A leading dairy co-operative has warned that a no-deal Brexit would “wipe out” profitability in the dairy sector.
Nick Whelan, chief executive of Dale Farm, said steep EU export tariffs in the event of a no-deal would crush the sector.
Dale Farm is owned by 1,250 dairy farmers in Northern Ireland and Great Britain.
The remarks are the clearest warning yet of the impact of a no-deal Brexit for NI’s key agri-food industry.
Dairying is one of the strongest planks of the agri-food economy, contributing around £1.5 billion a year in turnover, almost a quarter of the sector’s total sales.
Mr Whelan said: “We would go from a situation where we’ve got a really strong industry to an industry that’ll make no money.
“The tariffs on their own will wipe out total profitability in the industry and we all know that’s not a sustainable situation.”
Image copyrightGetty ImagesImage captionMr Whelan believes the sector will be left in a “precarious” position in the event of a no-deal Brexit
Half the milk produced in Northern Ireland would be subject to tariffs of at least 40%, according to Mr Whelan, either as it crossed the border for processing or was sold as finished product like butter, cheese and yoghurts, to EU markets.
And he said if there were to be a no-deal the government would have to shore up dairy farm incomes with a price support mechanism that would need to last for at least a year while the future was mapped out.
‘Survival mode’
He warned the sector would be left in a “precarious” position and even with government intervention, would be in “survival mode” and on “life support”.
Mr Whelan said a huge amount of work was going on behind the scenes and he had made the case to the prime minister Boris Johnson and other senior government figures.
But as yet no-one had come to the dairy industry with solutions for what to do with the one-third of Northern Ireland milk that currently crosses the border for processing in the Republic of Ireland.
Mr Whelan added Northern Ireland has a great dairy industry that was “well-invested and globally competitive on an international scale”.
But he said it would not be able to absorb the shock of a no-deal and that the sector felt it had been caught in a “Brexit crossfire”.
Australian dairy production declined by more than 5 per cent last financial year, Rabobank has confirmed in its quarterly analysis of the sector.
All dairy regions nationwide contributed to the 5.7 per cent overall decline to 8.795 billion litres, but the Goulburn Valley and Riverina registered the greatest falls, with a 50 per cent cut to usual output.
Lingering trade tensions between Washington and Beijing have flowed through to a softer global outlook, but Rabobank senior dairy analyst Michael Harvey said there was cause for optimism for 2020 prices.
“Despite all the noise about trade wars, we should take some comfort in global prices still being in good shape,” Mr Harvey told The Weekly Times.
Rabobank is still forecasting Australia’s milk production to decline in the 2019-20 season by about 3 per cent, led by further falls in output from the Southern Murray Darling Basin.
The report’s modelled annual average farmgate price was $6.65/kg milk solids for the 2019-20 season, based on a spot currency of US67 cents.
Rabobank also noted the end of the “dollar-a-litre’’ race between Coles and Woolworths, which started in January 2011, was having some flow-on effect to farmgate prices.
The global report provides an understanding of the current macro supply and demand trends affecting the dairy sector.
The 200-page IDF publication provides an overview of the dairy sector in more than 50 countries around the world and contains information including a set of dairy industry statistics and insight on the wide range of policies, analyses and economic factors influencing the sector.
The 2019 edition includes statistics on production, consumption and trade in all regions of the world as well as specific observations from IDF member countries.
The IDF said it will help the reader to gain a better understanding and respond to the many challenges and opportunities facing the global dairy market, including population and income growth, consumer health concerns and changing dietary patterns.
Gilles Froment, chair of the IDF standing committee on dairy policies and economics, said, “The world dairy market is constantly growing and evolving, with global production of milk and dairy products increasing and fulfilling new needs and nutritional requirements in all regions and continents around the world.”
The publication offers insight on macro supply and demand trends in the dairy sector with data on global milk production and processing, pricing, consumption and trade, and brings insights into a dynamic and growing world dairy market for use by dairy farmers, dairy product manufacturers, governments, academia and, ultimately, consumers of those products around the globe.
Caroline Emond, IDF director general, said, “We’re proud to present this essential tool for the dairy sector. The insight provided on national and global dairy production, consumption and trade flows, and demand and supply trends is invaluable to the whole dairy value chain to seize market opportunities.”
The IDF World Dairy Situation Report 2019 was launched at the IDF World Dairy Summit 2019 in Istanbul, Turkey. The 2019 Summit brought together around 1,000 representatives of the global dairy sector, including government agencies, civil society, academia, farmers, processers and producers from around the world.
The 2020 IDF World Dairy Summit will be held in Cape Town, South Africa, from September 28 – October 1, 2020.
The U.S. Department of Agriculture has extended the deadline from Sept. 20 to Sept. 27 for dairy farmers to enroll in the Dairy Margin Coverage program for 2019. Enacted in the 2018 farm bill, the safety-net program offers risk protection to dairy producers when the difference between the all-milk price and the average feed cost – the margin – decreases to less than a certain dollar amount selected by the producer.
“More than 21,200 dairy operations have already signed up for (the Dairy Margin Coverage program), but we’re providing an additional week to help ensure interested producers have time to come into the office,” said Bill Northey, USDA Under Secretary for Farm Production and Conservation. “With smaller margins and increased feed costs, (the Dairy Margin Coverage program) has resulted in almost $230 million in payments disbursed.
“I know that some farmers may still be cautious given their experiences with former dairy-support programs, but producers who have not signed up yet should come into a local office to learn how much money the program can put into their pockets.”
Almost half the producers who have registered so far are taking advantage of the 25 percent premium discount by locking in for five years of margin-protection coverage. The Farm Service Agency has launched a new web visualization of Dairy Margin Coverage-program data. Margin payments have triggered for each month from January through July. Dairy producers who elect greater coverage levels could be eligible for payments for all seven months.
Under certain levels the amount paid to dairy farmers will exceed the cost of the premium. For example a dairy operation that chooses to enroll for 2019 with an established production history of 3 million pounds – 30,000 hundredweight – and elects the $9.50 coverage level on 95 percent of production will pay $4,275 in total premium payments for all of 2019. The operation will receive $15,437.50 in Dairy Margin Coverage payments for all margin payments announced to date. Additional payments will be made if calculated margins remain below the $9.50-per-hundredweight level for any remaining months of 2019.
“My message to those dairy producers who are hurting out there – don’t leave this kind of financial assistance on the table,” Northey said. “Producers across the country have told us that (the Dairy Margin Coverage program) is a great risk-management tool that works well, and it can work for you too.”
Cooperatives Working Together (CWT) member cooperatives accepted 16 offers of export assistance from CWT that helped them capture sales contracts for 220,462 pounds (100 metric tons) of butter, 608,476 pounds (276 metric tons) of Cheddar and Monterey Jack cheese, 297,624 pounds (135 metric tons) of cream cheese and 2.050 million pounds (930 metric tons) of whole milk powder. The product is going to customers in Asia, the Middle East, Central and South America. It will be delivered during the period from September 2019 through January 2020.
These contracts bring the year-to-date totals to 42.3 million pounds of American-type and Swiss cheeses, 277,782 pounds of anhydrous milkfat, 4.5 million pounds of butter (82% milkfat), 4.9 million pounds of cream cheese and 38.6 million pounds of whole milk powder. The products are going to 27 countries in six regions and are the equivalent of 819.6 million pounds of milk on a milkfat basis. Totals have been adjusted for cancellations.
Assisting CWT members through the Export Assistance program positively affects all U.S. dairy farmers and dairy cooperatives by strengthening and maintaining the value of dairy products that directly impact the milk price. It does this by helping member cooperatives gain and maintain world market share for U.S dairy products. As a result, the program has significantly expanded total demand for U.S. dairy products and U.S. farm milk.
The amounts of dairy products and related milk volumes reflect current contracts for delivery, not completed export volumes. CWT pays export assistance to the bidders only when export and delivery of the product is verified by required documentation.
All dairy farmers and dairy cooperatives should invest in CWT. Membership information is available on the CWT website, www.cwt.coop.
The Cooperatives Working Together (CWT) Export Assistance program is funded by voluntary contributions from dairy cooperatives and individual dairy farmers. The money raised by their investment is being used to strengthen and stabilize the dairy farmers’ milk prices and margins. For more information about CWT, visit http://www.cwt.coop/
ESCAPE DROUGHT: Dairy farmer Greg Anderson has moved from Cobram to the south-west due to drought and pressures on the dairy industry in northern Victoria. Picture: Morgan Hancock
Drought-stricken dairy farmers are eyeing south-west Victoria’s green pastures and moving to the region to save on soaring water costs.
Greg Anderson farmed in Yarraoweyah near Cobram for eight years but pressure from drought led him to move his 300 cows to Cashmore, near Portland, last December.
«As time was going by the pressure for water in the north was really concerning us,» Mr Anderson said.
«With no long-range weather forecast predicting good rains, I said ‘we have to go somewhere it rains’.»
Mr Anderson is among a «steady» movement of farmers coming to the south-west, according to WestVic Dairy executive officer Lindsay Ferguson.
«We don’t know the numbers, but there are an increasing number of farmers moving here from the north, maybe from the southern Riverina, elsewhere in New South Wales, and particularly the Murray irrigation area,» Mr Ferguson said.
Mr Anderson said irrigation costs for north-Victorian farmers had risen from $100 to $800 a megalitre, while for him to break even that price needed to between $180 and $200.
«The main reason there is a shortage of water is because of drought … (But) water is a pretty valuable commodity and it has gotten into the hands of people now who are just trading it,» he said.
Mr Anderson said he knew of other farmers who had moved to the Cobden and Terang district, but said while more Australian farmers might want to move to the south-west, many were «tied to their farms».
«Land prices where it rains are a lot more expensive and the first thing you have to do is find someone to take on where you are in that irrigation country,» he said.
The Anderson family says they moved entirely for their daughters, Katie, 21, and Renee, 19.
«Our two daughters are just so passionate about dairying that we thought we just have to do this for them,» Mr Anderson said.
