Archive for Dairy Industry

Dairy farmers’ inspiring stories during COVID-19

While dairy farmers are often taken for granted, they are among the heroes of the pandemic, tirelessly working to provide food for our homes, schools and restaurants during unprecedented challenges. Dairy farming is more than hard work, though. In between caring for the cows and waiting for the rain to stop (or start), there is joy, hope and plenty of smiles to go around.

Enter ‘Where Goodness Grows,’ a six-part digital video series highlighting Land O’Lakes dairy farmer-owners with a behind the scenes look at the work they do and the lives they lead, on and off the farm. Amy Brown, co-host of iHeartMedia’s award-winning country music radio show, “The Bobby Bones Show,’ is hosting the series, introducing you to the farmers, their families and sharing their inspiring stories.

Click here for more information.

Synlait Milk forecasts higher earnings despite drop in annual profit

New Zealand’s Synlait Milk reported a 9 percent drop in annual profit on 28 September, but forecasts strong underlying core earnings for 2021 based on its core infant and lactoferrin business.

Synlait, which is part-owned by a2 Milk Company did not provide any profit figure for its fiscal 2021 guidance, but said it was targeting a “slight improvement on fiscal 2020”.

Reuters reports that the diary firm also increased its milk price forecast for the 2020-2021 season to NZ$6.40 per kg of milk solids (kgMS), up from its previous estimate of NZ$6.00 kgMS.

“While it is still early in the season, and commodity prices remain volatile, this reflects growing confidence in the season ahead,” the company said in a statement.

Synalit said that while global uncertainty continues regarding the coronavirus outbreak, it does not expect any disruption to manufacturing or demand for its ingredient and lactoferrin business.

Net profit after tax for the 12 months to 31 July came in at NZ$75.2 million ($49.15 million), down from NZ$82.2 million a year ago, due to higher investment made in new facilities and acquisitions over the past two years.

The company added that it was in the process of finalising a long-term supply agreement with a new, multinational customer for packaged products which is expected to have a positive impact on its earnings from fiscal 2023.

($1 = 1.5300 New Zealand dollars).

Read more about this story here.

Source: Reuters

As large dairies absorb the milk market, small farms seek a niche

After high school, Calvin Nisly, of Partridge, Kan., wanted to wash his hands of the family dairy. He enjoyed milking cows growing up, but after high school, he did not want to be tied down to a dairy farm. Eventually, his love for cows and living off the land won out.

Calvin owns Trails West Brown Swiss Farm, one of approximately 30,000 small dairy farms with fewer than 200 cows nationwide. When his father owned the farm, he was one of a much larger industry. Nationwide, in 1987, there were just under 150,000 small dairy farms.

After high school, Calvin received his master’s degree in social work and started practicing. That was, until he met his wife, Andrea, who is originally from Switzerland. After much consideration, the couple decided a farm would be a good place to raise their children.

Since Calvin was a third-generation dairy farmer, a dairy farm was what the couple decided on. From the beginning, it was difficult, but as the years passed, running a profitable dairy farm kept getting tougher and tougher.

Changing times

Calvin said he missed out on going to many of his children’s activities, as they took place almost always during his evening milkings. In contrast, while he was growing up, the schools geared activities around a farming schedule.

“When I was a kid, a lot of kids were dairymen’s kids,” Calvin said. “That’s not the case with my kids’ friends.”

Even though the business is rough financially, the Nislys said raising dairy cows is very rewarding. Each one of the cows is like family. From Ladyship to Butter to Nestle to Bonfire, each animal has a name and a unique personality, which goes along with their name.

“I get a lot of enjoyment out of my animals,” Andrea said. “They’re good company.”

Similar to nationwide numbers, in Kansas the number of dairy farms is dwindling, with larger farms producing more of the milk. According to the USDA, milk production in the state during August 2020 totaled 338 million pounds. This is up 7% from last year. The average number of milk cows in Kansas was 169,000 head — 7,000 head more than a year ago.

According to the Kansas Department of Agriculture, approximately 80% to 85% of the milk produced in the state is produced in western Kansas on 29 large farms.

“When the virus hit, the co-op market collapsed,” Calvin said.

Although, during some of this time, while sales for milk increased, prices dropped.

Brown Swiss

Since starting his own farm, Nisly raises Brown Swiss, even though his father raised Holsteins. Their 60-count size is typical of the amount of cows dairy farmers had when Calvin was growing up. But in 2013, according to the USDA, the midpoint size on the average dairy farm was 1,300 cows.

The Brown Swiss Association, which was established in 1880, has about 50,000 registered purebreds. Most Brown Swiss reside in Wisconsin, followed by New York and Pennsylvania.

“Brown Swiss are really a good cow,” said Norm Magnussen, executive secretary for the Brown Swiss Association. “They are docile and heat tolerant.”

Brown Swiss have higher butterfat and protein content, making them an excellent breed for producing cheese.

Magnussen said the only way to make money for a small dairy farmer is to go into a niche market, by making a specialty cheese, yogurt or milk product.

Along with being a part of Central Equity Milk Cooperative out of Missouri, Nisly Dairy Farm sells raw milk, as well as eggs from their free range chickens. They are also looking into making yogurt.

“Farming used to be a way of life,” Magnussen said. “Now, (Large) Farmers have become so efficient at making money. If you haven’t figured that market out, you’re going to go out of business (unless you get into a niche market).”

Source: leavenworthtimes.com

New Zealand’s a2 Milk projects weaker revenue for end of 2020

New Zealand’s a2 Milk Company Ltd forecast lower first-half revenue on 28 September as lockdown measures in Australia’s Victoria state hurt its informal Chinese sales channel more than expected.

Reuters reports that the revised revenue figures sent a2 Milk’s shares tumbling down more than 14 percent.

Sales from the “daigou” channel, where shoppers in China buy products in bulk from stores outside the country and import them informally, account for a significant portion of the dairy firm’s infant milk formula (IMF) revenue in Australia and New Zealand.

The Auckland-based company said it already had been experiencing disruptions to its daigou network due to low Chinese tourist and international student numbers, and it now expected difficulties to continue through the first half of fiscal 2021.

The company forecast revenue between NZ$725 million ($474.95 million) and NZ$775 million for the six-months ended December 2020, compared with NZ$806.7 million reported a year ago.

Shares of a2 Milk plunged as much as 14.9 percent after the announcement, its worst daily performance since 21 August 2019.

“The extended lockdowns in Victoria combined with less tourists and less students throughout the country has meant an increase in inventory and less demand,” said Jeremy Sullivan, investment adviser at Christchurch-based advisor firm Hamilton Hindin Greene.

The company said it believed weak daigou trading to be a short-term logistics issue.

It added that demand for its IMF brand in China was still solid and expected full-year revenue between NZ$1.80 billion and NZ$1.90 billion, higher than last year’s figure of NZ$1.73 billion but still below Refinitiv estimates of NZ$2.07 billion.

“Whilst revenues are growing year on year, a trend I think will continue, this miss is material and the market is acting in kind,” Sullivan said.

Meanwhile, shares of Synlait Milk, which is partly owned by a2 Milk and also depends on daigou shoppers for its sales, were down about 6 percent.

Read more about this story here.

Subsidies are swell and all – but can we talk about fair prices?

There’s a term swirling around the countryside these days: “Trump money.” It refers to the growing pile of subsidies hitting farm country during this – maybe not so coincidentally – election year. At a campaign rally in Wisconsin last week, President Trump announced a new $13 billion federal aid package that will benefit farmers through another round of Coronavirus Food Assistance Program payments. Coupled with this spring’s $16 billion relief package overseen by the U.S. Department of Agriculture, we’re entering record-breaking territory on farm subsidies.

That’s a lot of dough.

Don’t get me wrong, these payments are deeply appreciated. Here in America’s Heartland, we’re still reeling from the impacts of a years-long dairy crisis, extreme climate events like the recent crop-devastating derecho, and depressed commodity prices from the trade wars, not to mention pandemic-related market and supply chain disruptions.

But there is also something that feels just a little bit dirty about 2020 farm subsidies tripling over past years, especially as the payouts coincide with President Trump’s efforts to lock in rural votership in key states like here in Wisconsin.

My rural – and red – corner of the Badger State is hurting. Any aid for family farmers right now is sorely needed.

But do you know what farm families need even more than these short-term payoffs? Long-term sustainability.

In the grand scheme of things, subsidy checks are a drop in the bucket – one that’s likely to dry up next year when politicians are less focused on shoring up the support of rural voters.

For decades, our nation has watched the demise of the family farm. Even billions in subsidies in recent years haven’t stemmed the loss of our dairy farms – Wisconsin lost 2,800 herds in the last five years alone. Nor do I anticipate the jump in subsidies will have much impact on truly hedging the losses our grain farmers have experienced from the past year’s trade wars. They scarcely put a dent in the losses that livestock farmers incurred as beef prices plummeted amid the pandemic — even as supermarkets scrambled to keep meat freezers full with the increased demand.

What we need here in farm country are prices for our goods that are an accurate reflection of the cost of production. We need smart – and more stable – trade policy. We need to balance supply with demand. We need a fair share of the food dollar, enforcement of antitrust regulations, and a strong look at the consolidation in agriculture that is emptying the pockets of the family farmer, even as corporations pull in record profits. And we need leaders on the local, state, and national ballot who will stand up on these issues.

This latest aid announcement follows on the heels of a USDA forecast that overall net farm income is on the rise, projected at $102.7 billion for 2020, the highest since 2014. But government aid would account for $37.2 billion of that, according to DTN Ag Policy Editor Chris Clayton. That’s roughly 36 percent of net farm income for producers.

Meanwhile, farmers are making 4.9 percent less than they were a year ago, cutting into already razor-thin margins.

In my father’s childhood, our country neighborhood was a patchwork of family farms. My grandfather’s generation was able to make a decent living, raise a large family off their farm income, and even invest in the farm operation through the years. But in the past 20 years, I’ve watched the demise of that life as the dairy crisis hit America’s Dairyland. When Dad bought our family farm in the early 1990s, there were nearly 30,000 dairy herds in the state; now that number hovers just over 7,000. We’re down to only two operating dairy farms in the neighborhood, and I worry over how long they’ll be able to hang on.

My own family benefits from farm subsidies. I understand how direly needed any help is in these times when bank accounts are lean and debt loads are high. But I also know that a few dollars in the bank today won’t fix the broken system of tomorrow. Our growing reliance on farm subsidies is creating a culture of dependency that I daresay even represents the socialism so many conservative farmers rail against. Worse, it’s a system in which not all sizes or types of farms are being treated equally. Eighty percent of aid from the Coronavirus Farm Assistance Program was allocated to three commodities: beef, dairy, and corn – with some more diversified farm businesses being overlooked entirely.

Additionally, the top 1 percent of recipients got more than 20 percent of the money, while the bottom 10 percent received just 0.26 percent. According to The Environmental Working Group, which monitors farm subsidies, the largest 1 percent of U.S. farms received an average payment of $352,432 in Coronavirus aid, while the smallest 80 percent of farms received an average payment of $4,677.

We as farmers and as voters have a decision to make about the future of our food and farms. We can continue down this path of a highly subsidized, increasingly consolidated agricultural system in which many farmers are themselves living in poverty, or we can look to – and demand our candidates do, as well – long-term solutions that address the growing monopolization, lack of fair prices, and other deep-seated structural issues that our farm families face.

Because when election season is over, I fear the stream of subsidies will disappear, but rural America will still be facing down the challenges, long after the last cent of hush money has been spent.

Danielle Endvick is a former dairy farmer’s daughter from Holcombe, Wisconsin. She now raises beef – and, occasionally, a little bit of hell – in her corner of Chippewa County. She is communications director for Wisconsin Farmers Union, a grassroots family farm organization that is committed to enhancing the quality of life for family farmers, rural communities and all people through education, legislation, and cooperation.

U.S. dairy consumption at a 60-year high

American consumers are putting away dairy products at a rate we haven’t seen in 60 years. New numbers show Americans are now consuming 653 pounds of dairy products on a per capita basis. That’s up 50 pounds since 2005 and 114 pounds more than in 1975. Cheese consumption has led the way -growing from just over 14 pounds per person back in ’75 to over 38 pounds last year.

In spite of increased dairy consumption, the number of dairy farms in the state continues to fall. At the start of September, that number was 7,026 dairies, down 266 since the beginning of this year. But those losses are slowing. Last year we lost 818 dairies, the single biggest year ever for dairy farm losses in Wisconsin. The most dairy farms ever in the state was back in 1930 when we had 167,000 family dairy farms.

Agriculture Secretary Sonny Perdue gave an update on a government farm and food programs earlier this week. Speaking first on the Farmers to Families Food Box Program, the secretary said almost 95 million boxes had been given out as of the first of this week. He also said his best guess is that the program will continue through the end of the year, but no final decision on that timeline has yet been made. Regarding the second Coronavirus Food Assistance Program the Secretary said he has made 49 more specialty crops eligible for the new program and has changed the payment procedures for many commodities. He said they are taking a sales approach to payments this time around in order to help people who can document their actual sales decreases from 2019 to 2020.

In an effort to ensure better food security, the Food and Drug Administration is proposing some new rules. The FDA proposal would require added recordkeeping beyond current regulations. It would mean companies would have to set-up and maintain better records through the supply chain to make the food trail easier to trace in case of a problem with any foods going through the system from farm to table. Among foods on the list would be leafy greens, fresh cut fruits and vegetables, some types of fish, shell eggs and nut butter.

Not all ag events have been canceled. This weekend World Beef Expo is happening at State Fair Park in West Allis. The highlight will be the Supreme Champion Drive on Saturday. Over two-dozen breeds are registered this year.

Source: wsaw.com

Dairy Farmers of Canada Welcomes the Renewed Commitment from the Federal Government

Dairy Farmers of Canada (DFC) welcomes the renewed commitment from the September 23rd speech from the Throne on compensation for dairy farmers for the import access concessions made under the last three trade agreements.

