Archive for Dairy Industry

Reviewing U.S. Dairy Supply Management Efforts

Following five consecutive years of low milk prices and record U.S. milk production, some U.S. dairy farmers are again interested in coordinated intervention in dairy markets — specifically, a milk supply management program designed to increase the price farmers receive for their milk.

Farm Bureau grassroots leaders debated this issue in 2019 and ultimately decided to oppose a mandatory quota system with the willingness to consider a flexible supply management system that is administered through the marketplace and not through the federal government, i.e., milk processors and cooperatives alongside individual dairy farmers.

Milk supply management programs, which provide incentives or penalties to limit perceived over-production, have been used previously in the U.S. with mixed results. These programs included a USDA-administered milk diversion program, government-administered and industry-funded herd buyout programs, and base-excess plans, i.e., two-tiered pricing. In addition, a milk supply management program was heavily debated during the 2014 farm bill. Today’s Market Intel article reviews these previous attempts to manage the U.S. milk supply.

USDA-Administered Milk Diversion Program

According to the Government Accountability Office, USDA’s purchases of surplus dairy products through the dairy price support program increased from $247 million in 1979 to $2.7 billion in 1983. The milk diversion program was a temporary program enacted by Congress in 1983 to address excessive dairy product purchases and the costs associated with maintaining the dairy price support program.

Under the milk diversion program, which was funded through a farmer assessment of 50 cents per hundredweight, farmers were paid to reduce their milk marketings by 5 percent to as much as 30 percent. For every hundredweight of milk production not produced relative to their established base level of production, dairy farmers were paid $10.

The milk diversion program was in effect from January 1984 to March 1985. Approximately 38,000 commercial dairy operations in the U.S. participated in the milk diversion program. Total milk diversion payments were $955 million, and GAO estimated that milk production was reduced by 3.74 billion to 4.11 billion pounds in 1984. Figure 1 highlights U.S. milk production and the supply response to the 1984 Milk Diversion Program.

While the milk diversion program had the desired effect of reducing milk production, GAO survey results revealed that the program’s likely participants had already reduced milk production below their base levels. Nonparticipants were those dairy farmers who were actively expanding sales. These adverse selection and moral hazard issues plagued the program, and ultimately, the milk diversion program had no measurable impact on the national average milk price or the trend in milk production.

Following the milk diversion program, U.S. milk production quickly recovered in 1985, increasing by 7 billion pounds to a record 143 billion pounds. The lack of success in the milk diversion program and the quick recovery in the U.S. milk supply ultimately led to more government intervention efforts.

Milk Termination and Herd Buyout Programs

Milk termination and herd buyout programs were designed to reduce the milk supply by removing dairy cows from production. The first effort occurred in the 1985 farm bill with the Milk Production Termination Program. According to GAO, the goal of the program was to reduce milk production by 12 billion pounds, or nearly 9 percent from the base period of 1985.

The termination program was effective for an 18-month period beginning in April 1986 and provided payment to dairy farmers who entered into a contract with USDA to terminate milk production, e.g., cull or export dairy cows. Assessments on dairy farmers helped offset the costs of administering and funding the termination program. The program was limited in that no more than 7 percent of the dairy herd could be removed each calendar year.

Participating dairy farmers were prohibited from entering dairying for at least five years. As shown in Figure 1, while the growth in milk production remained flat through 1987, national milk production did not decline as non-participating operations expanded production during the 18 months of the termination program.

Similar to the milk diversion program, the milk termination program was also subject to a free-rider and adverse selection problem whereby any production declines attributable to a decline in the milking herd from the termination program was offset by non-participating operations expanding output. The inability to measurably reduce milk production was counter to the primary goal of the program to reduce the U.S. milk supply by 9 percent.

Following the USDA-administered termination program, dairy farmer cooperatives collectively formed an industry-funded and voluntary herd buyout program. This herd buyout program paid dairy farmers to reduce milk output or take whole dairy herds out of production.

Over a 12-month period, the goal of the herd buyout program was to collectively reduce the nation’s milk supply by slightly more than 1 billion pounds. During 2004, the herd buyout program contributed to a decrease in the dairy herd size by 150,000 head. In 2009, the program contributed to a 250,000-head reduction. Over the 7-year life of the program, the herd buyout program is estimated to have removed 510,000 milking cows from production. Figure 2 details the year-over-year change in the number of dairy cattle.

Dairy Market Stabilization Program

The next effort to control the milk supply occurred during the 2014 farm bill debate. The Senate version of the 2014 farm bill coupled the Margin Protection Program, a commodity support program for dairy producers, with the Dairy Market Stabilization Program. DMSP was a supply management program designed to enhance milk prices by levying a financial penalty on dairy farmers who did not reduce their milk supply when MPP margins fell below a specified threshold that triggered program payments. Although participation in the MPP was voluntary, under the Senate proposal, those enrolled in the MPP would have been required to participate in the DMSP.

DMSP would have been triggered when the MPP margin fell below $6.00 per cwt for two consecutive months, or below $4.00 per cwt for a single month. Farmers delivering a milk volume above the DMSP-assigned base would see their milk check reduced by as much as 8 percent. Farmers producing below their production base would not have been subject to a financial penalty.

In reviewing historical MPP margins, the DMSP program would have been triggered during 2003, 2009, 2012 and 2013. Had DMSP been included in the final 2014 farm bill, it would have been triggered only once in 2016, when MPP margins dipped to below $6.00 per hundredweight for two consecutive months, Figure 3. Thus, despite the financial struggles in the dairy industry in the last five years, in only one two-month period would the DMSP have been activated in an attempt to stabilize milk prices and margins.

Base-Excess Plans

The milk diversion and herd buyout programs were USDA-administered or quasi-voluntary efforts. The programs in place today are cooperative-led base-excess programs. (At one point in time, from 1965 to 1981, base-excess style programs were authorized and federally-administered under the Agricultural Marketing Agreement Act.) These two- or multi-tiered milk pricing programs are designed to provide dairy farmers with an economic incentive to adjust milk production to match seasonal demand for milk and dairy products.

Under a base-excess plan, producers establish a base level, or quota level, of milk production needed to service the market. For any excess milk deliveries beyond the base level, i.e., over-produced milk, dairy farmers receive a discounted or penalized price that is lower than the prevailing market price.

These base-excess plans match a milk processor’s milk supply with the processing and marketing capacity and provide an opportunity for dairy plants and cooperatives to effectively market only the volume of milk and dairy products demanded by their customers.

Figure 4 highlights the economic impact of a base-excess program on the weighted average milk price ultimately received by a dairy farmer producing within the base (quota) level and more than the base level (assuming a base milk price of $20 per hundredweight and an over-base value of $15 per hundredweight).

As identified in Figure 4, under a base-excess plan there are economic penalties associated with producing milk in excess of the base allotment. However, under this simple example of a base-excess plan, if the over-base price of milk, i.e., the marginal revenue, exceeds the marginal cost of production, there will be no economic incentive to reduce milk production. As a result, the costs of balancing the milk supply in a base-excess program will be borne by the producers with the highest costs.

Summary

Historically, periods of low milk prices were temporary. Herd culling and the loss of farm operations resulted in milk supply adjustments that, when combined with the demand for dairy products, helped to return milk prices to higher levels. However, during this most recent downturn in the dairy economy and despite the U.S. losing 7 percent of licensed dairy operations in 2018, and 34 percent over the last decade, Figure 5, milk production continues to be record high, and only recently have cow numbers started to decline from prior-year levels.

The lack of a production response has contributed to lower milk prices and spiked interest in programs designed to reduce milk output during times of low milk prices or profitability. Today’s article provided an overview of supply management-type programs that have been used or proposed in the past.

The performance of these programs has had mixed results. The milk diversion program, the milk termination program and the herd-buyout program all contributed to fewer milking cows, but without industry-wide participation suffered from free-rider, adverse selection and moral hazard problems. Over-base programs are likely successful at balancing regional supply and demand constraints, but without region-wide or national participation, over-base programs are unlikely to have the desired effect of lifting average milk prices in the current end-product pricing scheme.

Farm Bureau members have debated milk supply management many times throughout the years. In 2019, our members voted to oppose a mandatory supply management program but were supportive of considering a flexible supply management program. Such a program should be administered by the marketplace and would include coordination among milk processors, cooperatives and dairy farmers to ultimately balance supply and demand. Importantly, such a program can operate within the confines of a free market economy without government intervention.

While this type of coordination could prove beneficial in the short-run, some reflection should be given on the long-run, such as considering reforms that would drive further investment and innovation in the U.S. dairy sector as well as expand our market access around the world. As a first step Farm Bureau dairy farmer leaders will convene in 2019 and consider these very issues as they relate to milk pricing reform and, ultimately, the profitability and viability of U.S. dairy farmers.

 

Source: AFBF

Dairy firms eye growing Chinese appetite for cheese

Sales expected to boom as Chinese eating habits evolve due to increasing popularity of Western food

Cheese is set to become a new growth point of the dairy sector in China, prompted by the increasing popularity of Western food and some innovative combinations such as cheese hotpot and milk tea with cheese on top.

In major first-tier cities, the dairy market is undergoing some structural changes as sales of high-end pure milk continue to expand, and sales of yogurt and cheese surge, industry experts said.

Currently, annual per capita consumption of cheese in China is only 0.1 kilogram, far below 2.4 kg in Japan, 2.8 kg in South Korea, 15 kg in the United States and 18.6 kg in Europe where France, Germany and the Netherlands take the top three spots, according to the China Dairy Industry Association.

“Dairy consumption in smaller cities and rural areas in China is far from the level it could be. Consumption of milk and other dairy products like cheese and butter will keep growing and help to boost total dairy consumption,” said Zhang Liebing, an associate professor at China Agricultural University.

The annual per capita consumption of dairy products in China has reached 36 kg now, much higher than the 6 kg recorded two decades ago, but the volume is still less than half that of Asia and less than a third of the world average, the dairy association said. Meanwhile, to produce 1 kg of cheese, it requires about 10 kg of milk. The cost of milk in China is about double that in Europe and the US, and the cost of producing cheese is even higher, making the cheese products available in supermarkets in China relatively expensive.

“The number of Chinese people who like eating cheese will rise, due to the growth in popularity of Western food like pizza, spaghetti, cheesecake and sandwiches in China. The volume of imported cheese has been growing significantly, showing an increasing demand and appetite from consumers,” said Song Kungang, honorary chairman of the dairy association.

Last year, China imported 108,300 metric tons of cheese, which is nearly three times higher than that in 2011. China imported 6,200 tons of cheese from New Zealand in 2018, a 25.9 percent increase year-on-year, according to the General Administration of Customs.

Meanwhile, domestic dairy companies produced about 40,000 tons of cheese last year, figures from the dairy association show.

Currently, China only allows imports of large packages of cheese or smaller cheese already cut by foreign manufacturers, but does not allow domestic dealers to cut imported large packages of cheese for sale for food safety reasons.

“Domestic producers should pay more attention to the development of cheese products. Cheese wrapped in small packages and snack foods like cheese sticks are favored by consumers and seen as a future trend,” Song said.

“In fact, many Chinese foodstuff firms are starting to use cheese as an ingredient, such as vegetable buns with cheese, seafood cheese fried rice, and deep-fried purple potato balls in cheese. Besides, China has rich resources for special dairy products, and domestic producers can develop cheese based on goat, buffalo and yak milk,” he said.

“We would also like to call for a faster revision of the comprehensive cheese production standards in China and the issuance of licensing for cutting imported cheese. This would help to enable imports of more high-quality cheese, and build platforms for the innovation of more cheese products by domestic companies,” he said.

In addition, cheese has a high nutritional value and the protein from cheese can be fully digested, meaning that lactose-intolerant Chinese consumers don’t need to worry about such problems, Song added.

Major domestic dairy companies have witnessed a faster rate of growth in sales of cheese products than the overall dairy market and that of liquid milk.

Last year, Inner Mongolia-based Yili Group, China’s largest dairy producer, achieved sales revenue of 79.55 billion yuan ($11.85 billion), rising 16.89 percent year-on-year.

Its liquid milk sales reached 65.68 billion yuan, up 17.78 percent annually. Sales of dairy products such as cheese, butter and milk powder hit 8.05 billion yuan, an increase of 25.14 percent annually, according to Yili’s latest earnings report.

By 2023, sales of cheese in China, including processed and unprocessed cheese, are expected to reach $1.44 billion, which will be 44.7 percent higher than this year’s expected sales level, market researcher Euromonitor International said.

In terms of retail value, the US is the biggest cheese market, followed by France and Germany. Last year, sales of cheese in the US reached $23.41 billion, much higher than the $10.37 billion recorded in France, Euromonitor International found.

Song Liang, a senior dairy industry analyst, said in the next five years, young people born after 2000 will become the backbone consumer group of cheese, and he suggests that domestic dairy firms develop more cheese products, snack foods and fast food cheese products catering to younger appetites.

According to the Chinese Milk Quotient report released last year, currently the dairy consumption of nearly 80 percent of Chinese consumers does not meet national dietary recommendations – Chinese adults are advised to consume 300 grams of milk or the same quantity of dairy products every day, according to the Chinese Dietary Guidelines, but most people are not aware of the guidelines and do not consume enough. Besides, more than 70 percent of Chinese consumers only drink milk and yogurt, proteins from which are fairly simple in structure.

On the other hand, industry experts said China lacks advanced technologies to develop and produce high-quality cheese as well as more varieties.

“The production of cheese is the most difficult and complicated dairy process, and it is hard to make products of consistent quality. Major domestic dairy producers need to increase their investments in R&D and cooperate with more scientific research institutes in the development of cheese,” said Liu Zhenmin, director of the Bright Dairy Research Institute.

Source: China Daily

Dairy Farm Numbers Decrease In Michigan but Cattle Numbers Increase

2018 survey data by NASS shows that Michigan’s dairy farmers have expanded their herds since the last census while farm numbers are down. Milk cows actually increased 17 percent to 442,000 although we did see a good decrease in the number of milk cow operations, 251 fewer operations than we had in 2012. Results from the 2017 Census show milk sales were up for the state making it the 7th largest dairy state in the nation. Survey data by NASS does show the herd size declined 6,000 over the past year and the number of dairy farms is continuing to decrease.

 

DCHA 2019 annual conference in review

2019 Annual conference in review

Dairy Calf and Heifer Association just wrapped up a successful annual conference. Many thanks to the 2019 DCHA Annual Conference Planning Committee: Co-chairs Sam Gardner and Tamilee Nennich, and committee members Brent Caffee, Emily De Benetti, Jane Griswold, Ann Hoskins, Bob James, Megan Kissel and T.J. McClure. More than 400 dairy calf and heifer growers, dairy farmers and allied industry professionals – representing 33 states and eight countries – attended the conference.

The conference kicked off with tours of ABS Global, which featured a state-of-the-art calf facility where guests learned about top-notch biosecurity and animal health practices. Also, guests visited the company’s IntelliGen facility, which processes sexed bovine genetics. Tour day wrapped up with a stop at Crave Brother Farm LLC, Waterloo, Wis., which built three all-in, all-out calf nursery barns last year.

The conference offered world-renowned speakers who shared ideas and technologies that are implementable on many dairy operations. Despite the dairy industry’s current economic challenges, attendees left with renewed energy and enthusiasm for raising calves and heifers. World-renowned presenters discussed colostrum management, fly control, disease outbreak prevention, treatment and control, sustainable environmental practices, labor, cost and risk management, animal and human well-being, custom heifer-raising contracts, beef quality assurance, calf scours, dry period heat stress, gut health, alternative milk sources and animal welfare.

On Thursday afternoon, DCHA offered two hands-on training seminars and a tour of STgenetics’ testing site in Middleton, Wis. Don Sockett and Theresa Ollivett from the University of Wisconsin School of Veterinary Medicine demonstrated deep nasopharyngeal swabs and lung ultrasounds, respectively, and seminar registrants learned how to perform these tests.

Many thanks to our 60 trade show exhibitors. To help ignite dialogue between exhibitors and attendees, we encouraged attendees to gather information from at least 15 exhibitors. Those completing the assignment were eligible to win a free conference registration for the 2020 DCHA Annual Conference or $250 VISA gift card. The winner is Jillian Green, Paw Paw, Michigan.

We look forward to seeing you at the 2020 DCHA Annual Conference, April 7-9, at the Alliant Energy Center, Madison, Wis.

Visit our website

 

Fourth-generation dairy farmer quits the milking business

This April 11, 2019 photo shows dairy Farmer Dwight Raber in Louisville, Ohio. Raber, of Raber Dairy Farms in northeast Ohio’s Stark County says he can no longer make a living by milking cows and has lost money the last two years. State statistics show the number of dairy farms in Ohio dropped to fewer than 2,000. ( Julie Vennitti/The Canton Repository via AP)

A dairy farm operated for four generations by one Ohio family is set to run dry.

Dwight Raber, of Raber Dairy Farms in northeast Ohio’s Stark County, said he’s losing money and can no longer make a living doing the work his father, grandfather and great-grandfather did before him. His farm, which has grown to 500 acres (200 hectares) over the years, was founded by his great-grandfather who came to the U.S. from Switzerland in 1891.

Raber is scheduled Wednesday to auction off his dairy cows and much of the dairy equipment he has accumulated, The Repository in Canton reported .

Raber said he needs to make at least $16 per 11.6 gallons (44 liters) of milk to break even, but he’s been stuck at $13.89 for the past two years.

“He has poured his heart into this farm,” said Raber’s wife, Julia Raber, an English teacher at East Canton High School. “He just goes and goes, 24/7. But it’s time to slow down; it really is. His mother also told him, ‘Please don’t ruin your health.’”

The 58-year-old farmer was hospitalized with blood clots last year.

The number of dairy farms in Ohio dropped by more than 600 between January 2017 and January 2019, according to statistics from the Ohio Department of Agriculture. Another 51 dairy farms have been lost in 2019, bringing the total to slightly fewer than 2,000.

“The trend is alarming,” said Dianne Shoemaker, an Ohio State University extension field specialist in dairy product economics.

Shoemaker said the business has changed dramatically in the past 25 years, with smaller profit margins often driving farms to expand to survive.

Cheaper milk flowing into the state from Michigan mega-farms has contributed to the pressure Ohio dairy farmers have felt, Shoemaker said. While 2014 year was a boom year for Ohio dairy farmers, it’s been bad for four years in a row, she said.

Several years ago, Raber added beef cattle to his farm in Nimishillen Township to supplement the dairy portion. He plans to grow that herd and sell crops that in the past were used to feed his dairy cows.