Union Dairy Company is one processor working with farmers in drier climates considering a move to south-west Victoria, and chief operating officer Andrew Wellington said enquiry was «building».
«Australia still needs dairy and there will be a natural shift to where the resources allow sustainable dairying. There is plenty of productive land here,» Mr Wellington said.
He said the region’s dairying potential gave the company confidence to moot plans for a second milk plant in the Warrnmabool district or in South Australia.
The company started production in 2017 at a factory in Penola over the South Australian border. About 30 staff now operate the 24/7 plant producing fresh and frozen cream, premium powdered ingredients and fresh milk.
Louis Dreyfus previously had a 30 per cent share in the company, but the European agri giant exited dairy last financial year leaving Warrnambool’s Midfield Group in full control of UDC.
«Now we can be more reactive in the market, all the decisions are made in Warrnambool,» Mr Wellington said. «There’s not too many wholly owned Australian dairy companies and we’re proud of that.»
WestVic Dairy’s Mr Ferguson said last financial year the western district region produced the most dairy in Victoria.
«It is probably the best dairy farming area in Australia, or the one with the most potential,» he said.
In the vacuum created by the postponement of Fonterra’s financial results by a fortnight, experts have begun to weigh in on its future in Australia.
Credit rating agency S&P Global Ratings has maintained the dairy giant’s credit rating despite Fonterra’s recent announcement that its global business expects to make a NZ$590-675 million loss this year.
But there was a warning for Australia from S&P Global Ratings analyst Graeme Ferguson.
«We assess Fonterra as having higher debt capacity because milk payments to its New Zealand supplier base are effectively subordinated to payments to other creditors,» Mr Ferguson said.
While he noted suppliers outside NZ were not members of the cooperative, Australian farmers hadn’t forgotten local farm-gate price step downs.
The cooperative had «somewhat lost its way» with an «ambitious capital investment program that sought to grow Fonterra beyond its core function of collecting, processing, and selling NZ milk,» according to Mr Ferguson.
Asked to clarify the implications for the local arm, he said the Australian business continued to be «a drag on Fonterra’s results».
«Severe drought conditions and intense competition have weighed on milk collection, prompting Fonterra to close its Dennington plant,» he said.
«A speedy turnaround of Fonterra’s Australian operations appears unlikely, so perhaps more significant changes might be contemplated as part of the portfolio review that is currently underway.»
Federated Farmers of NZ national vice president Andrew Hoggard said last month the importance of Fonterra’s Australian arm was unclear.
«To be bluntly honest, it will depend on their strategy going forward, that’s going to be what determines whether or not Australia is relevant,» Mr Hoggard said.
«The feeling I get is that the focus is going to be on selling NZ milk to the world and they’ve gone away from the idea of being the globally relevant, dominant player and the whole milk pool strategy.»
Fonterra last month flagged asset write downs totalling NZ$820-860m that reduced the value of its Australian ingredients business by NZ$70m.
ANZ agriculture economist Susan Kilsby predicts more write downs totalling NZ$300-700m, including NZ$100m for the Australian ingredients business.
«Fonterra’s Australian business has two separate parts – the milk collection and processing part of the business and the sale of consumer goods,» Ms Kilsby said.
«The consumer goods side of the business is reported to be performing admirably but Fonterra’s Australian milk collection business is under pressure.»
While national milk production declined 5.7 per cent last season, Fonterra Australia’s milk collection fell by 20.3pc and has continued to drop.
Since April, it collected 30pc less than the same period 12 months before.
Fonterra will release its results on September 26.
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A growing number of dairy farmers across the country want the federal government to regulate the volume of milk their industry produces annually.
Their reason is simple: America’s dairy farms produce more milk than the market needs.
The oversupply has driven milk prices so low that the average farm is losing money. Thousands of dairies have gone out of business in the last five years, and more continue to fail.
Yet the United States’ milk supply continues to eclipse demand — and that does not appear to be changing. Production increases every year, rising by about 1 percent in 2018, according to the U.S. Department of Agriculture. In August, it was up about 0.4 percent over the same month last year.
“Milk production is happening in an unsustainable way,” said Lynne McBride, executive director of the California Dairy Campaign, which advocates for federal dairy supply management. “Our members think we need a change, or we’ll see more dairies go out of business.”
The organization is circulating a petition asking Congress to control the milk supply. Hundreds of farmers have signed it, McBride said.
But the movement faces steep opposition. The very concept of government supply regulation flies in the face of the free-market principles on which the American economy is rooted, industry leaders said.
“Supply management programs generate a lot of criticism … in general because government is making a massive invasion into the free market,” said Alan Bjerga, a spokesman for the National Milk Producers Federation.
Although groups like the California Dairy Campaign and the National Farmers Union loudly support supply management, most dairy farmers are quietly against it, Bjerga said.
Shortly before negotiations began on the 2018 Farm Bill, the National Milk Producers Federation, which represents the majority of America’s dairy farms, asked its members if they wanted to push for supply management.
“It didn’t have strong support,” Bjerga said.
More recently, the American Farm Bureau Federation this year sent out a similar survey to its members. The majority also voted against it.
The reasons for opposing supply management are diverse. Despite the depressed prices, some dairy operations are making good profits, said Charles Nicholson, a professor of applied economics and management at Cornell University. Those dairies do not want their production restricted. Even among farmers who are losing money, many are opposed in principle.
“A lot of people don’t think government should be involved in regulating markets,” Nicholson said. “They don’t want the government looking over their shoulder.”
But one of the biggest reasons why farmers oppose the proposal might be that previous attempts to regulate milk supply failed.
The most recent attempt came during negotiations on the 2014 Farm Bill. The dairy industry as a whole, led by the National Milk Producers Federation, asked Congress to pass a “mild form of supply management,” Bjerga said.
The program proposed “levying a financial penalty on dairy farmers who did not reduce their milk supply” when prices hit a predetermined level, John Newton, a chief economist with the American Farm Bureau Federation, said in a statement.
The program was hotly debated and ultimately rejected, leaving farmers with little support in the ensuing years of low milk prices. And those years were hard on dairy farmers.
In 2014, farmers saw record-high milk prices. Many responded by adding cows to their herds so that they could sell more milk for the high price. But the pendulum swung too far. By the next year, dairies were pumping out more milk than the market could handle, and prices plummeted.
Off-the-farm rates dropped by a third in two years, from nearly $24 per 100 pounds of milk in 2014 to under $16 in 2016, according to the USDA. Consumer prices followed suit, dropping from a national average high of $3.85 per gallon in November 2014 to a low of $2.85 in December 2018, according to the U.S. Bureau of Labor Statistics.
“Dairy is challenging because when prices increase, farmers add more cows to production,” Bjerga said. “They collectively overshot the target. Now, the demand isn’t so high, but you can’t turn the cows off.”
Because of this, it generally takes the dairy industry several years to respond to market fluctuations, with dairies going out of business, thereby reducing nationwide milk production, Bjerga said.
“There is a market response in dairy, but it tends to be a little longer and more painful than other commodities,” he said.
When it came time to negotiate the 2018 Farm Bill, the National Milk Producers Federation pushed for a federally subsidized insurance program instead of supply management. That program was ultimately included in the final bill. It’s called the Margin Protection Program. It’s relatively cheap for farmers to buy the insurance and generous when milk prices drop, Nicholson said.
The program might provide relief to struggling dairies — at a cost to taxpayers. A recent Cornell study showed the program could cost taxpayers more than a $1 billion in the first year.
“It may end up paying out a lot more than it takes in in premiums, depending on what happens with the market,” Nicholson said.
Proponents of supply management point to this as a reason to look seriously at regulating production instead. Previous Cornell studies have shown that managing supply could effectively stabilize milk prices and save farms, Nicholson said.
Success would depend largely on whether the federal government could adequately determine the level of domestic demand for milk and then create a program to efficiently enforce it, Nicholson said.
One way to do this would be for the government to set a limit to how much dairy producers are allowed to grow in a given year, depending on market conditions. Any farmer who wants to exceed that allowed growth would have to pay a penalty.
“There are different ways to do it,” McBride said. “We don’t have all the details ironed out. But we should all be able to figure out how much milk is needed.”
NZ’s Fonterra will face off with farmer shareholders over its foreign expansion and poor returns.Image: AP
Fonterra, the world’s biggest dairy exporter, will face off this month with farmer shareholders angry about the New Zealand company’s ill-fated foreign expansion and resulting poor returns.
Ructions at Fonterra, where a second year of financial losses is forecast following asset writedowns worth billions of dollars, have reverberated widely in a country where dairy farming is crucial to both the national accounts and politics.
A few of the approximate 10,500 farmers who supply Fonterra with milk and comprise its cooperative structure have transferred production to smaller rivals in recent years, while many others say they have limited options to do that.
“It’s a diabolical mess,” said Malcolm Lumsden, owner of Waikato-based Lumsden Farms, who is among farmers demanding a clear turnaround strategy at meetings when Fonterra’s delayed annual results are released on September 26.
The company has flagged an annual loss of as much as NZ$675 million ($A626 million) and write-downs of up to $NZ860 million for assets in Brazil, China and other countries that are being investigated by the Financial Markets Authority.
With a general election due next year, Regional Economic Development Minister Shane Jones has called Fonterra’s management “grossly inept”, while the government has tightened its oversight of how the company sets milk payments to farmers.
Chief Executive Miles Hurrell, who is due to give more details on company strategy with the earnings statement, has pledged to rein in Fonterra’s global ambitions to focus on producing milk in New Zealand.
Fonterra Chairman John Monaghan told Reuters he was confident the new strategy “implemented well … will bring a new period of success for our co-op”.
Rural communities are a significant voter base in New Zealand, where dairy directly contributes about 3.5 per cent to the country’s $NZ200 billion gross domestic product.
And there are growing concerns about rising debt in the sector. The Reserve Bank of New Zealand has warned that dairy farm debt is among the highest in the country at about $NZ41 billion.
For many farmers who have watched their shareholding halve in value over less than two years, Fonterra’s decision to axe its annual dividend was the final straw.