“The Speech from the Throne sent a message to dairy farmers that the government’s commitment to compensate them for the losses they incurred from Comprehensive Economic and Trade Agreement (CETA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and more recently the Canada-U.S.-Mexico Agreement (CUSMA) is still part of its deliverables,” said Pierre Lampron, President, Dairy Farmers of Canada. “When every year, you lose $450 million in domestic production being transferred to foreign dairy farmers, words aren’t enough – only when we see details will we know if a promise made is a promise kept.”

By 2024, 18% of our domestic dairy production will be outsourced to foreign dairy farmers, who will supply the milk for imported dairy products that will find their way onto Canadian supermarket shelves.

“By supporting its dairy farming families, the federal government would send a clear signal that they have heard Canadians when it comes to the issue of food security and sovereignty,” added Mr. Lampron.

The dairy sector is one of the largest agricultural sectors in Canada and is a key driver of economic activity in rural communities where it’s needed most. It supports more than 221,000 full time equivalent jobs, contributes $19.9 billion per year to Canada’s GDP and generates $3.8 billion per year in tax revenues. It is also an important source of employment for a whole array of professions, including veterinarians, machine dealers, truck drivers, mechanics, animal nutritionists, feed producers, and more.

Provided by Dairy Farmers of Canada

Buckfield farm with 50 Jerseys is Maine dairy farm of year

A Buckfield farm with 50 Jersey cows has been named the top dairy farm in Maine for 2020.

Lovell Family Farm is the winner of the Dairy Farm of the Year and Green Pastures award, the Maine Department of Agriculture, Conservation and Forestry said in a statement. The farm began shipping milk in 2007 after starting in a rented facility before moving to a farm on North Hill, the agriculture department said.

The family also harvests hay and grows corn. The agriculture department said the family has “created a farm business focused on cow comfort, quality milk, and exceptional quality forages.”

Acceligen looks to improve African dairy industry through genetics program

The breeding program will contribute to more sustainable production by using traits that will increase farmer income and improve animal health for Sub-Saharan Africa (SSA) dairy systems.

Acceligen received the $3.68m grant from the foundation to deploy a suite of traits from its discovery pipeline into commercially important dairy animals with high genetic merit for production and durability.

This will be accomplished by gene editing multiple traits in a series of donor animals in the US and Brazil. Primary traits include adaptation to tropical heat and milk yield, while traits for adaptations to local diseases and management preferences will also be added using input derived from smallholders. Complementary efforts are also in place to support regulatory review and other commercialization activities for these animals in SSA target countries.

“A critical part of this effort is to introduce multiple adaptation traits into the founder animals, so that their hybrid progeny are fully functional in tropical environments,”​ Tad Sonstegard, CEO of Acceligen and project lead, said.

Native dairy animals, although typically well adapted to local environmental conditions, have been under little or no selection for milk production.

Sonstegard added, “When we combine gene editing with top merit animals using advanced reproductive technologies from our partners Kheiron (Pilar, Argentina) and TransOva Genetics (Sioux Center, Iowa), we can make significant genetic improvement for well-adapted, high yielding dairy cows. Our goal is to get these animals into the hands of smallholder farmers.”

The current SSA dairy animals generally have a much higher ratio of greenhouse gas to animal protein output compared to breeds developed in the EU and US.

“By gene editing animals to be more sustainable and enable smallholder farmers to better provide for their families, this project exemplifies what Acceligen is really about,”​ said Sabreena Larson, director of commercial operations.

“Acceligen is driven to implement the use of gene editing in livestock to increase animal welfare and sustainability, while helping to improve the globe by reducing hunger and fighting climate change.”

Source: dairyreporter.com

The Worst is yet to come in Indian Dairy Sector

As we are going through the huge inventory of Skim Milk Powder (SMP), it alarms us to learn from the similar situation aroused in near past (2018). However, it’s observed that we haven’t learned anything form the experience of 2018.

Let’s look at the comparative analysis and root cause of both the situations of 2018 and 2020.

Situation in 2018

In mid-2018, Cooperatives (mainly GCMMF popularly known as AMUL) saddled with the stock of more than 150 thousand tonnes of Skim Milk Powder (SMP). During the same time, SMP rates in domestic market touched the rock bottom of Rs 130 per Kg due to distress sell by few players.

The situation was fuelled by many factors but the key factors are given below:

World Powder Market: It was hit by the lowest due to sluggish demand by the importing countries like China, Russia and other South East Asian countries. This led to reach the SMP price at Rs 135 per Kg internationally.

Milk Procurement by Private players: They stopped or reduced the milk procurement as they find it non-viable to convert the milk into powder and sell it domestically or in international market.

Milk Procurement by Cooperatives: They have received excess milk due to Private players’ decision and they responded lately to the flush procurement.

Election in Gujarat: Election commission had declared dates for assembly election in December 2017. Due to this, the cooperative dairies in Gujarat (having political hold) had increased/stable the milk procurement rates despite knowing what will be the consequences of this. Finally, this led to spurt in milk procurement by Gujarat cooperatives from within and outside Gujarat.

This led to the huge pile up of SMP with cooperatives (mainly GCMMF- had more than 100 thousand tonnes of SMP).

To do support in return, Government of Gujarat provided Rs 300 crore export subsidy (Rs 50 per kg) which allowed GCMMF to clear the excess stock of SMP to mainly neighbouring countries. This was the first time GCMMF took help from the State government to clear the SMP stock.

With the help of subsidy, India could able to export about 50 thousand tonnes of SMP in 2018-19. Of this 85% was exported to neighbouring countries (Bangladesh, Malaysia, Afghanistan, Pakistan and UAE).

Situation in 2020

Currently, India has burdened with more than 250 thousand tonnes of SMP, mainly cooperatives (of which Amul has more than 60%). The stock is almost twice than 2018 level. We need to remember that the situation was arose during flush months of 2018 while in 2020, it has happened during first 4 months of lean season.

The major factors are given below:

Covid-19: Due to stringent lockdown in the beginning, closure of HORECA business & Sweet shops and limited procurement by private players, the excess milk was procured by cooperatives.

Bottleneck in disposal of milk: Though the cooperatives had procured the excess milk but due to restricted movements in lockdown, the milk and milk products sale was hit hardest. The cooperative is forced to convert the excess milk procured into butter and SMP. Still the situation is improving but not reached normalcy.

Election in Gujarat cooperatives: As the election is going on in Gujarat cooperatives, the procurement price level is remain unchanged. Due to this, it may be possible that staus quo position will be maintained till Diwali (Nov-2020). This will also increase in the procurement levels in cooperatives and forced to convert surplus stock into SMP and Butter.

What’s next?

  • In a few media interviews, Mr Sodhi (MD, GCMMF) indicated the need of export subsidy so that the current stock situation can be eased. The both State and Central leaderships are yet to take any concrete steps to deal with the current stock condition.
  • After the election in different cooperatives of Gujarat will over (by Nov 2020), the procurement price will badly hit by the current inventory as Amul plays crucial role in benchmarking the prices at producer as well as consumer levels. This will have deep impact of the rural economy as dairying has been played important role in managing the day to day affairs where everyone is betting on Rural India.
  • Despite huge inventory with cooperatives, the SMP is trading at near Rs 200 per Kg locally as India is approaching big festive season in a short run. This gives us the hope that the situation may improve. Also the latest GDT auction rate of SMP (USD 2,889/MT translates into Rs 212/Kg ) shows hope for the improvement in the World Market and make India competitive. However, we have seen the decline of about 40% in the dairy export during the first quarter of financial year 2020-21.
  • The flush season is yet to start which is backed by good monsoon, sowing and abundance of fodder availability. This indicates that what we are currently facing is just a tip of iceberg.

Source: dairyoutlook.business.blog

Dairy farmers spill 200 litres of milk on road against Aavin decisions

More than 50 milk producers spilled about 200 litres of milk on the road on the Four-Road area in Dharmapuri town on Wednesday to protest certain management decisions of state-run milk co-operative Aavin.
The dairy farmers claimed that Aavin management had suddenly reduced the quantity of milk it was procuring from them. “We are not able to sell our milk to anyone as we have a large quantity of unsold stock,” said S Kumarasamy, a milk producer.

The milk cooperative in Dharmapuri usually procures 1.3 lakh litres of milk from producers across the district. Dairy farmers are mostly concentrated in Morappur, Chinnagoundampatty and Bombatty villages in the district.
When contacted by TOI, Dr K Venkatachalam, general manager of Aavin, Dharmapuri, said that the management hasn’t reduced its procurement level. “We are still procuring 1.3 lakh litres every day,” he said.

He said that private milk companies had reduced the procurement price to Rs 22 per litre, while Aavin was paying farmers Rs 32 per litre. “So the milk producers who were supplying to private companies left them and suddenly turned to Aavin,” he explained.
He said the Dharmapuri district Aavin could preserve 1.23 lakh litres of milk a day.

Source: timesofindia.indiatimes.com

Kansas dairy farm industry could be on the rebound


Kansas dairy farmers are milking recent market gains but is it too little too late?

The market isn’t where it was before the pandemic, but with the return of international trade and a new round of stimulus funds, the once struggling dairy farm industry could be on the rebound. 

“We were seeing the light at the end of the tunnel and then March hit,” said dairy farmer MeLissa Drzymalla.

“We’ve been operating in our location for hundreds of years, and you’d hate to be the generation that stopped it just due to the current environment in the economy,” said dairy farmer Aaron Pauly.

These dairy farmers were worried about their farms when prices dropped at the start of the pandemic, but now, they said the industry is starting to look up.

“Our cost of production is almost $19 per hundredweight and it was down to $11 back in April and May, so now we’re starting to see about $17, so we’re getting closer,” said Drzymalla.

There are still issues to overcome.

Drzymalla said she still isn’t meeting her cost of production because the price of milk is low.

Dairy farmer Aaron Pauly said the same and with the expectation of a two-month delay in receiving the new stimulus funding, he worries about his farm.

“It just kind of puts a band aid on it and lets you keep operating another day,” said Pauly.

Both said the federal funding will bring much needed relief.

“Without them, there would be so much more of us going out of business,” said Drzymalla.

Both said they are optimistic dairy farmers will be able to make it out of the setbacks from the pandemic eventually.

“Some of us were able to hang on because of those stimulus funds from the government so we are thankful for that,” said Drzymalla.

This stimulus money isn’t just for dairy farmers. Corn, soybean, and even livestock farmers can apply.

That application can be found here.

Source: ksn.com

The Chinese dairy category has been one of the strongest performers since COVID-19

Marketing analytics consultants China Skinny are reporting that the dairy category has been one of the largest beneficiaries from the COVID-19 outbreak in China.

State Media and renowned doctors such as Zhang Wenhong from the infectious diseases department at Shanghai’s Huashan Hospital have endorsed drinking milk to boost immune systems and help fend off the coronavirus.

The impact of the official endorsements has been obvious, they report. While many categories have seen flat-to-negative growth since the outbreak, dairy sales growth has been strong.

China’s dairy giants Yili and Mengniu reported +23% and +19% increases in revenue respectively in the June quarter. This is a stark turnaround from the category trend, which saw drinking milk products decline -4.0% on average per year between 2015-2020, according to Euromonitor. 

In light of renewed growth in dairy, the category shows strong potential for growth. China’s annual per capita consumption is around 34 litres, just one third of New Zealand rates. Foreign brands should be well placed to take advantage of this opportunity. Although the melamine scandal happened 12 years ago, it is still raised by many of the tens of thousands of Chinese consumers who China Skinny speaks to every year, inferring a trust deficit in domestic dairy brands. This has been further fuelled by an exposé that went viral in China in July, disclosing the “Six Sins of Mengniu and Yili.”

Good marketing beating ‘natural advantages’

China Skinny has been tracking the dairy market for many years, via its Dairy Tracker. And in spite of foreign brands’ natural advantages, their analysis points to performance of foreign dairy brands getting worse in most areas, indicated by the data below.

Using Tmall data,

  • Foreign brands’ share on Tmall was 35% in December 2019 (pre-outbreak), but over the first eight months of 2020 has averaged just 23%
  • In 2016, foreign brands accounted for 52% of sales on Tmall, more than double the 23% in 2020
  • In 2020, the average price per litre for domestic brands on Tmall is surprisingly 7% higher than foreign brands. This is an improvement from 2016, when domestic brands sold at a 38% premium.

In fact, domestic brands command a premium over foreign milk brands and they have done that by focusing on smaller formats and more targeted segmenting – which typically commands a premium.

“Many foreign brands point to rising nationalism as the reason for declining brand share, whilst this has an impact, the decline can be put more down to poor strategic and tactical marketing decisions. Insight-driven brands such as Nike and Coca-Cola has managed to grow despite rising geopolitical tensions between the US and China,” says China Skinny’s Mark Tanner.

They say marketing claims for foreign brands are also less resonant, and their propensity to discount more often cheapens the brand:

  • Foreign brands are missing the popular 250ml format, contributing to just 12% of sales, whereas the format accounts for 63% of sales on Tmall
  • Foreign brands continue to pin their hopes on the 1 litre format for dairy, accounting for 100% of the top selling brands in this format, yet the format makes up just 6% of sales overall on Tmall
  • Domestic brands have been more likely to adopt timely claims such as ‘healthy’ and ‘nutritious’ which commanded a 38% and 34% premium respectively
  • The average discount on Tmall between January to August 2020 was 16% for domestic brands and 48% for foreign brands
  • Foreign brands have less control of their marketing on Tmall, with just 18% of sales going through their flagship stores versus 32% for domestic brands.

The following graphic has been supplied by China Skinny.

Source: interest.co.nz

 

Best ‘spring flush’ in three seasons for Australian dairy

Australian dairy is heading for its best ‘spring flush’ in three seasons, as timely rainfall in key regions ramps up the nation’s milk production, according to a newly-released sector report.