Raber acknowledged he’s “a little scared” about making the change from dairy farming, but said beef cattle require less maintenance. That extra time will allow him to tidy up the property.

“This was a showplace,” he said. “I want to return it to that.”

Source: news5cleveland.com

Farrer to cease operations of dairy as drought continues to take a toll on region

A dairy that has been used to teach future generations for over 80 years is the latest victim of the nation’s worst drought on record.

Farrer Memorial Agricultural High School made the tough decision to temporarily cease operations of the school dairy as “it was no longer economically viable to continue operations”. 

Principal Clint Gallagher cited increasing fodder costs and scarcity, low milk prices and the very real chance of having a zero per cent river water allocation for irrigation next financial year as the main contributing factors, as well as a continued bleak forecast.

Fortunately the school has been well supported by both the local and educational community, which will enable the school “to maintain the heart of its dairy herd until conditions improve” according to principal Clint Gallagher.

“This will not mean the end of our dairy operations,” Mr Gallagher said.

“Fortunately, two producers will take 30 of our dairy cows, which will enable us to reinstate operations promptly as conditions improve.”

Hurlstone Agricultural High School are taking 20 cows, while Denman producer Brian Parker will take a further 10 cows. Tocal Agricultural College also offered assistance.

The dairy will officially cease operations at the end of May.

On Thursday Mr Gallagher informed students, parents and Old Boys of the decision.

“We look forward to better climatic times in the future when we can return to offering our students this unique educational opportunity,” he said.

“The support from Hurlstone Agricultural High School and Denman producer, Brian Parker, along with an offer of assistance from Tocal Agricultural College, have been enormously heartening.”

Since the dairy first opened its doors in 1939 year nine Farrer boys have enjoyed the educational benefits and hands on experience of operating a fully functional dairy, and “enjoyed the camaraderie of their daily tasks”. 

The school also forged a sound reputation for the calibre of its dairy stock over the generations.

“It gives us hope for the future,” Mr Gallagher said.

Source: The Land

Ohio has lost a quarter of its dairy farms

Before Lela Raber’s death in 2008, her son, Dwight, promised her he’d keep the family’s fourth-generation dairy farm outside of Alliance in northeast Ohio running for at least 10 more years.

He kept his word, but now times have changed.

“I’ve got to make $16 (per 100 pounds, or 11.6 gallons of milk) just to break even,” Dwight Raber said, as he turned the pages on a printed report that details daily production of the farm’s 235 cows. “Right now, I’m at $13.89, and it’s been that way for two years.”

In Raber’s younger days, a cow that produced 100 pounds of milk a day was a herd superstar. These days, that’s almost the average. Large-scale dairy farms and low milk prices have forced Raber to find new ways to keep the bills paid and the farm operating.

Raber added beef cattle to the farm to supplement the dairy portion. But even so, he has come to the conclusion that he just can’t make a living at it anymore.

So, at 10 a.m. Wednesday, Raber will sell his herd of dairy cows and much of the equipment he has accumulated through the years.

The same story is being played out at an increasing pace across Ohio, which lost nearly a quarter of its dairy farms in just over two years. In January 2017, there were 2,647 dairy farms in Ohio, compared with 2,045 by January of this year, according to license statistics from the Ohio Department of Agriculture. The state lost another 51 dairy farms already this year, slicing the statewide number to 1,994.

In addition to the Holstein cows, the Raber sale includes a Jaguar chopper, a six-row folding rotary corn head, a silage table, skid loader, trucks, a tractor, tandem twin manure spreader, disc, hay baler, cultivator, a computerized calf-feeder, milking units and a 3,000-gallon bulk tank, which held milk until it was trucked away daily.

“He has poured his heart into this farm,” said Raber’s wife, Julia, an English teacher at East Canton High School. “He just goes and goes, 24/7. But it’s time to slow down; it really is. His mother also told him, ‘Please don’t ruin your health.’”

A glut of global milk

The trend in dairy farming is alarming, said Dianne Shoemaker, an Ohio State University Extension field specialist in dairy product economics. “It’s … not the way I’d like to see the dairy industry going.”

 

Source: The Columbus Dispatch

CWT Assists Member with Sales of 1.3 Million Pounds of Cream Cheese

A Cooperatives Working Together (CWT) member cooperative captured 10 contracts to sell 1.254 million pounds (569 metric tons) of cream cheese with CWT assistance. Cream cheese was added to the list of dairy products eligible for export assistance April 1.

In addition, other members accepted 6 offers of export assistance from CWT that helped them capture sales contracts for 335,103 pounds (152 metric tons) of Cheddar and Gouda cheese, and 209,439 pounds (95 metric tons) of whole milk powder. These products, including the cream cheese, are going to customers in Asia, the Middle East and South America. The product will be delivered during the period from April through September 2019.

CWT-assisted member cooperative 2019 export sales now total 26.004 million pounds of American-type cheeses, 3.466 million pounds of butter (82% milkfat), 1.254 million pounds of cream cheese and 22.606 million pounds of whole milk powder to 22 countries in six regions. These sales are equal to 483 million pounds of milk on a milkfat basis.

Assisting CWT members through the Export Assistance program positively affects all U.S. dairy farmers and all dairy cooperatives by strengthening and maintaining the value of dairy products that directly impact their milk price. It does this by helping member cooperatives gain and maintain world market share for U.S dairy products. As a result, the program has significantly expanded the total demand for U.S. dairy products and the demand for U.S. farm milk that produces those products.

The amounts of dairy products and related milk volumes reflect current contracts for delivery, not completed export volumes. CWT pays export assistance to the bidders only when export and delivery of the product is verified by required documentation.

The Cooperatives Working Together (CWT) Export Assistance program is funded by voluntary contributions from dairy cooperatives and individual dairy farmers. The money raised by their investment is being used to strengthen and stabilize the dairy farmers’ milk prices and margins. For more information about CWT, visit www.cwt.coop.

 

Wisconsin lost 212 dairy farms in 1st 90 days of 2019

I wish I had good news to share about milk prices, trade wars, tariffs, dairy surpluses and the future, but I don’t. President Donald Trump says a “very monumental agreement” may be announced in early May about the trade war with China. I hope that’s true and that he’s not just leading us on. In February and March, he said he was close to resolving the trade war.

In the meantime, I checked with Greg Bussler at the National Agricultural Statistics Service office in Madison, Wis., to find out how many dairy farms we still have in Wisconsin. I learned last week about three more dairy farm families who are selling their herds in April, and I figured the numbers would not be good. Sadly, I was right.

Dairy farm numbers plummet

According to Bussler, 212 Wisconsin dairy farms went out of business between Jan. 1 and April 1. That means on average, more than two dairy farms sold out each day of the first 90 days of 2019. That’s on top of the 691 dairy farms we lost during 2018. In just 15 months, the Dairy State lost 903 dairy farms, or slightly fewer than two farms per day. That’s more than 10% of Wisconsin’s dairy farms going out of business in just 15 months. The numbers don’t lie — that is painful for the farm families who sold their dairy herds, the communities they live in and the businesses they supported.

That is the most dairy farms Wisconsin has lost in one year since 2011, when 645 farms left the dairy business. In 2009, 588 dairy farms sold out.

According to NASS, 10 years ago Wisconsin was home to 13,294 dairy farms. In 1999, we had 21,624 dairy farms. Forty years ago, there were 45,783 dairy farms in America’s Dairyland.

I asked Bussler how many dairy cows are in Wisconsin. He said as of April 1, there were 1,270,000 cows, or about the same number as on Jan. 1, 2018. That means while we have 903 fewer dairy farms than we did 15 months ago, we didn’t lose any cows — some of them just changed their address.

In fact, even with less than 20% of the dairy farms Wisconsin had in 1979, Wisconsin set a record in 2018 for the most pounds of milk produced in the Dairy State in one year, thanks to better cows, better farmers, better feed, better facilities and better genetics.

I hope all of you who are still dairy farming will be able to continue to do so a year from now. During that time, President Trump needs to end the trade war with China, and he needs to remove the tariffs on steel and aluminum from Mexico and Canada so they will sign the U.S.-Canada-Mexico Agreement replacing the North American Free Trade Agreement.

I also hope President Trump stops threatening to close the Southern border. U.S. dairy farmers’ top three export customers are Mexico, China and Canada. In 2018, mostly before the trade war started in July, the U.S. exported 16% of its dairy products. It will no doubt be a challenge to rebuild our trade with foreign countries to levels they were before the trade war began, but that will be necessary to improve milk prices and stop the demise of so many Wisconsin dairy farms.

Source: farmprogress.com

Fourth-generation Ohio dairy farm reaches end of the milking line

Before Lela Raber’s death in 2008, her son, Dwight, promised her he’d keep the family’s fourth-generation dairy farm running for at least 10 more years.

He kept his word.

But times have changed.

“I’ve got to make $16 (per 100 pounds, or 11.6 gallons of milk) just to break even,” Dwight Raber said in a folksy drawl, as he turned the pages on a printed report that details daily production of the farm’s 235 cows. “Right now, I’m at $13.89 and it’s been that way for two years.”

Raber’s laid-back tone belies what he’s felt inside the past few years.

The stress was catching up to him and he was hospitalized with blood clots last summer. He’s accustomed to long hours of waking up to work at 4:15 a.m. and quitting at sunset, but that lifestyle has become ever more grueling now that he’s 58 years old.

“He has poured his heart into this farm,” said Raber’s wife, Julia, an English teacher at East Canton High School. “He just goes and goes, 24/7. But it’s time to slow down; it really is. His mother also told him, ‘Please don’t ruin your health.’”

***

The dairy business has changed.

It’s tougher than ever.

Several years ago, Raber added beef cattle to the farm to supplement the dairy portion. After agonizing for more than a year, Raber has come to the conclusion that it’s time to quit milking cows — he just can’t make a living at it anymore.

He could have held out longer, though he decided it wasn’t worth the risk of a larger financial hole.

So, at 10 a.m. Wednesday, Raber will sell his herd of dairy cows and much of the equipment he’s accumulated through the years. Kiko Auctions will handle the auction.

The same story is playing out at an ever-increasing pace across the state. In January 2017, there were 2,647 dairy farms in Ohio, compared to 2,045 by January of this year, according to license statistics from the Ohio Department of Agriculture.

Besides the Holstein cows, the Raber sale includes a Jaguar chopper, a six-row folding rotary corn head, a silage table, skid loader, trucks, a tractor, tandem twin manure spreader, disc, hay baler, cultivator, a computerized calf-feeder, milking units and a 3,000-gallon bulk tank, which held milk until it was trucked away daily.

***

“I’m a little scared,” Raber admitted.

All he’s known is being a dairy farmer. He and his brother, Bruce, who died in 2007, grew up working the farm. So did his father, Russell. Same for his grandfather, Ernest. And his great-grandfather, Albert, who founded the farm after he came to the U.S. from Schangnau, Switzerland, in 1891, and changed the family’s surname from ‘Reber’ to ‘Raber’ because he grew tired of hearing it mispronounced.

Over the years, the farm grew to its present 500 acres, some on each side of State Street NE.

Dwight and Julia Raber live in a house on the north side of the street. One of their sons, Alan, lives in the old farmhouse, on the south side, near the barns and milking parlor. And Bruce Raber’s widow lives in another house on the property.

Dwight and Julia Raber’s two natural-born sons, Alan and Scott, helped for years on the farm. But ultimately, they chose other careers: Alan is a Stark County Sheriff’s deputy and Scott manages Titan Machinery stores in Nebraska.

“We never tried to push them into farming,” Dwight Raber said. “We let them find their way … I remember when I was a kid, I played sports in high school. And after the games, my friends would say they were going home to sleep or do whatever. But I’d just go home and work for four hours. It’s just what we did.”

Dwight and Julia Raber have three more sons — all adopted as young boys from Russian orphanages. They are Aaron, 20, Isaac, 18, and 15-year-old Austin.

***

A faded “Raber Dairy Farms” sign along State Street NE will soon be replaced with one that drops ‘Dairy’ from the title. Dwight Raber plans to grow his beef herd and to plant and sell crops — in the past, all the crops had to be used for feed.

“It’s going to be a lifestyle change for the better for him,” said Debbie Hajba, one of Dwight’s two sisters, who grew up on the farm before marrying and moving out.

Dairy cows get milked twice a day. They’re also particular about their feed. Their mix has be consistent and exact, in order for them to produce milk at a high level.

Beef cattle are less high-maintenance. Raber said he’ll take advantage of his extra time to tidy up the property and pay more attention to aesthetics, as his mom and grandmother did.

“This was a showplace; I want to return it to that,” he said.

Raber smiled and shook his head, as he walked by a series of cow hoof indentations in the wet grass near the farmhouse — evidence of a recent “jail break” by some in the herd.

Pardon the pun, but his mom would have had a cow if her manicured lawn wasn’t repaired within five minutes of the occurrence of such an unacceptable event.

***

Ohio has lost another 51 dairy farms already this year, slicing the statewide number to 1,994.

“The trend is alarming,” said Dianne Shoemaker, an Ohio State University Extension Field Specialist in dairy product economics. “It’s … not the way I’d like to see the dairy industry going.”

She said the business has changed dramatically in the past 25 years. Profit margins are smaller and smaller, which often requires farms to get even larger to survive. Shoemaker said about 17 percent of the milk produced in the U.S. is exported.

“There’s a lot of milk out there,” she said. “Back in grandfather’s day, the milk prices were local. Now they are global … or they are at least influenced on a global level.”

Dairy farmers enjoyed a boom year in 2014, but it’s been bad four years in a row, Shoemaker said. She added the plight of Ohio farmers is partly due to a glut of milk coming into the state from mega-farms in Michigan — often at less than market rate.

***

Dwight Raber said he’s felt the pressure. In his younger days, a cow that produced 100 pounds of milk a day was a herd superstar. These days, that’s almost the average.

“We’ve been so blessed for so long, and with our wonderful sons … but it’s time,” Julia Raber said of the upcoming auction. “There’s such a beauty about the land. It’s spiritual.”

After Dwight’s mom, Lela, died a decade ago, her ashes were scattered in a small garden she tended behind the farmhouse. A plaque marks the location. Julia Raber is sure Lela, the matriarch who’d kept the farm going for so long, would understand and approve of the auction.

After all, the Rabers still have the farm, even if it will change.

Source: Ohio

30% Decline in Herds Milking Over 500 Cows in the US in the Past 5 Years

According to the latest US census, more than 20 per cent of the nation’s dairy farms has closed between 2012 and 2017.  USDA survey data in 2018 says that number dropped an additional five per cent last year with more than 1,800 farms closing.

Herds milking more than 500 cows declined by more than 30 per cent and made up nearly nine per cent of dairy farms in 2017.  The number of farms selling milk with less than 100 milk cows declined by 28 per cent and made up 64 per cent of the dairy farm total. Farms ranging from 100 to less than 500 milk cows declined by four per cent and made up 27 per cent of the total. Less than one per cent of farms milked more than 5,000 cows which were a new category in the census. The largest percentage of dairy farms, milking less than 100 cows, produced slightly more than 10 per cent of the milk supply while those with 500 or more produced nearly 70 per cent. 

 

Saputo enters U.K. dairy market by closing $1.7-billion deal for Dairy Crest

Saputo Inc. has expanded its global presence as it entered the British dairy market with the closing of a $1.7-billion deal to acquire Dairy Crest Group plc.

The transaction announced Feb. 22 was payable in cash from a new bank loan.

Dairy Crest manufactures and sells cheese, butters, spreads and oils under British brands such as Cathedral City, Clover, Country Life and Frylight.

The company has about 1,100 employees in seven locations across the United Kingdom.

For the 12 months ended March 31, it had about $796 million in revenue and $260 million in after-tax profits, including $172 million in exceptional items.

Saputo says it has invested in a “well-established and successful industry player with a solid asset base and an experienced management team.”

Source: business.financialpost.com

Dairy program a ‘game changer’ for US Milk Producers

Milk producers are caught in a difficult market right now, and individual dairy farmer numbers are dropping.

In the federal milk marketing order that covers part of Indiana, Michigan, Ohio and Pennsylvania, the number of dairy farms in January was 4,311, down 411 farms in one year.

But Dr. Marin Bozic, a dairy economist with the University of Minnesota, says there’s something all milk producers can, and should, do to help their bottom lines: sign up for the new dairy revenue protection program.

“This is a program that will improve your bottom line.”

Bozic spoke via a web presentation to Ohio Dairy Producers Association members April 4 at their annual meeting in Wooster.

“Everybody has been battered the past few years,” Bozic said. “This is a program that will improve your bottom line.”

New Dairy Margin Coverage program
Dairymen, however, are gun shy, because payouts in the previous program, the Margin Protection Program for Dairy Producers (MPP-Dairy) created in the 2014 farm bill, didn’t happen as they had hoped.

Bozic calls the new program, renamed Dairy Margin Coverage, a “game changer,” and says it could help some dairies stay in business that otherwise would be selling the cows.

Basically, it’s “crop insurance for milk,” he explained. The program doesn’t offer a higher price for your milk, but allows you to smooth out that price over time.

If the voluntary program had been in place the past four years, he calculates the net benefit in 2018 would’ve been more than $1 per hundredweight.

Dairy Margin Coverage makes payments when the national average income-over-feed-cost margin falls below a farmer-selected coverage level. Coverage is available from $4 per hundredweight to as high as $9.50 per hundredweight.

Dairy producers pay low premiums for coverage and may annually re-select their coverage options. There are discounts for consistent use.

Program payments are based on the amount of milk covered in the program and may range from 5 percent to 95 percent of a farm’s milk production history in 5 percent increments.

The program also includes a partial rebate of net MPP premiums paid for 2015 to 2017, and there are no longer restrictions on combining the new program and crop insurance programs on the same milk.

Think long term
The risk management strategy works best, Bozic added, if you hedge your milk prices long term, and not just the next quarter. The new program allows farmers to price up to five quarters out.

If you buy protection only the next three months? The economist said you’ll be “very disappointed.”

His calculations, had the program been in place the past 10 years, or 40 quarters, show that 1 in 3 quarters would pay out. Taking the long-term approach, though, lets milk producers protect large volumes of milk.

The program also benefits herds of all sizes, and Bozic encouraged the dairymen to consider the coverage “especially if you have less than 250 cows.”

Research by Ohio State University’s Carl Zulauf and Michigan State University’s Christopher Wolf found, when measured by $/cwt., the 2018 dairy policy changes most benefit small dairy farms.