“I’ve lost half a million dollars on those dividends,” said one farmer, who requested anonymity after transferring some of his milk production to other producers.
“We continued to tell Fonterra to look after us, but they never listened.”
Colin Armer, Fonterra’s biggest individual shareholder, whose complaints sparked the FMA probe, said management had made some “very poor past decisions.”
Fonterra Chairman John Monaghan acknowledged “the impact that recent decisions have had on our share price and the balance sheets of our owners in a challenging environment”.
Founded in 2001 as a “national champion” cooperative to represent New Zealand’s dairy farmers, Fonterra grew into a global processer of milk in China, Latin America and Australia, as well as at home.
Previous management sought to transform the company from a simple milk processor into a producer of value-added dairy products as it chased profits offshore.
Among Fonterra’s biggest missteps was the 2015 purchase of an 18.8 per cent stake in Chinese infant formula manufacturer Beingmate Baby & Child Food for $NZ755 million, just as the China market became hyper-competitive and demand slowed.
Fonterra last month announced it would cut its Beingmate stake by selling shares after failing to find a buyer.
Meanwhile, back home, Fonterra’s share of the milk processing market dropped from 96 per cent in 2001 to 82 per cent currently, with consultants TDB Advisory expecting it to be about 75 per cent by 2021.
ANZ Bank dairy analyst Susan Kilsby estimated that Fonterra may need to take further asset write downs of $NZ300 million to $NZ700 million, flagging Beingmate, the company’s Chile offshore milk-processing business and Australian operations as concerns.
Credit-rating agency Standard & Poor’s, which has downgraded Fonterra twice in the last five years, expressed faith in the new management but warned of a “sizable execution risk”.
Dairy exports appear to be holding strong despite the decline in volume headed for China. Figures from the U.S. Dairy Export Council demonstrate solid numbers for dairy exports in July. Mexico was the largest importer of American dairy products, receiving nearly 48,000 tons of milk powders, cheese whey, lactose, and butterfat. While volume to Mexico increased 12 percent from a year ago, the value of dairy exports to Mexico increased 30 percent.
Overall, dairy exports to all markets have shown mixed results. While value increased ten percent over last July, volume declined by six percent. The increased tariffs with China have taken a toll on U.S. dairy exports into the country, with volume down 35 percent from last year and value down 16 percent. Lactose volume fell 20 percent from last year, and whey exports were off by 41 percent.
Other Asian markets also experienced varying levels of decline from a year ago. The market in Southeast Asia slowed down significantly after a strong start to the year, with dairy export values declining nine percent from July 2018. Volume also fell by 21 percent with fewer purchases made in the Philippines, Vietnam, and Indonesia. Export values to Japan and South Korea also declined substantially to the lowest level of the year. As the second and third-largest markets for American cheese, volume to South Korea dropped 40 percent, while exports to Japan fell by 15 percent.
Fortunately, some of that decline has been offset by strides made in other export markets in the Middle East, South America and North Africa. Exports to the Middle East and the North Africa region increased by 50 percent in volume and 56 percent in value for July 2019. The overall value of dairy exports to South America was also 37 percent higher than in 2018, with the majority of American dairy products going to Columbia, Peru, and Chile.
A shipment of 5,000 cattle due to leave Victoria for China on the live export ship Yangtze Fortune has been halted by Australian officials. Photograph: Caroline Duncan Photography/AAP
Australian officials have halted a proposed shipment of 5,000 cattle over allegations that ear tags had been tampered with to circumvent China’s strict import protocols.
The dairy cattle were scheduled to leave Portland in southern Victoria on the live export ship Yangtze Fortune on 23 August, bound for China as breeding stock.
Instead they spent weeks in feedlots as federal agriculture officials told the live exporter to halt the consignment following allegations of tampering.
“This decision was due to the department’s concerns that elements of China’s strict export protocols had not been adhered to in relation to this specific consignment,” a Department of Agriculture spokesperson said. “This issue does not relate to any type of disease outbreak in Australia.”
The department said it was conducting a joint investigation with Agriculture Victoria and providing regular updates to authorities in China. It said it would not comment further while the investigation was under way.
The Portland Observer newspaper reported that the cattle were filling up local feedlots, but the department said they could be moved.
“There are no current restrictions on the domestic movement of the cattle,” a spokesman said. “This is a commercial decision for the exporter.”
It was understood that ear tags, used to trace the origin of cattle, were tampered with.
The Australian Live Export Council’s chief executive, Mark Harvey-Sutton, said the incident related to an alleged breach of Australia’s domestic traceability systems.
He said that halting the shipment was a “drastic action” that reflected the seriousness of the incident.
“Compliance with our integrity systems is paramount and if there has been a breach we hope the department investigates that thoroughly,” Harvey-Sutton told Guardian Australia. “But we would also like the department to conclude their investigation as soon as possible because it obviously does come at a significant cost to the exporter when consignments are held up.”
Four Australian cattle, exported by Perth-based International Livestock Exports, were filmed being held down by ropes and slaughtered in a mosque car park. ILE said it believed the cattle had been sold by a “rogue person” at one of the 140 Indonesian facilities in its supply chain, and had suspended that facility.
The RSPCA’s senior policy officer, Dr Jed Goodfellow, said the incident was a stark reminder of the inherent risks of live export, and criticised attempts to shift blame onto Indonesian facilities.
“RSPCA Australia is also concerned about a trend in [exporter supply chain assurance system] non-compliance investigations where blame is being shifted to the in-market abattoir or facility, which is then periodically suspended to allow the exporter to simply move to the next abattoir down the road,” Goodfellow said.
“Given the number of breaches recorded against this exporter, this shows that there is simply no effective deterrent under the current ESCAS system. It is has become a system of managing animal cruelty incidents rather than stamping them out.
“At the end of the day, the exporter must be held accountable for such breaches as it is ultimately their decision as to what supply chains the animals are sent into.”
Like my family before me, and following after me, I’ve always taken great pride in being a dairy farmer, and in the reputation of the New Zealand dairy industry internationally.
My husband and I grew up in a generation where we had the opportunity to buy a farm and build our livelihoods on the land as our family had before us. It has been a privilege to forge an incredible career as a dairy farmer. My husband, Louis, and I are both award-winning dairy farmers and we’re proud of the mark we’ve made on the industry.
Sadly, the outlook for New Zealand’s primary sector is the worst that I’ve seen in my lifetime. I don’t make this strong statement lightly, nor to scaremonger – but rather to reflect the policy settings under a virtue-signalling government which is setting the dairy industry up for failure. As a rural MP, but more importantly as a farmer, I won’t sit back and allow the ladder to be pulled up behind future generations of New Zealanders wanting to pave their way in the farming sector.
Like every industry, the environmental practices that were acceptable 30 years ago are not acceptable today. But farmers have responded to stricter environmental standards with major changes in farm practices and investment over the last 15 years to meet the ever-stricter demands of central and local government.
Dairy farmers have fenced and planted over 20,000 kilometres of waterways. As an industry, dairy has invested over a billion dollars on environmental improvements over the last five years. They have been running fertiliser budgets to calculate precisely how much fertiliser is needed on their farms. This has resulted in a reduction in fertiliser use per hectare.
The ongoing uncertainty of mycoplasma bovis has been thrust upon farmers who are already struggling beneath the heavy pile of environmental regulations and the stresses of turbulent times for our cooperatives, which has a very real impact on the livelihoods and retirement savings of every dairy farmer.
Westland Milk is now in the hands of private interests, something that the shareholders of the company would obviously have preferred to avoid. Fonterra has announced a $675 million loss, and the share price has dropped from $6.70 just a year and a half ago to less than $3.20. This has wiped out a huge chunk of the retirement savings for 10,000 Fonterra supplier shareholders.
Sadly, the picture being painted isn’t such a rosy one, but rather an outline of the massive drop in confidence we’re seeing in rural New Zealand.
We know that agriculture sector business confidence is low. Business confidence surveys show that if you asked 100 farmers if they are confident, neutral or pessimistic, 80 would tell you
they are more pessimistic than positive. This is worse than any sector in the last 14 years. It is no wonder rural mental health has become an even more pressing issue for me as a rural MP.
The government has been completely silent on this crisis of confidence. Their response has been warm words such as ‘Just Transition’.
The Government’s climate change targets are particularly worrying for farmers. In his first month as Climate Change Minister, James Shaw flew to Germany and announced New Zealand’s agriculture sector would be carbon neutral by 2050.
I respect the climate is changing, but we cannot afford to move faster than the rest of the world in our response. The world’s four largest emitters, China, the US, Russia and India, responsible for over half of global emissions, have not taken on such a target.
Too often decisions are made with little regard for the impact on the livelihoods of hardworking families. It is nothing short of incompetence if this government believes we can lead the world on climate change without any impact on the confidence and investment farmers will undertake. I often reflect that they need to be reminded that this sector represents 60 per cent of our exports as a nation. If we undermine farming, we undermine our entire economic fabric.
The oil and gas ban, close to home for me in Taranaki, as well as swift moves to halt coal and gold mining activities in Waihi and the West Coast, are other examples where the government preaches kindness and compassion, but shows no consideration for the impact of their decisions on the families working in export industries.
The irony of a Labour Party implementing policies which hurt working class New Zealanders has not been lost on me. We are slowly but surely becoming a nation with limited reliable economic industries to support the prosperity of New Zealand, and it’s about time we were honest about this.
The primary sector is rightly becoming increasingly wary of this government’s intentions. We will soon see the introduction of freshwater targets and certainly the burden of yet more obligations that our farmers will have to meet, with crippling effect.
Despite the ‘‘climate change is our nuclear-free moment’’ rhetoric of our Prime Minister and the radical green hype of her government partners, water quality is not solely a rural issue. I would comfortably propose urban centres could do more to grasp an understanding of the impact that their actions have on water quality. Every farmer I know is making an effort to ensure that their impact on their surroundings is, if anything, a positive one.
Before the end of the year, the Government hopes to pass the long awaited Zero Carbon Bill, new freshwater regulation, and an amendment bringing agriculture into the ETS. Individually, arguments will be made for and against each of these policies.