In its Q3 Global Dairy Quarterly – A delicate rebalancing, agribusiness banking specialist Rabobank forecasts national milk production to expand by 2.8 per cent in 2020/21, bringing it back above nine billion litres for the first time since the 2017/18 season.

The report says with rainfall expected to be above average across Australia’s main “dairy belts” from September through November, the sector is on track for a strong ‘spring flush’, the time of the season when milk production typically surges, peaking in October.

Rabobank senior dairy analyst Michael Harvey says this follows a turnaround in production conditions seen half way through the 2019/20 Australian dairy season, which finished at the end of June.

“While national milk production for 2019/20 finished overall marginally down on the previous year at 8.775 million litres, it was a tale of two halves for the season,” he said.

“Production was negatively impacted by poor seasonal conditions in the first half of the 2019/20 season, but timely rainfall across key regions since summer has seen the milk pool begin to recover from December last year.”

The report says this growth was led by Tasmania and eastern Victoria, while irrigated dairy farming operations in the southern Murray Darling Basin – the region which contributed to the biggest milk production declines in recent years – were now “enjoying better water market conditions”.

For the month of June 2020, Mr Harvey said, Australian milk production was already 4.1 per cent higher than the previous June (2019).

Welcome news

The ongoing recovery in milk supply will be welcome news for the Australian dairy supply chain, the report said.

“Australia’s exportable surplus will continue to recover with milk supply growth,” Mr Harvey said. “Not only will more milk in the system help alleviate some overhead cost pressures for dairy processors, it will also allow dairy exporters to explore growth opportunities.”

In other positives, the report said, Australian dairy farm operators continue to enjoy lower feed costs and elevated cull cow prices.

Rabobank’s farmgate milk price forecast remains broadly in line with the previous (Q2) report – at AUD 6.30/kgMS for the 2020/21 season.

This will see the Australian dairy sector set for a profitable season, Mr Harvey said.

New normal

Australia’s domestic dairy market continues to find a ‘new normal’, following the impacts of COVID-19, the report said.

“Retail sales of dairy products continue to grow above long-term trends, according to the latest data,” Mr Harvey said.

“That said, sales growth is moderating as ‘pantry loading’ (triggered by the coronavirus lockdowns) recedes. And out-of-home consumption of dairy – while in recovery mode – remains well below levels seen a year ago, with ongoing lockdowns in Victoria, capacity restrictions in venues and cautious consumers limiting foot traffic in major cities.”

In overseas markets, for the 2019/20 season, Australia’s dairy export volumes had finished 7.1 per cent down year-on-year, the report said.

Mr Harvey said this was not surprising, given the backdrop of tight milk supply seen in Australia, primarily due to recent years of dry weather.

Large falls were recorded in export shipments of skim milk powder (down 29 per cent) and butter (down 44 per cent) for the year.

“Exports of liquid milk and fresh cheese were the leading lights, however – both growing four per cent for the year,” he said.

Global outlook

Globally, a “delicate rebalancing of supply and demand is on the horizon”, the Rabobank report said, with milk production growth among the global ‘big seven’ dairy exporters to collide with a “recalibration” of retail, food service and export dairy demand.

Milk production growth across the major “export engines” began in Q2 2020 and is forecast to continue expanding into 2021 – a feat not matched since 2018, it said.

“Despite the disruptions COVID-19 brought to the global dairy markets, farmgate milk prices have been resilient,” the report said, and Rabobank forecasts a 1.3 per cent year-on-year increase in production across the ‘big seven’ dairy export regions – the EU, US, New Zealand, Australia, Brazil, Argentina and Uruguay – in Q4 2020. This is expected to be followed by a one per cent increase in the first half of 2021 and 0.8 per cent growth in the second half of next year.

The report said dairy commodity prices had rallied in quarter two of this year, “largely on the back of government support in the form of government purchases, inventory management and fiscal stimulus for consumers”.

“The outlook for government support is less certain in Q4 and into 2021, elevating the risk of downward price pressure,” it said.

Meanwhile, globally, sequential improvements have been observed in dairy consumption from the food service sector as more regions have come out of lockdown, while retail dairy sales (for at-home consumption) are showing early signs of slowing.

“It will take time for food service demand (for dairy) to return to pre-COVID-19 levels, even for countries that have been well ahead of the curve,” the report noted.

With milk production forecast to grow over the next 12 months – and consumption to take time to recover – Rabobank expects global dairy market fundamentals to remain weak into the second quarter of 2021, at which point the level of exportable surplus on the market is predicted to retreat in the second half of next year as domestic consumption improves.

“By mid-2021, the delicate balance in the global dairy market could tip,” Mr Harvey said, “and the market balance tighten.”

Rabobank Australia & New Zealand is a part of the global Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has 120 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 38 countries, servicing the needs of approximately 8.4 million clients worldwide through a network of more than 1000 offices and branches. Rabobank Australia & New Zealand Group is one of Australasia’s leading agricultural lenders and a significant provider of business and corporate banking and financial services to the region’s food and agribusiness sector. The bank has 93 branches throughout Australia and New Zealand.

U.S. Milk Production Update – Sep ’20

U.S. milk production figures provided by the USDA were recently updated with values spanning through Aug ’20. Highlights from the updated report include:

  • U.S. milk production increased on a YOY basis for the 13th time in the past 14 months, finishing 1.8% above the previous year and reaching a record high seasonal level. YOY increases in production on an absolute basis were led by Texas, followed by California and Idaho.
  • The Jul ’20 U.S. milk cow herd was revised 8,000 head higher than levels previously stated while the Aug ’20 figure remained unchanged month-over-month. Milk cow herd figures finished 42,000 head above the previous year but remained 78,000 head below the 23 year high level experienced during Jan ’18.
  • U.S. milk per cow yields increased 1.4% on a YOY basis throughout Aug ’20, finishing higher for the 57th time in the past 58 months.

Additional Report Details According to the USDA, Aug ’20 U.S. milk production declined 0.7% on a daily average basis but remained 1.8% higher YOY, reaching a record high seasonal level. The month-over-month decline in production volumes was slightly smaller than the ten year average July – August seasonal decline in production of 1.0%. The smaller than normal seasonal decline in milk production volumes occurred despite previous month production volumes being revised 0.5% above levels previously stated. U.S. milk production volumes had finished higher on a YOY basis over 61 consecutive months from Jan ’14 – Jan ‘19, reaching the longest period of consecutive growth on record, prior to declining by a total of 0.3% from Aug ’19 – Aug ’19. Milk production volumes rebounded throughout more recent months, however, finishing higher over 13 of the past 14 months through Aug ’20. The 12-month rolling average milk production growth rate reached a 28 month high level throughout Aug ’20. YOY increases in production on a percentage basis were led by South Dakota (+10.8%), followed by Texas (+7.1%), Kansas (+6.6%) and Indiana (+6.6%), while production volumes finished most significantly lower YOY on a percentage basis within Vermont (-5.3%), Florida (-3.9%) and Utah (-2.1%). Wisconsin milk production remained lower on a YOY basis for the eighth time in the past ten months, finishing 0.3% below previous year levels. Overall, 16 of the 24 states milk production figures are provided for experienced YOY increases in production throughout the month. California milk production volumes increased on a YOY basis for the eighth consecutive month throughout Aug ’20, finishing up 1.8%. California accounted for 18.2% of total U.S. milk production volumes throughout the month, leading all states. Seven of the top ten largest milk producing states experienced YOY increases in production throughout Aug ’20, as milk production within the top ten milk producing states increased by a weighted average of 1.7% throughout the month. The aforementioned states accounted for nearly three quarters of the total U.S. milk production experienced during Aug ’20. Production volumes outside of the top ten largest milk producing states increased 2.3% on a YOY basis throughout the month. Aug ’20 YOY increases in milk production on an absolute basis continue to be led by Texas, followed by California and Idaho, while YOY declines in production on an absolute basis were most significant throughout Vermont. The Jul ’20 U.S. milk cow herd was revised 8,000 head higher than levels previous stated while the Aug ’20 figure remained unchanged month-over-month. The U.S. milk cow herd currently stands at 9.36 million head, finishing 42,000 head above the previous year but remaining 78,000 head below the 23 year high level experienced during Jan ’18. U.S. milk per cow yields finished 1.4% above previous year levels, finishing higher on a YOY basis for the 57th time in the past 58 months. Yields experienced throughout the Midwestern states of Wisconsin, Minnesota, Iowa and Illinois finished 1.8% higher on a YOY basis while yields experienced throughout the Western states of California, Idaho, Washington and Oregon increased 0.8% YOY. A month-over-month increase in the Indiana milk cow herd offset a MOM decline in the Georgia milk cow herd throughout Aug ’20. YOY increases in milk cow herds continued to be led by Texas, followed by Idaho and South Dakota, while Wisconsin experienced the largest YOY decline in their milk cow herds throughout the month

.

Source: Atten Babler

New Zealand Milk Production Update – Sep ’20

New Zealand milk production figures provided by Dairy Companies Association of New Zealand (DCANZ) were recently updated with values spanning through Aug ’20. Highlights from the updated report include:

  • Aug ’20 New Zealand milk production volumes reached a record high seasonal level for the fourth consecutive month, finishing up 5.3% on a YOY basis.
  • Fonterra’s ’20-’21 farmgate milk price forecast of $5.90-$6.90/kgMS was unchanged from the previous month, remaining below the six year high level experienced throughout the previous production season.
  • New Zealand cow & heifer slaughter rates increased 14.0% on a YOY basis during Jul ’20 when normalizing for slaughter days, reaching a 34 year high seasonal level.

Additional Report Details Milk Production According to Dairy Companies Association of New Zealand (DCANZ), Aug ’20 New Zealand milk production volumes finished 5.3% higher on a YOY basis, reaching a record high seasonal level for the month of August. On a milk-solids basis, production increased 4.7% YOY, also reaching a record high seasonal level. The Aug ’20 YOY increase in New Zealand milk production volumes was the fourth experienced in a row and the largest experienced throughout the past 14 months a on percentage basis. New Zealand milk production volumes have reached record high seasonal levels over each of the past four months. ’19-’20 annual milk production volumes declined 0.7% on a YOY basis however production on a milk-solids basis increased 0.3% YOY throughout the period. Drought conditions impacted the milk supply throughout the ’19-’20 production season. ‘20-’21 YTD New Zealand milk production volumes have rebounded by 4.7% on a YOY basis throughout the first quarter of the production season. Farmgate Milk Prices Fonterra finalized their ’19-’20 farmgate milk price at a value of $7.14/kgMS, reaching a six year high level. Fonterra’s ’20-’21 farmgate milk price forecast was unchanged from the previous month through Sep ’20, remaining at a range of $5.90-$6.90/kgMS. Fonterra’s ’20-’21 farmgate milk price forecast range remains historically wide as significant uncertainties remain surrounding the impact of COVID-19 on global demand. Cow & Heifer Slaughter New Zealand cow & heifer slaughter rates increased 14.0% on a YOY basis during Jul ’20 when normalizing for slaughter days, reaching a 34 year high seasonal level. The YOY increase in New Zealand cow & heifer slaughter rates was the second experienced in a row. Jul ’20 dairy cow & heifer slaughter, which has more limited historical data available, also increased on a YOY basis for the second consecutive month, finishing up 7.0%. ’19-’20 annual New Zealand cow & heifer slaughter rates rebounded 2.7% from the previous year, reaching a four year high level. ’20-’21 YTD New Zealand cow & heifer slaughter rates have increased by an additional 9.6% on a YOY basis throughout the first two months of the production season. New Zealand milk production volumes increased at a compound annual growth rate of 4.2% over the ten year period ending during the ’14-’15 record production season but have trended flat-to-lower over the four most recent production seasons as farmgate milk prices declined from the ’13-’14 record high levels and the New Zealand milk cow herd was reduced. USDA is projecting the New Zealand milk cow herd will decline slightly on a YOY basis throughout 2020 but remain above the six year low level experienced throughout 2017.

Source: Atten Babler

Quarterly Argentina Milk Production Update – Sep ’20

Argentine milk production figures provided by the Argentina Ministry of Agriculture were recently updated with values spanning through the end of the first quarter of the ’20-’21 production season. Highlights from the updated report include:

  • Argentine milk production increased on a YOY basis for the 14th consecutive month during Aug ’20, finishing up 5.0% and reaching a five year high seasonal level.
  • USDA is projecting the Argentine dairy cow herd will increase 0.8% throughout 2020, rebounding from the long-term record low levels experienced throughout 2019.
  • Argentina is the fifth largest global dairy exporter, accounting for 2.8% of combined butter, cheese, nonfat dry milk and whole milk powder exports throughout 2019. The bulk of Argentine dairy exports are in the form of whole milk powder and cheese.

Additional Report Details According to the Argentina Ministry of Agriculture, Aug ’20 Argentine milk production increased on a YOY basis for the 14th consecutive month, finishing up 5.0% and reaching a five year high seasonal level. ’19-’20 annual Argentine milk production volumes finished 3.8% higher on a YOY basis, reaching a four year high level. ’20-’21 YTD production volumes have increased by an additional 7.6% throughout the first quarter of the production season. The USDA is projecting Argentine milk production will increase by 4.3% on a YOY basis throughout the 2020 calendar year as a positive margin environment, coupled with positive weather conditions, is expected to incentivize production expansion. USDA noted inflation and currency devaluation will begin to cut into profitability as the year goes on, however, while domestic demand is expected is fall due to a contraction in GDP related to COVID-19. 2020 YTD milk production is up 8.0% on a YOY basis throughout the first two thirds of the calendar year. Recently experienced adverse conditions contributed to the Argentine dairy cow herd declining to a long-term record low level throughout 2019, finishing lower for the seventh consecutive year. USDA is projecting the Argentine dairy cow herd will rebound by 0.8% throughout 2020, however. Recent declines in the Argentine dairy cow herd resulted in a consolidation of operations along with a culling of the lowest producing cows. Argentina is the second largest milk producing country in South America, trailing only Brazil, and the fifth largest global dairy exporter, trailing only New Zealand, the EU-28, the U.S. and Australia. Of the aforementioned major dairy exporting regions, Argentina accounted for 3.6% of total combined milk production and 2.8% of combined butter, cheese, nonfat dry milk (NFDM) and whole milk powder (WMP) export volumes throughout 2019. The bulk of Argentine dairy exports are in the form of WMP and cheese. Argentina was the third largest exporter of WMP throughout 2019, trailing only New Zealand and the EU-28, accounting for 4.7% of global WMP export volumes. From a global perspective, WMP markets Aug be most affected by a continued rebound in Argentine milk production.  