The program is not, however, going to automatically push a farm into the black. Zulauf and Wolf calculations show no farm size has 2014-2017 losses turned into profits had the program been in place the past four years, but it would’ve reduced the losses. In fact, for herds of 200-499 cows, the loss declined by almost 41%.

Bozic anticipates 30 to 50% of the U.S. milk will be covered under the new program.

Other market factors
Bozic also reviewed other economic factors impacting the current and future dairy market, including the China trade deal and the U.S. Mexico Canada Agreement that is replacing the North American Free Trade Agreement, or NAFTA.

Ohio milk producers shouldn’t ignore the impact the global market and trade has on their farms, the economist said. Exports have been absorbing most of the growth in U.S. milk production over the past decade. The rule of thumb is that the milk production from one day out of each week goes to export, but on a milk-fat basis and skim-solids basis, it’s even higher.

Even though cow numbers are falling, overall production has increased, which makes the export markets more valuable in light of declining domestic milk use.

“We need to capture world markets,” Bozic said. “Free trade, market access is very important to us.”

But Trump administration trade strategies hint to him that “the system of free trade that we’ve come to rely on is going away.”

Bozic said the shift is from multi-national trade agreements to single country trade agreements. In the long run, the U.S. will secure more market access for dairy and other agricultural products, but it will take some time.

“It’s going to be a rocky road.”

Source: Farm and Dairy

Sydney supermarket experiences a MILK shortage

A major supermarket has confirmed they are experiencing milk shortages due to extreme weather, droughts and increased electricity costs. 

The Summer Hill IGA in Sydney posted a sign in their dairy department this week, claiming these issues have caused their supplier to reduce product distribution. 

Dairy farmers have warned the milk shortage could get worse if prices for products aren’t increased and the drought continues. 

Lion Dairy and Drinks, the supplier who posted the statement, are one of the largest food and beverage companies in the Oceania region. 

The Summer Hill IGA in Sydney posted a sign in their dairy department stating environmental issues and rising costs have caused their supplier to reduce product distribution

The Summer Hill IGA in Sydney posted a sign in their dairy department stating environmental issues and rising costs have caused their supplier to reduce product distribution

‘We apologise for non-supply of some of our milk lines by our supplier. This is due to the current conditions impacting dairy farmers,’ the notice stated.  

‘Extreme weather conditions including drought, together with significant cost increases across water, feed and energy.

‘These have all contributed to the challenges facing dairy production in Australia, which has resulted in lower milk supply.’

Member of the NSW Farmers dairy committee, Rob Miller, said areas in regional NSW had been experiencing a shortage of products over the past month and the milk shortage could get worse. 

‘[The shelves are] quite empty of dairy – there might be a bit in the morning but as the day goes on the product runs out. They’re not being re-stocked,’ Mr Miller told The Sydney Morning Herald

‘Milk prices haven’t been lifted by the processor or the retailer to compensate for the high cost of production, so farmers have just cut production.

‘The next month is going to get a lot worse. The serious thing is that there’s a shortage of milk… What we need is a major retail price rise in the dairy cabinet.’   

A spokeswoman for Lion Dairy and Drinks stated that the drought was the largest contributor to the shortage, but dairy supply should be back to normal in the coming week (Summer Hill IGA pictured)

A spokeswoman for Lion Dairy and Drinks stated that the drought was the largest contributor to the shortage, but dairy supply should be back to normal in the coming week (Summer Hill IGA pictured)

A spokeswoman for Lion Dairy and Drinks said the drought was the largest contributor to the shortage, but dairy supply should be back to normal in the coming week. 

‘Lion Dairy & Drinks is a demand-driven business and this is reflected in the way we procure the right amount of milk to meet our customers needs’, the spokeswoman said. 

‘At this time we are also experiencing an increase in demand for our dairy products and we are unable to source the additional milk to fulfill this volume. 

‘Unfortunately, as a result, this week we are experiencing some intermittent supply shortfalls across our customer base.’ 

Daily Mail Australia has reached out to the National Farmers’ Federation for comment. 

Member of the NSW Farmers dairy committee, Rob Miller, said that areas in regional NSW had been experiencing a shortage of products over the past month and the milk shortage could get worse (stock image)

Member of the NSW Farmers dairy committee, Rob Miller, said that areas in regional NSW had been experiencing a shortage of products over the past month and the milk shortage could get worse (stock image)

Source: DAILY MAIL AUSTRALIA

Restraints on Fonterra’s growth

Growth has been debated at the Fonterra board table and the directors’ view now is that the co-op will not see the huge growth of the past, says director Brent Goldsack.

Environmental constraints could be the limiting factor.

“Things around water and nutrients: we will get a very good handle on that,” he told the Northland Dairy Development Trust’s annual meeting in Whangarei last week. 

“But as we look at gases – whether methane or nitrous oxide — that’s much harder.” 

Methane may be a little easier but generally it gets harder, Goldsack said.

Over 35 years production has increased threefold but the co-op won’t be getting that growth in the future, he says. With genetics and science he is confident farming will consistently improve. 

“As a board I think we are saying [growth] is probably going to be relatively flat — certainly for the foreseeable future.”

Goldsack says he is worried at the prospect of a payout of $7/kgMS or better next year because at that price people start getting ahead of themselves and do things they later regret.

“The Europeans, the Americans… they would much rather be where we are today and this is our third year in the mid $6/kgMS. It’s been a nice spot for the co-op over the last three years.”

Source: ruralnewsgroup.co.nz

Struggling Smaller-Dairy Farmers Told to Hang On as USDA Prepares Latest Dairy Fix

The survival of thousands of smaller dairy farmers rides on the success of the latest program designed to save them as dairy farmers right now continue going out of business at a rapid clip.

Struggling dairy farmers and their bankers are being told to just hold on until this summer when USDA will finally be ready to sign up dairy producers for the Dairy Margin Coverage program.

“This program isn’t perfect, but it’s the best thing that we’ve had in dairy in a long time,” said House Agriculture Committee Chairman Collin Peterson, D-Minn. “It will keep these small guys in business, and that’s the purpose of it.”

The Dairy Margin Coverage payment program is going to be retroactive until the beginning of the year, but it’s unclear how many people know that. Peterson said this week he’s been meeting with bankers and others in Minnesota and Wisconsin to explain the program and payments. He led a bipartisan letter with more than 70 House members in late March calling on USDA to prioritize implementation of the DMC program. Days later, the Senate followed up with a similar letter by 38 senators calling for the same thing.

“So I’m worried about that, and I still don’t think it should take them until June to get this program rolled out,” Peterson said. “I’ve been pushing the department hard on this because we are losing dairy farmers as we speak. They have had a tough time, and a lot of them are giving up.”

Agriculture Secretary Sonny Perdue told the House Appropriations Ag subcommittee that it would be impossible to move up the signup date for the new dairy program, now set for June 17. But Perdue added the program should be a “no-brainer” for farms with fewer than 250 to 300 cows.

Sarah Lloyd, a dairy farmer who milks about 350 cows with her husband and family near the Wisconsin Dells, was among roughly three dozen Wisconsin farmers who drove to a family-farm rally late last month in Storm Lake, Iowa, largely to draw attention to the plight of dairy farmers. She is worried she and her husband won’t be milking cows by the end of this year. Lloyd just saw a headline this week in a dairy magazine, “Help is on the Way.” She also just watched a whole herd sold off at a nearby farm. Lloyd is skeptical that a revamped version of the old dairy program is going to help people, especially if they have to wait until June to sign up and July to get a payment.

“The USDA folks are just saying, ‘We’ve got this farm bill through and you should be glad because payments will catch up with people.’ But we know things are really dire,” Lloyd said. “We know that when we lose these small- to medium-scale farmers, we’re not going to get those farms back. As a dairy farmer and a rural community member, I want to see a distributed structure of production. More farms, not fewer farms.”

Nationally, overall, dairy revenues are down 24% since 2014, and dairy income has not recovered as well as other commodities, even corn or soybeans.

“Dairy has struggled and its struggles are disproportionate compared to other commodities,” said Alan Bjerga, senior vice president of communications for the National Milk Producers Federation.

 

NMPF, which represents 28 dairy cooperatives around the country, sees the changes in the 2018 as providing margin protection for dairy farmers that actually works, Bjerga said. Besides the DMC, there are now other programs such as Dairy Revenue Protection insurance being offered for larger dairy farmers as well. Like Peterson, Bjerga said the dairy industry is counting on some immediate leniency from lenders until the DMC fully kicks in. Payments could go out as early as July 8.

“The hope is that, even if these payments aren’t coming now, bankers know they will be,” Bjerga said

USDA will be rolling out a decision tool possibly next week for the DMC. Peterson said he’s seen a preview of it and he thinks USDA has overcomplicated the options for farmers.

“I think they are going to confuse farmers,” Peterson said. “They are laying this out as if there is some big choice that needs to be made.”

The way Peterson sees it, farmers who milk under 5 million pounds a year would best protect their revenue by choosing 95% coverage at the top level of $9.50 coverage. Further, farmers who sign up for five years will get a 25% premium discount as well.

“It will literally give producers five years of gross revenue that they can count on to keep them in business,” Peterson said.

But smaller dairy farmers want more fundamental changes in dairy pricing after losing an average of seven dairies nationally every day last year — more than 2,500 total. Lloyd and members of the Wisconsin Farmers Union are working with the National Farmers Organization, holding meetings in major dairy-producing states to highlight different options to help farmers, including supply management programs and direct payments to smaller producers. (http://www.nfo.org/…)

“We’re in a disaster and we need to put something out there to catch people’s fall,” Lloyd said. “We know that we need fundamental price policy reform, and we know that’s going to take a couple of years to get the political will together to do that. Meanwhile, we’re bleeding all of these family farms and that’s not acceptable.”

Roger Johnson, president of National Farmers Union, has been explaining to his members that a fundamental change such as managing or controlling milk supplies would have to come from the grassroots or state level. The 2014 farm bill initially had a modest supply management provision that offered farmers higher protection levels if they agreed to cut production. That idea was killed on the floor by then-Speaker John Boehner, R-Ohio, called it “Soviet-style” production.

“Internally, in Farmers Union, the dairy voice is really loud, and they have been arguing that we need to get supply management to Congress,” Johnson said. “My response is that’s not going to happen unless it comes from the countryside.”

Pursuing supply management in 2014 “was a mistake” because dairy farmers were stuck when the policy got rejected, Bjerga said. While adding that NMPF would “welcome the discussion,” Bjerga added that NMPF “has a lot of constituencies” that would resist supply management. Dairy farmers got a better deal in the 2018 farm bill because the industry was more united than 2014.

“The goal in 2018 was to get dairy all on the same page,” Bjerga said.

Peterson believes that once USDA gets the dairy program going, it will finally prove a winner for smaller dairy farmers. He expects the criticism in two years is doing something that was “too good” for dairy producers. So his message to dairy farmers now is: “Don’t give up. Wait until you can sign up in June before you give up the ghost.”

Farmers that qualify for the maximum enrollment or under only produce about 14% of the nation’s milk, Peterson said. That should help avoid further overproduction.

“Even if they go hog wild and start increasing, they aren’t going to really increase the milk supply,” he said.

With some farmers getting out, Peterson said he sees an opportunity for young people to step into the business because cows are cheap, and there are empty dairy parlors out there to rent or buy. The farm bill also offers more incentives for new and beginning farmers to get into dairy production.

“You are never going to have a time like this to get into dairy and basically have a five-year guarantee on your gross revenue,” he said.

Source: DTN

Wisconsin’s Place In A Bewildering Milk Pricing System

A stubborn slump in milk prices is hammering Wisconsin’s dairy industry. In 2015, prices plummeted, and have yet to recover. In 2018, the state lost dairy herds at a record-breaking pace, and led the nation in farm bankruptcies.

While the economic and human toll wrought by low milk prices have been documented, the factors that determine those prices can feel enigmatic or perhaps even baffling for people outside of the industry — and perhaps for those within as well.

Indeed, a dairy processors trade organization referenced the complicated American milk pricing system in a “Milk Pricing 101” lesson for its members: “There is an old joke about a senior-level USDA person testifying to Congress on dairy policy and milk pricing. He said there are only three people that understood it and two of them are lying.”

Hyperbole aside, the regulatory and market systems that determine the size of farmers’ monthly milk payments are indeed complex. To help demystify how milk prices are determined, Wisconsin-based dairy economists provide a crash course in the history and unique economics of milk pricing in the United States.

Dairy farmers are vulnerable to becoming price-takers

Just like any other business, to remain viable over the long term, a dairy farm must maintain enough cash flow cover expenditures. However, milk’s unique qualities complicate this basic business necessity.

Milk stands out from other agricultural products in three ways. One, milk has to be harvested 365 days a year given the biology of cows. Two, it spoils quickly, and requires refrigeration to extend shelf life. Three, at 85% water, milk is bulky and expensive to ship long distances.

These factors have historically made dairy farmers vulnerable to becoming “price-takers,” according to Mark Stephenson. He is director of the Center for Dairy Profitability at the University of Wisconsin-Madison, and also chairs Wisconsin’s Dairy Task Force 2.0, a group assembled by former Gov. Scott Walker to address the ongoing industry crisis.

A price-taker is someone who lacks bargaining power in a marketplace and therefore has to accept the price dictated by those in power. Unlike other producers, who can sometimes sit on their harvest and hope for higher prices, or ship it to more lucrative markets, dairy farmers generally have little choice but to sell their milk immediately to a local processing plant at the price it offers.

Prior to the 1930s, Stephenson said this vulnerability led to what he called “destructive competition,” whereby dairy processors sought to increase their market share by lowering prices, to the detriment of farmers.

As a milk processor, “it’s pretty hard to distinguish my product from my competitor’s product,” Stephenson explained. “Why should it get a better price? The only way to sell more is to sell mine at a lower price than yours.”

Because processors have some market power over farms, prior to regulations they were able to dictate lower prices in an effort to increase market share. Without a different buyer for their milk and with no one to pass a price cut onto, farmers were faced with a lower income.

As a perishable liquid, the costs of preserving and transporting fluid milk factor into the prices dairy farmers get for the product.

This destructive competition first became a problem in the U.S. dairy industry during the late 19th century, and in turn spurred dairy farmers to form cooperatives to restore a semblance of power in price negotiations with processors, Stephenson said. But these cooperatives found only limited success, and by the 1930s global economic pressures and ongoing destructive competition sent milk prices into a downward spiral.

“That’s why we got [milk pricing] regulation in this country,” said Stephenson. “When agriculture was really taking it on the chin in the Great Depression, there were real ideas that maybe government could do something.”

Those ideas culminated in the Agricultural Marketing Agreement Act of 1937, which provided the foundation for the federal milk pricing system still used to this day.

To ensure the viability of dairy farming, this act of Congress authorized the U.S. Department of Agriculture to set pricing rules to encourage more order within the industry. Those rules have evolved over the decades, but their basic intent has remained constant.

Encouraging order in a volatile industry

Today, federal rules establish a classified pricing structure for Grade A milk based on end-product, meaning raw milk that is processed and eventually winds up in a jug is priced differently than milk that is processed into cheese or ice cream. Grade B milk, which does not require the same set of sanitary conditions as Grade A, cannot be used for fluid consumption and is not regulated by this USDA’s price system. These rules also establish price pooling within most major dairy regions in the country, which are known as Federal Milk Marketing Orders, or FMMOs.

Wisconsin is included in one of 11 Federal Milk Marketing Order areas in the contiguous United States, which help define price sturctures for different types of dairy products.

Because milk is processed into broad product classes with varying demand and manufacturing costs, federal regulators have established four pricing classes for Grade A milk: Class I is milk for fluid consumption, including buttermilk and eggnog; Class II is soft products, including yogurt, cottage cheese and ice cream; Class III is hard cheeses and cream cheese; and Class IV is butter and dry products, including milk powders.

The proportion of milk processed into the four classes varies by FMMO region. These regulatory regions are structured around fluid milk markets, so those where demand for fluid milk is high compared with its supply generally produce more Class I milk. Most of Wisconsin is within a fluid milk surplus region, and has historically supplied much of the nation’s cheese.

Milk for fluid consumption usually gets top dollar, Stephenson said, partly because of demand, but also because fluid processing plants have more variable needs and are therefore more expensive accounts to service. On the other hand, cheese plants usually receive a break on prices because, among other factors, their needs are less variable. Cheese processors also often take milk at times when fluid plants won’t, like weekends and during periods of surplus local production.

Only a few products determine the value of milk

The USDA calculates the minimum price for each class of milk based on the value of the milk’s component parts needed to make the various end-products. Those components include butterfat, protein, nonfat solids and other solids.

The USDA estimates the value of those components through a highly structured process, which changes occasionally but has remained more or less the same since the early 2000s, Mark Stephenson said.

The process begins with weekly surveys of dairy processors, who must report the wholesale prices they receive for several standard products considered indicative of the value of each component.

Butter is one dairy product that plays a role in the regulations that help determine milk prices.

For instance, the USDA has deemed the wholesale market price for butter as a good gauge for determining the value of butterfat. Meanwhile the wholesale market price for cheddar cheese dictates the value of milk protein. Nonfat dry milk prices are a proxy for the value of nonfat solids, and dry whey prices indicate the value of other solids.

Regulators average the wholesale price surveys within each FMMO on a monthly basis. They then plug those wholesale averages into calculations that also take into account the proportion of each component in a given amount of milk — known as the component’s yield factor — as well as the cost of processing. Those calculations result in a monthly value for each component part, and those values are plugged into further calculations that determine the minimum price for each class of milk.

Impact of export markets

International demand for dairy products plays a significant role in determining milk prices, particularly in recent decades.

“Exports play a big role,” Mark Stephenson said. “It used to be that 3 to 4% of our milk production was exported, and now we export 15 to 17%.”

With this increased dependence on the global market, when international demand for American dairy products falls, as it did during the Great Recession and again in 2015, milk prices generally fall as well.

“Export markets are key to the viability of the U.S. dairy industry,” said Brian Gould, an expert on dairy pricing and professor emeritus of agribusiness in UW-Madison’s Department of Agricultural and Applied Economics. “If you lose those export markets, everything gets driven down.”

Indeed, the milk price fell rapidly in 2015 as American producers began losing market share to producers in Europe and New Zealand, Stephenson said. Ongoing trade wars have aggravated the export slump, he added. American farmers have been further sidelined as major dairy export markets like Canada, China and Mexico retaliate to American-imposed tariffs on raw materials like aluminum and steel by setting their own tariffs and restrictions on other goods, including milk products.