My challenge to the government is to look at this package as a whole and consider the message this is sending to a sector which remains our economic backbone and has already worn a huge amount of the burden of improved environmental performance over the last 15 years.
In my view, farmers are right to push back on these reforms if their collective impact on the sector is too much. I for one won’t roll over for this government without a fight.
The primary sector is rightly becoming increasingly wary of this government’s intentions.
Fonterra’s Australian milk collection in July was down nearly 30%.
Fonterra’s woes are also worsening in Australia.
The cooperative kicked off the season there with a 28.9% decline in milk production as it continues to lose its collection share.
This was the percentage drop for the first month of the season, July, versus the same month last year. It represents a small percentage of the full year’s collection, Fonterra says in its latest Global Dairy Update.
However it admits its share of the milk collection continues to decline, impacted by intense competition for milk supply and the continued impact of the poor conditions on farm.
“The drought has led to an increase in cow cull rates, a significant number of farm retirements and a continuation of historically high input costs resulting in a material reduction of the Australian milk pool in FY19 (full year) versus FY18.”
Australia’s overall milk production is dropping but nothing like as steep as Fonterra is seeing
Australian milk production in the 2018-19 season (ending June 30, 2019) was 8.8 billion litres, down 5.7% from 9.3b litres the previous year, says Bonlac Suppy Company chairman John Dalton. This production is noticeably greater than Dairy Australia’s previous estimate of a fall of 7-9% to 8.45-8.65b litres.
Dairy Australia anticipates a further drop in national milk production of 3-5% to 8.3-8.5b litres during the 2019-20 season, due to continued high input costs and the reduced size of the national herd.
In New Zealand Fonterra’s milk collection was up 2.2% in July versus the same month last year and 4.7% for the season to the end of July. Season-to-date collections represent only about 2% of full season collections.
NZ’s total production was up 4.8% for July. Fonterra’s South Island collection is up 8.6% for the season to date and the North Island is up 4%.
The update showed that European Union (EU) and US production is flat.
The EU was up just 0.1% for the 12 months to June 2019 and the US was up just 0.3% for the 12 months.
Exports for the 12 months to the end of June from NZ grew by 8.4%, from Australia for the same period by 5.1% and the EU by 3.7%, but the US was down by 6.3%.
Imports into the Middle East and Africa showed large declines of 24.5% for May versus the same month last year and 11.4% for the year to the end of May.
Asia, Latin America and China imports continued to grow, with China up 8.4% for the 12 months to June this year.
No China effects
Talk of economic slowdown in China has not yet affected dairy demand, says Open Country chief executive Steve Koekemoer.
“We will deal with it if and when it happens,” he said.
Results of the September 3 Global Dairy Trade (GDT) auction support a view of price stability within the whole milk powder product range, he says.
Participation levels were the highest in at least the last 18 months which is a good sign for demand.
“The dairy industry is not an easy industry to be in and volatility has been a constant for many years,” he said.
“The food industry, like many, is changing fast and requires businesses to review their investments and strategies regularly. Our strategy and investment decisions remain sound for dairy ingredients for the foreseeable future.”
Open Country says it is looking towards another solid year and that its projects are tracking well. It is well positioned with its large customers and multinationals, who now “view us as a long term strategic partner”.
Gus Tafel of Sidehill Farm in Hawley carefully measured grain from a trough for his cattle’s breakfast — a specific amount based on each cow’s milk production. In their stalls, the cows strained at the scent of food, swinging their heads from side to side in excited anticipation.
Outside the milking parlor, the morning air was crisp. Birds sang on overhead wires. Long shadows slanted across the farm’s 225 rolling acres. Across a field, amber tones tinged the green canopy of a distant treeline.
It’s not just the seasons that are changing on Sidehill Farm. Before the end of the year, Gus Tafel, 34, and his wife, Kyra Tafel, 36, intend to purchase the operation from farmers Amy Klippenstein and Paul Lacinski, who started Sidehill Farm in 2001. While signing is a cumulative step in both their respective careers in agriculture, it’s also a transition into murky economic territory.
“The dairy industry is in a pretty poor state. It’s a huge risk,” Tafel said about their plans.
Over the last 20 years or so, the number of dairy farms in Franklin County has thinned from around 75 to about 30. Nationally, the picture is no better — the United States Department of Agriculture reported recently that dairy operations nationwide had decreased by more than 2,700 farms in the last year, a drop of more than 6 percent.
Despite these sobering statistics, Gus Tafel said investing in agriculture in today’s world is a worthwhile endeavor — perhaps more important than ever.
“There’s a disconnect, now. People don’t (always) realize where their food is coming from,” he said. “It’s our passion. It’s what we think is important, so we have to try.”
An evolving industry
With the current decline in the national dairy industry, the economic machine of today’s agriculture industry in Franklin County is evolving yet again. It’s not the first time this has happened and it won’t be the last. During the second half of the 20th century, Claire Morenon, communications manager with South Deerfield-based Community Involved in Sustaining Agriculture (CISA), said the farming industry changed drastically because of federal policies and increased globalization, among other stressors.
As a result, Franklin County farmers bowed under “the loss of regional wholesale markets and increased price competition,” Morenon said. Those changes drove farmers to diversify into direct sales markets. They built farm stands, founded CSAs and forged other revenue streams such as corn mazes or by producing value-added products like jams, vegetable pasta and beverages.
“When CISA was founded 26 years ago, it was because farmers and advocates for farmers were looking for local solutions to the challenges that farmers were dealing with as a result of those changes,” Morenon said.
Decades on, area farmers are facing another challenge: legacy continuity, as an older generation gives way to a younger one. Acold cording to 2012 Census of Agriculture data compiled by the American Farmland Trust, 92 percent of New England’s 10,369 senior farmers (representing 35 percent of total farms) don’t have a manager under 45 working with them. These senior farmers own a collective $6.45 billion in agricultural assets and steward 1.15 million acres of farmland. Over the next few decades, a 2016 report by the American Farmland Trust noted that “30 percent of New England’s farmers are likely to exit farming.” The land and assets they hold will change hands one way or another. This transition has already forced some farmers to shutter their barns altogether, according to Jason Silverman of Conway, a Massachusetts agent for Land For Good, an advocacy organization.
But there are also success stories, like that at Sidehill Farm.
Klippenstein and Lacinski broke into the agricultural business as first-generation farmers nearly two decades ago. They founded the farm as a vegetable operation, leasing land from more than a dozen different landowners before buying land in 2012 and starting the yogurt business. The brand grew “much faster than we ever expected,” Klippenstein said, noting they rode the “buy local” initiative that was pushed by CISA in response to Franklin County’s changing agricultural economy.
“People were really excited about it and grabbed onto the idea of local dairy. We went through a couple of years of enormous growth,” Klippenstein said.
Regional mainstay
These days, Sidehill Farm Yogurt is a regional mainstay. It’s identifiable purple and green containers can be found in supermarkets throughout Western Massachusetts. Now at a precipice of that growth, Klippenstein said they want to shift their attention from managing the land to making more yogurt.
“About a year ago, we decided that working 100 hours a week and two full-time jobs is not what we want for the long -term. We (want) to stick to the yogurt making,” Klippenstein said.
To that end, they began searching for younger farmers looking to purchase land last September. They posted an advertisement on their website and connected earlier this summer with Gus and Kyra Tafel, who were searching for their next business endeavor after managing bovines on a number of farms in upstate New York. Most importantly, according to Klippenstein, they shared their vision of organic farming.
As part of a transition agreement, the Tafels began working on the farm in June as employees to “learn the systems” and to ensure a good match, Lacinski said. Their working relationship so far “is feeling like validation.”
Pinned to an office wall behind Lacinski was a map outlining their property. In a room next door, two Sidehill Farm Yogurt employees, Shahid Jalil and Chris Ryan, added maple syrup to a 900-gallon vat of plain yogurt. Outside, more than 100 grass-fed Normande and Jersey cows ranged as far as the eye could see, producing enough milk to make thousands of gallons of yogurt each week.
The Tafels intended to purchase the Hawley farm using a Food Safety and Drug Administration farming loan. While they were applying for it, however, Klippenstein said they ran into a problem because they didn’t have the 30 percent down-payment required to qualify. To circumvent the fiscal conundrum, Klippenstein said they connected with Dirt Capital Partners, a mission-driven investment firm and technical partner for farmers around land access, transition and conservation, according to Benneth Phelps of Sunderland, director of farmer services at the national firm.
The investment “allowed them to buy a $1 million-plus dairy farm,” Klippenstein said.
According to Phelps, “Gus and Kyra Tafel are skilled young farmers who had lost their milk market in N.Y., and we’re fortunate that due to the (Pioneer) Valley’s business and market opportunities, they have joined us here in the region,” she said. “When we sat down to discuss finding successors for the farm, Paul Lacinski and Amy Klippenstein had a vision grounded in reality about creating an opportunity for young farmers, and they were realistic about the timing and factors involved. Passing on the farm is an emotional step for all farmers.”
In this case, Phelps noted that Dirt Capital is providing transaction due diligence, facilitation and flexible financing for the Hawley farmers. It’s not the first time she’s helped facilitate such a transition.
“Retiring farmers face decisions about how to sell their farm or transfer their business. Viability plays a key role,” she said. To that end, “Dirt Capital (works) with farms approaching a family or non-family transition if there is a transition agreement in place; the business is viable and will still be viable after the transition.”
Moving forward and once the documents are signed, Kyra and Gus Tafel will run the day-to-day operations on the farm and will sell their milk to Lacinski and Klippenstein — continuing a symbiotic relationship that is the farm’s “financial engine,” Klippenstein said. Without it, Kyra Tafel said the business move might not have made sense.
“This is a really unique situation, here — the sale of Sidehill, the combination of the business and the farm and the two relying on each other,” she said. “It’s everything we were already doing, plus a contract for our milk, which was what we needed.”