Source: Atten Babler

Wisconsin Farm Support Program distributes over $8 million in second round of funding

The numbers are in from the second round of the Wisconsin Farm Support Program, a joint program between the Wisconsin Department of Agriculture, Trade, and Consumer Protection (DATCP), and the Wisconsin Department of Revenue (DOR) under the direction of the office of Governor Tony Evers.

Designed to assist Wisconsin farmers who have faced financial challenges due to COVID-19, the program utilized $50 million of the state’s CARES Act funding to quickly provide direct support to help cover economic losses during the pandemic.

In the first round, $41.6 million was distributed to nearly 12,000 farmers in 71 of Wisconsin’s 72 counties. Columbia County saw 328 farmers receive a combined $1,148,000, while 579 farmers in Dane county received $2,026,500.

In the second round, Columbia County was given $191,845 across 75 farmers, while 130 farmers in Dane County received a combined $334,975.

Grant County has received the most funds, with 984 farmers seeing $3,171,242 in funds.

“I am proud that more than 3,300 Wisconsin farmers received a total of $8.4 million in the second round of Farm Support Program funding,” noted Governor Tony Evers. “In all, $50 million has been distributed to more than 15,000 farmers across our state. These folks have never stopped doing their part to ensure that consumers around the world have access to high-quality, nutritious food during this public health crisis. I want to thank our farmers for their critically important work, and we’re proud to support them in any way we can.”

The second round of funding was open to farmers whose gross income from farming in 2019 was between $10,000 and $5 million. “In this round, almost 60 percent of funding recipients reported a gross income from farming of less than $40,000,” said DATCP Secretary-designee Randy Romanski. “Clearly, there was a need for additional support among Wisconsin’s smaller farm operations. We are glad that this second round was able to provide that support. While this funding won’t make anyone whole, we hope it will provide some relief.”

Dairy technology: not a gadget, but vital for successful and profitable dairy farming

Owners of large dairy operations will become CIO’s (Chief Information Officers) in the near future. This is according to dairy tech expert Jeffrey Bewley. He also thinks that “technology can help farmers in many aspects on the farm and the farmers who can capitalize on the value of the data will have a competitive advantage in the future”.

Bewley, expert in dairy analytics and technology and currently working at Holstein Association USA, will delve deeper in the changing role of dairy farmers and the role of technology at the Global Dairy Tech Start-up Spotlight on October 1st.

The unique, online and FREE event includes ten short presentations of dairy tech start-ups, showcasing their technology, business model and experience with producers and how these can transform how we produce milk in the US and globally. The pitches are followed by an in-depth discussion featuring Jeffrey Bewley, Marcia Endres from the University of Minnesota-Twin Cities and Joao H.C. Costa from the University of Kentucky, who will all share their thoughts on the current technologies and how they can help farmers to stay in business.

Capitalize on the data

The ten start-ups selected by this committee each have a digital based technology for dairy and answer a specific need from producers like feed bunk management, cow behavior monitoring, cow health, milk quality and manure treatment. “And all of these technologies are needed for dairy business to stay in business and to keep on farming in a profitable and efficient way”, explains Bewley. He adds: “The so-called ‘dairy farm of the future’ will be driven by external factors and consumer demands regarding the environment, and animal welfare. But also labor is a big issue in dairy farming. All of these have a tremendous impact on how a dairy operation looks like today and will look like in the future”. According to Bewley, it is technology that can help farmers deal with all of these challenges.

It is not all about the gadget

“But to do so effectively, farmers need to capitalize more on the data and then add value to the data and use it. This means that farmers, heading large dairy operations will become CIO’s (Chief Information Officers instead) of CEO’s. Using data that is already on the farm is key. On top of that, farmers will have a competitive advantage in the future when they invest in technology. But it is not all about the gadget, the technology should be really adding value to the farmer and help with his daily decisions. Getting too excited about having a fancy new gadget on the farm can be a bit tricky. Often it is about savvy (existing) data use with the help of new technologies. I strongly believe that this is vital for success and profitability”, according to Bewley.

HEAR the full panel discussion and SEE and LEARN what the ten start-ups can mean for your dairy operation. Register now, it’s free! The Dairy Tech Start-up Spotlight will be hosted on October 1, 2020 at 1 p.m. (CST) with free event registration available now at www.dairystartupspotlight.com.

About the 10 start-ups

The event is hosted by AgriTech Capital, and funded by the start-ups themselves. The companies participating in the first-ever Global Dairy Tech Start-up Spotlight are Advanced Animal Diagnostics, Cainthus, EIO diagnostics, Fyto, Labby,Livestock Water Recycling, Milc group, PharmRobotics, SomaDetect and Zisk. All the start-ups selected propose solutions that solve a critical problem for dairy producers and as a result help them maximise efficiencies, profitability and production. This is an extraordinary opportunity for them to show their products in action!

Endorsed by World Dairy Expo

While the global dairy industry would normally be meeting in Madison, Wisconsin on October 1 for World Dairy Expo (WDE), dairy farmers and dairy professionals can now meet online and learn about the latest dairy technologies during ten short presentations from dairy tech start-ups. “The Global Dairy Tech Start-up Spotlight is in line with the spirit of World Dairy Expo, showcasing some of the newest technologies available to the dairy industry from young companies,” said Scott Bentley, World Dairy Expo General Manager. “WDE is delighted that it is taking place and is exploring the possibility of making it an in-person feature at the 2021 show.”

Fonterra posts $659m full year profit, an increase of $1.3b on the previous year

Fonterra has posted an after tax profit of $659 million for the 2020 financial year, a $1.3 billion improvement on the previous year.

The New Zealand dairy co-operative’s chief executive Miles Hurrell said it was a good year for the business with profit up, debt down and a strong milk price.

“We increased our profit after tax by more than $1b, reduced our debt by more than $1b and this has put us in a position to start paying dividends again,” Hurrell said.

It will pay a dividend of 5 cents per share, which is at the lower end of its 5 to 7 cent range.

“This year marks a return to paying dividends, a position we expect to maintain in the future, assuming normal operating conditions,” Fonterra chairman John Monaghan said.

It will pay farmers $7.19 per kilogram of milksolids for the 2019-20 season.

A final farmgate milk price of $7.14 per kilogram of milksolids meant the total payout for a fully share-backed farmer was $7.19 per kilogram of milksolids, the fourth highest for the co-operative, Monaghan said.

In July Fonterra said there was uncertainty around how the global recession and the ongoing Covid-19 pandemic would impact milk demand.

Christel Yardley/Stuff

In July Fonterra said there was uncertainty around how the global recession and the ongoing Covid-19 pandemic would impact milk demand.

The full year result is a vast improvement on the $605m loss it made in the 2019 financial year, which was largely a result of massive asset write downs. That came after Fonterra posted a $196m loss, its first ever in 2018 at which time it launched an organisational reset which included a significant debt reduction programme.

In 2020 debt reduced by 19 per cent or $1.1b compared to the previous year.

Fonterra’s unit price is trading at $4.05, up 85 cents over the past year.

Hurrell said it was a year of two halves and the flow-on effects of the Covid-19 pandemic did impact its performance in the second half, particularly in its consumer and food service businesses.

In strengthening its balance sheet the business had been able to focus on managing Covid-19, Hurrell said.

“So far, demand for dairy has proved resilient and our diverse customer base and ability to change our product mix and move products between markets has meant we can continue to drive value.”

Food was a good business to be in and Fonterra’s workers and teams had responded well to Covid-19 disruptions, he said.

“It shows a resilience in our business and the strength of the co-op to handle these types of sudden and significant changes which are now the new reality for us.”

Normalised profit before interest and tax of $1.1b was significantly up on last year’s $17m loss. The normalised profit included gains from asset sales, and impairments and costs relating to a strategic review.

Fonterra chief Miles Hurrell says, despite Covid-19 challenges, the co-operative performed will in the 2020 financial year.

Ross Giblin/Stuff

Fonterra chief Miles Hurrell says, despite Covid-19 challenges, the co-operative performed will in the 2020 financial year.

Once these were taken out, normalised profit before interest and tax, which Fonterra used to show its underlying business performance, was up from $812m to $879m, despite the financial impact of Covid-19 in many of its markets, Hurrell said.

The main drivers were strong profit in its ingredients business and strong sales and gross margins from its China food service business in the first half of the year despite Covid-19-related disruptions, Hurrell said.

Fonterra had entered 50 new cities across China, taking its total to 350.

Fonterra had also made progress in reducing its environmental footprint, Hurrell said. For example its energy intensity at its manufacturing sites reducing by 20 per cent – enough saved energy to power all New Zealand households for a year, Hurrell said.

Fonterra chairman John Monaghan says, in light of Covid-19, it is being prudent by keeping its dividend at the lower end of its range.

Chris McKeen/Stuff

Fonterra chairman John Monaghan says, in light of Covid-19, it is being prudent by keeping its dividend at the lower end of its range.

Monaghan said given uncertainty created by Covid-19 a 5 cent dividend was a prudent decision and one that balanced its goal of further reducing debt and distributing earnings.

Earnings per share for the 2020 financial year was 24 cents. Fonterra is forecasting earnings per share in a range of 20 to 35 cents per share in the 2021 financial year, he said.

“This earnings range assumes a number of factors working in our favour, including that there is no heightened disruption from Covid-19 over what we currently face, and an improved trading performance driven out of Asia and Greater China.”

Monaghan said Covid-19 meant the “demand picture remains finely balanced” from a milk price perspective.

“The best way of coping with uncertainty is to stay on strategy and focus on what is within our control – delivering for our farmers, unit holders and customers, and maintaining our financial discipline.”

Hamilton Hindin Greene broker Grant Davies said the result was in line with forecasts, albeit with a slightly lower dividend payout than expected.

A lower dividend allowed Fonterra to pay off more debt and reduce the interest burden that came with higher debt levels, he said.

He expected Fonterra to continue its debt reduction programme which, in turn, would allow the company to pay better dividends in the future.

The result showed Fonterra had a solid cashflow, which increased $733m to $1.8b, he said.

As indicated the co-op was distributing a decent payout for farmers, he said.

“That’s got to bode well for the regions.”

Fonterra chief financial officer Marc Rivers says it will continue to reduce debt by increasing profit and selling assets.

Abigail Dougherty/Stuff

Fonterra chief financial officer Marc Rivers says it will continue to reduce debt by increasing profit and selling assets.

Fonterra chief financial officer Marc Rivers said the co-op was making good progress in the sale of its China Farms business and selling down its share in Beingmate.

It was also looking to sell its joint venture with Nestle, DPA Brazil, however the disruption of Covid-19 in Brazil had slowed that down.

Fonterra assets had to ”pull their own weight” and justify their place in the co-op’s, portfolio which meant they were constantly being reviewed, he said.

“Going forward you’re always looking at the whole portfolio of businesses.”

As an essential business Fonterra had been able to continue operating throughout the pandemic and had not needed any government assistance, Rivers said.

It had no plans to increase its staff numbers any more than it needed to, he said.

“We need to remain disciplined and efficient.”

He said he sympathised with farmers who may be disappointed with the lower range dividend.

But the fact Fonterra was able to return a dividend marked “significant progress” from where it had come from, he said.

Farmers also needed to understand that Fonterra had made good progress on reducing debt but it was still not at a level that was needed.

That combined with Covid-19 pandemic risks meant it needed to be prudent in dividend payments, he said.

“We want the farmers, unit holders, everyone to see there’s a return on their capital. We have to respect that.”

Source: stuff.co.nz

Federal aid improving “safety net” for Midwestern dairy farmers

President Donald Trump trails in the polls in Wisconsin and Minnesota, but he is banking on the support of one group whose fortunes have improved somewhat in the past year: dairy farmers.

Thanks to reinforcements to the federal dairy safety net and a generous coronavirus-relief package, fewer dairy farmers are going out of business and their outlook has brightened despite the pandemic.

“People’s morale has definitely lifted,” said Shelly DePestel, one of the owners of the Lewiston Dairy in southeast Minnesota, one of the state’s largest. “I do think a lot of dairy farmers support Trump, from my limited communication.”

An irony of this new optimism in dairy is that the politician most responsible for the legislation that caused it is U.S. Rep. Collin Peterson, a Minnesota Democrat, the chairman of the House Agricultural Committee.

“Collin Peterson is a champion to dairy,” DePestel said. “It’s not about a party thing. It’s about who’s helping us, who’s looking out for us, who’s got our interests at heart.”

Peterson — who faces his own re-election bid in November against Republican Michelle Fischbach, a former lieutenant governor and Minnesota Senate president — was honored Friday in Perham, Minn., by the Minnesota Milk Producers Association with the legislator of the year award for his work on the coronavirus relief package among other things.

Those who milk cows for a living, especially on the traditional family scale of a couple hundred head or less, have been battered for the past five years. While the entire farm economy has struggled, dairy seemed to be in terminal decline.

Facing a wave of consolidation, oversupply, trade wars and shifting consumer demand, 1 in 10 dairies in Minnesota and Wisconsin closed in 2019. Minnesota lost 268 dairy farms in 2019; Wisconsin, 818.

Dairies are still going out of business in 2020, but at less than half the pace.

