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Feb 4 2014

The dairy programs in the farm bill: A helpful analysis?

Thanks to the Hagstrom Report for sending along analyses of the dairy programs in the farm bill.

I’m not a dairy farmer and I’ve never had to work with these programs, which is a good thing because I find them impenetrable.  

For one thing, support for dairy farmers—and protection against disastrous cost and price fluctuations—is accomplished through several extraordinarily complicated programs that survive or are newly enacted in this farm bill.  

  • The permanent Dairy Price Support Program from the 1949 farm bill.
  • The Dairy Forward Pricing Program
  • The Dairy Indemnity Program
  • Export market development in the National Dairy Promotion and Research Program
  • The Margin Protection Program for Dairy Producers (MPP)
  • The Dairy Product Donation Program (DPDP)
  • Federal Milk Marketing Order for California

Why impenetrable?  Try this explanation (from the first document listed below) of the new Margin Protection Program:

A voluntary program that pays participating farmers an indemnity when a national benchmark for milk income over feed costs (the actual dairy production margin or ADPM) falls below an insured level that can vary over a $4 per cwt range.

That document explains the two new programs, MPP and DPDP, in great detail, with charts and formulas.  For them, I have to take the authors’ conclusions on faith:

The two new programs (MPP and DPDP) offer a total revamping of the safety nets that have been in place for the dairy sector going back to the middle of the 20th Century…Whether the programs proposed here will prove to be the answer farmers seek is something that will be debated and estimated, but we won’t really know unless and until they are tried.

Dairy farmer readers:  Will these new programs make your lives easier?  More secure?  Bring you more income?

Here are the analyses:

 

 

 

Jan 7 2014

Today’s irony: butter

A new report from Finland says that people with metabolic syndrome (high blood pressure, cholesterol, sugar, etc) do not follow dietary recommendations.

In particular, their diets contain too much saturated fat and sodium.

The saturated fat part is funny because this morning’s PoliticoPro Agriculture notes that the American Butter Institute (yes, such things exist) proudly announces that Americans are consuming more butter.

The Butter Institute’s press release, according to PoliticoPro, says:

Margarine and other spreads are no longer viewed as healthier alternatives…since 2002, Americans have increased butter consumption by 25 percent. In 2012, per capita consumption reached 5.6 pounds a year, a dramatic increase from the 1997 low of 4.1 pounds.

We still have a way to go to beat the Finns.  In 2011, average butter consumption in Finland was 4 kilos (nearly 9 pounds), and rising.

Love butter?  Better eat your veggies and balance calories!

Nov 12 2013

Annals of marketing: Got Milk?–Lady Gaga style

This gem comes courtesy of DairyReporter.com.

New Picture (2)

It got my attention, for sure.

Recall that Got Milk! ads are funded by a USDA-sponsored research and promotion (a.k.a “checkoff”) program, this one, appropriately, for fluid milk.

Will this ad help reverse the long-term trend in declining milk sales let alone consumption?

Um.  Why don’t I think so.

Aug 12 2013

What’s up with Chinese infant formula?

I would never have predicted that infant formula, of all things, would become the poster child for the down side of globalization.  Look at all the issues:

Price fixing

The Chinese government has just fined six infant formula companies for fixing prices:

  • Mead Johnson (US): $33 million
  • Dumex/Danone (France): $28 million
  • Biostime (Hong Kong): $27 million
  • Abbott Labs (US): $13 million
  •  Royal FrieslandCampina (The Netherlands): $8 million
  •  Fonterra (New Zealand): $700,000

The fines may seem severe but the Chinese bought $12.7 billion worth of infant formula in 2012 and are expected to buy $18.4 billion in 2014.

Botulism contamination

Fonterra, the New Zealand manufacturer of infant formula contaminated with the type of bacteria that cause botulism, says it’s sorry.

We deeply apologize to the people who have been affected by the issue.

Food safety is our first and foremost interest.

That’s  what they all say when something like this happens.

The company noticed botulinum contamination in March but did not identify the contaminating strain or notify consumers until last week.  That’s also typical.

Fonterra made $15.7 billion in sales last year, more than half of it from selling dairy foods to China.  Other big customers are in Australia, Malaysia, New Zealand, Saudi Arabia, Thailand and Vietnam.

China has now stopped importing Fonterra’ powdered infant formula.  This alone was worth nearly $1.9 billion last year.

Recall that Fonterra was a part owner of the Chinese company that made infant formula laced with melamine—the formula that made more than 300,000 babies sick.  Six died.  That happened in 2008, with dire consequences for Chinese formula manufacturers.