Fragile dairy industry
In their decade or so of farming together in New York, first working on organic farms and then starting their own, Kyra Tafel, who grew up in a non-farming family in Connecticut and studied agriculture at the University of Massachusetts Amherst, said they’ve experienced just how fragile the dairy industry can be. Gus Tafel grew up on a dairy farm in upstate New York and studied carpentry before following in his parents’ footsteps.
“We started our farm with a goal of starting small … and gradually building up over time. We couldn’t just jump into buying a farm, especially with no guarantee of a market,” Kyra Tafel said.
Previously, Gus Tafel said they owned about 40 acres of land and ran a dairy operation through a three-year milk contract with a New York buyer, selling organic milk at a premium.
“But it was only for three years. We knew very well that the history of dairy was up and down, up and down,” she said. “When we started off, we were getting paid 36 cents per hundredweight. Three years later when we lost our contract, we were down to 21 cents per hundredweight.”
In contrast to the unstable business plan within which they operated in New York, which was reliant on selling product outside of the region, “Being that Sidehill is right here in the market, the milk goes right from the farm to the creamery and it is marketed to locals,” Kyra Tafel said. “This is a local farm, and you can go and see it if you want. … That’s what’s behind the product, and we think that’s great. It’s more secure than other businesses in the dairy industry. We didn’t have that when we started our first farm. It was uncertainty.”
While they differ somewhat in their approaches to farming, Klippenstein said they share the same farming values — a commitment to organic farming practices and to managing the land in a sustainable way.
“We each have something to bring to this. This really is going to be a partnership,” Klippenstein said. “Maybe the details will change, but the principles will stay the same, and that’s what’s important.”
Now that they don’t have to worry about birthing calves, haying or daily milking anymore, Lacinski said they’ll spend more time experimenting with new yogurt flavors (perhaps using locally produced fruit) and pushing into new markets. The transition, once it’s solidified, will ensure that Sidehill Farm and its symbiotic yogurt business continues its legacy for the foreseeable future — even if the dairy industry is in a state of decline right now.
“People will hold up their 3-year-and say ‘This baby is 80-percent Sidehill Farm Yogurt,” Lacinski joked. “That feels pretty good.”
The saying goes: Don’t cry over spilled milk, but these farmers say they simply can’t carry on at current prices.
This demonstration is to mark the 10 year anniversary of a protest which saw Belgian dairy farmers spray 3 million litres of milk over the very same field they’re in now.
“We are exactly in the same situation as the dairy producers ten years ago, when they didn’t have quotas anymore, and had to work below their production costs; so they lost money producing milk,” Jean-Jo Rigo, a farmer tells our reporter.
Around 600 tractors from across Belgium, France, Germany, Luxembourg and The Netherlands turning up to voice their demands for production quotas which they hope would boost prices.
The difference between this protest and ten years ago is that it isn’t only dairy farmers who brought their tractors out to the field, it’s also pig, cattle, sheep and arable farmers who are all unhappy about the pricings.
The farmers say the EU’s trade deals with Canada and the Latin American Mercusor bloc are flooding European markets.
They say citizens must boycott all imported produce and only shop locally.
“The European agricultural policy is the only policy that is totally integrated in the EU, and moreover, that is used by the European trade direction as leverage in international treaties,” Hugues Falys – FUGEA tells Euronews.
The European Commission has just launched a fresh set of measures aimed at forcing transparency around the pricing of produce.
But the farmers say unless more action is taken to support them when the EU’s agricultural policy is renewed post-2020, they’re feelings towards those in power will remain sour.
The Wisconsin Dairy Business Association is applauding three state lawmakers for new legislation designed to stop the use of misleading labels on imitation milk and other “dairy” products. The legislation would ban the labeling of products as milk or as a dairy product or ingredient if the food was not made from the milk of a cow, sheep, goat, or other mammals.
“The plant-based food industry increasingly masquerades its products as real dairy foods,” says DBA President Tom Crave, DBA President. “This mislabeling confuses customers who often make judgments about a food’s nutritional value based on its name. Milk is milk and cheese is cheese, customers deserve transparency.”
A recent national survey about imitation cheese confirms customer confusion. About one-quarter of customers mistakenly think plant-based products that mimic cheese contain milk. About one-quarter of customers purchase plant-based foods that mimic cheese because they believe them to be low in calories and fat, as well as without additives. The reality is plant-based foods contain a comparable amount of fat and calories and substantially more additives than dairy cheeses.
Sixty-five-year-old David Duprey has been a dairy farmer almost his entire life. It’s the life he has built, the life he knows, and the life he’s not yet ready to give up, even if it’s not the most lucrative.
“Dairy farming is not easy,” Duprey said. “You put in a lot, but you don’t get back anywhere near as much, except satisfaction.”
Duprey is a third-generation dairy farmer. He lives in the house and on the land where his grandparents lived and farmed, and then, his parents. His son helps on the farm, when he’s not working his full-time job. His two daughters live near Boston and have careers there.
Sunbrite Farm at 144 Eden Trail in Bernardston was passed down to Duprey after his father died. Today, Duprey owns about 100 acres — 70 are woodland and 30 are pasture and hay. To keep the cows fed, they also rent another 75 acres for haymaking.
“He died when I was a kid,” Duprey said of his father. “He started farming after he was in the service. I watched him work hard, and I helped. But I never knew just how hard it was until I took over.”
Duprey’s father died from a brain tumor. He said he was only 12 years old at the time, so his mother rented the land to farmers, though that never lasted long.
“It sat idle for a long time,” he said.
When Duprey graduated from the University of Massachusetts Amherst, he decided he wanted to try dairy farming on his own.
“I didn’t know what else to do,” he said.
Cost of living
Duprey, like many other dairy farmers in Franklin County and across the state, said dairy farming has always kept a roof over his and his family’s heads, but not much else. His wife, Deborah Barton-Duprey, 64, has always had to work a full-time job off of the farm to keep food on the table and for the health insurance.
“We raised three kids,” he said. “We couldn’t have done it without her working off of the farm.”
Barton-Duprey said though she has always worked off the farm, she has also helped on the farm when she could. For instance, she helps her husband and son get the cows ready for milking.
Selling milk, the couple gets a paycheck every two weeks for their efforts. They have 120 cows and are milking about half of those (56). Forty are young stock, so they’ll be milked in another year or two.
Duprey said what they get paid for the milk doesn’t cover the cost of living, even for just the two of them now that their three children are grown.
“You do this because you love it,” he said.
Duprey said he receives around $18 for 100 pounds (11.6 gallons) of milk. That’s the price at this time, though he said it fluctuates from day to day — sometimes a little more, sometimes a little less.
He, his wife and son, plus the three part-timers who work for him milking every morning and every evening, produce about 3,800 a day. A single cow can produce up to 65 to 70 pounds each day.
“The amount they produce can change each day, too,” he said. “A heat wave can knock down production. So can other things.”
‘We’ll keep doing what we’re doing’
Duprey said it’s almost impossible for someone to start dairy farming at this point, because of all of the costs and little return financially.
“It’s a lot of manual labor and you’re always looking for ways to make things more labor-efficient,” he said. “You need machines that help lighten the load. You need a milking parlor. Unless you have a lot of money to begin with, you’re not going to get rich doing it, so not a lot of young people are looking at it as an option.”
When he first started dairy farming, it was extremely labor-intensive, so there was a much higher turnover of employees. He said dairy farmers have struggled with that for years.
Duprey said a state incentive program has helped him buy equipment and invest in the farm over the years.
“I’m not sure what we would have done without the program” he said. “It was getting to the point of ‘I have to fix these things or quit,’ when the program assisted with some money to fix them.”
He has used the program twice in 10 years to borrow money that he could pay back slowly and at a good rate.
Barton-Duprey, who does the bookkeeping for the business, along with working a full-full time job off the farm, said she loves the farm, too. It has taught her to be frugal, and she knows how much her husband loves what he does, so that makes it all worth it.
“I grew up in Leyden,” she said. “I always worked two jobs when I was old enough, so I could pay my bills and buy whatever I wanted. The way you live on a dairy farm put stress on the marriage in early years, because I couldn’t do that any longer. But I learned you don’t do something like this for the money.”
Duprey said he’ll see how things go. He said he has no intention of retiring at this point, but you never know.
“We’ll keep doing what we’re doing,” he said. “We’ll keep equipment purchases to the bare minimum and spend time taking care of the cows because, after all, they pay the bills.”
Duprey said the only advice he can give someone who is either thinking about starting a dairy farm or taking one over is to not think they have to get really big really fast and to realize you need an outside income to keep it going.
He worries about the future of dairy farming. He’s not sure any of his children will end up taking over his farm, and he said it’s the same with many other dairy farmers he knows.
Family tradition
According to Claire Morenon, communications manager at Community Involved in Sustaining Agriculture in South Deerfield, land costs are high in Western Massachusetts and dairy farmers do not get paid well, so it makes it difficult to survive financially.
Currently, there are 29 (bovine only) dairy farms in Franklin County. There are 142 across the state, with half of those in Franklin, Hampshire and Hampden counties. She said dairy farms make up about 2 percent of all farms in Massachusetts and 3 percent of the farms in the Pioneer Valley, while they make up 18 percent of agricultural activity. Twenty percent of the milk in the state is produced by Massachusetts dairy farms.
“Dairy farmers are anchor tenants,” she said. “They manage a lot of land and livestock, but get little for what they do. They still have all of the costs other farmers have, like equipment maintenance. So, many of them are closing their doors.”
Morenon said it’s an emotional issue for farmers, because they take what they do seriously, love it so much and many have done it for as long as they can remember, so deciding to stop can be quite traumatic, especially if generations before them were dairy farmers, as well.
“It’s a family tradition for most dairy farmers,” she said. “Not many, if any, new farmers will choose dairy.”
Morenon said the process of producing and selling milk is efficient. Farmers milk the cows — some are turning to robotics to make it even more efficient — and trucks pick it up at the farm and get it to nearby plants, like Cabot and Hood. There is at least a “splash” of Massachusetts milk, and in many cases it’s local, in the milk people drink in Franklin County. Milk is collected from all over the state and combined.