Trump was carried to the White House by rural voters and has sought to ally himself with farmers.

At the Republican National Convention, Grantsburg, Wis., dairy farmer Cris Peterson spoke on national television and said Trump came to office “in the middle of the great depression for dairy farmers.”

Business started “booming” again, she said, thanks to his renegotiation of trade deals.

“One person deserves the credit, and our vote,” said Peterson. “President Donald J. Trump.”

Better insurance

The biggest recent help to dairy farmers was dairy margin coverage, a program that was years in the making, said Charles Krause, who milks 250 cows near Buffalo, Minn., with his father and his son.

This new type of insurance, authorized by the 2018 Farm Bill, allows farmers to insure their margin, between the cost of feeding the cows and the price of their milk, by up to $9.50 per hundredweight of milk. Starting in 2019, dairy farmers could get better coverage for lower premiums.

“That’s probably the biggest, most supportive thing that’s happened in dairy in my lifetime, my 30 years of farming,” Krause said.

Smaller farmers benefit in particular, since the program offers the sweetest terms for up to 5 million pounds of milk.

“It’s really been big, especially if you look at the average size Minnesota farmer,” Krause said.

Peterson, who represents Minnesota’s Seventh Congressional District, “played a huge role” in getting dairy margin coverage into the farm bill, said University of Minnesota dairy economist Marin Bozic.

A second new insurance program made available in October 2018 allows farmers to buy area-based dairy revenue protection under the federal crop insurance program.

The premiums are taxpayer-subsidized, typically at 44%, and farmers can choose how much of their expected quarterly milk production to insure, and how much revenue they want to guarantee.

“The dairy safety net has been improved tremendously,” Bozic said.

Pandemic relief and trade

Trump’s campaign has criticized Joe Biden’s running mate, Kamala Harris, for voting against the new trade deal with Mexico and China, saying she put a “radical environmental agenda ahead of Wisconsin dairy and ahead of Wisconsin power.”

Renegotiation of that trade deal has not had much immediate impact, however, Bozic said.

“That’s a long-term help,” he said. “Short term, the biggest help is that it removes uncertainty.”

The payments to milk producers that are part of the coronavirus relief package — following in a trend of generous government assistance to farmers throughout Trump’s presidency — have been a big deal.

Dairy farmers have received $1.7 billion, more than corn, hog and soybean farmers.

“Generous would be an understatement when it comes to dairy,” Bozic said.

There are both electoral and geopolitical reasons for the Trump administration to support farmers so much. Wisconsin is a swing state. Support for farmers also signals to China that the U.S. will stick to its guns in the trade war.

“For whatever reason they did it, they did a tremendous job for dairy,” Bozic said.

Mike Yager, who milks 300 cows near Madison, Wis., is not as impressed. He said “middlemen” continue to benefit the most from dairy farms. He blames the complexity of federal dairy policy — “they don’t want you to understand it” — and politicians in general.

“This country has allocated $2.2 trillion for this pandemic, and agriculture’s receiving $19 billion,” Yager said. “That’s less than 1% for the most important industry in this country.”

But Yager, a self-described political independent, doesn’t blame Trump.

In fact, he’s thankful that the U.S. Department of Agriculture reversed Obama-era standards for school lunches that pushed 1% and skim milk.

“He’s the first president in years that’s spoken up for the farmers and tried to make things better for us,” Yager said.

 

New Zealand WMP reaches peak seasonal milk production

New Zealand WMP prices fell by 4% to NZD 4,280/MT in the four-week period ending 16th September 2020, as New Zealand nears the peak of seasonal milk production, which coupled with weaker export demand is weighing on prices.

As New Zealand reaches the height of milk production (Sept-Oct), WMP plants are actively drying resulting in a stock build. Milk production is currently high (+5% y-o-y), while buying interest from the Middle East has eased. Therefore, as New Zealand is export-focused, this has led to slightly weaker prices. Elsewhere, Chinese stockpiles have continued to grow, which could add downward pressure to New Zealand WMP prices in the coming months, especially as New Zealand’s 2019/20 milk production has peaked.

WMP is a mainstay of New Zealand dairy production, with WMP pricing being a significant factor in determining seasonal milk prices. Although dairy producers feel there is sustained export demand, a continuing concern remains whether global economic growth will ease. This may exert downward pressure on New Zealand’s key export markets – China and the Middle East. This is likely to create bearish sentiment for export demand, and subsequently for New Zealand WMP prices in the near-term.

Source: mintecglobal.com

Paving the way for a fair and thriving Scottish dairy industry

THIS WEEK marked the closure of Defra’s 12-week long consultation on contractual relationships in the UK dairy industry.

Over the past three months, the dairy industry have been urged to feed in responses to the consultation following concerns that primary producers tend to occupy positions of relative market weakness in the food supply chain.

NFU Scotland’s milk committee chair, Gary Mitchell played a huge part in encouraging the sector to take part in the process – which he referred to as a ‘once in a lifetime opportunity’:

Speaking after the closing date he took the opportunity to thanks those who responded to the Unions call: “For at least two years now, we have been actively talking to all parts of the dairy supply chain on this topic and I would like to take this opportunity to thank all the farmers and industry stakeholders that interacted with NFUS during this consultation process and, in turn, offered feedback to Defra. It was important that our voices were heard,

According to Mr Mitchell the easy part is now out of the way and the ‘hard work’ will begin when they hear the outcome from Defra.

“NFUS believes the introduction of well-considered, appropriate legislation regarding dairy contracts between dairy farmers and milk buyers is essential and this was stressed in our response to Defra,” he continued.

“This will create the foundations of a modern, thriving industry based on contracts that are agreed, not imposed, through free and equal negotiation and in good faith for the benefit of all in the supply chain.

“COVID 19 and Brexit are only two of the challenges facing us at the current time, and it is essential that all sectors in the dairy supply chain are best equipped to meet these challenges head on,” he concluded.

Source: thescottishfarmer.co.uk

U.S. Dairy Farmers Want Help To Expand Trade

Dairy Farmers want U.S. trade policy to focus on opening markets and fending off competition from the European Union and New Zealand.

U.S. dairy exports were up about 10% in the first half of 2020 compared to last year. But that’s not enough to return the sector to profitability, according to dairy farmers and producers that are participating in a series of virtual town hall meetings on trade issues.

“America’s dairy future growth is really tied to the success of global markets,” said Jim Mulhern, president and CEO of the National Milk Producers Federation.

Dairy industry leaders want the next president, regardless of whether it’s Donald Trump or Joe Biden, to promote a trade policy that seeks bilateral trade deals with countries that will keep U.S. milk and cheese competitive.

“Any market you look at, the EU or New Zealand, has better tariff advantages than we do. We need a focus from U.S. trade policy that is designed to create that level playing field,” Mulhern said.

The issue is tariffs, according to Jeff Schwager, CEO of Sartori Cheese, based in Plymouth, Wisconsin. 

“For the cheese we ship to Europe, we pay more in duty per kilogram than the Europeans pay to export their cheese to the United States. What’s fair in that?” Schwager said.

Dairy farmers do give credit to the Trump administration for the U.S.-Mexico-Canada Agreement (USMCA), which replaced the expired North American Free Trade Agreement (NAFTA). That deal is expected to increase dairy sales to Canada by more than $200 million annually. 

But the deal doesn’t go far enough for some dairy interests.

“USMCA is an improvement, but we are still at a disadvantage in Canada with the import limitation on U.S. cheese,” Schwager said. “They have a bilateral trade agreement with the EU that is more favorable for cheese than with us, their closest neighbor.”

Some congress members are siding with the dairy industry on that topic. Twenty-five senators and more than 100 representatives have sent bipartisan letters asking the Trump administration to start holding Canada and Mexico up to their parts of the deal on dairy.

Exports currently make up 15-17% of U.S. dairy production.

Source: wvik.org

American Dairy Consumption Reaches All-Time High; Cheese, Butter and Yogurt Continue to Drive Growth for Dairy Industry

Americans are turning to dairy products at a rate never seen before, according to the USDA Economic Research Service (ERS). New ERS data on annualized per capita consumption of dairy point to cheese, butter and yogurt categories driving substantial growth in per capita consumption of dairy, which reached a record high in 2019.

“Since the USDA began tracking per capita dairy consumption in the 1970s, the trend has continued upward for five straight decades, increasing 21% since 1975,” said Michael Dykes, D.V.M., president and CEO of the International Dairy Foods Association. “While Americans have always turned to dairy products as fresh, nutritious staples in their diets, they also value the versatility of dairy in new, delicious, and more accessible products. Thanks to its continued innovation and ingenuity, the dairy industry is poised to continue to grow and deliver nutritious products for Americans.”

In the past decade alone: domestic per capita consumption of cheese is up 19%; per capita butter consumption is up 24%; per capita yogurt consumption is up 7%. Ice cream per capita consumption also rebounded in 2019, increasing by a half-percent over 2018. Overall, ERS data show American dairy per capita consumption across products consistently increasing each year, with 2019 up 6% over the past five years, 10% over the past 15 years, and 16% over the past 30 years.

“The product mix in most demand by consumers is changing—we eat more dairy than we drink these days—and dairy on the whole continues to grow,” said Dykes.

The charts below illustrate the consistent growth in per capita consumption of dairy products.

Dairy products consumption per capita United States of America
American dairy per capita consumption across products consistently has been increasing each year, with 2019 up 6% over the past five years, 10% over the past 15 years, and 16% over the past 30 years.
Cheese dairy consumption per capita United States of America
Domestic per capita consumption of cheese is up 19% over the past decade.
Butter consumption per capita United States of America
American butter consumption per capita has increased 24% in just the past decade.

# # #

The International Dairy Foods Association (IDFA), Washington, D.C., represents the nation’s dairy manufacturing and marketing industry, which supports more than 3 million jobs that generate $159 billion in wages and $620 billion in overall economic impact. IDFA’s diverse membership ranges from multinational organizations to single-plant companies, from dairy companies and cooperatives to food retailers and suppliers, all on the cutting edge of innovation and sustainable business practices. Together, they represent 90 percent of the milk, cheese, ice cream, yogurt and cultured products, and dairy ingredients produced and marketed in the United States and sold throughout the world. Delicious, safe and nutritious, dairy foods offer unparalleled health and consumer benefits to people of all ages.

 

Dairy giant Fonterra posts huge profit after revamp

New Zealand dairy giant Fonterra posted a bumper annual profit Friday, putting the world’s largest dairy exporter back in the black after two years of heavy losses.

Fonterra announced a net profit of NZ$659 million (US$445 million) for the 12 months to July 31, rebounding from a NZ$605-million loss the previous year.

The turnaround comes after Fonterra restructured its operations to focus on core business after last year writing down more than NZ$800 million in assets, including slashing the value of investments in China.

Fonterra said shareholders would receive a final dividend of five cents a share, ending a suspension on payouts that began in 2019.

“We increased our profit after tax by more than NZ$1.0 billion, reduced our debt by more than NZ$1.0 billion and this has put us in a position to start paying dividends again,” chief executive Miles Hurrell said.

He said Fonterra experienced a strong first half to the financial year but the Covid-19 pandemic affected the second half.

“As we moved through the second half, we saw restaurants, cafes and bakeries close and intermittent spikes in supermarket sales, creating uncertainty across the global dairy market,” he said.

Chairman John Monaghan said the health crisis made providing a detailed outlook difficult as new waves of infection and the virus-induced global slowdown would affect demand in unpredictable ways.

“The best way of coping with uncertainty is to stay on strategy and focus on what is within our control –– delivering for our farmers, unit holders and customers, and maintaining our financial discipline,” he said.

“We need to stay agile and draw on our strengths across the supply chain to manage and adapt to the changing global situation.”

Source: news.yahoo.com

USDA Needs Tools to Help Farmers

The American Farm Bureau Federation and 41 other agriculture organizations are asking Congress to ensure the USDA has the tools necessary to help farmers in times of crisis. The group sent a letter to House and Senate leadership requesting they immediately provide replenishment for the Commodity Credit Corporation (CCC) through the continuing resolution. Without immediate replenishment, funding for farm bill programs could run out while farmers struggle against low commodity prices, natural disasters and the coronavirus pandemic.

“For decades, CCC has been regularly replenished to fund programs integral to the farm safety net that Congress has worked tirelessly to craft,” the letter states. “Producers count on programs like Agriculture Risk Coverage, Price Loss Coverage, Dairy Margin Coverage, Marketing Assistance Loans, conservation programs, and many others as they provide food, fuel and fiber for our nation. Without immediate CCC reimbursement, payments and programs would be significantly delayed, jeopardizing operations across the country.”

Although much recent attention has been focused on CCC aid to farmers to address the unprecedented crisis caused by the pandemic, it’s important to recognize that the CCC is critical when natural disasters strike, enabling USDA to act quickly to deliver aid. The CCC is also core to our nation’s success advancing conservation efforts, having enrolled more than 140 million acres in USDA conservation programs – more than the land mass of California and New York combined. In reality, the CCC is a stabilizing force across U.S. agriculture.

Organizations that signed the letter include the Agricultural Retailers Association, Amcot, American Agri-Women, American Cotton Producers, American Cotton Shippers Association, American Dairy Coalition, American Farm Bureau Federation, American Pulse Association, American Sheep Industry Association, American Soybean Association, American Sugar Alliance, Association of Equipment Manufacturers, Cotton Growers Warehouse Association, Cotton Warehouse Association of America, Crop Insurance Professionals Association, National Association of Wheat Growers, National Barley Growers Association, National Cattlemen’s Beef Association, National Corn Growers Association, National Cotton Council, National Cotton Ginners Association, National Council of Farmer Cooperatives, National Farmers Union, National Milk Producers Federation, National Sorghum Producers, National Sunflower Association, Panhandle Peanut Growers Association, Plains Cotton Growers, Inc., Produce Marketing Association, Rural & Agriculture Council of America, Society of American Florists, Southeastern Cotton Ginners Association, Southern Cotton Growers, Southwest Council of Agribusiness, U.S. Canola Association, U.S. Cattlemen’s Association, United Egg Producers, United States Peanut Federation, US Rice Producers Association, USA Dry Pea & Lentil Council, USA Rice and the Western Peanut Growers Association.