 With lower international demand coinciding with growing production, commodities like cheese are piling up in the U.S. and contributing to lower milk prices.

“There are a host of reasons as to why [exports are down], but the bottom line is we haven’t been exporting as much as we need to,” Stephenson said.

Selling milk to make cheese

For a number of reasons, not least of which is Wisconsin’s longtime status as a region with a large milk surplus, most the milk produced in the state is processed into Class III hard cheeses, which can be stored and shipped to distant markets.

“Eighty to 90% of the milk produced in Wisconsin goes to cheese, so Class III is important here,” said Brian Gould.

In a map illustrating the availability of milk in the contiguous United States, darker green shades indicate a surplus of fluid milk availability while darker red shades indicate a deficit of the product. Most of Wisconsin is geographically a zone of surplus production, which affects the price of milk and how it is processed and sold.

However, this use doesn’t mean individual Wisconsin farmers who sell milk to cheese processors receive lower prices than they would if it were processed for fluid consumption.

Instead, each FMMO pools the dollars that all participating processors pay for Grade A milk on a monthly basis. Farmers receive a blended price reflecting the average amount those processors paid for milk over the last month. Only Class I fluid milk processors are required to participate in the FMMO pools, but Mark Stephenson said most Class II, III and IV processors also opt in because the pools allow them to pay higher prices to farmers without having to cut into their own profits.

A simple example to illustrate how price pooling works is to imagine an FMMO where 50% of the milk is sold to Class I fluid milk processors who pay $20 per hundredweight (cwt), and 50% is sold to Class III hard cheese processors who pay $18 cwt. The blended milk price in that FMMO would then be $19 cwt, and Class I fluid milk processors would pay $19 cwt directly to farmers and contribute $1 cwt to the FMMO pool. Class III processors can draw from the pool so their farmers also receive $19 cwt.

More than four-fifths of the fluid milk produced in Wisconsin goes into cheesemaking.

Other factors affect the price of milk, such as the distance between where Class I milk is sold and areas of surplus supply. Also, the USDA only regulates a minimum price for milk, with some processors paying more, including a premium for organic milk. But market changes in the organic industry are causing problems for Wisconsin’s organic dairy farmers too.

Several dairy-producing regions around the U.S. also operate outside of federal pricing system, which only applies to areas where a majority of farmers have opted into it. These regions are instead subject to state regulations.

How the system could change

The rules governing milk prices have changed over the decades, and both Brian Gould and Mark Stephenson predict more changes in the near future.

“The USDA expects to go to a hearing again sometime this year or next year,” Stephenson said. “It’s partly the current situation [in the dairy industry] and partly because the rules haven’t changed in a long time.”

Any potential hearing about regulatory changes would be open to the public, Stephenson said, and anyone would be able to provide input directly to USDA officials. He added that law stipulates the USDA can only draw from ideas entered during those public hearings when considering updates to regulations.

Gould said he would like to see the USDA better address overproduction.

Improving technology and genetics, and the decisions of thousands of dairy farmers have led to record milk production in Wisconsin and the U.S. just as market demand has slowed. Gould pointed to production rules in Canada as a possible framework for American regulators.

Stephenson agreed with Gould that the USDA would do well to find a better way to help farmers manage supply, though he did not endorse the Canadian supply model and considered it difficult to implement in the U.S.

“We could consider alternatives to coordinating the supply chain,” he said. “We had in the past 40,000 independent decision-makers, and when milk prices are high like in 2014, that’s a market signal that the market wants more milk … well, 40,000 individual decisions flooded the market. Maybe we can coordinate that better.”

A growing supply of milk — and cheese — is affecting the prices dairy producers in the U.S. are getting.

Gould would also like the USDA to consider reevaluating the products it uses for pricing milk components.

“There’s been a tremendous increase in dairy products,” Gould said. “When you have a commodity-based pricing system, and you use just a few commodities to help set prices, is the value of milk really reflected in that price?”

Gould singled out cheddar in particular, given its importance to Class III pricing and the Wisconsin dairy industry. He suggested the USDA look into pegging milk’s protein value to another product or multiple products.

For his part, Stephenson said he didn’t think changing the commodity pricing structure would have that great an effect on milk prices.

“Right now, cheddar is kind of our currency in cheese in this country. It isn’t as though that’s the only cheese product we make or the largest volume, but it provides at least a beacon for prices,” he said. “We need something that reflects changes in the market’s valuation of products — I’m not suggesting that we move or not from cheddar, but I think it’ll be awhile before we get there.”

Source:  Will Cushman wiscontext.org 

Dairy opportunities: The top five trends in China market revealed

From functional claims, to plant-based sources, and dairy for different occasion, China’s dairy brands are on constant innovation drive to stand out from their competitors.

At the recent Food Ingredients China show, Yuan Zhao, market analyst from Innova Market Insights shared some of the top trends and opportunities for exploration in China’s dairy market.

1.) ​Power of functional dairy​

Functional yogurt is now the topping the charts in China’s dairy market and digestive health was one of the most commonly seen claims.

Last year, one in every two new functional dairy beverages launches was related to digestive health.

The fastest growing category was seen in functional dairy with protein claims and some brands had combined proteins from plants such as chia seeds and animal milk.

Clean label and fibre claims were also finding its way into the China market, with some domestic manufacturers taking the lead with their “no additives” products, such as Tianyou Simpire Milk, Shengmu Mongolian Plateau flavoured yogurt drink.

2) ​Soy popular ​

Soy is the most common source for making plant-based dairy in China and boasted the biggest market size, with new launches of plant-based dairy numbered at 53% between years 2013 to 2017, which was higher than the global market size at over 40%.

This was because the Chinese were “most familiar with soybean”,​ Zhao explained.

An example of a soy-based product is Pulmone soybean milk.

Nonetheless, Zhao said that there was still opportunities for other types of plant-based dairy products.

“If manufacturers want to stand out in China, there explore the use of a greater variety of plant-based ingredients for dairy products,”​ she said.

3) ​Age targeted​

The dairy market in China is also segmented according to age groups, with the elderly and children as key audiences.

Zhao said that there was a growth in functional dairy beverage for healthy ageing, which mainly target bone health, while other claims such as low fat and the addition of other compounds, such as selenium.

Children was also “an important target group”,​ with brain and bone benefits as the most commonly seen claims, she said.

4) ​Opportunities for different occasions​

Manufacturers were starting to explore new dairy product consumption for different occasions, Zhao said.

An example was the concept of “drinking dairy an hour after meal”,​ Zhao explained that some manufacturers have claimed that doing so would allow the digestive system to perform at the optimal level.

Besides aiding the digestive system, she said that manufacturers could also explore dairy for sports occasion.

5) ​Novel flavours​

There is no lack of innovative flavours in China’s competitive dairy market.

Ranging from durian to aloe vera, manufacturers were bold in infusing novel flavours into dairy products, Zhao pointed out.

Some of these examples include Jian Ai’s durian yogurt, Wei Chuan’s aloe vera flavoured fermented milk, Lepur’s blue cheese yogurt, salted egg yolk yogurt, and tiranmisu yogurt.

 

Source: Food Navigator – Asia

When the producer becomes the processor

Panel shares lessons learned from adding on-farm creamery

From the rigors of becoming a licensed cheesemaker in Wisconsin to educating customers, dairy farmers who have donned the additional hat of being their own processor say it’s not for the faint of heart.

They made no bones about what it takes, as well as the price-control opportunities, during a workshop on value-added milk production March 27 in River Falls. Among the biggest barriers mentioned were financing, finding a place to do a cheesemaking apprenticeship, juggling a new venture with farming and navigating the regulatory world.

But it can be well worth the effort.

“When I started, I never thought processing plants would be telling farmers they wouldn’t take their milk. When it started happening, I felt we did something really smart on our farm,” said Theresa Depies of Springbrook Dairy near Hayward. “This has allowed me to take control of what I’m going to get paid for my milk; that was huge.”

One step at a time

Josh Bryceson of Cosmic Wheel Creamery near Clear Lake said he and his wife, Rama Hoffpauir, entered the processing realm “step by step. We never set a hard date (for launch) until we got really close.”

Bryceson and Hoffpauir began their creamery in 2015 to supplement their Turnip Rock Farm, where they offer vegetables, eggs, meat and cheese through a Community-Supported Agriculture enterprise. Bryceson said they started with a family cow and experimented with cheesemaking in small batches at home, for their own enjoyment.

Eventually, “we thought it might be a business to pursue,” he said.

They make a few varieties of fresh cheeses, as well as six kinds of aged cheeses that they can sell year-round. They do aged cheeses for cash-flow reasons, Hoffpauir said, so they have something to sell when the cows are dry. She said they must provide a variety because of their CSA, but in the future, she’d like to make fewer cheeses and do more wholesale.

The family’s 20-cow mixed-breed herd calves in the spring and goes dry in the fall. Bryceson handles the once-a-day milking, while Hoffpauir makes cheese. Annual milk production averages 8,000 to 10,000 pounds per cow. Cosmic Wheel makes 6,000-8,000 pounds of cheese each year, selling aged cheeses for $14 per pound at wholesale and $20 per pound at market. Fresh cheeses go for $1 per ounce at market.

Hoffpauir said the dairy is a good fit with the rest of their operation, as they can compost the livestock manure and bedding for use on their gardens and feed the leftover whey to their pigs. With their artistic backgrounds, they also like the creativity that goes into cheesemaking.

“It’s really fulfilling for us,” Bryceson said.

Hoffpauir said the most difficult part of the process was finding a place to fulfill her cheesemaking apprenticeship requirement. She made as many as 50 phone calls to find a place that would take her; most either didn’t return her call or said no. Through a friend, she finally got in at Castle Rock Organic Farms in Osseo.

But “it’s hard to get through that while working on the farm,” she said, adding that it took her five years to complete.

It’s also difficult to find the time to wade through all the rules and regulations; larger plants have staff for that, while most farmers already are stretched thin. Hoffpauir said the program should be made more accessible for more people. In the future, she hopes to take more classes to expand her knowledge base.

“I want it to be easy to be in compliance and to be up-to-date,” she said.

Filling a niche

Meg Wittenmyer of Bifrost Farms near Boyceville is seeing success after retrofitting an existing building on her farm for milking goats and making cheese. She operates the only farmstead goat creamery in western Wisconsin, and that niche is a big part of her marketing plan.

“People love coming out, looking at the creamery, petting the baby goats in the barn,” she said. “I want to add agritourism sometime, maybe a yurt. If you want to milk my goats, go for it.”

Wittenmyer said she opened her creamery “on a shoestring” budget, buying 75 percent of her equipment used, and she and her husband did much of the work themselves. “We got commercially licensed for under $50,000.”

Wittenmyer sells her cheeses for a little more than $1 an ounce at the Menomonie farmers’ market and wholesale at restaurants in Eau Claire and restaurants and food co-ops in the Twin Cities. She makes deliveries to the Twin Cities every two weeks, avoiding use of a distributor.

“My goal is to concentrate more on the wholesale route,” she said.

Wittenmyer said she is milking up to 10 goats and hopes to max out at about 20, with a total herd numbering about 50 head. Entering her fourth season, she said she is looking for some help with milking so she can focus on cheesemaking. She recently receive a grant to install some aging space, which will give her an outlet for extra milk.

While it wasn’t easy, she said, “in retrospect, I’m glad to have a cheesemaker’s license.”

Wittenmyer, who did her cheesemaking apprenticeship at Comstock Creamery, said she now can return the favor by opening up her creamery to apprentices. Recently, she joined with six other farms to offer a whole-diet CSA to customers.

Education is key to market development, she said. “Take the time to explain what you’re putting into this. I hardly have anybody tell me my cheese is too expensive.”

She said it hasn’t made sense for her to pursue organic certification so far: “My market supports local more than organic.”

While educating customers, she also continues to educate herself, in part through online groups for artisan cheesemakers and small dairies.

“I’m still learning every year. Always,” she said.

Some patience required

Processing her own milk and selling products locally has paid off for Depies, who opened her creamery more than 20 years ago and worked to get her products into about 24 grocery stores. She started by bottling fluid milk but has since added fresh cheeses including quark.

“I can’t keep fluid milk on the shelf,” she said.

Depies, who bought her farm in 1990 and milks 25 Jersey cows, said the idea of sending her milk off on the truck and accepting a given price never appealed to her.

“I didn’t like the system,” she said.

It took about three years to get her cheesemaker’s license. Due to a lack of plants in her area, she said, she put up a Grade A dairy plant so a cheesemaker would come to her. She has since let her Grade A certification lapse due to cost and a smaller milk supply. She also dropped her organic certification 1-1/2 years ago because of the expense.

“My stores don’t mind now,” she said. “It might have made a difference in the beginning.”

Depies said her biggest struggle was financing, and her biggest mistake with bankers was talking about her project in terms of its small size.

“Bean-counters usually don’t think that’s a good idea,” she said. “They’re all looking for progress.”

Dairy farmers going this route must be patient and strive to have a good working relationship with their inspector, she said.

Depies said the financial return on her cheese is much greater than what she sees for fluid milk, which sells at wholesale for $9 per gallon, so she’s been focusing more on cheese lately. She recommends setting prices on the higher side.

“It’s easier to lower your price than to raise it. Don’t be afraid to go a little high, because you can always go down,” she said. “I have to make money. If you’re not going to make any money, that doesn’t help anybody.”

She doesn’t plan to get back into fluid milk until she gets more help on the farm. When she began, four of her five children still lived at home. Now, none of them are home. Her son hopes to eventually return to the farm but likely won’t be able to for a few more years.

Depies said getting her market established has required “a lot of educating in the back of grocery stores.” Retailers and consumers need to know who put in the work behind value-added dairy products and why they’re worth more.

“Retailers are looking for the product that we have,” Depies said, but “I don’t waste time trying to convince someone I have a good product; if they’re not on board right away, that’s OK; I just look for someone else who is on board.”

Depies said she realizes she probably won’t see all the long-term benefits of her taking on the processing and marketing aspects of her business, but she hopes her children and grandchildren will.

 

Source: Leader Telegram

Minnesota Dairy Farm Breaks Down Hardship Dairy Industry is Facing in Viral Facebook Video

In a Facebook post that has gone viral, Mark Berg, a dairy farmer from Minnesota, breaks down and speaks about the hardships of being a farmer in today’s industry. Mark reveals the realness of the hardship, saying we have farmers committing suicide in the ag industry due to defeating times. They feel like they failed every generation before them.

Mark’s dad said, “I have worked here 40 years, and have less than what I started with.” That really makes you step back and think about what our dairy farmers are up against. Mark continued,”We are not asking to make a million, we aren’t asking to be rich. It is not about having money. But when you literally work day in and day out all the time, for nothing. We have gained nothing.”

“No body gets it. Because they just go to the grocery store and they get food and it is there. They don’t realize that people are literally losing their lives, because they working for nothing,” said Mark.

Finally, Mark breaks down at the end of the video saying, “I just want a fair cut. I just want my family to be happy again.” To all of those in the dairy industry, or any industry for that matter, who just don’t know how they are going to make it to the next day — you can do it! Remember, you are a farmer — strong and passionate. 

Declining milk prices puts Wisconsin farmers in a pinch

Wisconsin is known as ‘America’s Dairyland’ but there is concern about the future of the dairy industry across the nation.

According to the Wisconsin Department of Agriculture, Trade and Consumer Protection, the state has lost 638 dairy farmers in 2018 and this year, 212 farms have closed down. Declining milk prices have put pressure on profits and farmers have had to find alternate ways to recoup their losses.

“It does concern us because we have to make a living on the farm. We have to pay our bills. We have loans. We have to make sure we get paid. We have tried to cut expenses as much as we can,” said Dave Daniels, Co-Owner of Mighty Grand Dairy Farm.

For Dave and Chad Daniels, farming is not only their passion, it’s also their way of life.

“We don’t look at this as a job we look at it as a livelihood this is what we are born and raised to do,” Chad Daniels said. 

Their farm has 550 cows with their milk going to a cheese maker near Fond du Lac. Since the price of milk has consistently declined since 2014, they said their income from sales has gone down 35-40% but it’s not only their farm suffering with losses, farmers across the state and nation had the same issue.

The dairy industry contributes $43 billion to Wisconsin’s economy annually. Mark Stephenson, Director of Dairy Policy Analysis at the University of Wisconsin, said not all the farms closing down is specifically due to financial issues, others were at an age where they were ready to retire from the business. Stephenson said prices in the industry fluctuate but this is the fifth consecutive year milk prices are low.

“There has been a lot of production put on the world market place made available. We have had too many stocks on dairy products. All those things put downward pressure on prices,” Stephenson said.

The decline in prices has put farmers in difficult situations. However, over the past couple of months, prices have improved.

“I think there is a possibility by the time we get to the fourth quarter this year, that we could have potentially much better prices,” Stephenson said.

For Chad and Dave, they will continue to do what they love. They hope to continue to spread knowledge and education about the dairy industry.

“Farmers are pretty resilient. It’s springtime so we are ambitious and we would like to see things changed around,” Dave said.

On June 15 the farmers are hosting a Kenosha County Dairy Breakfast from 6:30-10:30 a.m.

The public is invited to get to know the local farmers and learn about the business.

It cost $6 and children 5-and-under are free.

 

Source: TMJ4

Former World Dairy Expo president, well-known dairy farmer to retire

A former World Dairy Expo president and well-known local farmer is moving on to the next chapter of his life after this weekend. 

Mike Holschbach owns the Heatherstone Enterprises farm off U.S. Highway 12 in Baraboo, which he called the welcome mat of Baraboo. 

He said after spending his entire life raising cattle and working on a farm, he’s ready to retire and move on with the next phase of his life. 

“I’ve been involved with cattle for as long as I can remember,” Holschbach said. “For decades, it’s been up before 3 o’clock in the morning and milking cows and caring for them until 7 at night.”

Holschbach said he’s sold cattle and dairy products to farmers from more than 30 countries around the world. On top of being well-known, he’s also well-decorated and has no shortage of awards lining the halls that lead to his barn.

His farm also has a lot of family history.

“My in-laws came here in 1961, and they operated the farm till about 1984, when we bought it,” Holschbach said. 

He has been operating the farm with his wife and kids for decades, but the next few days will be Holschbach’s last opportunity to spend with the cattle who have become part of his family. 