“It’s a well-functioning infrastructure,” Morenon said. “But, there are big, regional meetings that are happening to discuss how dairy farmers can stay in business. Farmers are always thinking about how they can maintain the status quo and make it even better. The industry needs to be stabilized. They’re just not making enough money to survive.”
Morenon said many dairy farmers have started to diversify, so they have other sources of income to fall back on, like ice cream stands and crops they never grew before.
“They’re just not on stable ground and that’s sad,” she said. “They’re just not as visible as other types of farmers because they don’t sell their products directly to the public; so, for instance, you don’t see them at farmers markets selling milk.”
The challenge, Morenon said, will be helping farmers find a way to make it possible to pass their farms on to the next generation and keep the industry viable.
Duprey said he hopes that’s possible.
“We’ll see how it goes over the next few years,” he said. “I’d like to keep doing it a few more years, at least. It all depends on how I feel. Then, we’ll see what happens after I decide to retire.”
Dairy is facing challenges. In a crowded beverage marketplace, per-capita fluid milk consumption in the U.S. is down by a quarter in the past 20 years, and the number of U.S. dairy farms dropped 6.8 percent in 2018.
That’s one part of the story. But a more accurate picture of the health of the dairy industry is much brighter than the doom and gloom conjured from selective use of data. No matter what critics may say, attempts to craft a “death of dairy” narrative are mistaken.
Looking more broadly than milk in a glass, per-capita dairy consumption has been on the rise since the 1970s, according to USDA data. Last year’s level – 646 pounds per person – was the most popular year for dairy in the U.S. since 1962.
Individual products tell similar stories. Cheese per-capita consumption has tripled since 1971. Butter is at its highest per-capita use since 1968. Contrast that with nose-diving sales of margarine, the longest-established “plant-based” dairy alternative, which in 2010 was at its lowest per-capita consumption since 1942. After that, the federal government stopped tracking it altogether.
Milk, like every other beverage, exists in a competitive marketplace. Bottled water, orange juice, energy drinks, and yes, plant-based dairy imposters, all compete for shelf space. But spinning a segmenting beverage market into a “declining dairy” narrative is disingenuous at best, dishonest at worst. Just like Mark Twain when he said of an erroneous news story, “The report of my death was an exaggeration,” dairy is very much alive — and on the rise.
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The National Milk Producers Federation (NMPF), based in Arlington, VA, develops and carries out policies that advance dairy producers and the cooperatives they own. NMPF’s member cooperatives produce more than two-thirds of U.S. milk, making NMPF dairy’s voice on Capitol Hill and with government agencies. For more, visit www.nmpf.org.
The dairy industry is a major part of Pennsylvania’s economy, with more than half a million cows on 7,000 farms.
This week, people from across the country are showcasing their cows at the All-American Dairy Show at the Farm Show Complex.
“It’s a very important part of youth development in learning animal science, learning what makes a great dairy cow,” said Shannon Powers, Press Secretary for the Pennsylvania Department of Agriculture.
While many show off their cows at the show, it’s also highlighting the struggle in the industry, as the market and consumer demands change.
“It’s been tough to keep going and keep the finances where they need to be, but we’re fighting through it,” said dairy farmer Jacob Kline.
Kline’s family runs a dairy farm in Myerstown, Lebanon County. He’s part of the younger generation stepping up to find ways to make sure their family farms are more profitable.
“We milk about 170 cows, fluctuates a little bit in the difficult economy,” Kline said.
He’s finishing his college degree in agriculture business management, trying to figure out how to keep the business going.
“What we can do to become successful and keep going and try and see what else we can do to generate revenue so we can continue and have a good family operation,” Kline said.
The state is stepping in to help too. This past year, $5 million became available through the Dairy Investment Program.
“We awarded grants to people for things like new products that they’re developing on their farms or new ways to do business that can offset those changes in the marketplace,” Powers said.
Consumer demands are changing, so farmers are being encouraged to produce things other than liquid milk, such as yogurt and cheese.
“We need the dairy industry in Pennsylvania. It’s part of our heritage and it’s part of our future,” Powers said.
Credit rating agency S&P Global Ratings believes Fonterra would be “willing and able” to adjust its milk prices paid to farmers in future in order to support debt servicing requirements.
S&P, which has an A- rating (ratings explained here) for Fonterra, sees the flexibility the dairy co-operative has in setting its milk price as enabling it to have a higher debt capacity than similarly rated peers.
“We assess Fonterra as having higher debt capacity because milk payments to its New Zealand supplier base are effectively subordinated to payments to other creditors,” S&P credit analyst Graeme Ferguson.
“Fonterra has a long-established track record of exercising its discretion over these supplier payments during and at the end of the season,” Ferguson said in an article on Fonterra. The article did NOT constitute a rating action.
Fonterra sets its milk price using the Farmgate Milk Price Manual. However, the board does have the discretion to retain a portion of the milk payment if its deemed necessary for Fonterra’s balance sheet. A portion of the payout was retained in both 2014 and 2018.
ANZ agriculture economist Susan Kilsby recently suggested that Fonterra might have to retain as much as 45c per kilogram of milk solids of the milk price payout in the current season in order to shore up its balance sheet.
S&P’s Ferguson said S&P considered it “highly probable that the cooperative would be willing and able to adjust milk payments in the future given its position as the dominant buyer of milk in New Zealand, purchasing more than 80% of milk production”.
However, he noted that farmers supplying Fonterra outside New Zealand are not shareholders.
“To this end, we believe the effective subordination of payments could be meaningfully tempered if New Zealand-sourced milk declined to around 70% of Fonterra’s total global milk collection. This would imply a lower debt capacity. So, too, would any adverse changes that arise from Fonterra’s current capital structure review.”
Ferguson said Fonterra’s milk price structure “supports debt servicing in virtually all foreseeable circumstances”.
“We note that Fonterra’s flexibility and willingness to pass through milk price changes to farmers is significantly greater than many offshore peers, where this flexibility is theoretically available but rarely demonstrated by global peers.
‘Ability to reduce member payments’
“Fonterra’s constitution provides it with the ability to reduce member payments. Milk prices are determined by the board based on the cooperative’s milk price manual, a publicly available document, and the forecast milk price is published at the start of each season. Any revisions to the forecast price are publicly released.
Ferguson said S&P believed Fonterra has “a credible deleveraging plan” and reasonable prospects of building a rating buffer over the next 12 to 18 months. T
“The new leadership is forthright in its acknowledgement of the challenges confronting the cooperative and the scale of the task ahead. The suspension of dividends and adjustment of the milk price indicate the group is willing to actively protect the interest of creditors, which we view as broadly analogous to the long-term sustainability of the cooperative.”
S&P believes that Fonterra “somewhat lost its way” over the past seven years, with the common undercurrent being the co-operative’s “ambitious capital investment programme that sought to grow Fonterra beyond its core function of collecting, processing, and selling New Zealand milk”.
‘Unconstrained global demand’
“This investment cycle was predicated upon the cooperative’s belief that unconstrained global demand would surpass New Zealand’s milk supply.
“In response, Fonterra embarked on a strategy to build global scale by investing in offshore milk pools and processing capacity in New Zealand to accommodate significant milk supply growth. This occurred during a period when the cooperative was also investing in higher-value specialised ingredients and consumer and food services. The result was a step-change in organic and acquisition-led growth that pressured Fonterra’s balance sheet,” Ferguson said.
Fonterra is yet to release its results for the year to July 31, 2019 but has said the results will be released no later than September 30.
At the half-year mark, January 31 the company’s Economic Net Interest Bearing Debt, which Fonterra says “reflects total borrowings, less cash and cash equivalents and non-current interest-bearing advances, adjusted for derivatives used to manage changes in hedged risks”, stood at $7.352 billion.
Total borrowings at that time stood at $7.754 billion. The major components of that were $4.746 billion borrowed through Fonterra’s medium term notes programme, $1.947 billion of bank loans, $600 million of bond issues listed on the NZX debt market and $354 million of commercial paper.
Gearing ratio
Fonterra’s gearing ratio, which is calculated as economic net interest-bearing debt, divided by equity (shareholders’ funds) plus economic net interest-bearing debt, stood at 52.5%, up from 51.6% at the same time a year earlier.
The co-operative targets a year-end gearing ratio of 40% to 45%. As at July 31, 2018 the Fonterra gearing ratio was 48.4%. The company had targeted reducing its debt by $800 million by the end of the financial year to July 2019, but it has conceded that it didn’t make the target, though it hasn’t yet said how far short of the target it was.
At the July 31, 2018 balance date Fonterra’s net debt was 4.5 times operating earnings (as expressed through earnings before interest, tax, depreciation and amortisation – EBITDA). That was up from 3.5x in July 2017.
S&P is forecasting that asset divestments, reductions in capital expenditure, better working capital management, and some earnings normalisation will restore Fonterra’s debt-to-EBITDA ratio below 4x within the next few months.
“While the cooperative’s leverage will remain above its downward ratings trigger at the July 2019 balance date, the deleveraging timetable is still broadly consistent with past expectations.”
Earnings stability
S&P’s Ferguson says Fonterra’s divestment of noncore or underperforming assets should promote earnings stability with proceeds applied to reduce debt. Lower capital expenditure and more stable working capital will also help repair the balance sheet.
“In addition, we believe the cooperative has made good progress in restructuring its operating cost base and is committed to better transparency, forecasting, and performance monitoring.
“In our opinion, Fonterra has maintained its global market leadership, dominance in the purchase of raw milk in New Zealand, and position as the lowest cost, large-scale producer globally. That said, we are mindful of execution risks and any wavering of the cooperative’s commitment to restoring its financial health would put immediate downward pressure on the ‘A-‘ rating.”
Wisconsin’s self-proclaimed moniker as “America’s Dairyland” is taking on fresh meaning in the 21st century thanks to a growing market for milk from an animal that bleats rather than moos. While the state’s traditional dairy cattle industry continues to hemorrhage producers at a record pace, Wisconsin’s dairy goat industry is in the midst of a long-term, and accelerating, growth spurt. Indeed, in 2019 Wisconsin can reasonably claim to be America’s dairy (goat) land.
