product containers several times since the SPCC rule went into effect. Today’s formal rule change reflects EPA’s commitment to common-sense, responsive, and transparent rulemaking. It’s also consistent with the president’s executive order on improving regulations.

“After working closely with dairy farmers and other members of the agricultural community, we’re taking commonsense steps to exempt them from a provision in this rule that simply shouldn’t apply to them. Despite the myths that have arisen about EPA’s intentions, our efforts have been solely focused on exempting milk and milk products from this regulation — and that exemption is now permanent,” said EPA Administrator Lisa P. Jackson. “This step will relieve a potential burden from our nation’s dairy farms, potentially saving them money, and ensuring that EPA can focus on the pressing business of environmental and health protection.”

Based on input from the milk industry, EPA previously delayed SPCC compliance requirements for milk and milk product containers until the mandated regulatory process could be completed. In January 2009, EPA proposed the rule to exempt milk containers from the SPCC rule. Milk production is already subject to certain construction and sanitary standards and requirements that help prevent spills.

The final exemption applies to milk, milk product containers, and milk production equipment. In addition, because some of these facilities may still have oil storage subject to the spill prevention regulations, EPA is also amending the rule to exclude milk storage capacity from a facility’s total oil storage capacity calculation. The agency is also removing the compliance date requirements for the exempted containers.

This announcement is consistent with President Obama’s executive order on regulatory reform, which requires federal agencies to design cost-effective, evidence-based regulations that are compatible with economic growth, job creation, and competitiveness. As part of the immediate implementation of that strategy, agencies were asked to develop a plan to ensure that existing regulations are up-to-date, effective, and cost justified. This update to SPCC regulations is in line with that effort.

Vilsack called on the rural telecom execs to ask the same questions and close the deal by saying “Then you might take the time to thank somebody who’s a farmer or rancher in rural America.” NCTA members are in town to push for sensible telecom regulatory reforms. Vilsack called on them to add another message to their meetings here: “We’ve got to make people stop and think that rural America is not somewhere that has no relevance.”

Voicing his signature “importance of rural America” message, Vilsack said “My life, my family’s life depends to a large part on the capacity of rural America to be successful.” He said the country as a whole needs to understand the importance of investing in rural America – as in the case of the $4 billion in new federal funds “to advance telecommunications opportunities in rural America.” He said this $4 billion in stimulus money is “an investment that’s important not just for the folks in rural America, but for all of us. If that farmer doesn’t know how to get good, timely information, he or she may not succeed, that farm may go under, and that’s one more family no longer living in rural America. That creates greater stress on our structures in urban America.”

Hoping to sign up NTCA members to spread the rural message, he told the crowd “any time you have an opportunity to talk to anybody in any position of authority or power, you ought to be talking about the fundamental concept here, which is that rural America matters, it matters, and the rest of the country needs to understand that.”

Vilsack explained “rural America really matters to this country. And I am concerned about the fact that its population is aging and declining, I’m concerned about the fact that per capita income in rural America is about $11,000 less than what folks make in urban and suburban areas, I’m concerned about the fact that 90% of America’s persistent poverty counties are located in this very important place that we all rely on for our food and our fiber and our fuel and for our protection and I’m concerned that we have to have a revitalized rural economy so that young people who genuinely want to live and work and raise their families in the same type of communities that they had the privilege of growing up in have the economic opportunity to be able to do that.”

Today, a final rule was released by USDA. It will extend the checkoff to all 50 states and Puerto Rico as of April 1st, and starting on August 1st, it assesses the equivalent of 7.5 cents per hundredweight on all dairy-based imports, including cheese and butter products, as well as dry ingredients such as casein and milk protein concentrates. The money will be collected by the National Dairy Board to be used for nutrition research, consumer education, issues management, and other programs that build demand for dairy consumption.

“It’s been a long time in coming, but we’ve finally achieved a degree of fairness in the area of dairy promotion between domestic milk production and imports. Dairy importers, who benefit from the world’s largest dairy market, need to help pay to expand that market, the same way that our farmers do,” said Jerry Kozak, President and CEO of NMPF. “We appreciate the efforts of Agriculture Secretary Tom Vilsack to recognize how important it was to finally resolve this issue.”

Under the new import assessment, regional and state promotions, including those in Wisconsin and California, will continue to drive demand for dairy products, and the program will, in all substantive respects, continue to run as it has. The USDA has stated that the dairy import assessment will be administered so as to continue to permit state and regional promotions.