“I’ve tried to prevent myself from even thinking about it,” he said. “Empty. I think that is going to be the word of the day for a while. It’s just going to be an empty feeling.”

Holschbach said he named all 230 of his cattle, which will make cutting ties with them so difficult this weekend.

“There’s an emotional tie. There is no question,” he said. “It’s like being part of a family. It’s like seeing your daughter go off to college.”

After years of caring for these cattle, his last hope is that the next owners love them as much as he does. 

“That’s the way I would like to leave a legacy, is for our cattle to go to the next farm and be profitable and make those people happy that they came and purchased our cattle,” he said. 

For more information on Holschbach’s cattle sale this weekend, you can browse the site here

Source: channel3000.com

Dairy industry continues to grow in I-29 corridor despite national trends

The prolonged period of low milk prices has taken its toll on the nation’s dairy industry with the U.S. Department of Agriculture reporting a 6.5% loss in operations between 2017 and 2018. However, the Interstate 29 corridor in South Dakota has still seen fairly steady growth in dairy cow numbers and expansion of key processing facilities.

As a result, dairy producers are looking ahead with some optimism. That attitude was apparent among those attending the Central Plains Dairy Expo in Sioux Falls March 26-28.

South Dakota Dairy Producers Association President Marv Post, who farms near Volga, says South Dakota normally sees about a 5% loss of dairies on an annual basis and in 2018, the state lost some smaller operations because of low return on investment, lifestyle change and the agricultural labor crisis. However, he says the I-29 corridor is still seeing expansion of the herd.

“In cow numbers, we continue to grow,” Post says. “We are looking to increase our cows about 40,000 in the next year, year and a half and so we’re excited about the growth in the dairy industry in South Dakota.”

Some of the need for additional cows is related to the expansion of the dairy processing business. Valley Queen Cheese put a $50 million investment into its facility in Milbank, which increases the firm’s processing capacity by 25% to more than 5 million pounds of milk per day. Agropur has also just completed its project in Lake Norden. That move increases daily milk processing capacity at that facility from 3 million pounds to more than 9 million pounds, which is equal to the output of an additional 85,000 cows.

Dairy farmers have been struggling to survive with the low milk prices for the last four years. However, Post says there is some light at the end of the tunnel. “We’ve seen $1 increase just in the last month.”

He says they’re also looking forward to the implementation of the new farm bill to provide a better safety net for dairy producers. He says that in South Dakota, the new dairy program will be beneficial, due to the wide basis on input costs and because milk prices are generally above the national average. So, Post says he thinks dairy farmers will benefit on both ends.

“Tier 1 is very favorable for the smaller operation. So, any farm at 5 million pounds or less annually should sign up,” he says. The program will be retroactive to the first of the year. Signup is expected to start in the middle of June and the checks will come shortly after that.

Another positive is the effort the industry is making to increase domestic and international consumption of dairy products.

Allen Merrill, chairman of the Midwest Dairy Association, says they are working with their national partners to use the checkoff to stimulate demand. “Taco Bell, Dominoes, KFC and McDonald’s are all industry leaders. We put food scientists in with them and they have the opportunity to work side-by-side to spur innovation because we know that is what their consumers want.” That ultimately moves more dairy products.

On the export front, the U.S. dairy industry had a record volume year in 2018, up 9% over the previous year. The total value of those sales was $5.6 billion, up 2% over the previous year. That was even with the headwinds of retaliatory tariffs and a drop in business to China. Mexico, the top market, was up 7%, but Merrill says they would like to see that market fully reopened.

Meanwhile, he says the industry is looking at ways to grow international markets and help processors export their products such as cheese and dry ingredients.

“We export 90% of the dry ingredients in the world and so it’s a huge market for us and we know we’d like to make that more of an added-value product,” Merrill says.

The United States Dairy Export Council helps the dairy industry understand the policies of those other countries, so that exporters can work within those guidelines. Merrill says, “We then share that information with the processors to see if they’re interested in exporting to those countries.”

 

Source: Ag Week

Milk production below last year in Argentina and Uruguay

For the moment El Niño impact has been minimal for the agricultural sector in South America, according to climate experts. The temperature has been favorable for crops and grass quality, and many milk producers are beginning to see some relief in feeding costs.

In Argentina and Uruguay milk production levels are below last year.  Consequently, some processors are manufacturing dairy products exclusively to meet the strong domestic demand, but not for export purposes.

In Brazil, milk intakes are less than adequate to meet all manufacturing requests. Fluid and UHT milk orders remain strong. Compared to one year ago, the domestic demand for dairy products has increased considerably, mainly supported by a relative improvement in the economy of the country.

Skim milk powder (SMPexport prices adjusted lower in South America. Inventories remain readily available to meet immediate needs. The trading activity within and outside the continent is reported as sluggish with expectations to improve slightly during the upcoming fall festivities.

Whole milk powder (WMPexport prices increased. With lower milk production and strong bottled milk requests, WMP supply is scarce and below regional and international demands. In some cases, manufacturers are limiting exports, producing exclusively to satisfy the domestic demand of their respective countries.

 

Source: CLAL

No-deal Brexit could put UK dairy farmers out of business overnight

People living and working on the Irish border say they have no option but to prepare for a no-deal Brexit on Friday.

Northern Irish farmers fear an immediate loss of trade with the Republic could put hundreds of them out of business overnight.

Damian McGenity, a part-time farmer from Jonesborough, one mile on the northern side, says the economic impact would be “catastrophic”.

Dairy farmers are particularly concerned at the lack of breakthrough at this late stage
Image:Dairy farmers are particularly concerned at the lack of breakthrough at this late stage

He explained: “An enormous amount of the commerce that happens in Northern Ireland happens because a product is made in the north, it’s shipped to the south, it comes back to the north and vice versa.

“I think 75% of the business activity that happens in Northern Ireland happens via a cross-border element.”

Dairy farmers are particularly concerned at the lack of breakthrough at this late stage.

The Irish government says it is discussing options for the border with the EU
Image:The Irish government says it is discussing options for the border with the EU

An estimated 35% of the milk produced in Northern Ireland enters the Republic. If there is no deal by Friday, it will be prohibited from entering on Saturday.

Drivers who criss-cross the border, to collect milk from both sides in the same tanker, will be restricted to the southern side. The northern milk would no longer be EU regulated.

The Irish government says it is discussing options for the border with the EU. The British government says nothing needs to change but many doubt that.

Dr Katy Hayyard from Queen's University Belfast said no deal would mean a border situation
Image:Dr Katy Hayyard from Queen’s University Belfast said no deal would mean a border situation

Dr Katy Hayward, from Queen’s University Belfast, told Sky News: “It’s all very well to say you’re not going to impose any checks or controls but the fact is with a no-deal situation, you will have a customs border and a regulatory border.

“Those rules exist for a reason so customs controls protect citizens and consumers and if the UK wants to go and make deals with other countries, it has to be shown to be a responsible state.

Milk made in the northern side won't be able to go to the Republic
Image:Milk made in the northern side won’t be able to go to the Republic

There was always potential for Brexit to have an impact on the UK’s only land border with the EU but there was just as much potential for that border to have an impact on Brexit.

Whatever happens – no-deal, a further extension or something else – the need to avoid any visible partition on the island of Ireland is effectively shaping the UK’s departure from the EU.

Source:news.sky.com

Do Happier Cows Make For Happier Consumers?

I recently came across a fascinating product aimed at dairy farmers. Check out the video below, which shows a cow enjoying the product, called the BlissBrush, which is designed to help dairy cows reduce stress, enjoy themselves and stay clean. I was not only fascinated by the video itself, but also by the fact that it represents a well-reasoned response to consumer trends for farm products on the part of its marketer.

Today’s consumers and especially many young consumers have a desire to know more about the products they buy, including food products. Driven by an increased awareness of and empathy toward the care of production animals, products aimed at enhancing the quality of food and/or improving the quality of life on farm animals are becoming more common. This is evident in the increased prevalence of marketing of organic, non-GMO foods, cage-free eggs, free-range chicken and the reduction of use of hormones in dairy production.

The BlissBrush is part of a significant trend among farmers toward the adoption of products and management practices that improve what’s known as “cow comfort.” Data indicates that comfortable cows are healthier, happier and more productive. A recent study conducted at Cornell University suggests that the purchase of cow brushes by farmers pays off as well, finding that milk production increases by 3.5% in second lactation cows.

I asked Eric Schreiber, CEO of Harmony Marketing Partners, who is actively involved in the marketing of this product to farmers for his take on why he believes the BlissBrush, versions of which have already been popular in Europe, as to why he believes this product is starting to catch on with U.S. farmers. He states:

“Cows, like all animals, have a natural need and desire to scratch itches, to be massaged, cleaned and groomed. Recent scientific studies indicate that cows are equally motivated to access a brush as they are to access food, indicating a high need for these benefits. Providing access to an automatic rotating cow brush like the BlissBrush, allows cows to relieve these needs, decrease stress, improve cleanliness and have a more enriched environment.  Farmers are always interested in improving the health, care and overall welfare of their animals, and to them, they see advantages in providing cow comfort, improving hygiene and increasing production. Data shows cows with access to brushes produce more milk.”

Schreiber adds that farmers view the product as being economical in providing comfort to the cows while consumers like that the cows are provided with a better environment, leading to a situation in which, “…the cow, the farmer and the consumer all feel good.”

Brent Hershey, President of Hershey Agriculture, and owner of cowbrushes.com adds, “There is clearly a large unmet need for cow brushes in the U.S., and we saw a significant opportunity to bring a needed solution to dairy producers. Seeing the penetration in Europe, the trends in the U.S. market and the lack of high-quality brush options convinced us this was the right thing to do.”

So are there obstacles to the BlissBrush and other cow brushes realizing large sales? According to Schrieber, in Europe, approximately 70-80% of dairy farms have cow brushes, while penetration in the U.S. is currently an estimated 20-30%, but growing. I asked Leslie Carlson, Nathan J. Gold Distinguished Professor of Marketing at the University of Nebraska-Lincoln, a noted expert on consumer behavior and green marketing for his take on the potential for cow brushes in the U.S. Carlson emphasizes that literature on the consumption of environmentally friendly products appeal to some consumers, but not all. He states:

“This form of consumption has parallels to ‘green’ product consumption. That is, cows who have access to products such as these brushes seem to be ‘happier’ which may result in higher production of dairy products. Similar to environmental product consumption, such considerations may prove to be quite attractive to some consumers as long as the price differential isn’t too great. However, there’s also literature which suggests that there are also consumers who don’t care about the environmental aspects of products.”

Carlson expresses that he’s not convinced that the appeal of cow brushes cuts across all consumers of any single age group and cautions against any strategy that leads to increased milk prices as a result. Still, he acknowledges that there is a segment who will find it appealing.

My own take on this is that it is a nice marketing story in that the product leads to more comfortable cows and does address the concerns of at least a significant segment of consumers while also pleasing farmers.

Charles R. “Ray” Taylor is the John A. Murphy Professor of Marketing at the Villanova School of Business and Senior Research Fellow at the Center for Marketing and Consumer Insights.

 

Source: Forbes

 

The sad story of dairy’s decline in the US: Problem is obvious, solutions…

All farmers and livestock producers are important. All the crops and animals they raise are important. That said, there’s something special about the dairy industry, especially the people who operate dairy farms. Their skill and dedication reflect what’s best and noblest in production agriculture.

So the ongoing slump in the U.S. dairy industry is distressing. Beset with a multi-year stretch of poor milk prices and limited profitability, far too many dairy producers have shut down or are in imminent danger of doing so. From 2017 to 2018 alone, 6.5 percent of U.S. dairy farms went out of business, according to U.S. Department of Agriculture statistics.

That’s a big economic hit to the communities, often small, rural ones, where they operate. It’s a huge emotional loss for families who put so much of themselves, sometimes over several generations, into their dairy business.

The fundamental problem is obvious: There’s too much milk. The supply exceeds demand, which inevitably holds down prices.

On the supply side, the United States has more cows (the surviving dairy farms are getting bigger), which on average produce more milk. In 2006, the 9.1 million U.S. dairy cows produced an average of 19,951 pounds per cow. In 2018, the 9.4 million U.S. dairy cows produced an average of 23,149 pounds per cow.

In contrast to rising per-cow production, per-capita demand has been shrinking for decades. Americans on average now drink about 18 gallons of milk annually, down from about 30 gallons per year in the 1970s. Increased competition from alternatives — energy drinks are a good example — account for part of it. So does less-than-enthusiastic assessments of milk from some of today’s nutritionists.

But exports helped to offset lessened sales at home. U.S. dairy farmers, once focused almost exclusively on domestic demand, benefitted for years from soaring incomes and demand for milk in developing countries. The value of U.S. dairy product exports more than quadruped from 2004 to 2014, according to a 2016 USDA report.

One more example of how important exports have become: In 1996, exports accounted for 3.6 percent of U.S. dairy production. In 2018, exports accounted for 15.8 percent of American output, according to statistics from the U.S. Dairy Export Council.

With Americans on average drinking less milk, maintaining and expanding dairy exports becomes increasingly important. But current trade policies have had the opposite effect, sharply reducing dairy exports to Mexico and China. A September 2018 study from Texas A&M University found that, depending on what happens with exports to China and Mexico, U.S. dairy farmers could lose $2.07 billion to $13.87 billion over the next five years.

Supporters of President Donald Trump point to the current trade policies and say they offer “short-term pain, long-term gain.” Maybe, but so far the pain vastly exceeds the gain.

If we’re serious about helping dairy farmers overcome these tough economic times, we need sensible trade policies that allow and encourage foreign consumers to buy U.S. dairy products.

Solutions, answers

Other solutions to the dairy industry’s plight aren’t so obvious.

U.S. dairy policy is incredibly complicated, a mind-boggling brew of regulations that virtually nobody understands fully. Perhaps revamping and simplifying dairy policy is the place to start.

This much is clear: Policymakers, the dairy industry and the general public — at the federal, state and local levels — need to look long, hard and thoughtfully at what can be done to help dairy producers survive in the short term and thrive in the long term.

And we’re optimistic they can thrive. Technology and automation offer more and new options that hold promise for dairy farmers, including relatively small family operations in the Upper Midwest.

The U.S. dairy industry has a proud past and, we think, a bright future. But the present — the here and now — is concerning. All of us, both in and out of agriculture, need to work to change that.

Source: agweek.com

Last day for dairy at Deniliquin in southern NSW as drought forces farmers out

A family has been forced to shut down their dairy farm at Deniliquin in southern New South Wales.

David and Kathleen Johnston and their daughter Kacee can no longer survive farming through the drought without water, and they believe the NSW Government is to blame.

“Who knew that this drought was going to be like this and who could foresee the Government’s stupidity for giving away all of NSW water,” Mrs Johnston said.

The Johnstons milk 140 cows in the Murray region of the Riverina, which has a general water allocation of zero from the NSW Government.

Buying what little water that is being traded at inflated prices and buying expensive feed to keep their cows producing milk is no longer viable for the family.

“A normal irrigation season for us costs about $60,000, but this year if I was to buy temporary water out of the channel system it would cost us close to $300,000 for the same amount of water,” Mr Johnston said.

“We need to be getting $1 a litre to cover it.”

Dairy days over at Deniliquin

In the good times, Mr Johnston said Deniliquin was home to as many as 40 dairy farms.

But since they started dairying 10 years ago they have seen farmers continually exit the industry.

However, the Johnstons’ confidence in the dairy industry lifted when Canadian dairy giant Saputo took over embattled processor, Murray Goulburn.

The family received a Premium Quality Award from Saputo for the milk they supplied to its factory at Cobram, Victoria, for 2017/18.

“Saputo were promising a lot of things, but we can’t hang on waiting for them,” Mrs Johnston said.

 

Source: ABC News

Australia’s dairy industry faces fights on multiple fronts

The dairy industry is in the fight of our lives on a number of fronts.

While the drought continues, fodder and water are trading at record or near record prices.

For irrigators in northern Victoria, where the average price for water in February was $499 per megalitre, this is nothing short of a catastrophe. That’s a $79/ML increase since the month before and 420 per cent higher than it was a year ago.

The current situation is untenable and must be addressed before we lose more farmers.

On a broader scale, I was in Canberra last week for the start of third round negotiations between Australia and the European Union over a new free trade agreement.

The EU is continuing to drive a hard bargain by pushing for the inclusion of geographical indications (GIs) in the agreement, banning Australian dairy manufacturers from using product names, such as parmesan and fetta, that have a connection with EU countries.

If the federal government caves to this demand, the dairy industry faces losing 22,000 tonnes of cheese varieties with an annual value of production worth more than $180 million and export sales averaging more than $55 million.

Even more worryingly, if Brussels succeeds in forcing us to extend GIs to capture packaging that evokes EU regions, a further 45,000 tonnes of local cheese production will be affected, averaging $300 million in domestic and export sales per year.

This is truly alarming for our industry, which is still the third largest agricultural industry in Australia.

And if we are serious about growing the Australian dairy industry, we must also work constructively to solve the industry’s skilled labour shortage.

After scrapping the sub-class 457 visa last year and replacing it with a Temporary Skills Shortage (TSS) visa, which blocked a pathway to permanent residency for skilled migrants looking for work on dairy farms, the federal government has now brought us a step closer to securing a permanent skilled workforce.

Under changes to the Australian Skilled Occupation List, high level dairy farm managers who have responsibility for overseeing farming operations are eligible for TSS visa entry to Australia for up to four years with the possibility of renewal and permanent residency via the 187 visa.

The pathway to permanent residency is vital to ensuring Australian dairy farmers can attract skilled overseas workers who will avoid Australia if they can obtain permanent residency in other countries.

This outcome is good news for farm owners. The experience of regional communities around Australia is that migrant farmers not only fill labour shortages, but also bring new technological insights gained overseas to apply to Australian farming and revitalise local communities.

The industry has also achieved a victory in breaking the back of the despicable discount milk marketing ploy that has dogged us for eight long years.

Woolworths, Coles, ALDI and Costco have all raised the price of their cheap milk by 10 cents, with the increase going back to farmers. IGA is slowly following.

There is no denying that this is a great outcome, but while some producers have gained substantially from this initiative, most farmers won’t receive much benefit.

It at least sets the stage for a larger conversation around the value of the entire dairy cabinet, but it is vital that all dairy farmers receive a fairer return for their hard work.

But while we speak about the industry, we must remember that it begins each day with people on more than 5500 individual farms sending milk off to be processed.

Every dairy farm relies on the commitment, enthusiasm, and hard work of these people for success.