Data from the United States Department of Agriculture, which counts livestock across the United States every 5 years, show just how much Wisconsin dominates the nation’s dairy goat industry. In 2017, the most recent year the USDA surveyed producers, the size of Wisconsin’s dairy goat herd easily topped the nation at more than 83,000-head. California came in a distant second, with some 43,000 dairy goats, while Iowa, Texas and Missouri rounded out the top five.
It’s not only the sheer size of Wisconsin’s dairy goat herd that stands out: The state also leads the nation in the value of sales from dairy goat operations and is the epicenter of national growth in goat dairy.
While these figures give Wisconsin producers bragging rights among their peers elsewhere, they also reveal just how much, and how quickly, the industry has grown in the state in recent years. Between 2002, when the state’s herd amounted to about 26,000 goats, and 2017, the number of dairy goats in the state skyrocketed some 222%.
This explosive growth — about half of which occurred in the five years between 2012 and 2017 — has even caught some producers off guard.
“It would’ve really surprised me when we started 10 years ago that now there would be so many goats in the state,” said Becky Mills, who milks 110 goats and 280 cattle in Winnebago County with her husband, Marvin, and their son.
Wisconsin’s dominance in the dairy goat industry
The growth of the industry is especially astonishing given its humble beginnings in the 1980s, when tariff threats prompted a scrappy upstart from France to bring European-style goat dairy processing to rural Wisconsin.
Arnaud Solandt moved with his parents from France to the U.S. in 1983. At the time, his father represented French food manufacturers to foreign markets and agreed to a four-year stint abroad. Solandt had just graduated from high school and decided to follow his parents and attend college in the U.S., but tragedy struck two years later when a car wreck killed his father and severely injured his mother. With his mother requiring care and two younger sisters at home, Solandt said he had little choice but to alter his plans.
“I had to get working,” he said. “My father had been representing a French goat cheese company at the time, and the owner asked if I could get involved for a few months answering calls at the office and taking orders.”
Then, a long-running trade spat between Europe and the U.S. over the use of hormones in American beef came to a head when widespread boycotts of American veal in European countries including France, Italy and Germany prompted U.S. officials to threaten a 100% tariff on French cheese.
“It was only a threat, but [American] buyers wanted to hold off on their purchases,” Solandt said. “So I asked my [employers] ‘Why not make goat cheese in the U.S.?’ They said it wouldn’t be easy, but find some goats and find a building and we’ll see.”
Solandt traveled far and wide in search of a region with enough dairy goats to start a cheese processing operation, he said, from Minnesota to Oregon and beyond. It was at a goat conference in California where he met a dairy goat farmer from Wisconsin who told him about a small dairy-goat cooperative in the south-central part of the state that might fit what he was after.
At the time there were only about 5,500 dairy goats in Wisconsin, according to the USDA, with a quarter of them concentrated in Columbia and Dane counties. Solandt soon came to an agreement with the co-op to purchase milk, and together with his French partners purchased an abandoned cheddar processing plant in Preston, in Adams County.
“The threat of tariffs was lifted at that point,” Solandt said. “But there wasn’t much risk and the building was very cheap. We found something in Wisconsin that was very good.”
On July 4, 1989, the new company, called Montchevre, accepted its first milk delivery. After a couple years struggling to make ends meet, business began taking off in the early 1990s, Solandt said. Eventually, Montchevre bought a much larger processing plant in Belmont, in Lafayette County, and cultivated a milk supply network that steadily grew the dairy goat industry in Wisconsin and eastern Iowa.
By the time Solandt and his business partners sold the company to the Montreal-based dairy processor Saputo in 2017, Montchevre had 320 employees, contracts with about 500 farms and was the top-selling brand of goat cheese in the U.S.
Raising dairy goats can be tricky
The Mills in Winnebago County are among the roughly 500 farms that contracted with Montechevre and now sell milk to Saputo. The family entered the dairy goat business in 2009 after years of experience milking cattle and quite a bit of research about what to expect with goats, Becky Mills said.
She noted that while there are important differences between cattle and goats, including what she called their “vastly different” nutritional needs, Mills believes having a history in traditional dairy helped ease the transition to goats. She’s witnessed numerous people enthusiastically start milking goats without enough preparation only to realize how difficult it can be to produce high-quality milk and turn a profit.
“I’m thankful I have a background with dairy cattle,” she said. “The number of people that just decided that they’re going to milk goats because they think there’s money in it and they jump in completely blind is astounding.”
Courtesy of LaClare Family Creamery
Goats are more finicky eaters than many believe, and producing quality goat milk requires highly-tailored diets.
Anna Thompson Hajdik, vice president of the Wisconsin Dairy Goat Association, said that there are several common misconceptions about dairy goat farming that can lead to trouble for new producers who haven’t done their homework. Chief among them is that goats are fine, or even thrive on, eating substandard forage.
“One of the kind of grand myths out there about the dairy goat world is that goats will eat anything,” Thompson Hajdik said in an Aug. 12, 2019, interview on Wisconsin Public Radio’s The Morning Show. “And that is a myth that, you know, so many of us in the industry are really … working hard to dispel. They are actually quite finicky.”
In fact, Thompson Hajdik said in a follow-up interview with WisContext, achieving high-quality goat milk can require even more nutritional care than in cattle.
“Goats are a little more high-maintenance than cows, and getting a high level of performance means really tailoring the diet in some ways even more than cows,” she said.
Feeding goats the right diet to achieve high-quality milk can be tough, Mills said, especially in years like 2019, when cold and wet conditions led to a rise in hay and grain prices. These and other expenses can be too much for many new and smaller producers to handle, as evidenced in the churn of dairy goat operations in Wisconsin.
Between 2002 and 2017, the number of dairy goat farms in the state grew by about 350, but that overall growth, concentrated in southwest and western Wisconsin, masks the industry’s volatility. A quarter of Wisconsin counties actually had fewer dairy goat farms in 2017 than in 2002.
The finicky nature of dairy goats can also make scaling up an operation more difficult, Thompson Hajdik said, which is one reason why the average dairy goat herd in the U.S. includes only 15 goats. However, there are signs that Wisconsin’s industry is becoming more consolidated.
Wisconsin’s largest dairy goat businesses
The only measure of dairy goat farming that USDA tracks where Wisconsin lags behind other states is in its total number of dairy goat farms. With just a little over 1,000 farms, Wisconsin ranks 14th in the nation, slightly fewer than California and a number of other Midwestern states and well behind Texas, which boasts more than 3,600 farms.
As a result, the average size of Wisconsin’s dairy goat herds tops the nation, signaling a more developed, and more consolidated, local industry.
For example, a pair of massive new farms in Calumet County have demonstrated that, with enough capital, scaling up a goat operation in Wisconsin is possible. The farms include Drumlin Dairy, which milks about 8,000 goats and contracts with Saputo, as well as the nearby Chilton Dairy, which has capacity to milk between 6,500 and 9,000 goats and supplies LaClare Family Creamery in Malone, in Fond du Lac County. Chilton Dairy is owned by Milk Source, which also operates several of the state’s largest dairy cattle operations.
Meanwhile, Drumlin is a venture of the owners of Holsum Dairy, another large dairy cattle producer in the state. When Holsum announced the new venture in 2016, those in the industry said it would easily be the largest dairy goat operation in the nation.
The two farms, which are located just 7 miles from each other in the town of Brothertown, milk as much as 20% of the state’s dairy goats, accounting for a large part of the growth seen in the state’s herd in recent years.
Though Drumlin Dairy and Chilton Dairy are enormous, they do not necessarily qualify as Concentrated Animal Feeding Operations in Wisconsin. Known as a CAFO, this type of business must house an equivalent of at least 1,000 animal units, according to the Wisconsin Department of Natural Resources, which defines one goat as one-tenth of an animal unit. That means a goat dairy would have to be at least 10,000-head to meet the threshold for air and water quality standards that come with a CAFO permit.
Drumlin Dairy is regulated under a CAFO permit for Holsum that includes nearby dairy cattle operations, according to Raechelle Cline, a spokesperson for the WDNR.
Management at both Drumlin and Chilton dairies declined to comment, as did representatives at Saputo.
However, Drumlin Dairy general manager Kevin Wellejus told Green Bay’s Fox 11 in 2016 that Holsum was “approached by processors” to fulfill demand for goat milk in the state.
Meanwhile, Larry Hedrich, who owns and operates LaClare Family Creamery with his family, said that a contract with Chilton Dairy has allowed his processing business to flourish. The Hedrich family has milked dairy goats since the 1970s, and today milks several thousand goats. Unlike most Wisconsin producers, however, they no longer sell their milk but process it into dairy products on-site in what is known as a farmstead creamery operation.
“We had come to the conclusion that if we were to survive in the long-term we had to add value to our milk,” Hedrich said. “And that caused us to look at processing milk products.”
Courtesy of LaClare Family Creamery
The goats at LaClare Family Creamery, near Malone, produce milk that is processed into dairy products on-site in what is known as a farmstead creamery operation.
After a trip to Europe in 2009 to study how farmstead operations there work, the Hedrich family jumped into the business, with Larry’s daughter, Katie, becoming a cheesemaker. Business steadily grew, Hedrich said, sometimes faster than they could manage.
“We ran short on milk for the first few years until I talked to Milk Source,” Hedrich said. “The [contract] with Chilton Dairy is what’s allowed our plant here to grow.” More broadly, Hedrich points to Wisconsin’s extensive dairy infrastructure as key to growth of the wider industry.
Even with the success of businesses like Montchevre and LaClare in Wisconsin, some are anxious that the industry’s growth is beginning to crowd out smaller producers, leading to a dynamic that is somewhat reminiscent of the dairy cattle industry, said Becky Mills and Anna Thompson Hajdik.
There are only a few major goat milk processing plants in the state, including Saputo, that contract with smaller farms, and they can exercise considerable power over producers by dictating milk hauling routes and determining when to accept new supply contracts. As of fall 2019, Saputo was not accepting new contracts, according to Mills, but potential plans for an expansion of its plant in Lancaster, in Grant County, could significantly add capacity and demand for more milk.