Distrust of Chinese infant formula

Since then, the Chinese have become suspicious of local infant formula and are buying foreign infant formula to the point of scarcity.  The new scare makes that situation even worse.

In Hong Kong, officials have been cracking down on foreign infant formula smugglers.

Joe Nocera of the New York Times attributes the scandal to three problems with China’s rapidly expanding economy:

  • Complete lack of faith in Chinese companies.
  • Corner-cutting deeply ingrained in Chinese business culture, with no government regulatory enforcement.
  • Bad incentives.

He has a Slide Show to back this up.

Other consequences

Decline in breastfeeding.  Rates of breastfeeding in China are declining.  Do Western infant formula companies have anything to do with this?

Environmental Pollution.  I was at an agriculture meeting in New Zealand a few years ago and got an earful about what it means to convert a sheep-growing country to one focused on dairy cattle: pristine to polluted.

Alas, the externalized costs of globalization.

Apr 22 2013

Food politics makes strange bedfellows, again

Last week, I wrote about the dairy industry’s petition to avoid having to follow FDA rules about labeling artificial sweeteners on the front of milk cartons.

Cara Wilking, Senior Staff Attorney at the Public Health Advocacy Institute at Northeastern University points out that the Sugar Association, the trade association for producers of cane and beet sugar, is right on top of this issue.

To assist consumers in making informed choices about what is sweetening the products they purchase, the Sugar Association petitioned the Food and Drug Administration (FDA) requesting changes to labeling regulations on sugar and alternative sweeteners.

In this petition we asked that artificial sweeteners and sugar alcohols be identified on the front of the package along with the amounts, similar to what is required in Canada.

If it is important to you to know if the product you purchase contains artificial sweeteners, let your congressional representatives know that FDA needs to take action on this important consumer issue.

The Sugar Association, obviously, represents the producers of cane and beet sugar. It wants to sell more sugar.  It doesn’t like artificial sweeteners much.  [Recall: it doesn't like me much either---go to Media and scroll down to the bottom to read the Sugar Association's letter threatening to sue me].

In contrast, the dairy industry wants to sell more milk.  Sweetened milk, no matter with what, sells to kids.  School kids are a big market for the dairy industry.  This market, however, is not doing well these days, according to the dairy industry’s August 2012 School Channel Survey.

Schools and processors are realizing 59% of current potential…Milk potential stands at 6.29 milks per student each week…Actual usage is 3.74 milks per student each week.  Elementary schools: 70% of potential being realized, down 1 point Secondary schools: 50%, down 1 point over last year.

Achieving ‘a milk with every meal’ translates into nearly 300 million incremental gallons….

Of course artificial sweeteners should be prominently labeled.  The Sugar Association has this one right.

Whatever your opinion, you can file comments at www.regulations.gov. Search for docket number FDA-2009-P-0147.

 

Apr 18 2013

FDA wants comments on labeling of artificial sweeteners in milk

The FDA is collecting opinions on a dairy industry petition to change the standard of identity for milk.  The dairy industry wants to be able to add artificial sweeteners to chocolate- and strawberry-flavored milk without saying so on the front panel of the package.

FDA Wants Your Opinion on Dairy-Product Labels - (JPG v2)

Why is the dairy industry doing this?  Because it believes that:

Labels such as “reduced calorie” or “no added sugar” are a turn-off to kids who might otherwise reach for flavored milk with non-nutritive (artificial) sweeteners at the school cafeteria or from the grocery store cooler.

As if kids should be reaching for milk with artificial sweeteners.  

The FDA wants to hear from YOU about this.  It wants your comments on these questions (my translation):

  • If the label just says Chocolate Milk, will consumers understand that the milk is artificially sweetened?
  • Are descriptions like “reduced calorie” really unattractive to children?
  • Will it be hard for consumers to figure out whether a product contains sugar or an artificial sweetener?
How about a couple of other questions?
  • Why would anyone put artificial sweeteners into milk in the first place?
  • Is giving artificial sweeteners to children a good idea?
  • Why does milk for kids have to be sweetened?  Can’t kids drink plain, unflavored milk?
Just asking.  Do weigh in on this one.  It’s not hard to do.

Go to www.regulations.gov. Search for docket number FDA-2009-P-0147. 

Aug 8 2012

Question for today: how should we support mid-size dairy farms?

My “thought for a summer weekend” post elicited interesting comments.

Let’s start with the one from FarmerJane, a mid-size dairy farmer who is a frequent contributor.