However, I know from my own experience that dairy farming can be tough, and sometimes you have to reach deep for the commitment to get to the day’s end.

But I also know from experience that it is important to never think you are alone when there is uncertainty.

I count myself fortunate that I reached out, shared problems and talked issues through. I encourage anyone who finds themselves in a tough spot to do the same.

Even more important is for each of us to open the conversation with someone who might be in that position.

 

Source: Queensland Country Life

Clock runs out on Oregon industrial dairy bills

Proposals to treat large Oregon dairies as industrial facilities met with an uproar of objections but have quietly died due to a legislative deadline.

Dairy farmers crammed a hearing room at the Oregon Capitol in Salem last month to testify against bills that would eliminate “right to farm” protections for large dairies.

Losing those protections would leave large dairies vulnerable to lawsuits over nuisance and trespass as well as local ordinances regulating their operations.

The Senate Committee on Environment and Natural Resources did not schedule a work session to vote on either proposal by the March 29 deadline, killing Senate Bill 104, which would classify large dairies as industrial, and Senate Bill 104, which would prohibit new construction of large dairies and impose air and water restrictions.

Opponents of the legislation argued that family dairies often grow larger as new generations join the business, and they shouldn’t be penalized for the notorious downfall of Lost Valley Farm, a dairy in Boardman, Ore., that went bankrupt after a profusion of wastewater violations.

Sen. Betsy Johnson, D-Scappoose, urged the committee against passing the bills, which she called “an enormous threat to the economy of Tillamook County and the vibrant dairy industry throughout Oregon.”

Supporters of the bills claimed the changes were necessary to close regulatory loopholes that were exploited by Lost Valley Farm’s owner.

While SB 103 and SB 104 are dead, the committee is still considering Senate Bill 876, which would require new large dairies to clear new regulatory hurdles before starting operations. A work session on the proposal was scheduled for April 4.

Timber proposals

Another piece of controversial legislation that would prohibit clear-cutting in forested watersheds has also come to an end after it encountered strong opposition from the timber industry.

Proponents touted Senate Bill 2656 as a way to ensure safe drinking water for rural communities that depend on waterways that flow through private timber properties.

Critics of the proposal countered that forestlands have the highest water quality in Oregon compared to other land uses and claimed the bill would eliminate commercial production across millions of acres.

The March 29 legislative deadline proved deadly for another proposal opposed by the timber industry that would repeal lower property tax rates for commercially managed forests in Oregon.

Supporters of House Bill 2659 said Oregon counties would see increased revenues from the proposal, which would also encourage landowners to adopt environmentally friendly practices to take advantage of tax exemptions for “natural” and “semi-natural” forests.

Opponents of the bill argued it lacked a scientific basis and would eliminate jobs in the timber industry while encouraging forest fires and conversion to other land uses.

Aerial applications

Legislation that would change reporting requirements for aerial applications of pesticides and fertilizers will go no farther this legislative session.

Under House Bill 3044, flight conditions during aerial applications would have to be reported to Oregon’s Department of Environmental Quality, which would make the information available to the public and fine companies for chemical drift and other violations.

“An industry that does not overspray has no fear of notification requirements. An industry that does not overspray has no fear of fines for doing so,” said Rep. Marty Wilde, D-Eugene, the bill’s chief sponsor.

Critics of the proposal, including the Oregon Farm Bureau, Oregon Wheat Growers League and Oregonians for Food and Shelter, worried the bill would expose applicators and landowners to possible harassment or vandalism and claimed that drift can’t reliably be confirmed from flight records.

Critics of HB 3044 also argued against shifting oversight of aerial pesticide spraying from the Oregon Department of Agriculture to the DEQ, which doesn’t have as much experience in regulating pesticides.

Water use reporting

A proposal to increase the number of irrigators who report their water usage to Oregon regulators has died in committee.

Only about 16 percent of water right holders — generally irrigation districts and municipalities — must currently report their usage to the Oregon Water Resources Department.

Under House Bill 2851, OWRD could have required anyone who must measure water usage to also report it, which supporters claimed would help the agency better understand water availability when making permit decisions.

The Oregon Farm Bureau and Oregon Water Resources Congress opposed the bill, arguing that OWRD doesn’t have the resources to analyze the data, which would likely be used against irrigators in litigation.

 

Source: Capital Press

Texas dairy industry expands production

The United States Department of Agriculture recently reported that milk production in the top 23 U.S. states during December was up 2.4 percent.

Texas is the sixth largest dairy-producing state, and gaining fast on Pennsylvania, who is currently number five.

A steady increase that Darren Turley, executive director of the Texas Association of Dairymen, said will continue to grow as the industry gets closer to the 100 million gallons per month mark.

“We are one of the few places in the country where there’s expansion happening in dairy plants. Nowhere else is seeing new growth and development of dairy plants like we are in Texas,” Turley said.

This trend is due to the potential for future growth led by positive prices and production in 2016, Turley, an Erath County Farm Bureau member, said.

“Texas is just one of the places in the country that can still have wide open spaces and resources available for additional production,” he said. “I think we’ll see Texas producers continue to advance in the industry and be able to produce more milk per cow.”

Turley noted that although the Lone Star State has fewer than 400 dairy farms, it won’t stop Texas dairymen from staying competitive.

“There are some concerns with the new president not working with the Trans-Pacific Partnership as we were hoping to try and increase our exports some, but we’re fortunate that we have a growing state and our fluid milk and cheese sales continue to be strong,” Turley said. “However, the outlook for 2017 is positive on pricing, as stocks and sales are pointing toward a good year for milk prices and products.”

Another phenomenon helping increase dairy sales—Greek yogurt. Texas dairy farmers are seeing a big increase as consumers are reaching in the dairy case for Greek yogurts, according to Turley.

For 2017, USDA additionally raised the forecast for milk cows by 5,000 to 9.365 million head. Higher milk prices and relatively low feed costs are expected to encourage greater expansion of herds.

Source: texasfarmbureau.org

A2 Milk says lift in dairy prices may impact in FY2020

A2 Milk Company said recent increases in dairy pricing will have an impact on gross margin percentages in the 2020 financial year but it doesn’t anticipate any significant impact this year.

Dairy product prices rose for the ninth straight time in the overnight Global Dairy Trade auction. The GDT price index added 0.8 percent from the previous auction two weeks ago and average prices are now up 28 percent since the auction on 20 November.

“We do not anticipate any significant impact to gross margin percentage during FY19 as a result of recent increases in dairy pricing as reflected in Global Dairy Trade Indices. However, these increases are likely to have some impact in FY20,” A2 said in a presentation for investors in Sydney published on the stock exchange. Its financial year runs to 30 June. Gross margin in the first half of the current financial year was 55.6 percent.

A2 Milk reiterated that it expects the group revenue growth rate in the second half to continue broadly in line with the first but second-half earnings before interest, tax, depreciation and amortisation margins will be lower. Full-year ebitda as a percentage of sales will be 31 to 32 percent due to marketing investment, investment in organisational capability and the weaker Australian dollar versus the kiwi dollar.

Revenue lifted 41 percent on the year in the first half to $613.1 million while ebitda was up 53 percent at $218.4 million.

Regarding the third quarter, A2 said its marketing programme is on track in China and it continues to strengthen its infant formula market share position. In Australia and New Zealand, it reiterated that it has not experienced any impact to infant formula sales from new e-commerce or cross border e-commerce regulations in China. In the US it cited “continuing positive momentum” in sales velocities and distribution growth for liquid milk.

First NZ Capital search analyst Tristan Joll said A2 has done “an excellent job of creating and managing demand for its A1 protein-free dairy products. The outcome is a business which has passed-through $1 billion in revenue with free cash flow that can support growth, upstream investment and potential capital returns. In our view, the outlook for the balance of full-year 2019 continues this momentum on.”

He rates the stock at neutral but lifted his 12-month target price to $14 in a note published Wednesday. The stock last traded $14.58 and is up 31 percent so far this year.

“Given the stock is trading at 12 percent above FNZC’s revised spot discounted cash flow or DCF and on 30 times forward earnings per share “we view the stock as a more balanced investment proposition,” said Mr Joll.

 

SourceNewsroom.pro

Struggling dairy farmers push for control of milk supply

Some dairy farmers advocated Tuesday for controlling the supply of milk to increase prices as producers and officials discussed how to support the struggling industry at a two-day summit.

Dairy farmers are in their fifth year of low milk prices. Vermont has lost more than 400 dairy farms since 2008, with the total dropping from 1,100 11 years ago to 694 last month. Wisconsin lost 691 dairy farms last year alone.

“There is so much at stake if we don’t turn this around for our rural communities,” said Vermont Agriculture Secretary Anson Tebbetts.

About 240 people attended the summit in Jay, Vermont, including 125 farmers and the New York agriculture commissioner.

The presentations from farmers and industry experts included how to run a dairy in a global market, how to diversify dairy operations, and how local dairies affect local economies.

“They buy supplies,” said Tebbetts of the farmers, “they support stores, they’re on the fire department, they are the EMTs, they’re people who volunteering, they’re on select boards, school boards and when a farm leaves some of that goes away.”

Some farmers created a petition seeking support for a national milk supply management program to disseminate at the conference.

The details of the program have not been determined, but it would set a base level of production for each farm and create incentives for farmers not to overproduce, Kara O’Connor of the Wisconsin Farmers Union. That could be met with opposition since it could raise the price of milk for consumers — even if only a small amount.

“We’re inviting people to consider whether consumers might pay a few cents more for a gallon of milk in exchange for saving hundreds of dairy farms per year and paying less in taxes for government dairy programs,” said O’Connor, who spoke at the event.

Other groups suggested compensation for farmers for their environmental stewardship; educating consumers about farms, possibly through television segments featuring farmers talking about their operations; and subsidizing farms with tourism dollars.

“We have a huge tourism industry,” said farmer Leon Corse. “We need to somehow take some of those tourism dollars to subsidize dairy to get us through this issue that we’re having now because if dairy dies in 20 years we’re going to wish that we had saved it because tourism is going to die, too.”

Source: startribune.com

USDA: Dairy farms take big hit in 2018

The United States lost 2,731 licensed dairy farms from 2017 to 2018, a drop of 6.5 percent, according to a U.S. Department of Agriculture report. Forum News Service file photo

It’s no secret that the U.S. dairy industry is suffering. New statistics help to document the extent of the pain.

The United States lost 2,731 licensed dairy farms from 2017 to 2018, a drop of 6.5 percent, according to a U.S. Department of Agriculture report.

The percentage loss was even worse in Minnesota, where the number of dairy operations fell from 2,380 in 2018 to 1.980 in 2017, a 10.2-percent decline, according to USDA.

Blame a further decline in already poor profitability. The median dairy operation tracked by the University of Minnesota Extension earned less than $15,000 in 2018, down from $43,000 in the previous year, according to Minnesota Extension.

Median is the middle number in a list of numbers.

Help is needed quickly, Minnesota dairy farmers say.

“Minnesota dairy farmers and the local businesses they support are depending on much needed relief this year. Minnesota loses if we lose another 10 percent of dairy farmers – the time to act is now,” the Minnesota Milk Producers Association said in a written statement.

In response, the milk group has made three proposals now working their way through the Minnesota Legislature. They are:

  • Providing dairy farmers with long-term tax relief when they sell to cooperatives.
  • Creating state rebates for eligible dairy farmers enrolled in the federal dairy margin coverage program.
  • Awarding state grants to dairy farmers who have implemented conservation practices.

The dairy industry has been struggling with poor prices and profitability for four years. Financial conditions deteriorated even further in 2018 after U.S. trade policies led to retaliatory tariffs on U.S. dairy exports, cutting into sales to foreign consumers. That’s contributing to the loss of dairy farms nationwide, with relatively small operations in the East and Midwest especially hard hit, according to USDA statistics.

State numbers

Wisconsin, which still leads the nation in the number of dairy farms, had the biggest numerical decline, falling from 9,090 in 2017 to 8,500 in 2018, a loss of 590 operations.

Other states with big numerical declines were Pennsylvania, which lost 370 farms; New York, which lost 280; and Michigan, which lost 230.

South Dakota and Montana lost dairy farms, too.

The number of licensed dairy herds in South Dakota fell from 225 in 2017 to 215 in 2018.

In Montana, the number of dairy farms dropped from 65 in 2017 to 60 in 2018.

North Dakota’s licensed dairy herds held steady at 80.

Despite the drop in the number of dairy farms, 2018 U.S. milk production in the 23 major dairy states stood at 218 billion pounds, 1 percent more than in 2017.

That reflects the longstanding trend of increasing per-cow production. In 2018, milk production per cow averaged 23,149, 235 pounds more than in 2017.

USDA also reported that the average number of milk cows on U.S. farms in 2018 stood at 9.4 million head, down 0.1 percent from a year earlier. Even so, the average annual number of cows has increased 2.1 percent since 2009, which, along with increased per-cow production, has contributed to excess milk supplies and poor prices.

California, home to a number of extremely large dairies, continues to lead the nation in milk production. Farmers in the state produced 3.51 billion pounds in 2018, up from 3.48 billion pounds a year earlier.

Minnesota ranked seventh, with 2018 milk production of 848 million pounds, up from 835 million pounds a year earlier. Why the increase in milk production despite the 6.5-percent decline in the number of farmers? Milk production per cow rose from 1,835 pounds in 2017 to 1,885 pounds in 2018.

South Dakota farmers produced 235 million pounds of milk in 2018, up from 221 million in 2017. Again, increased per-cow production more than offset the number of lost farms.

North Dakota and Montana were not among the 23 states included in USDA’s annual milk production statistics.

Source: thedickinsonpress.com

 

“Westland dairy co-operative created its own demise”

Keith Woodford explains how the Westland dairy co-operative created its own demise, with sale to Chinese company Yili now the best and only realistic strategy

The approaching demise of Westland Co-operative Dairy (trading as Westland Milk Products) has come as a surprise to many people.  It should not have done so.  At the very least, either a partial sale or major joint venture has been inevitable for some years. Survival as a co-operative is now impossible.

Most of the people I talk to think the sale to Chinese company Yili is a very bad idea. West Coasters do not like it. Even Minister of Agriculture Damien O’Connor is of that opinion. And if a sale really is necessary, then the common perspective seems to be that it should be a local company.

In response, I say ‘dream on’. 

The die was cast many years ago.

There is no local company with the strength to take over Westland’s debt and operations. That includes Fonterra which is itself in asset divestment phase.

Quite simply, the Westland co-operative has got itself into a dreadful mess with too much debt and a non-competitive milk price relative to other companies.  This is a serious matter for all West Coasters given that the Westland co-operative is the biggest employer on the Coast.

The root of that problem has been steadily developing over the last 17 years.  Once Westland got on the slippery path it could not find its way back to firm ground.

As the proverb says, success has many parents but failure is an orphan. So, no-one is going to put up their hand and say ‘mea culpa’.

However, all of the Westland directors for the last 17 years should be asking themselves ‘where did we go wrong?’. Where did it all start and when were the last opportunities to get back onto firm ground? 

Arguably, the answers to these questions are no longer relevant to the future of Westland itself. It’s too late to make any difference. But they are relevant to the directors of every other New Zealand co-operative business. There are lessons to be learned.

I have always been a strong believer in the role of co-operatives within agribusiness. For quite some years I taught a course at Lincoln University on co-operatives.

Co-operatives can help farmers maximise the selling price for their products and also minimise the cost of specific inputs. They change the power balance between farmers and those who are further along the value chain towards the market.

However, co-operatives can only be long-term successful if they show financial discipline. That means making sure there is always enough money left in the kitty for capital expenditure. It also means keeping a rein on managers who are driven by growth at the expense of company stability, and not being fooled by a company’s own PR.

 The Westland dairy co-operative began its modern-day life in 2001. That was when the New Zealand Dairy Board was disestablished and Westland chose to go it alone from Fonterra. Westland was paid $84 million for its share of the Dairy Board and it thereby started its modern life with minimal debt.

 I say ‘modern life’ because the Westland dairy co-operative actually goes back to 1937. However, prior to 2001 it did not market its own products. The Dairy Board did that for them.

The first big mistake of the modern Westland co-operative was that they stayed with a traditional capital structure of cheap shares with no capital gain. The mantra was ‘cheap-in and cheap-out’.

However, Westland always had ambitions to grow its business. Way back in 2001 I led a team from Lincoln University that was tasked by the co-operative with assessing the scope for increased milk production on the Coast.

We analysed the soil maps and overlaid existing farm land use with GIS mapping. We had some debate about the suitability of some soils, but the overarching message was clear. There was indeed great scope for expansion.

Westland did not ask us to address the issue of funding the necessary increase in processing capacity. Westland could themselves see that they had plenty of borrowing capacity. However, Westland got carried away with reliance on debt. It became a slippery path.

Westland’s cheap-in and cheap-out policy meant that farmers supplying new milk had to make a one-off capital contribution of only $1.50 for each additional kg of annual Millksolids production. That was crazy. And there lay the seeds of Westland’s eventual demise.

Although the seeds were sown back in 2001, the sprouting shoots of trouble were not evident until about 2009. Even then, there was time to change the policy and require new production to be equity funded at say $4 or thereabouts. But it did not happen.

This capital policy was highly beneficial for some major corporates, including Landcorp. It meant there was a wealth transfer from existing family farms on the Coast to these expanding businesses.

I remain puzzled as to why Westland’s external directors did not argue for increased capital contributions.  Perhaps they did, but if so, they did not argue hard enough.

Westland could still have survived with its low capital contributions, but only if everything went well. The capital structure left no resilience to withstand misfortune.  Lack of retained earnings made the situation worse.

One such misfortune occurred during the global financial crisis. Westland’s currency-hedging skills were inadequate. To its cost, it became an accidental speculator. That was a management mistake, but perhaps the external directors, with their financial background, should once again have been looking more closely.

Westland also lost a huge opportunity in 2009, when, following the tragic death of CEO Scott Eglinton, the new CEO reversed the policy of moving to A2.

To place the A2 issue in perspective, in this current year, The a2 Milk Company should make a net profit well in excess of $300 million, all from about 20 million kg A2 Milksolids produced by Synlait farmers. If Westland had continued with its A2 policy, then it could by now have been producing more than 50 million kg A2 Milksolids per annum under its own banner. The economics of West Coast life would have been very different.  I tried in 2009 without success to convince the new CEO to stick with the A2 policy.

Westland’s most recent problems stem from expansion into Canterbury, the associated debt, some cost over-runs, and poor performance of value-add investments. Those value-add outcomes illustrate that value-add is harder than it might seem.