Read the full letter here.

Read the Market Intel on CCC Replenishment.

Kiwi Dairy Innovation Leading The Way

Dairy is New Zealand’s top earner following the impact of COVID on tourism and education. Much now rests on the shoulders of busy farmers, some of whom are still struggling to get key staff back through New Zealand’s borders.

Annual breeding is a key pressure-point in the dairy calendar that requires skill and experience. A local Hamilton company is now attracting global attention for an imaginative solution to a perennial farming headache.

Kiwi dairy farmers need to know exactly when to artificially inseminate cows. FlashMate was created to stick to cow hair during the breeding period to interpret cow behaviour. The red light comes on at just the right moment when the cow is on heat and the unit is easily removed after breeding without bothering cows. “Reading body language when you have as many as 1,200 cows isn’t easy” says Matt Yallop, one of the creators of FlashMate.

It’s a problem worth solving. Industry body DairyNZ put an annual value of NZ$1.5 billion on lifting the percentage of cows that are pregnant in the first six weeks of the annual mating period to 78 percent as the key industry target. Heat detection efficiency is a critical element in achieving this goal.

New Zealand is renowned for its dairy industry and FlashMate has not gone unnoticed by farmers and experts worldwide. FlashMate has reached far flung cows in remote Russia, Brazil, China, Chile and the Baltic shores of Estonia – even the mountains of Japan.

Dairy Industry bodies in Ireland, Japan and the USA are embracing FlashMate for its potential to lift productivity. In all three countries, clinical work has been completed to confirm the accuracy of the product. “We’ve been stunned by the strong interest outside New Zealand” says Yallop who receives offshore enquiries from farmers and experts every other day.

He suggests that with COVID effectively eliminating overseas travel, people are very open to doing international business online. This has freed up energy and resource which we can now focus directly on the local market. “There’s a huge number of positives there; I can be here in New Zealand with the family more and be far more available to support local farmers” Yallop says.

Peer-reviewed publications utilising FlashMate are being accepted into the prestigious Journal of Dairy Science in the USA. “It’s really exciting to see a New Zealand innovation unlocking valuable new insights into animals that have been farmed for millennia.” Once published, the science can be shared back to our industry via DairyNZ.

Yallop adds that many cultures find the concept amusing, “it’s a brilliant ice breaker” he says. “People soon see the science and results behind the idea; realise it’s not a gimmick and are keen to see their own herds fitted out with flashing lights.”

Internationally, language is challenging and while actions and gestures can help convey the message, this can get awkward too with the subject matter. “Google translate has also handed us some hilarious moments” laughs Yallop.

The product has clinically demonstrated a 6.3 percent lift in six-week in-calf rate on New Zealand farms, head-to-head with skilled farmers using tail paint. A number of farms have already attributed more than $100,000 in improvements over several years, freeing up labour and helping sustain their farming way of life, while improving on-farm efficiency.

Because FlashMate has a very low skill requirement and makes life easier on the farm, it can help to save the day for farms affected by staff caught in COVID border closures, which may explain an early surge in local demand for the seasonal product.

Here at home, most people don’t know the full story says Yallop, but word of mouth is steadily growing. FlashMate has already been used on DairyNZ research farms and the product is building a reputation among artificial breeding technicians for alerting heats that even highly-skilled farmers would otherwise miss.

“Farmers are constantly being told to use technology but aren’t always offered a realistic starting point” says Yallop. “Our approach is to keep it very simple, muck in with farms and support the real decisions farmers have to make.” He adds that everyone in New Zealand should look to support farming in every way they can while, particularly as they lead our economic recovery.

Source: scoop.co.nz

Holstein America Broadcasts Sept. 24 on RFD-TV

On family farms and in rural places across America, dairy farmers share a goal of caring for their cows and families while supplying the world with quality milk and dairy products.

Holstein America, the leading dairy program on national television, airs at 9 p.m. central time, Thursday, Sept. 24 on RFD-TV. Mark the calendar or set the DVR to join Holstein Association USA and thousands of viewers in celebrating America’s dedicated dairy farm families.

The upcoming episode showcases the diversity of farms across the country and opportunities found through U.S. Registered Holsteins, the world’s perfect cow.

“The Holstein cow is a natural converter. She takes energy from the sun, rain, and forages, and produces milk. It’s a wonderful, sustainable and efficient part of life that we have,” says John Meyer, CEO of Holstein Association USA. “Our mission with Holstein America is to share that story with fellow farmers and consumers alike.”

Discover how dairy farmers are sharing their livelihoods with the community and beyond — from artisan cheese and farm tours to Washington, D.C., where Holstein Association USA’s Board of Directors represent members.

The hour-long program, sponsored by Merck Animal Health, is the only dairy-specific program produced for a nationwide audience. The February 2019 episode attracted nearly 300,000 Nielsen viewers; and the five programs that have aired to date have drawn more than 1.3 million YouTube views.

Join Holstein Association USA and dairy farmers across the country for the sixth episode of Holstein America at 9 p.m. central time, Thursday, Sept. 24 on RFD-TV.

RFD-TV is a leading independent cable channel available on DISH Network, DIRECTV®, AT&T U-Verse, Charter Spectrum, Cox, Comcast, Mediacom, Suddenlink and many other rural cable systems. Reference local listings for more information.

Did coronavirus impact UK dairy trade?

The coronavirus pandemic has inevitably had an impact on global trade, with IHS Markit dubbing April-June 2020 “the worst quarter in trade on record”.

On a global level, it notes shipments to and from multiple key trading nations were down significantly on the year. But how did UK dairy trade perform, questions Katherine Jack, AHDB dairy analyst

Cheeses and powders drive lower dairy imports

UK imports of dairy products (excluding liquid milk and cream) totalled 616.5k tonnes in Jan-Jul 2020, down 8% on 2019 and down 7% on the 3-year average (2017-2019). There has been some uplift in recent months, with June imports up on the year and July in line with a year previous. This is likely tied to the return of some foodservice demand as restrictions started to ease.

The reduced imports so far this year (Jan–Jul) were driven by cheeses and powders, down 3% and 6% on the year respectively. Other product categories such as butter, whey products and fermented dairy products (e.g. yoghurts) were up on 2019.

UK dairy product exports up on 3-year average

Exports of UK dairy products (excluding liquid milk and cream) totalled 330.8k tonnes for Jan-Jul 2020, down 8% on the same period in 2019, but up 6% on the 3-year average (2017-2019).

The year-on-year losses came from predominantly from lower exports of cheeses and fermented dairy products. There was also a small drop in exports of whey products, while butter exports rose and exports of powders and concentrates held steady.

Source: thedairysite.com

Commission Releases Final Report On Fonterra’s Milk Price

The Commerce Commission has today released its final report on Fonterra’s base milk price calculation for the 2019/20 dairy season.

The base milk price is the average price Fonterra sets for raw milk supplied by farmers, which is currently forecast to be $7.10 – $7.20 per kilogram of milk solids for the 2019/20 dairy season.

The Commission is required to review the calculation at the end of each dairy season under the milk price monitoring regime in the Dairy Industry Restructuring Act (DIRA). The regime is designed to provide Fonterra with incentives to set the base milk price consistent with efficient and contestable market outcomes.

“We are satisfied Fonterra’s calculation is largely consistent with both the efficiency and contestability purposes of the Act,” Commission Deputy Chair Sue Begg said.

“Our review this year focused on Fonterra’s administrative and overhead costs, as well as the range of commodity products manufactured and sold, and revealed no new areas of concern.”

The Commission remains of the view that Fonterra’s current estimate of “asset beta” – the extent to which the assets associated with processing milk are more or less risky than the stock market as a whole – is unlikely to be practically feasible for an efficient processor. Fonterra is scheduled to review its estimate for the asset beta for the 2020/21 season, which will likely be a focus for next year’s report.

The final report and related information can be found here.

Source: scoop.co.nz

IDFA says USDA data show Americans eating more dairy

“Since the USDA began tracking per capita dairy consumption in the 1970s, the trend has continued upward for five straight decades, increasing 21% since 1975,”​ said Michael Dykes, D.V.M., president and CEO of the International Dairy Foods Association.

“While Americans have always turned to dairy products as fresh, nutritious staples in their diets, they also value the versatility of dairy in new, delicious, and more accessible products. Thanks to its continued innovation and ingenuity, the dairy industry is poised to continue to grow and deliver nutritious products for Americans.”

In the past decade, domestic per capita consumption of cheese is up 19%; per capita butter consumption is up 24%; per capita yogurt consumption is up 7%. Ice cream per capita consumption also rebounded in 2019, increasing by a half-percent over 2018.

Overall, ERS data show American dairy per capita consumption across products consistently increasing each year, with 2019 up 6% over the past five years, 10% over the past 15 years, and 16% over the past 30 years.

“The product mix in most demand by consumers is changing—we eat more dairy than we drink these days—and dairy on the whole continues to grow,”​ Dykes said.

Source: dairyreporter.com

Fonterra Australia to acquire Dairy Country for $14.03m

Fonterra Australia has agreed to purchase cheese processor Dairy Country for AUD 19.23 million ($14.03 million approx.) from food and beverage company, Retail Food Group.

Fonterra claims to hold a 23% market share in the ‘AUD 2.6 billion Australian retail cheese category’. The company expects the acquisition to help drive efficiencies in its Australian cheese business, which includes brands such as Perfect Italiano, Mainland and Bega.

The deal includes Dairy Country’s processing and packing facilities at Campbellfield and Tullamarine in Victoria, along with related services, intellectual property and the trademark for the Dairy Country brand.

“This acquisition is a logical choice and further supports our strategy to be customer- and consumer- led, while ensuring we keep pace with the fast-growing cheese category in Australia,” said Fonterra Australia managing director, René Dedoncker.

“Dairy Country has two well-equipped secondary processing sites with capability across grating, shredding and block, as well as an experienced workforce.

“For some time we have been looking to bring more of our secondary cheese processing in-house to gain greater end-to-end control over a range of different cheese products and further strengthen our integrated supply chain.

“Having this kind of capability in-house will enable efficiencies and allow us to make the most of opportunities for value creation and product innovation.”

The ‘majority’ of Dairy Country’s permanent employees will reportedly transfer to Fonterra and continue to work at the Campbellfield and Tullamarine facilities.

The transaction is subject to regulatory approvals and standard closing conditions.

Source: foodbev.com

Standing for change in Australian dairy

Dairy farmers are encouraged to become members of both ADF and DA.

While the Australian dairy industry waits for decisions to be made around the Dairy Plan, the regular show must go on and our two national organisations, ADF and DA must continue to operate under their constitutional guidelines. This means that significant executive board elections for both organisations must be held later this year and all dairy farmers must get actively involved.

I would encourage all dairy farmers to become members of both organisations (membership is not automatic for either), particularly given the important changes being planned that will significantly affect the future of the dairy industry.

As the newest QDO board member, I am the least seasoned by the political intrigues of our industry and I find the actions of some of the more self-interested parties hard to accept. But I do know that if I don’t like what’s going on in the industry, I need to exercise my democratic vote to make change happen.

QDO president Brian Tessmann has applied as a candidate for the Australian Dairy Farmers (ADF) director position that will be contested at the 2020 ADF Annual General Meeting scheduled for Thursday, November 26.

Two director positions are being contested at this election. John Versteden is up for re-election and Bruce Donnison will not recontest at the AGM.

Most importantly for this current election, ADF is the lead organisation for the national Dairy Plan and as such, its board members have significant influence on the future of the Australian dairy industry, so these appointments are especially important.

While Brian is already involved as a member of the ADF National Council and is on several of ADF’s Policy Advisory Groups which report back to the board, these roles do not allow Brian to have an active decision-making role in the strategic direction of ADF or the Dairy Plan.

Only ADF board directors can determine the direction of ADF and they have a pivotal role in key decisions around the Dairy Plan. It is these directors who need to drive the structural changes that grassroots dairy farmers have been demanding.

Having now worked alongside Brian on the QDO State Council for the past year, I have come to know Brian’s professional history and where he stands on national policies. I am confident that he can provide dairy farmers from the northern regions of Australia with a significant and strong voice that will make change happen.

Come November, I will be putting my vote with Brian and encourage any dairy farmer who is a member of their state advocacy body to do likewise.

New membership applications for ADF must be received no later than Friday October 9.

If you would like assistance in completing your application or have any questions regarding the application, contact Kerrie at QDO on 3236 2955.

Decline in school lunch milk consumption may affect future health

Fluid milk consumption among children is vital, as adequate consumption of dairy products, especially during childhood, has beneficial health outcomes later in life. These benefits include reduced risk of osteoporosis, hypertension, obesity and cancer in adulthood.

Milk consumption among children has been declining for decades, so understanding and fulfilling the needs of children is crucial to reverse the decline. In an article appearing in the Journal of Dairy Science, scientists from North Carolina State University and Cornell University studied key contributors to increasing milk consumption among children. Factors evaluated in the study included food trends, nutritional and school meal program requirements, children’s perceptions and preferences, and environmental influences. Among these influences, flavor and habit were the primary drivers for long-term milk consumption.

In this episode of Feedstuffs in Focus, Feedstuffs editor Sarah Muirhead talks with senior author MaryAnne Drake, PhD, department of food, bioprocessing and nutrition sciences, North Carolina State University, and Dr. David Barbano, professor of food science at Cornell University about their ongoing research.        

“Making milk more appealing to children, having schools include milk in their meal plans, and increasing the types of milk available in schools are all positive options to encourage children consume fluid milk and receive those health benefits,” said Drake. “The findings in this study, however, reveal critical insights that will aid in efforts to increase milk consumption among children.”