“While dairy imports enjoy a larger share of the U.S. market compared to where things stood back in 1984, importers haven’t paid a single penny to help promote the market, the way America’s dairy farmers have. It’s time that inconsistency ends,” Kozak said. “Everyone who benefits from this market should pay part of the tab.”

Replaces end product pricing formulas with a competitive milk pricing system;
Incorporates two classes of milk – fluid (Class I) and manufacturing (formerly Class II, III and IV product uses);
Maintains the higher of for establishing the fluid use (Class I) minimum base price;
Maintains current Class I regional differentials;
Maintains the number and basic structure and provisions of Federal Orders.

“In order to create a truly comprehensive transformation for the betterment of the dairy industry, we needed to adopt these specific changes as part of Foundation for the Future,” said Jerry Kozak, President and CEO of NMPF. “Our Board’s vote today is a critical, necessary step toward significant reform of the entire regulatory structure of the dairy sector.”

The changes approved Tuesday – which were developed by a committee of dairy policy experts from across the industry – maintain the basic framework of the Federal Milk Marketing Order system, but eliminate some of the most contentious elements from the current structure, such as make allowances, which are the result of the end product pricing formulas now used to price farmers’ milk.

Kozak said that the Federal Order reforms will be incorporated into legislative language and submitted to Congress to review, as part of the overall Foundation for the Future package. He said that the proposal will be shared with other stakeholders in the dairy sector, including processors, in an effort to build consensus around the changes.

“There has long been a shared notion that change is needed; now we’ve taken a big step toward defining what that change should look like,” Kozak said. “We are looking forward to explaining to everyone, from farmers to processors to lawmakers, how a competitive pricing system, and shifting the pricing basis to two classes of milk, will make the Federal Order system more flexible and sensible.”

The Committee suggests that using objective measures of sector hardship can reduce political pressures in the allocation process. The Committee recommends that the Secretary implement trigger levels based on the difference between average milk prices and a new measure of feed costs . The Secretary can then objectively determine when dairy farmers face extreme hardship by examining whether the difference between revenues and costs fall below specific trigger levels. Extreme hardship would justify shifting governmental resources from other uses. Within this framework, the first trigger would indicate use of a food assistance program to increase demand for dairy products. At the second trigger, the DPPSP purchase prices may be raised. The Committee recommends applying these responses cautiously.

In the span of just five years, New York State lost 23 percent of its dairy farms. As of 2007, New York State is home to nearly 5,700 dairy farms, down from nearly 7,400 in 2002, according to the USDA.

Gillibrand said she is also working to prevent looming cuts to the MILC (Milk Income Loss Contract) program, bolster New York’s dairy exports, improve cold storage inventory reporting standards to stabilize dairy trading prices, and arm dairy farmers with more of the tools and information they need to thrive.

The federation, which represents farmers’ bargaining cooperatives, has proposed a margin insurance program to be supported with a combination of government money and fees charged to farmers and administered by the U.S. Department of Agriculture. The program would pay farmers when high feed prices or low milk prices — or both — undermine their typical operating margins.

The program has been in development since last year, but the NMPF now is dealing with a different cast of lawmakers in the House, dominated by Republicans who are sour on farm subsidies, government-sponsored insurance and many other domestic programs. Any program that increases federal spending is a tough sell to the new majority, although the NMPF figures the government can pay for its proposal by dismantling subsidies now paid to farmers when milk prices are low. The current dairy program costs about $102 million annually.

“We’re optimistic that we will get the stars and planets aligned to rewrite dairy policy this year,” said Christopher Galen, a spokesman for the federation. The organization represents co-ops such as Dairy Farmers of America and Agri-Mark Inc., which dominate in Northern New York.

Farmers would receive payments when the difference between milk prices and the cost of feed falls below $4 for every 100 pounds of milk. Farmers could buy additional insurance for protection when margins are greater than $4.

The program would be optional, as is the current support program called the Milk Income Loss Contract. The MILC program pays farmers when milk prices fall below a federal target, with a slight adjustment for feed prices.

Mr. Galen said the NMPF has discussed the proposal with the new chairman of the House Agriculture Committee, Rep. Frank D. Lucas, R-Okla., as well as with the top Democrat, Rep. Collin C. Peterson, D-Minn. They have not necessarily promised it will be approved, Mr. Galen said, but the NMPF was pleased by the reception.