Without the Canterbury expansion, Westland could probably have survived.

To those who now want to criticise the proposed sale to Yili, I say ‘think again’, and do that thinking in the real world.

Yili has been investing heavily in its Oceania (Waimate) operations and is financially strong. It has given ten year guarantees to match the Fonterra price.  It has the supply chains in place through to Chinese consumers. 

There is no local company that can match the Yili offer.

Yes, we can continue to regret Westland’s spilt milk of the last 17 years, but it is also time to move on. Westland’s farmers now need to focus on reducing their own farm debts to sustainable levels. These next ten years will indeed go quickly.

 

Source: Interest.co.nz

Arizona dairy farmer would equate border closure to losing 30% of paycheck

From electronics to dairy, Arizona sells more goods and products to Mexico than any other country. So what will local farmers do if the ports close?

Boyle belongs to a co-op, the United Dairymen of Arizona. And Mexico is their biggest trade partner.

“We ship a variety of products into Mexico, on a daily basis,” Boyle said. “Whether it’s fresh cream, butter and a whole variety of dried products.”

Boyle said he and his co-op peers export about 40 percent of the dairy products they produce. Two-thirds of that goes to Mexico.

“With it being shut down, those products would just back up,” Boyle said. “The problem is we make that product every day. Milk doesn’t slow down. We don’t stop producing milk one day.”

And he said they’re still trying to recover from tariffs one year ago.

“Now a shutdown of the border would almost make that seem insignificant,” Boyle said.

He added that this comes at a time when Arizona dairies are already struggling. He said in the last year, eight farms, or about 10 percent, have closed in our state.

Boyle they’d have to find a home for the products that couldn’t be exported here in the U.S., but that would likely drive prices down.

“We employ thousands of truck drivers. We have on-farm employees in the thousands. Every one of their jobs would be at risk,” Boyle said. “You’d struggle to survive.”

Source: azfamily.com

Minnesota dairy farmers struggle to find workers

Staci Sexton keeps busy at her dairy farm near Millville.

“My dad, technically, kind of retired this year,” she said. “Mom’s not retirement age yet.”

That means the bulk of the work on her dairy — her parents currently own 60% of the dairy operations on their 300-acre, 127-head dairy, and Staci owns 40% — falls to Staci and her youngest brother, Lance Sexton.

Well, and her mom. And the “neighbor kid.”

And that’s where the trouble looms, Staci Sexton said.

The “neighbor kid,” a high school student who milks the herd on weekend nights, is the lone non-family employee, giving the Sexton clan a night off. “We take a night off, swapping on the weekend, my brother, myself and my parents,” she said.

Before this “neighbor kid” there was another one, Sexton said. When that part-time worker graduated high school, he bequeathed the job to his friend who often tagged along to help out. But when the current “neighbor kid” finishes high school, Sexton doesn’t see another one taking his place, the Post-Bulletin reported.

Caring for the combined herd of her business and her parents’ business — called Schoene Kuh (German for “Beautiful Cow”) and Irish Ridge Dairy, respectively — is really a two-person job, she said. Milking, feeding and caring for upward of 120 cows can be a lot for just one person. Too much, really.

On a short-term basis, Sexton said she can handle the herd on her own. But when she and Lance take over the work completely, they’ll need that person who fills in from time to time to give a little respite when the other one is gone, sick or needs to go to a meeting.

Sexton said she remembers when she was the “neighbor kid.” Her junior and senior years of high school — plus some holidays and summers in college — she worked for Kevin Siewert, who’s Hyde Park Holsteins is just a few miles away near Zumbro Falls.

Siewert, who’s milking herd of 520 is more than four times the size of Sexton’s herd, has eight full-time employees and four part-time employees.

“As you have more cows you have more help and you have to pay people,” Siewert said. “If you’re on your own, you’re on your own.”

With about 200 head to milk, Alan and Bill Miller at Little Red Dairy near Millville employ four part-time workers who help with the daily chores and milking.

Alan Miller recently started making cheese curds, which also involves packaging, distributing and marketing the tasty treats. Some of that work, particularly the marketing, is taken by his wife.

“We’ve been very fortunate with good help,” Miller said, but added, “It’s hard to find a replacement, or someone who just wants to work in general.”

Sexton said she understands the difficulty. Her “neighbor kid,” she said, is responsible and reliable. That, she said, isn’t always the case.

And while she knows the local schools have agriculture programs where they offer some credit for job experience, her farm is “a little far out for those schools.”

“Long term, I guess it’s going to be hard when my parents want to retire,” she said. “I think it’ll be a little tougher, especially in the summer when you want to get crops done and you still have to mix feed or milk cows.”

But for that day-to-day, every week work, she said, the farm just doesn’t need a full-time employee. And, in a way, that’s good.

“It takes us about two hours to milk,” she said, adding that her part-time teen helper has a friend who lives on a larger dairy where the milking takes significantly longer. “He says, ‘I don’t think I could milk for that long.'”

Source:  kare11.com

Can the world quench China’s bottomless thirst for milk?

China’s leaders have championed milk as the emblem of a modern, affluent society – but their radical plan to triple the nation’s consumption will have a huge environmental cost.

Beijing-based film-maker Jian Yi, now 43, clearly remembers the arrival of fresh milk in his life. It was an image of it, not the real thing. “It was the 1990s, and I first saw it in an advert on TV. The ad said explicitly that drinking milk would save the nation. It would make China stronger and better able to survive competition from other nations.”

Like most ethnic Han, who make up about 95% of the population, Jian was congenitally lactose-intolerant, meaning milk was hard to digest. His parents did not consume dairy at all when they were growing up; China’s economy was closed to the global market and its own production very limited. Throughout the Mao era, milk was in short supply and rationed to those deemed to have a special need: infants and the elderly, athletes and party cadres above a certain grade. Through most of the imperial dynasties until the 20th century, milk was generally shunned as the slightly disgusting food of the barbarian invaders. Foreigners brought cows to the port cities that had been ceded to them by the Chinese in the opium wars of the 19th century, and a few groups such as Mongolian pastoralists used milk that was fermented, but it was not part of the typical Chinese diet.

As China opened up to the market in the 1980s, after Mao’s death, dried milk powder began appearing in small shops where you could buy it with state-issued coupons. Jian’s parents bought it for him because they thought it would make him stronger. “It was expensive, I didn’t like it, I was intolerant, but we persuaded ourselves it was the food of the future,” he said. “You have to understand the psychology here – there is a sense in China that we have been humiliated ever since the opium wars, but that now we are no longer going to be humiliated by foreign powers.”

When the People’s Republic of China was born in 1949, its national dairy herd was said to consist of a mere 120,000 cows. Yet today, China is the third-largest milk producer in the world, estimated to have around 13m dairy cows, and the average person has gone from barely drinking milk at all to consuming about 30kg of dairy produce a year.

In a little over 30 years, milk has become the emblem of a modern, affluent society and a country able to feed its people. The transition has been driven by the Chinese Communist Party (CCP), for which milk is not just food, but a key strategic tool. The party’s claim to a monopoly on power is based on the principles of socialism. As it has tempered that socialist ideology with elements of a market economy, the legitimacy of the one-party state has instead depended on delivering the capitalist promise of increasing material wealth. The fact that people can afford animal produce is a visible symbol of the party’s success. Making animal produce, particularly milk, available to everyone across the country is a way of tackling potentially destabilising inequalities that have arisen as China has developed between the big cities and some of the poorest rural areas. In the poorest regions, nearly one in five children are still stunted, or short for their age, from lack of adequate nutrition.

The party’s current, 13th five-year plan identifies one of its top priorities as shifting from small-scale herds to larger industrial factory farms to keep its population of 1.4 billion in milk. Official guidelines on diet recommend people eat triple the amount of dairy foods that they typically consume currently.

President Xi Jinping has talked in speeches about making a “new China man”. In 2014, he visited a factory owned by China’s largest dairy processor, Yili, and exhorted its workers to produce good, safe, dairy products. That new China man is expected to be a milk-drinker.

The reinvention of milk as a staple of modern China has required a series of remarkable feats, not least of which was to overcome the people’s lactose-intolerance and create a market for milk where there had been none. It has involved privatising farming, allowing processing companies to become corporations, and even converting desert areas into giant factory farms.

Now the global impact of China’s ever-expanding dairy sector is causing concern in other countries. Dairy farming requires access to vast quantities of fresh water: it takes an estimated 1,020 litres of water to make one litre of milk. But China suffers from water scarcity, and has been buying land and water rights abroad, as well as establishing large-scale processing factories in other countries.

Farmed animals are also one of the most significant causes of man-made climate change. Livestock currently account for about 14.5% of the world’s total greenhouse gas emissions, more than the entire global transportation sector. Cattle account for more than two-thirds of those livestock emissions. Ruminants have a disproportionate impact because their digestion releases vast quantities of methane, a particularly potent greenhouse gas, and their excreta produces nitrous oxide. On top of that, large areas of forest are being cleared to make more land available for crops to feed farm animals, releasing carbon dioxide. China already imports 60% of the total volume of soyabeans traded worldwide, to make the high-protein feed it needs. Its demand for soya is a major driver of deforestation of the Amazon and Brazilian savanna. Delivering milk across long distances to urban supermarkets produces yet more emissions.

According to a study by academics in China and the Netherlands, if Chinese milk consumption grows as forecast, using its current farming methods, the global emissions from dairy production alone will increase by 35% and the land needed to feed cows for China would have to increase by 32% in the next 30 years. China’s ambitions to triple its milk consumption “will have major global consequences”, according to the study’s lead Dutch researcher, Gerard Velthof. China’s own capacity to produce more is limited by its lack of resources. So, if the additional milk to meet demand in China were mostly imported, we would have to find two new countries the size of Ireland and give them over completely to producing feed just for cows milked either in or for China.

Jian believes China’s new obsession with milk took hold with the 1984 Olympic Games in Los Angeles. When he made a documentary about food in China a decade ago, he interviewed people of his parents’ generation, who repeatedly mentioned watching the games. New mass ownership of television sets had allowed Chinese people to see real foreigners, as opposed to actors, live on TV for the first time. “It made a huge impression on people,” Jian recalled. “They were amazed to see how strong and tall foreigners were. They could jump twice as far, run twice as fast. They concluded that Americans ate a lot of beef and drank a lot of milk and Chinese people needed to catch up.”

Chinese state planners were also impressed by the way the Japanese had developed. When the US defeated and occupied Japan after the second world war, they had introduced feeding programmes in Japanese schools to give children milk and eggs. Average heights increased within one generation.

By 1984, Deng Xiaoping’s market reforms, which had begun just a few years earlier in December 1978, were ushering in a period of unprecedented economic growth. GDP increased an average of about 10% a year until 2010. The first phase of reforms ended collective farming in agriculture, opened industries up to foreign investment, and allowed individuals to start businesses. A new “household responsibility programme” allowed families to farm individual plots of land and sell surplus for profit once again. These smallholders were encouraged to keep a few cattle for milk to increase their income while boosting domestic supplies. The effect was dramatic. The amount of food produced rose rapidly and, over the next two decades, would grow by an average of 4.5% a year.

As populations urbanise, they have always moved up the food chain, making the transition from diets largely based on grains and vegetable staples to ones in which meat, dairy, fats and sugars feature more prominently. China has followed the same trajectory. Dairy consumption grew rapidly through the 1980s and early 90s. The western model of retailing based on supermarkets with longer supply chains arrived in cities, too, making it possible for producers to distribute milk further and easy for shoppers to buy it.

As incomes increased, people could afford refrigerators in their homes and wanted milk to put in them. For factory employees working long hours, dairy foods represented a convenient way to get nutrients without having to cook. Technology to produce UHT milk with longer sell-by dates, imported in the late 90s, gave consumption a further boost. Since fermenting milk helps break down lactose, new yoghurt products were also marketed to overcome lactose-intolerance.

From the mid-80s on, a number of leading dairy transnationals such as Fonterra, Nestlé, Danone and Arla made major investments in China to grow their brands there. Chinese dairy processors, supported by the state and with access to new foreign capital, also spent millions – creating demand through advertising first, and then looking to meet supply second. The arrival of western-style fast foods such as McDonald’s in the early 90s brought cheese into the everyday Chinese diet. The end of the decade saw Starbucks opening in Beijing and western-style coffee-shop culture take off, making milk fashionable. Milk represented modernity, progress and the rise of China.

By the end of the 90s, the eastern cities of China were booming, and people were consuming more dairy foods, but a gap was growing between there and the interior, where people were much poorer and still drank little milk. The state began new campaigns to make farming more efficient and to speed up overall development in the less prosperous western regions. Promoting the industrial-scale farming of intensively fed cows in new hi-tech facilities in Inner Mongolia was part of that push for modernisation.

The party’s five-year plans, from the late 90s on, introduced a raft of supports for dairy businesses. The state facilitated loans to farm companies to buy cows, gave processing companies tax breaks and issued tens of millions in national debt funds to improve breeding stock and milking and packaging facilities. China’s accession to the World Trade Organisation in 2001 gave the dairy trade a further boost. The drive for dairy was highly effective. In 1990, urban Chinese were consuming about 4kg of dairy produce on average a year. By 2005, that had skyrocketed to 18kg per person per year. In the countryside, consumption lagged, but in that same period it nevertheless rose from 1kg per person per year to nearly 3kg. Inner Mongolia became the leading source of milk and now accounts for a quarter of the country’s total dairy production.

To spread the milk habit further, the state set about creating new generations of dairy consumers. Babies are born with the capacity to make lactase, the enzyme needed to digest the lactose in milk, but generally lose it when they are weaned in infancy. East Asian people are also genetically predisposed to lactase-deficiency. Older generations of Chinese, whose diet has not featured dairy produce, are mostly intolerant of lactose, but if infants never stopped drinking milk, they could maintain some capacity to produce lactase and avoid suffering the bloating that put people off it.

So health professionals in vaccination clinics were trained to tell parents to feed their children milk. The state initiated a school milk programme in 2000 to give a daily cup of free milk to urban children, and later extended it to rural areas. Premier Wen Jiabao visited a dairy farm in 2006 and wrote that he had a dream that everyone in China, and especially children, should have one jin (or 500g) of milk a day. New official nutrition guidelines were issued recommending more milk and dairy foods in the diet.

Drinking milk was deliberately associated with athletic prowess and national pride. Yili, which has its headquarters in Hohhot, where the local Inner Mongolian state is a shareholder with significant control, was designated official partner and supplier of milk to the Olympics in 2008. Its slogan was: “With me, China is strong.”

Mengniu, China’s second-largest dairy producer, is also a state-controlled private enterprise based in Inner Mongolia. It has spent millions sponsoring televised sport, as well as China’s version of Pop Idol and the Chinese space programme. It was an official sponsor of the 2018 football World Cup, and its advertisements were ubiquitous during matches, with the unforgettable slogan: “Power of nature, born for greatness.”

Jian’s parents now drink milk regularly, although he has himself become vegan. Concerned about climate change and animal welfare, he runs the China Good Food Fund, a project to promote sustainable food. “My mother has diabetes and has been told to diet, but the doctors say she must still have milk to make her strong,” he said. “The Chinese have learned to drink milk in the same way that they learned to drink Coca-Cola. Cola seemed weird at first, it tasted odd, it was brown, it had horrible bubbles … milk was the same, but we were drinking something in our imagination; we were drinking the western lifestyle, what was modern,” he told me.

It seemed as though nothing could stop the inexorable rise of milk in China, but then scandal struck. In 2008, after a decade of explosive growth, it emerged that raw milk from 22 dairy companies, including Yili, Mengniu and many other leading processors, had been adulterated with melamine, an industrial chemical used in plastics. It had been added to watered-down milk to cheat the protein tests on which the price paid to farmers was based. The melamine combined with uric acid to make kidney stones, which cause acute damage to the urinary tract, and excruciating pain, particularly in babies and young children. Nearly 300,000 children across mainland China suffered serious illness. Six babies died. Tens of millions of infants had to be checked by doctors as their parents panicked about their safety. Sales of Chinese milk collapsed overnight.

Top executives from one large processing company, Sanlu, turned out to have known about the adulteration for months but had covered it up, paying for internet search engines to censor negative reports about its products. While the 2008 Beijing Olympics was projecting a positive image of modern China, local officials delayed reporting the crime to higher authorities. It was the New Zealand dairy giant Fonterra, which had a 43% shareholding in Sanlu, that blew the whistle to its own government, eventually forcing the Chinese authorities to act. Sanlu became the focus of enforcement: its managers were prosecuted and jailed, a farmer and middleman were tried and executed. Fonterra had to write off NZ$139m (£71m) of investment. Most of the blame, however, was put on small farmers and largely unregulated middlemen who collected milk from communal milking stations.

The state has since made sweeping changes to safety regulation and tightened inspection. There have, however, been repeated food scares linked to contaminated milk and other products in recent years. Consumers remain deeply suspicious about the safety of local food, fearing adulteration, residues from the overuse of agrochemicals, toxins from the pollution of ground water and air by industrial waste and excessive use of antibiotics. Many affluent parents still only buy foreign brands of milk for their young children.

When it was imposing its one-child policy, the CCP made a social compact with the people: while family size might be limited, the state would make sure that each couple’s treasured offspring would be as strong as it could make them. In the 2000s, feeding children milk took on great importance in maintaining the policy.

In the hutong – the narrow alleys of old Beijing, with their traditional single-storey courtyard houses and communal public toilets – one often sees clusters of three or four ageing grandparents playing with a single small child whose parents are out at work. A grandmother in her 60s shopping in Jinkelong supermarket chain told us she bought milk everyday for her grandchild. The child’s parents did not drink cow’s milk, but soya milk instead, while she herself did not drink it at all because she was lactose-intolerant, but she thought it was good for the child to build his strength and physical development. Did she feel confident it was safe, after the melamine scandal? She laughed and said: “No, but I choose the bigger brands and I switch between them a lot; so if we’re being poisoned at least we are not storing up one kind.”

Since the melamine scandal, imports of foreign milk powder have soared. To stop agents buying too much milk powder for resale in China, shops in Australia imposed bans on bulk purchases of infant formula. New Zealand has also had periods of rationing formula. BHG, an upmarket Beijing supermarket in a shopping mall near an affluent residential area, had prominent displays of UHT and milk powder brands from Germany and New Zealand, along with gift packs of small cartons in luxury packaging. The fresh milk on display made much of being pure, sourced from Inner Mongolia with its bright green pastures.