This episode is sponsored by Balchem Animal Nutrition and Health – join Balchem for their Real Science Lecture series, a weekly webinar series featuring ruminant nutrition experts discussing vital topics for today’s dairy industry. You can learn more at BalchemANH.com/RealScience.

Milking Profits: The Dairy Monopolies That Are Hurting Farmers

Born of a noble idea, dairy cooperatives let farmers join forces to get a good price for their milk and stand up to powerful interests. Now the coops are powerful, huge, and squeezing the farmers that ostensibly own them.

Earlier this summer, the Justice Department filed a legal brief to support Northeastern dairy farmers. More than 115 farmers are suing mammoth milk processor Dairy Farmers of America (DFA) for conspiring to hold down milk prices. The farmers argue that DFA violated antitrust laws by colluding with other milk buyers and striking exclusive deals with processors. The sad irony is that many of these farmers are owners of DFA, which isn’t a publicly traded agribusiness giant but rather a cooperative.

And there’s the problem. Cooperatives are meant to be a democratic and producer-owned alternative to corporations. Farmers have long used cooperatives to join forces and bargain with dominant agribusiness. Instead of selling their milk solo to Big Butter, Inc. farmers can form a cooperative that helps market their products to larger buyers or even build a farmer-owned butter factory.

The problem is some cooperatives have started to resemble the giant agricultural businesses they were meant to reign in. Under pressure to get big or get out, co-ops such as DFA have developed perverse incentives to squeeze their own members. Growing business hierarchies make cooperative managers less accountable to farmer-owners.

The dairy showdown has lessons for us all no matter where we work. The struggles of family farmers to build power together against giant agribusinesses parallel the struggles of Uber drivers and third-party vendors on Amazon to organize and bargain collectively. Ensuring healthy cooperative governance is critical for all independent contractors, workers, and small business owners who need rights to cooperate with one another in increasingly monopolized markets. Together, greater antitrust enforcement and healthy cooperative enterprise have massive potential to lessen structural inequalities and build an economy based on more than just short-term profits for investors.

A recent report by the Open Markets Institute, an anti-monopoly think tank where I work, argues that proper antitrust enforcement is critical to both level the playing field for cooperatives and to rein in cooperatives that no longer serve their members. By arguing that DFA’s exclusionary conduct and buyer power over dairy farmers could violate antitrust laws, the DOJ’s recent brief marks a step in the right direction.

But bolder action is needed. To truly rebalance power in agricultural markets and ensure that co-ops serve their members’ interests lawmakers and antitrust enforcers need to break up dominant agribusinesses and institute stronger guidelines ensuring healthy, democratic cooperative governance.

Cooperatives were a cornerstone of early anti-monopoly movements in the late 19th century. At the same time that farmers in the Populist and Progressive eras pushed hard for anti-monopoly laws to break up the power of railroad, granary, and meatpacker cartels, they also promoted cooperatives to build power among farmers. Unions and farmers organizations such as the Knights of Labor and the Farmers Alliance promoted farmer-and worker-owned cooperatives as a democratic alternative to replace exploitative financier-run firms.

Much to their dismay, the very antitrust legislation that reformers helped pass initially hindered this burgeoning co-op movement. Rather than take on big business, early enforcers used the Sherman Antitrust Act of 1890 to break up labor unions and farmer co-ops. In 1895, for example, Chicago-area milk distributors successfully sued a local dairy co-op by arguing that the co-op’s insistence on an exclusive contract was an illegal restraint of trade under state antitrust law.

In response, farmers helped push through the 1922 Capper-Volstead Act to protect economic coordination within agricultural cooperatives. The law largely protects cooperatives from antitrust scrutiny. Unfortunately, farmers and lawmakers did not foresee cooperatives growing to mimic monopolists.

The number of agriculture cooperatives grew through the 1960s until policy changes began to consolidate the agricultural economy around them. Free-market ideology overtook antitrust enforcement in the 1970s and ‘80s, and a flurry of agricultural mergers prompted consolidation among cooperatives as well. As DFA states in its official business history, “as milk processors and grocers grew larger and more national in scope, it was clear that the regional structure of the traditional cooperative couldn’t keep up.” The number of cooperatives dropped from 6,445 in 1979 to only 2,186 in 2014, largely due to mergers and buyouts.

DFA, for instance, merged with regional co-ops to become a dominant raw milk buyer – and sometimes the only buyer – in many local markets. The co-op also moved beyond just negotiating better milk trucking terms or selling milk to major dairy processors, such as Kraft or Chobani, by investing in their own milk trucks and processing plants to ship and bottle their own milk or make their own cheese. As dairy processing became a larger part of their business, DFA managers developed a perverse incentive to pay less for members’ milk in order to maximize processing profits. DFA does not sharethese profits with farmers and instead pads its managers’ and executives’ pockets while dairy farms go out of business at a historic clip.

As the nominal owners of DFA, farmers should be able to have a voice in the direction of their cooperative by electing board members or voting on major business decisions. But DFA members complain that the co-op is not sufficiently transparent in its decision-making and that board members, each elected by different regions, hold too much decision-making power compared to farmer members.

As a result, some DFA members felt they had no other recourse but to sue their own cooperative for conspiracies to fix prices, resulting in two multi-million-dollar settlements. The most recent case, a spinoff from farmers who opted out of one of these settlements, is set for a federal district court jury trial in September.  The plaintiff farmers allege that DFA and other cooperatives agreed to not poach each other’s members and shared how much they were paying farmers for their milk, limiting competition and holding down prices. They also allege that DFA entered into exclusive supply agreements with major processors such as Dean Foods and Chobani that guaranteed low milk prices for processors and forced farmers to work with DFA in order to access these major markets.

The DOJ weighed in on the side of farmers and critically argued that the antitrust exemptions of Capper-Volstead do not function as a “shield insulating monopsonies from the antitrust laws.” In order to maintain its Capper-Volstead protections, the DOJ says that DFA must prove that its collusion and exclusionary conduct benefited farmers.

While this brief is a step in the right direction, it may not make up for the fact that this same DOJ recently approved DFA’s acquisition of dominant dairy processor Dean Foods, which sells 12% of all fluid milk in the U.S. Unsurprisingly, DFA also struck exclusive deals to become the only milk supplier for Dean Foods in exchange for locking in low milk prices for Dean, harming farmer members. Rolling Dean’s plants into DFA makes these illegal arrangements perfectly legal as internal business coordination.

Truly reforming cooperatives requires a broader anti-monopoly approach, as the Open Markets Institute’s report argues. First, we need renewed antitrust enforcement to break up big processors and retailers that pressure cooperatives to expand into similar monopolies. Second, we need greater scrutiny of cooperative mergers, to avoid dangerous concentrations of buying power in cooperatives. This includes skepticism of deals that allow dominant co-ops to vertically integrate into processing. And any cooperative that does not demonstrably benefit its members should not receive Capper-Volstead protection from antitrust action.

Most critically, we need to restore the democratic promise of cooperatives so that farmers once again have a say in co-op decision-making. This includes promoting federated cooperative structures where some national scale is necessary; mandating one-member, one-vote systems; regular board elections; and limiting cooperative membership to bonafide farmers directly involved in food production (some cooperatives take on non-patron investor members or board members to raise capital). Management must also share more information with farmer members, and the largest co-ops should be held to the same information reporting standards as publicly held corporations are, including executive compensation disclosure.

Finally, Congress and the USDA need to rebuild federal cooperative research, education, and technical assistance programs. At its peak in the 1960s, the USDA had more than 100 employees supporting the cooperative movement through training and technical assistance that helped farmers form and manage cooperatives. This assistance can help co-ops get off the ground and empower coop members to develop healthy governance structures that prevent a managerial takeover. But as of this writing, the USDA Rural Business-Cooperative Service directory lists only four staff members dedicated to cooperative services, and a 2018 letter from the agriculture secretary proposes transfers that would further shrink federal cooperatives services.

Congress should also appropriate more public financing opportunities, modeled after the National Rural Electric Cooperative Finance Corporation, to provide capital for the creation of new co-ops and to help established co-ops stay afloat in economic crises such as the ongoing pandemic. Limited access to financing pushes cooperatives to take on investor members and resemble true corporations.

In the 19th Century, the Knights of Labor’s vision to replace short-term profit-oriented corporations with farmer- or worker-owned cooperatives was transformative. In the 21st Century, we need bold federal policy that ensures cooperatives live up to their democratic ideals.

Source: washingtonmonthly.com

Why fewer Minnesota dairy farmers are going out of business

President Donald Trump trails in the polls in Wisconsin and Minnesota, but he is banking on the support of one group whose fortunes have improved somewhat in the past year: dairy farmers.

Thanks to reinforcements to the federal dairy safety net and a generous coronavirus-relief package, fewer dairy farmers are going out of business and their outlook has brightened despite the pandemic.

“People’s morale has definitely lifted,” said Shelly DePestel, one of the owners of the Lewiston Dairy in southeast Minnesota, one of the state’s largest. “I do think a lot of dairy farmers support Trump, from my limited communication.”

An irony of this new optimism in dairy is that the politician most responsible for the legislation that caused it is a Democrat, U.S. Rep. Collin Peterson, the chairman of the House Agricultural Committee.

“Collin Peterson is a champion to dairy,” DePestel said. “It’s not about a party thing. It’s about who’s helping us, who’s looking out for us, who’s got our interests at heart.”

Peterson — who faces his own re-election bid in November against Republican Michelle Fischbach, a former lieutenant governor and Minnesota Senate president — was honored Friday in Perham, Minn., by the Minnesota Milk Producers Association with the legislator of the year award for his work on the coronavirus relief package among other things.

Those who milk cows for a living, especially on the traditional family scale of a couple hundred head or less, have been battered for the past five years. While the entire farm economy has struggled, dairy seemed to be in terminal decline.

Facing a wave of consolidation, oversupply, trade wars and shifting consumer demand, 1 in 10 dairies in Minnesota and Wisconsin closed in 2019. Minnesota lost 268 dairy farms in 2019; Wisconsin, 818.

Dairies are still going out of business in 2020, but at less than half the pace.

Trump was carried to the White House by rural voters and has sought to ally himself with farmers.

At the Republican National Convention, Grantsburg, Wis., dairy farmer Cris Peterson spoke on national television and said Trump came to office “in the middle of the great depression for dairy farmers.”

Business started “booming” again, she said, thanks to his renegotiation of trade deals.

“One person deserves the credit, and our vote,” said Peterson. “President Donald J. Trump.”

Better insurance

The biggest recent help to dairy farmers was dairy margin coverage, a program that was years in the making, said Charles Krause, who milks 250 cows near Buffalo, Minn., with his father and his son.

This new type of insurance, authorized by the 2018 Farm Bill, allows farmers to insure their margin, between the cost of feeding the cows and the price of their milk, by up to $9.50 per hundredweight of milk. Starting in 2019, dairy farmers could get better coverage for lower premiums.

“That’s probably the biggest, most supportive thing that’s happened in dairy in my lifetime, my 30 years of farming,” Krause said.

Smaller farmers benefit in particular, since the program offers the sweetest terms for up to 5 million pounds of milk.

“It’s really been big, especially if you look at the average size Minnesota farmer,” Krause said.

Peterson, who represents Minnesota’s Seventh Congressional District, “played a huge role” in getting dairy margin coverage into the farm bill, said University of Minnesota dairy economist Marin Bozic.

A second new insurance program made available in October 2018 allows farmers to buy area-based dairy revenue protection under the federal crop insurance program.

The premiums are taxpayer-subsidized, typically at 44%, and farmers can choose how much of their expected quarterly milk production to insure, and how much revenue they want to guarantee.

“The dairy safety net has been improved tremendously,” Bozic said.

Pandemic relief and trade

Trump’s campaign has criticized Joe Biden’s running mate, Kamala Harris, for voting against the new trade deal with Mexico and China, saying she put a “radical environmental agenda ahead of Wisconsin dairy and ahead of Wisconsin power.”

Renegotiation of that trade deal has not had much immediate impact, however, Bozic said.

“That’s a long-term help,” he said. “Short term, the biggest help is that it removes uncertainty.”

The payments to milk producers that are part of the coronavirus relief package — following in a trend of generous government assistance to farmers throughout Trump’s presidency — have been a big deal.

Dairy farmers have received $1.7 billion, more than corn, hog and soybean farmers.

“Generous would be an understatement when it comes to dairy,” Bozic said.

There are both electoral and geopolitical reasons for the Trump administration to support farmers so much. Wisconsin is a swing state. Support for farmers also signals to China that the U.S. will stick to its guns in the trade war.

“For whatever reason they did it, they did a tremendous job for dairy,” Bozic said.

Mike Yager, who milks 300 cows near Madison, Wis., is not as impressed. He said “middlemen” continue to benefit the most from dairy farms. He blames the complexity of federal dairy policy — “they don’t want you to understand it” — and politicians in general.

“This country has allocated $2.2 trillion for this pandemic, and agriculture’s receiving $19 billion,” Yager said. “That’s less than 1% for the most important industry in this country.”

But Yager, a self-described political independent, doesn’t blame Trump.

In fact, he’s thankful that the U.S. Department of Agriculture reversed Obama-era standards for school lunches that pushed 1% and skim milk.

“He’s the first president in years that’s spoken up for the farmers and tried to make things better for us,” Yager said.

Source: startribune.com

How Trump’s dairy deal with Canada is viewed in swing-state Wisconsin

U.S. President Donald Trump has been campaigning in Wisconsin on what the new NAFTA deal will do for dairy farmers. Dave Daniels, who runs a farm near Kenosha, says the new trade deal with Canada might help stabilize milk prices but he doesn’t expect to feel a personal boost. (Alex Panetta/CBC)

Talk to Wisconsin dairy farmers about the ground-shifting events in their industry and it’s striking how rarely the new trade deal with Canada comes up.