She asks: How can farmers and consumers find ways to dialog and share information?

She says (and I’m doing some heavy editing here, with her permission):

Thoughts about ag are dominated by a few powerful big media writers.  When we farmers try to speak, we find ourselves excoriated….Rural America does not seem to have any sort of spokesperson who has access to national media.  The issues are framed by a handful of urban food-elite writing whose thoughts then trickle down to how rural farmers are perceived…I think the inclusion of farmers in food dialog would bring a multidisciplinary approach to the issue of food:  environment, ag economics, animal welfare, food systems to name a few. But what are the ways this could happen?

I feel that we, the average farmer of the middle are being marginalized.

I asked: What would you like to see done for farmers like you, neither CAFO, nor small.  She had several suggestions, which I summarize here mostly in my words (hers are in quotes):

Fix milk marketing orders and “end-product” pricing.  Right now, prices are paid to farmers according to the use of the milk.  From high prices to low: Class I (fluid milk), Class II (yogurt), Class III (cheese), Class IV(butter/powder).  If the push is to turn milk into yogurt, cheese, or butter, dairy farmers don’t get paid as much.

Encourage local production.  “The eastern half of the country is actually in “milk deficit” of about 3.2 billion pounds per month, while the western half is pushing the milk out like there is no tomorrow…Farmers in the western part of the country are calling for supply management to rein in some of this rapid growth, while we here in the east are generally opposed to it.”

Make pricing more transparent.  “Farmers don’t know instantly what dairy prices are (hopefully this will change as farmers have pushed hard on this issue to come out of the Stone Age).”

Cap supports on CAFOs.  “Some of the major NY CAFO’s got millions in terms of ‘corn subsidies’ in addition to dairy payments.”

Support mid-size dairy herds: The trigger point at which a farm becomes a CAFO in NY is only 200 cows.  Extension estimates that meeting CAFO requirements at this limit keeps farmers at 199 cows because the compliance cost is something like $162,000.

Reregionalize dairy processing: “meaning more processors in NY who can compete for the farmers’ milk….The more competition for milk the better, especially from a number of smaller processors that farmers and smaller coops can negotiate with.”

Deal with anti-competitive forces. Large dairies are engaged in market collusion and this hurts smaller dairies.  “ Massive retail level buyer consolidation is another issue… Walmart has the power to drive down farmer prices in all dairy categories… The more we can do to break the Walmart grip, the better off we all will be.”

Look at the trends.  “ I know that NY has gone from 30,000,000 acres of farmland when we were kids, to just 7,000,000 today.  There are some 3,000,000 acres of abandoned grazing farmlands Upstate, with empty barns as far as one can see in some areas.  And, I see an increasing number of huge CAFO’s with all-immigrant work forces who send every penny home, cows that never go outdoors, and emptied out Main Streets up here….I wonder how it could possibly make sense not to encourage farms of all kinds, especially making use of the grasslands that are close to NYC.”

Her overall question: “How does one move these questions into the public realm for intelligent discussion?

Senator Gillibrand has made it her business to understand dairy policies as they affect New York State.  For anyone who has ever tried to understand milk marketing orders, that’s an achievement (see below).

Responses?  Any good ideas for FarmerJane?

Mar 10 2012

Dairy farmers: are you part of the 1%?

Adam Davidson in the New York Times Sunday Magazine asks how come dairy farmers have such a hard time making a living?

His explanation: Dairy farmers thought they were in the business of raising cows.  Wrong.  They are in the business of betting on feed prices.

…in the last decade, dairy products and cow feed became globally traded commodities. Consequently, modern farmers have effectively been forced to become fast-paced financial derivatives traders.This has prompted a significant and drastic change.

For most of the 20th century, dairy farming was a pretty stable business…at base, dairy-farming economics are simple: when the cost of corn and soybeans (which feed the cows) are low and milk prices are high, dairy farmers can make a comfortable living.

And for decades, the U.S. government enforced stable prices for feed and for milk, which meant steady, predictable income, shaken only by disease or bad weather.

…[But] by the early aughts, to accommodate global trade rules and diminishing political support for agricultural subsidies, the government allowed milk prices to follow market demand.

…Animal feed, especially corn and soybeans, became globally traded commodities with all the impossible-to-predict price swings of oil or copper.

Davidson points to the 1% of dairy farmers who have figured all this out and are big enough to hire derivative traders to manage their feed stocks.

Farm bill politics, anyone?

Dairy farmer readers: comments please.

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