To rebuild confidence in Chinese produce, the state has accelerated the industrialisation of production and investment in large-scale farms. Before the scandal, 70% of dairy farmers in China had herds of 20 or fewer cows. Six years after, the number of small herds had dropped to 43% and industrial units with more than 1,000 head of cattle accounted for nearly 20% of the dairy farms. Smallholders were encouraged to move their cattle into special designated zones – known as “cow hotels” – with expert technicians on hand. At the same time, the state imposed tough licensing on farmers, forcing many with smaller herds out of dairy production altogether.

Last October, I was taken to one model operation in Inner Mongolia that shows the trend towards hi-tech, more intensive farming. The China Shengmu Organic Dairy was first conceived in 2009 as a response to the melamine poisoning scandal, and as a pioneering experiment in tackling environmental problems. The company is an example of the close relationship between private enterprise and state that characterises the socialist country’s engagement with capitalism. Farmland was nationalised under Mao and remains in state control. The local Mongolian state allowed Shengmu to rent land and was involved in negotiating rights with nomads and local farmers, some of whom now work with its livestock, its manager Yan Shengmao told me. Its founding directors were executives from Mengniu. They were given the go-ahead by state regulators for a public offering on the Hong Kong stock exchange in 2014, and fresh capital flowed in from foreign and Chinese state banks and private equity investors. The idea was to test the market for a higher-quality, more expensive sort of home-grown production.

Despite Inner Mongolia’s pastoral image, which is a big selling point in milk advertising, the traditional nomad herder way of life has been decimated over decades by overgrazing, by policies of compulsory settlement, enclosure and relocation, and by industrial development. The region’s grasslands are now severely degraded, grazing is restricted, and the Gobi desert is encroaching. But in part of the region’s Ulan Buher desert, thanks to irrigation from the Yellow River and 90m recently planted trees, what was a landscape of giant sand dunes less than a decade ago has been turned by Shengmu into a farm for up to 100,000 Holstein cows, kept in 23 industrial units housing 5,000-10,000 each. Most of Shengmu’s cows have been bred from US stock, whose advanced genetic selection makes them very high-yielding. It is a confined animal feeding operation (CAFO), meaning the cows do not graze outdoors on pasture – even if it were available, such breeds are at the limit of their physiology and could not keep up with their energy needs by eating grass alone.

I was invited up to the office control centre where several giant screens filled one wall, some split into 36 CCTV images monitoring every corner of the unit. With no smell and no noise, the view felt more Truman show than real farming, but biosecurity rules prevented Yan from taking me around on the ground in person, he explained, so we zoomed in remotely instead.

In the centre image, a steady stream of cattle were filing on to a continuously rotating milking machine, slotting themselves into each of its bays without human intervention. A handful of workers in a pit below then checked their udders and briskly attached automatic suction teats. The computer-controlled milking machines record output per cow and release the suction when they detect that an udder is empty, at which point the cows back themselves out of the still-revolving platform and follow the bovine traffic back to their hanger-like barns. From a multi-storey watchtower outside we then surveyed the area around. Each Shengmu barn adjoins an open-air pen, and the cows were queuing up in the dry, cold air to relieve their itches on a whirring electric scrubbing brush.

Manure from the farm is collected, and then used to build soil in the desert, fertilising the surrounding new fields where fodder is grown in summer, instead of becoming the polluting slurry that is a serious problem in many CAFOs. The feed is supplemented by commodity imports from the US. When Shengmu’s founders first considered siting their project in the area, experts told them it could not be done, Yan said. “They thought it was too barren.” But now they thought they had kept the herd largely free of the disease that often affects such intensive production while changing the climate, and offering Chinese consumers premium milk they could trust.

Shengmu’s milk is processed in its own factory, where lines of gleaming imported stainless steel pipes and vats turn it into Tetra Paks of premium yoghurt and UHT milk. Its worker dormitory, amid bright green lawns, was quiet when I visited, as the factory was working at a fraction of its capacity. “We overestimated current demand for organic milk and have adjusted production,” Yan said.

In fact, Yili tried to take over the company in 2016, but failed to gain approval from the state. Then at the beginning of 2019, Mengniu made its bid for the Shengmu milk operation. Despite profit warnings, the factory serves another function. It advertises itself as a tourist centre – like several other large-scale farm businesses, it is not just a producer but also a marketing tool, and the Chinese public are encouraged to visit and see how reliably hi-tech and hygienic its dairy processes are.

Years of famine and constant food shortages are a living memory for older Chinese people, and are the spectre that still drives much of party policy today. Under Mao’s Great Leap Forward programme, which began in 1958, farmers had been forced on to collective farms and rural workers diverted away from fields into new industries and the building of infrastructure. The collectives were paid a fixed price for what they produced, but were not allowed to make a profit from any surplus. When mismanagement coincided with flood and severe drought in 1959, agricultural production collapsed. In the Great Famine that followed, at least 36 million people died. Then Mao’s subsequent decade of Cultural Revolution between 1966 and 1976 saw the relocation of millions of people. By the end of it, people in rural areas barely had enough to eat.

Maintaining the growth in prosperity from 40 years of market reform is of existential importance to the leadership, said Charles Parton, adviser on China to the House of Commons foreign affairs select committee and associate fellow of the Royal United Services Institute thinktank. “The legitimacy of the party is based on several pillars, but the first is economic. It’s the promise that the party will make you better off than you were before,” Parton told me. Meat used to be an occasional luxury; dairy was mostly not available, so if you can now afford both meat and milk regularly, you feel wealthier.

Food shortages and food prices that rise faster than wages are historic causes of civil unrest. “The CCP is obsessed with feeding this enormous population – it will go on growing until at least 2030. The reason it bangs on about food security and food safety is that it’s a potential source of instability. People come out on the streets about it. It really hits them if the milk they want to feed their babies is not safe.”

Preparing for the growth in its own demand, China has been buying up land and water resources along with dairies and processing factories across the world. The Belt and Road Initiative, Xi’s plan to build road, rail, cable, pipe and port infrastructure on an unprecedented scale to link China to resources and markets across the world, is at least in part about food security. Launched in 2013, it is expected to cost more than $1tn, and to cross more than 60 countries. It will enable China to access food resources more widely and, thanks to new digital networks, faster than ever before. The Yili group has already acquired huge dairy processing capacity in New Zealand and talks enthusiastically of being part of a Belt and Road dairy alliance, a new China-led milk road across the continents.

As the economy has slowed down, it is critical for the state to keep delivering on the promise that people will be better off than before. As Parton explained: “The message is that only the party can make China great again, putting it back in its rightful place at the centre of the world; only China has the right form of governance to deal with huge global challenges.” The party promotes “socialism with Chinese characteristics” on the basis that we face systemic crises such as climate breakdown that can only be fixed with the sort of long-term structural reform that is impossible within short electoral cycles or in unfettered markets where the profit motive trumps all else.

State ownership of the means of production and distribution has shrunk considerably; it now accounts for about 25-30% of business overall, and the party recognises that the private sector is the most dynamic. “But as good Leninists, you don’t let go of the main economic levers,” Parton said. The Chinese dairy sector is an example of the approach: leading companies such as Yili and Mengniu, and new ones such as Shengmu, are well capitalised with private shareholders and foreign investors, but the state retains control in various ways, by being a significant shareholder, giving preferential access to state-bank loans or state assets such as land or to listings on stock exchanges, and through internal party committees.

That has created tension with the west, which questions how open to the free market China really is. The leading Dutch cooperative bank, Rabobank, provides financial services to 17 of the top 20 global dairy companies, so its senior dairy analyst, Peter Paul Coppes, has an inside view of the sector. He has tracked the Chinese dairy market since the 1990s.

“It’s a very big and growing market, and the increase in dairy consumption is driven by the Chinese state. It is making sure that the essential parts of people’s expenditure, whether it’s food or fuel, are affordable,” Coppes said. “We did it in Europe. Now they want to take care of their food security, too.” He is sanguine about what this means for foreign investors. “There is a long-term interest for the Chinese state in foreign collaboration. They just won’t let you get control of production. You’ll have to settle for a minority shareholding.”

The Chinese diet has been transformed with extraordinary speed. The percentage of the population that was undernourished fell from 24% in 1990 to 9% in 2015, as per capita income soared by more than 2,000%, according to the UN’s Food and Agriculture Organisation (FAO). Now, however, like other emerging and developed economies that have adopted western eating habits, the country faces a new dilemma. Inadequate diets are still causing stunting in the poorest country areas, but now about a third of the adult population is overweight, while 6% is obese. China is having to deal with undernutrition and overnutrition at the same time.

“The sort of growth we’ve seen in just 40 years, and for a population of 1.4 billion, it’s never been seen in history. It’s tremendous,” said Shenggen Fan, director general of the Washington-based International Food Policy Research Institute. “The Chinese think that part of the reason why they are shorter than other nationalities is a lack of access to milk. If you drink a cup of milk a day, or have an egg a day, you will get taller. There is good evidence that animal-source foods reduce stunting.”

For Fan, the transformation has been personal. His parents and grandparents were farmers. “I was born in a poor village in Jiangsu province and we were hungry all the time. We really struggled. We lacked basic things – electricity, roads. When I grew up I never, ever had dairy products. I only saw fresh milk when I went to college.”

His grandmother saved the family from the Great Famine, he said, and he was born right after it in 1962. During the collectivisation period you were not to supposed to cook for yourself, but eat in the communal canteens. “My grandmother was smart – she saw it would not work, so she saved food for the whole family hidden around for a rainy day.” His father, a village leader when Deng’s reforms were introduced, was able to increase his income with livestock and cash crops. “We saw the market beginning to work.” That enabled him and his brothers to be educated and, when state restrictions on where you could live were relaxed, they were free to move to the cities and earn more, climbing the socio-economic ladder.

After 33 years in the west, Fan is soon to return to a university post in Beijing, to promote sustainable development. “The government has a very ambitious programme, Healthy China 2030, to make sure children have access to healthy food including dairy produce in all provinces. They are scaling up in China. I’m not against it, but industrialisation must be sustainable. China needs to make sure smallholders don’t lose out in the process. ”

Concerns around finite resources, the climate and the overuse of antibiotics, drugs and pesticides have now moved up the state’s agenda. Last October, in the grandiose, state-run Beijing Conference Center, the Chinese ministry of agriculture laid out what the CCP’s current priorities for farming are. Its chief director of animal husbandry, Ma Youxiang, addressed the second world conference on animal welfare, hosted by the International Cooperation Committee of Animal Welfare (a Chinese NGO) and the FAO, and co-organised with UK-based NGO Compassion in World Farming. Taking to the stage to the triumphal Star Wars theme, Ma described new challenges ahead. An ageing population with greater life expectancy, and the recent relaxation of the one-child policy to allow all couples to have a second child, would increase China’s nutritional requirements. In the tit-for-tat trade war with the US, retaliatory tariffs imposed by China on US soya had dramatically affected the price of animal feed, creating inflationary pressures in food.

“We shall promote the milk industry continuously,” he said. But going all out for growth whatever the environmental costs was no longer possible.

“The priority for livestock used to be just producing more. That’s not an approach we can take any longer. We have over 80m farm units, and many scattered family households. How do we make them more modern?”

While I was in Inner Mongolia, we were taken to tour one of the earliest hydroelectricity dams on the Yellow River, built in 1961 to control what had been frequent flooding, and to channel irrigation. In these upper reaches, the river’s water had powered heavy industry and made the desert bloom. The officials said there was plenty of water, but over-extraction has left other regions critically short. A decade ago, the Yellow River was failing to reach the sea for significant parts of the year. Since then, a digital monitoring and rationing plan has helped reduce contamination and keep it flowing once more but some experts question the sustainability of siting water-intensive industries such as livestock farming in areas of water scarcity and warn that China is heading for an acute water crisis.

“Eight of China’s northern provinces suffer from acute water scarcity, four from scarcity, and a further two, Xinjiang and Inner Mongolia, are largely desert. Ground water is falling fast. These provinces account for 38% of China’s agriculture, 46% of its industry, 50% of its power generation, and 41% of its population, so China is going to have to make some very difficult decisions about who and what gets the water,” said Parton. It will also continue to outsource its needs abroad.

Despite Xi’s Made in China 2025 campaign to increase domestic production for many commodities, milk is not included in that homegrown policy. “In the plans from the party, dairy is always very high on the agenda, but they don’t say it has to come from China,” said Coppes from Rabobank. If China’s demand for dairy triples again by 2050, as projected by state targets and some financial analysts, the typical Chinese person would still consume less than half of what the average European gets through. Given the size of its population, that nevertheless poses an increasingly urgent question: how many cows, and other livestock, can the world actually sustain?

 

Source: The Guardian

Dairy farmers hold fast in extreme weather

Most of the cows on Echo Dell Organic Farm have gotten through the winter and recent flooding unaffected. What farmer Calvin Yoder is worried about, however, is that the frost will have killed off his crop, which could mean he’ll take a hit economically next year if he’s required to buy feed.

Even as the region enters comfortable spring temperatures, Calvin Yoder still is worried about frost.

It’s not that Yoder, who handles the livestock at Echo Dell Organic Farm in Kalona, thinks the frost is going to come back anytime soon or that it would directly affect the cows on the dairy farm. He’s worried about what might already have been done by the frost.

“The thing we’re most concerned about would be the ice over the hayfields,” Yoder said, explaining his concern that the cold of January and February may already have killed plants.

Like many dairy farmers across southeast Iowa, Yoder is taking stock of the damage left by the hard winter while preparing for future weather threats such as flooding.

It won’t be until mid-April, when the crop starts to grow, that Yoder will know whether he’ll be able to have a viable harvest. If not, he’ll have to “reseed” the land, which is where he’ll take the biggest financial hit.

He estimates it would cost $100 per acre to reseed, which could put the farm a few weeks behind schedule.

“We have probably 100 acres of hay,” Yoder said.

In a regular year, he’s able to get “four cuttings,” meaning once a month, May through August, he’s able to harvest hay.

“We’re already having to buy feed because we didn’t get enough last year,” Yoder said. So if his hayfields don’t start growing, he could be in for another shortage this year.

The cows weren’t too hurt by the cold. Yoder lost two calves born in the cold and had to sell a few cows for meat after they were frostbitten, but it was not enough to move his bottom line.

At Hilltop Dairy Inc. in Mount Pleasant, Madison Roth said she and her fellow dairy farmers were more bothered by the winter cold than the cows were.

“Being a dairy farm, we have lots of facilities we can close up with doors or curtains,” she said. “The cows were very comfortable inside the whole time.”

The farm didn’t lose any calves over the winter. Those born during the coldest days were kept in the milk barn with the heater on, Roth said.

The latest weather threat that dairy farmers are monitoring is flooding. Roth said she hasn’t had any flooding, and Yoder said he’s seen only a little bit on the edge of his fields.

“To me the real disaster are the people who’ve got beef cattle out in Nebraska dealing with flooding,” Yoder said. “I’ve heard some of those guys have lost 40 percent of their calves.”

The record flooding earlier this month along the Missouri River killed at least four people, drowned livestock and closed dozens of roads in Nebraska and Iowa. Property losses were estimated at more than $3 billion in the two states.

 

Roth said the farmers she knows living along the Mississippi River and the Dubuque River have emergency evacuation plans in place for flooding. The plans would allow those farmers to bring their cows to other facilities to be milked temporarily. However, the biggest issue would be trying to keep the feed dry.

“Feed’s the most expensive thing on a farm for any farmer,” Roth said. “It’s our highest priority; we make sure to keep it fresh and keep it dry. We’re thankful we’re not on the western side of the state right now.”

Source:thegazette.com

Depressed Whey Export Volume Drags Overall U.S. Performance

January whey shipments to China the lowest in nearly seven years.

U.S. dairy exports continue to struggle in the face of strong competition and retaliatory tariffs in China and Mexico. Overall volume to China was down 41% from a year ago—including a 54% drop in whey shipments—while cheese exports to Mexico were off 20%. 

On the positive side, U.S. exports to milk powder to Mexico remained robust, and cheese shipments outside of Mexico were up 15%. In addition, exports of whey protein isolate (WPI) continue near historic highs. 

Overall, suppliers shipped 151,851 tons of milk powders, cheese, butterfat, whey products, and lactose in January, down 9% from January 2018. Total U.S. exports were worth $429.9 million, up 4%. 

Chart1 (2)-2


Whey exports in January were just 34,920 tons, down 28% from the previous year. WPC shipments were the lowest in four years (6,768 tons, -56%), while dry whey was off 28% and modified whey (permeate) fell to a two-year low. 

Total whey exports to China were only 9,593 tons, the lowest since February 2012. WPC sales barely topped 1,000 tons, down 86% and the lightest volume in more than eight years. 

Chart3 (2)-2


Whey shipments to Southeast Asia, Mexico and Canada were lower as well, offsetting increased sales to Japan. 

Cheese exports in January were 27,885 tons, up 3% from January 2018. Volumes have been relatively steady since mid-2018, registering between 26,000 tons and 29,000 tons in six of the last seven months. Lighter sales to Mexico were offset by record sales to Central America (mostly Guatemala) and increased shipments to South Korea (+29%) and Australia (+14%). 

U.S. exports of NDM/SMP totaled 49,386 tons in January, down fractionally vs. the year before. Most of the volume went to Mexico (28,177 tons, +38%), while exports to Southeast Asia continued to slump (13,359 tons, -18%, with lower sales to Indonesia and Vietnam). In addition, combined exports to China, Peru, Pakistan, Japan and the MENA region were just 2,477 tons, down 62%. 

(USDEC has adjusted official U.S. Bureau of Census trade data for NDM/SMP and WMP since June 2016 to account for shipments we believe are misclassified.) 

Lactose exports totaled 28,973 tons in January, down 6%. Sales to Southeast Asia rebounded (+16%), but shipments to China (-7%) and Mexico (-6%) were lighter. 

January export performance was mostly higher among other products. Whole milk powder (WMP), milk protein concentrate (MPC) and fluid milk/cream each posted double-digit increases. However, butterfat exports were off 1%, and food preps (blends) were the lowest in 15 months (daily-average basis). 

On a value basis, sales to China were down 20% in January, while sales to the Middle East/North Africa region were off 17%. This was offset by a 20% increase in sales to Mexico. 

On a total milk solids basis, U.S. exports were equivalent to 12.5% of U.S. milk production in January, the lowest figure in nearly three years. 

 

Source: U.S. DEC

Send this to a friend