That might surprise anyone who’s heard about the dairy liberalization in the new North American trade agreement — which gave U.S. producers a bit more access to Canada’s tightly controlled dairy market, and limited the Canadian sector’s ability to export dairy products to the U.S. — described as a major development.

The 2018 deal has been characterized that way on both sides of the border: by Canadians unhappy with the new NAFTA, and in the U.S. by President Donald Trump as he campaigns in Wisconsin, a key presidential election swing state and dairy-producing region.

It could soon heat up again as a political issue. The U.S. has hinted its first lawsuit against Canada under the new pact might involve dairy, as Democratic and Republican politicians have written letters accusing Canada of unfairlyimplementing the deal in a way that discriminates against U.S. farmers.

But right now, down on the farm, based on conversations with American dairy operators of different political stripes, trade with Canada ranks low on the hierarchy of priorities. 

America’s huge dairy sector generates tens of billions in revenue each year and regularly deals with abrupt and brutal price swings that dwarf the few hundred million in new revenues expected from Canada.

“It’s a drop in the bucket,” said Sarah Lloyd, a Democrat and dairy farmer who lives two hours west of Milwaukee, describing the new Canadian market access.

A tractor passes a sign expressing support for Wisconsin’s dairy farmers in Watertown, west of Milwaukee, on Aug. 18, 2020. (Alex Panetta/CBC)

A third-generation dairy farmer near Kenosha, who voted for Trump in 2016 and said he probably will again, Dave Daniels, said the new pact might help the overall market a bit. 

But, “On my own bottom line it’s probably not going to make a lot of difference,” he said.

Lloyd Holterman said he’s heard detailed opinions about this agreement in one place — in Canada, when he visits for dairy conferences.

“They seemed to know more about it [in Canada] than I knew. [Farmers there] were upset …  so I figured we probably got the better end of the deal,” said Holterman, who prefers not to divulge his voting intentions 

“I don’t know how big a deal it was, really. … That’s a small [market in Canada].”

Dairy farmers in Wisconsin have considerable political power this year.

Why Trump needs Wisconsin farmers

Wisconsin, a swing state, will be decided not just by whether Trump wins a majority of votes in the rural, milk-producing areas — as he almost certainly will.

The other factor is whether Trump racks up enough of a lead here to offset his likely deficits in urban areas, like Milwaukee and Madison.

And the dairy deal with Canada is central to Trump’s re-election message here.

Trump supporters greeted Vice President Mike Pence as his motorcade headed to a dairy farm in Onalaska, Wis., on July 17 to promote the new North American trade deal. (Mark Hoffman/Milwaukee Journal-Sentinel via AP)

In speeches last month in different parts of the country, Trump promoted the new NAFTA as a turning point — he said, in one, that Canada used to take advantage of the U.S. when it came to dairy, “but not anymore.”

At the Republican convention, his daughter Ivanka described the president constantly asking about dairy when getting briefed on the NAFTA negotiations: “[He would say], ‘Don’t let down those dairy farmers I met in Wisconsin. I don’t want them to like this deal; I want them to love it.”

Even if the Wisconsin farmers have limited expectations for the agreement, they do appear to like the fact a deal has been made. The industry is craving stability after a wild few years, and this pact helps in that regard.

WATCH | In 2017, Trump said Canada was doing ‘very unfair things’ to U.S. dairy farmers

U.S. president’s new ‘Buy American and Hire American’ executive order targets Canada’s dairy industry 1:24

More than half of U.S. dairy farms shut down over the last two decades and 2018 and 2019 were some of the hardest years on record.

The destabilizing forces included a dramatic plunge in prices. Whole milk prices dropped 33 per cent from 2014 to 2016, then remained low for years. Milk consumption has also declined. And there’s never-ending pressure to keep growing, keep innovating — or die.

“Highs, lows, highs, lows,” said Daphne Holterman, Lloyd’s wife, describing the unpredictability of U.S. dairy prices.

The Canada deal brought some benefits.

What the new NAFTA does

American farmers were happy it set limits on Canadians’ ability to sell protein powders on world markets: they argued that Canada was damaging the entire industry by dumping excess product at artificially low prices.

That’s the issue that first caught Trump’s attention in 2017 when dozens of Wisconsin farms lost their contract with a processor who couldn’t compete with what they perceive to be non-market Canadian rates.

“That hit Wisconsin pretty much right in the jaw,” Daniels said.

The U.S. dairy industry is huge. Its trade volume with Canada is, and will continue to be, comparably minor. (CBC News)

The agreement also gave Americans more access to dairy sales in Canada, which tightly controls the supply and prices of dairy products.

The U.S. International Trade Commission, tasked by Congress with analyzing the effect of American trade agreements, estimated that the pact would increase U.S. dairy output by a mere 0.1 per cent.

Lloyd Holterman, who farms near Milwaukee, calls U.S. dairy competition ‘brutal,’ with survival requiring constant innovation. (Alex Panetta/CBC)

It suggested exports to Canada would grow $227 million a year — which is an increase of exports to Canada of one-quarter to one-half of recent estimated annual volumes. That’s a significant change for Canada.

But it’s closer to pocket change for the U.S. American dairy farms generated approximately $40 billion in cash receipts last year.

A price plunge, then a pandemic

Dairy was hit hard by the commodities bust that sent prices plunging in the mid-2010s, touching everything from oil to food crops.

Then just as things seemed to be picking up after last year, the pandemic struck. Purchases froze up at schools, restaurants and workplaces, which account for nearly half of U.S. dairy consumption.

“The cows didn’t get the memo that said, ‘Hey, we’ve got COVID, slow down,'” said Mark Stephenson, a dairy-markets expert at the University of Wisconsin. 

A view of Dave Daniels’ farm near Kenosha, Wis., which has stayed profitable by consolidating assets with neighbours and investing together in new technology. (Alex Panetta/CBC)

“We had a lot of milk that needed to be processed, that needed to have a home. And it’s not like corn — you obviously can’t keep it in the bin for a while, until you find a sale. It has to go.”

Farmers have long had to innovate, or get out of the business. Daniels and the Holtermans describe how they’ve merged their farms with partners, pooled their resources to buy better machines, and done everything from breed longer-living cows to installing equipment that cut the cost of feeding and veterinary services.

Lloyd Holterman said business is now picking up again. He got twice as much revenue last month as in May — people cooking at home are now using more butter, milk and cheese, and products originally destined for commercial establishments are being repackaged for home use.

Half the cost of producing milk goes to feeding the cows. The Holtermans, who run this farm west of Milwaukee, reduced long-term expenses by investing in this grain-feeding system. (Alex Panetta/CBC)

“[Tough times are] an opportunity to get better,” he said. “When things are really good, you get sloppy. … So we’ve actually done pretty well through the downturn.”

But he concedes the constant pressure to innovate can be tough. 

“Our system of dairy production is brutal. It’s brutal. Nobody feels sorry for anybody that goes broke,” Holterman said. “That’s the way business is here. … The positive side is we have high quality and cheap prices.”

Some American farmers, including Sarah Lloyd, wish their industry were a bit more stable and are pushing for the U.S. to adopt Canadian-style controls on prices and supply volumes.

But the Holtermans and Daniels doubt that idea will fly in the U.S.; they say they prefer the less-regulated American system, arguing it encourages competition and innovation. 

The big export market: Mexico

Another way U.S. farmers have survived the lean years is by expanding trade: export volumes have grown, over a generation, from negligible amounts to 18 per cent of total U.S. dairy production.

The largest market by far for U.S. dairy exports is Mexico, with Canada second.

Wisconsin dairy farmers were more worried that the bigger market to the south might slip away, amid tensions between Trump and Mexico, and his threats to rip up NAFTA.

“There was some offensive things said about Mexico as a country,” Lloyd Holterman said.  “They, rightly, took offence to that.”

Sarah Lloyd, right, seen here with her husband Nels Nelson in 2017 on their farm two hours west of Milwaukee, calls the new Canada exports ‘a drop in the bucket’ compared to the major issues that need to change in her industry. (Marie Claudet/CBC)

But a representative of the U.S. dairy lobby in Washington said the new trade with Canada should make a difference. She said a tiny change in markets can have a ripple-effect on prices.

Now, said Shawna Morris, vice-president for trade policy at the U.S. National Milk Producers Federation, people will be scrutinizing whether Canada, in fact, lets more dairy in.

She and others were concerned that Canada has, in past trade agreements and in this one, made it too difficult for foreign companies to access new import quotas, leaving them unused.

“It’s about fairness for us,” Morris said.

“The U.S. negotiated really hard for this. It’s not full access to the Canadian market. It’s nowhere even close to it. But we definitely want to make sure we get what we thought we had on paper.” 

Election predictions

So does this deal help Trump win Wisconsin again? Trump carried the state by a margin of one per cent last time, and polls show him behind now.

Daniels says it’s going to be tough. 

Daphne Holterman, who runs a farm with her husband Lloyd near Milwaukee, says prices keep fluctuating wildly. (Alex Panetta/CBC)

What he hears from people in his area is that those who voted for Trump last time will vote for him again; he suspects, however, that Democratic turnout will spike in cities from its low 2016 level.

“It’s going to be a pretty slim margin if he does [win],” Daniels said.

Lloyd Holterman said he likes what Trump has done on taxes and deregulation. He assumes the state will be a tossup, with the vast majority voting as they did in 2016.

But “I can’t even predict,” he said. “48 hours is an eternity.”

 
Source: CBC

A 99-year-old Vermont dairy is shutting down because of the pandemic

A 99-year-old Vermont dairy is shutting down at the end of September because of the Coronavirus pandemic.

Owners of Thomas Dairy, in Rutland, announced in a Facebook post that it will close at the end of the month because the pandemic hit them hard and the future remains uncertain.

They said they had less business from the traffic colleges, restaurants and tourism would bring in.

Fifth generation co-owner Abby Thomas says including increased competition from organic and nut milks, and the facilities are in need of expensive upgrades also played a role.

The owners tried selling the dairy, but they were unsuccessful.

Source: NBC5

How cheddar cheese explains Canada’s dairy politics

Canada had extra cheddar in July. About 38 million kilograms of extra cheddar.

That’s not unusual. The sharp, hard cheese — a statistical benchmark for the federal government — has a long history in Canada’s almost $7-billion dairy industry. A history that’s key to understanding modern-day dairy politics.

“You need to go back to the farm level and the pricing of raw milk used to make cheese,” Al Mussell, an economist and research lead for Agri-Food Economic Systems, said.

Canada made roughly 515 million kilograms of cheese in 2019, costing on average $15.14 per kilogram.

About 31 per cent this was cheddar, while the remainder was what Statistics Canada calls “variety cheeses” — a group that includes everything from mozzarella to camembert.

These cheeses are by far preferred by Canadians: Their production and consumption has more than tripled since 1980. Cheddar consumption remained relatively stable during the same period.

Canadians taste for “variety cheese” — every kind of cheese except cheddar or processed cheese — has increased exponentially since the 1980s. Still, cheddar remains a statistical benchmark in large part due to its historical role in shaping Canada’s dairy industry. Graph by Agriculture and Agri-Food Canada/Data by Statistics Canada.

It wasn’t always like this: Cheddar was once Canada’s most coveted dairy product at home and abroad.

“Cheddar cheese was a huge item that was exported to Great Britain during the war,” Mussell explained.

Canada, along with other Commonwealth countries such as Australia and New Zealand, was a key supplier of food to Britain during the Second World War. By 1945, more than 325 million kilograms of cheddar had been sent across the Atlantic to support the war effort.

That demand transformed the Canadian dairy industry, boosting the volume of milk farmers could produce and the amount of cheese and other dairy products made in the country. It was a boom for Canadian farmers, one that many expected would continue after the war, Mussell explained.

It didn’t. Demand for Canadian cheese and dairy tumbled, leaving farmers with too much milk on their hands and unsustainably low prices.

“We languished for decades under these chronically low milk prices,” Mussell said.

The federal government took a few different tacks to help dairy farmers through the 1950s, including import controls and subsidies to keep the industry afloat. These subsidies ended up costing hundreds of millions of dollars, Mussell explained, essentially to offset surpluses.

It wasn’t a sustainable solution, so the federal government developed a policy to cap the number of subsidies a farmer could receive with the goal to reduce the overall supply of dairy.

From there, it was a relatively easy shift in 1965 to capping the volume of milk farmers could produce — giving them milk production quotas, in other words. It was the start of a supply management system that endures today.

Canadian dairy farmers each own a milk quota, which only allows them to produce a set quantity to prevent milk flooding the market, while milk prices are controlled to reflect farmers’ costs of production. Both mechanisms are managed by the Canadian Dairy Commission.

Milk and dairy imports are also strictly controlled, with high tariffs applying to all dairy imports above a set threshold — a major sticking point between the Canadian government and the Trump administration in the recent NAFTA renegotiation.

It’s an approach that’s not without critics.

“A straightforward approach to improve the quality of life for all Canadians is to eliminate the quota system and restore a competitive approach to pricing our basic food inputs,” states a 2017 report by the Fraser Institute, a Vancouver-based right-wing think tank.

The supply management system, it argues, results in Canadians paying unnecessarily high prices for dairy products. Prices that could be lowered in an unregulated dairy industry similar to the one in the U.S.

It’s a model with no guarantee of success: Dairy products are not significantly cheaper in the U.S. For example, in December 2018 the average price of American cheese was $15.60 per kilo — 46 cents more expensive than in Canada. Meanwhile, American dairy farmers deal with significant price fluctuations, exacerbated by COVID-19, that put intense pressure on farms’ financial viability.

For Mussell, those arguments hold minimal appeal — especially when the supply management system is put into context.

“What I see is decades of misery (in the 1950s and 1960s) and a search for a policy approach that could work to deal with this issue and the government stumbled on it,” he said.

Cheddar might not be on many Canadians’ dinner plates — but its legacy lives on.

Source National Observer

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