On the other side of the Capitol, Sen. Kirsten E. Gillibrand, D-N.Y., has supported programs that help farmers manage risk. After a Senate Agriculture Committee hearing last week with Agriculture Secretary Tom Vilsack, Mrs. Gillibrand submitted written questions to the USDA, asking about a margin insurance program — called the livestock gross margin dairy program — already offered that only recently has begun to attract interest.

That program, she said, is in danger of running out of money for the year.

“As you know, Mr. Secretary, dairy farmers have not had very good tools to help manage price risk in a global market. Can you assure us that dairy farmers who sign up in the next few months will get into the LGM Dairy program?” Mrs. Gillibrand wrote. “Are there other ways that we can partner together to help protect profitability margins for dairy producers?’

A spokeswoman in Mr. Vilsack’s office had no immediate information on the program Tuesday afternoon.

The dairy cooperatives’ lobbying group is dealing not only with new congressional leadership but also with big changes in the Agriculture Committee’s rank and file. The committee has 24 new members, out of a total of 45, many of whom are new to dairy policy. Education will require a heavy effort, said Robert Gray, executive director of the Council of Northeast Dairy Cooperatives.

“George Greig is an experienced farmer, businessman and leader,” Corbett said. “His record of success and service makes him an ideal choice to lead this important state agency.”

Greig, 59, has held many positions within the Pennsylvania Farm Bureau, where he has served as the state board director for the past six years. Before that, he served as Crawford County Farm Bureau president for eight years, Crawford County board member for 12 years and has been local affairs chairman and served on the legislative committee.

Greig also owns and operates a 650-acre dairy farm in partnership with his brother in Crawford County. The Greig brothers also produce soybeans and hay.

Greig currently serves as township supervisor in Conneaut Township. Corbett said that Greig has also served on the USDA Farm Service Agency’s Pennsylvania State Committee, the Crawford County Conservation District and the Great Lakes Regional Water Board.

The new 2010 Dietary Guidelines for Americans focus on balancing calories with physical activity, and encourage Americans to consume more healthy foods like vegetables, fruits, whole grains, fat-free and low-fat dairy products, and seafood, and to consume less sodium, saturated and trans fats, added sugars, and refined grains.

Because more than one-third of children and more than two-thirds of adults in the United States are overweight or obese, the 7th edition of Dietary Guidelines for Americans places stronger emphasis on reducing calorie consumption and increasing physical activity.

“The 2010 Dietary Guidelines are being released at a time when the majority of adults and one in three children is overweight or obese and this is a crisis that we can no longer ignore,” said Secretary Vilsack. “These new and improved dietary recommendations give individuals the information to make thoughtful choices of healthier foods in the right portions and to complement those choices with physical activity. The bottom line is that most Americans need to trim our waistlines to reduce the risk of developing diet-related chronic disease. Improving our eating habits is not only good for every individual and family, but also for our country.”

The 2010 Dietary Guidelines for Americans include 23 Key Recommendations for the general population and six additional Key Recommendations for specific population groups, such as women who are pregnant. Key Recommendations are the most important messages within the Guidelines in terms of their implications for improving public health. The recommendations are intended as an integrated set of advice to achieve an overall healthy eating pattern. To get the full benefit, all Americans should carry out the Dietary Guidelines recommendations in their entirety.

More consumer-friendly advice and tools, including a next generation Food Pyramid, will be released by USDA and HHS in the coming months. Below is a preview of some of the tips that will be provided to help consumers translate the Dietary Guidelines into their everyday lives:

* Enjoy your food, but eat less.
* Avoid oversized portions.
* Make half your plate fruits and vegetables.
* Switch to fat-free or low-fat (1%) milk.
* Compare sodium in foods like soup, bread, and frozen meals – and choose the foods with lower numbers.
* Drink water instead of sugary drinks.

USDA and HHS have conducted this latest review of the scientific literature, and have developed and issued the 7th edition of the Dietary Guidelines for Americans in a joint effort that is mandated by Congress. The Guidelines form the basis of nutrition education programs, Federal nutrition assistance programs such as school meals programs and Meals on Wheels programs for seniors, and dietary advice provided by health professionals.

The Dietary Guidelines aid policymakers in designing and implementing nutrition-related programs. They also provide education and health professionals, such as nutritionists, dietitians, and health educators with a compilation of the latest science-based recommendations. A table with key consumer behaviors and potential strategies for professionals to use in implementing the Dietary Guidelines is included in the appendix.