Still, Mills remains concerned that potential smaller producers could be left on the sidelines as larger operations fulfill demand among processors.
“Why should the plants go to 10 little guys if there’s one big one?” said Mills.
The farmstead route can be an expensive risk itself, made even riskier by new producers who might find the notion of producing artisanal goat cheese more romantic than financially feasible, Thompson Hajdik said.
“For people wanting to get into goats, the biggest thing is you’ve got to have a plant that’s willing to take your milk before you take the leap,” she said to WisContext. “People can have stars in their eyes about goats and making a living milking goats, but the economics of it is just so complex. We’re in a better place overall than dairy cattle, but when you have these 7,000-head dairies coming in, you’re starting to see similar dynamics. As a small producer, there’s just so much that’s out of your control, particularly if you’re going to just milk goats and sell your milk. That kind of tension is something a lot of people don’t realize.”
Dairy is big business in New York, but the dairy industry is changing and so is the look of dairy farms.
Inside the Cornell Teaching Dairy Barn its breezy and comfortable. The barn is part of the Veterinary School.
Veterinarian and farm manager Blake Nguyen described the place like it’s a bovine spa.
Celia Clarke/WSKG Public Media
Dr. Blake Nguyen, Veterinarian and Manager of the Cornell Teaching Dairy Barn. (Celia Clarke/WSKG Public Media)
“In here we have shade,” he said. “We have sprinklers. Fans, to keep the cows cool.”
They have constant access to nutritionally-balanced food and back scratchers. They look like the big spinning brushes in a car wash.
Nguyen said they have fewer than 200 cows. That’s the average size of a New York dairy farm. Everything at the Cornell barn is about making farming more efficient and profitable.
“In pretty much all our life stages [of the animals],” he said, “our goal is to manage health and productivity, and those two things go hand in hand. The healthiest animals are also the most productive.”
These cows don’t go out on pastures. That is more common these days, unless a farm is certified organic, which requires cows be on pasture a certain number of hours a day.
Matt Haan is with Penn State cooperative extension and works with organic dairy farmers. He said cows on pasture are not necessarily healthier.
“I don’t think there’s a big contrast,” Haan said, “between the cow health in a pasture versus a confinement situation. I think a lot has to do with the management of that individual farm and that individual farmer.”
The importance of knowledgeable farmers, veterinarians and farmworkers is a priority at the Cornell Teaching Barn.
Growth in export markets has long been lauded as the measure of success in American agriculture. Last year, U.S Secretary of Agriculture Sonny Perdue credited exports for being a “major driver of the rural economy, generating 20 percent of U.S. farm income and supporting more than a million U.S. jobs.”
Those statistics conceal a hidden truth that most farmers know firsthand: exports don’t actually bring better prices. In dairy, exports have reached historic highs — now topping 15% of the total U.S milk supply — but that growth has failed to provide farmers a livable wage.
In a recent webinar hosted by Wisconsin Farmers Union through the Dairy Together initiative, dairy economist Chuck Nicholson explained, “price impacts of export growth tend to be limited. One of the reasons for that is the milk supply response. If we have opportunities to sell more product, typically the industry can respond fairly readily.”
In other words, opening new markets generates demand in the short term, but farmers quickly ramp up supply right along with it. Any price increase is quickly neutralized.
Nicholson’s analysis shows that for every 1% increase in dairy components exported, the All-Milk price increases by only 10 cents.
Despite the limited impact on milk prices, the U.S Dairy Export Council aims for a goal of exporting 20% of the U.S milk supply, a 5% increase from 2018 levels. USDEC claims that export growth benefits everyone in the industry: farmers, consumers, and everyone involved in the complex dairy supply chain. But Nicholson’s analysis suggests that may not be the case.
“The primary benefits will go to farms that are growing because they are the ones that will be supplying that additional product that goes into export markets. Other benefits will go to supply chain partners like the processors and exporting companies that are also part of facilitating trade flows of dairy products outside the U.S.”
Exports do contribute to farm income, but the profits are not distributed equally among dairy farmers or throughout the supply chain. Nicholson explains the income distribution issue this way: “The average milk price does not increase that much by increasing exports. So farms that are not growing are going to see milk revenues that look a lot like the revenues we would see if we weren’t exporting very much. The place where there is a difference is farms that are growing will see a larger demand for their milk. The benefits are not higher prices, but bigger quantities.”
That’s why many farmers feel pressured to expand their operations to stay afloat. But others cannot or do not want to manage a large dairy operation. For them, higher prices are the only way to stay in business. Since the price bottomed out in 2014, 7,339 U.S dairy farms have called it quits.
If we want to save the 37,000 dairy farms that remain, as well as the rural communities they support, we need higher prices. If higher prices are the goal, then exports are not the answer. To bring real prosperity to dairy farmers and rural communities, we need a national system to balance milk supply with profitable demand. Visit www.dairytogether.com to learn more about the grassroots movement to bring fair prices to family farmers.
The U.S. Farm Belt, already battered by low commodity prices, the trade war and mounting bankruptcies, is bracing for even worse times ahead.
Record flooding this spring across the Midwest and Great Plains damaged stockpiles of corn and soybeans in some areas, while the extremely wet weather led to widespread planting delays.
Now the threat of a weak fall harvest and the danger of an early frost could amplify hardship felt through stretches of Wisconsin and Minnesota and tip more family farms into bankruptcy.
“It’s going to be a tough year, there are no two ways about it,” said Steve Zenk, a farmer and farm advocate from Danube, Minnesota, a small town of less than 500 in the southern part of the state.
‘Holding our breath’
It was a soggy spring and cool, wet summer, which left crops in the area easily two to three weeks behind schedule in terms of maturity, according to Zenk.
Delays in getting the year’s crops into the ground have farmers and bankers keeping vigil over the harvest and approaching autumn.
“It gets cold this time of year,” Zenk told MarketWatch in a telephone interview. “We are kind of holding our breath, because an early frost could really damage crops.”
Corn, soybean and wheat crop progress across Iowa, Minnesota and Wisconsin has largely lagged behind five-year averages, according to the latest U.S. Department of Agriculture crop-progress reports.
Concerns about 2019 crops come as U.S. farm balance sheets already have been stretched thin by a handful of years of lower commodity prices. But early USDA forecasts for larger-than-expected corn production have contributed to pressure on prices while also drawing skepticism from producers and many analysts.
Weather-related worries had pushed corn futures C00, +1.16% to a five-year high above $4.50 a bushel in Chicago in June. On Wednesday, corn traded at $3.61 a bushel, after suffering a brutal August selloff. Soybean futures S00, +0.22% traded at $8.67 a bushel, after hitting a more-than-a-decade low earlier this year below $8 a bushel.
Wisconsin is the nation’s second-largest dairy producer after California, while Minnesota is also among the nation’s top dairy-producing states. While larger, industrial dairy farms may benefit from low crop prices that make it cheaper to feed cattle, family operations in states with shorter growing seasons often suffer.
“For the traditional dairy farmer growing their own crops, having low commodity prices is a bad thing,” said Pat Lunemann, a crop and dairy farmer with about 740 milking cows in Clarissa, Minnesota, in an interview.
Milk prices have risen in 2019, with September milk Class III futures DAU19, +0.00% trading at $18.20 a hundredweight Wednesday, marking a 9% year-to-date gain. Analysts have attributed gains in part to falling dairy cow inventories, which have contributed to slower growth in milk production.
Rising bankruptcies
Meanwhile, farm bankruptcies in the Federal Reserve’s Ninth District, which covers Minnesota, Montana, North and South Dakota and Wisconsin, recently hit their highest level in nearly two decades.
Federal Reserve Bank of Minneapolis
The chart below shows Wisconsin and Minnesota leading the Ninth District in chapter 12 filings, a special section of the bankruptcy code born out of the 1980s farm crisis to give farmers and fisherman ways to restructure their debt, while holding on to their businesses.
Federal Reserve Bank of Minneapolis
Joe Mahon, regional outreach director at the Federal Reserve Bank of Minneapolis, said the current farm landscape looks less bleak than during the farm crisis of the 1980s, mainly due to lower borrowing rates, less overall farm household debt and relatively stable land prices.
“Farms went into this slump with pretty built-up cash cushions,” Mahon told MarketWatch in a recent interview. “The concern is that the cash cushion has been worn down quite a bit. Not as many farms are positioned to withstand another year of low incomes.”
While bankruptcies have been a growing problem, Lunemann also said that many family-run dairies are calling it quits simply because they are burning equity and losing money. “At some point you say: enough is enough. I need to have something left over for retirement.”
Farm aid
Meanwhile, farmers have needed to tap the lifeline of federal government aid programs, which the Trump administration recently bolstered in the face of its continuing U.S.-China trade war.
The USDA this year expects direct farm payouts from the government to reach a decade high of $19.5 billion, or double the payments seen in 2014.
USDAFarm aid on the rise
“We are shipping practically nothing. We don’t have markets. We don’t have crops,” said farmer and farm advocate Ruth Ann Karty, of Clarkfield, Minnesota.
Since the 1980s, farm advocates have helped farmers in financial stress negotiate with lenders and apply for assistance programs, for free, including sometimes giving them a list of attorneys that handle chapter 12 proceedings. Farm Aid, started by musicians Willie Nelson, Neil Young and John Mellencamp, partners with national farm advocate programs.
Both Karty and Zenk said that bankers this fall were checking up on borrowers earlier in the season than usual about expectations for the 2019 harvest.
“It’s not an overwhelming number,” Zenk said of inquiries from bankers. “But we are seeing more than usual, pushing the issue of are you going to be short.”
Recent trade war escalations between Washington and Beijing, led China, the world’s largest buyer of soybeans, to close its doors last month to all U.S. farm products.
American Farm Bureau Federation President Zippy Duvall in August called the move a “body blow to thousands of farmers and ranchers who are already struggling to get by.” Farm Bureau estimates show that U.S. agriculture exports to China were down by $1.3 billion in the year’s first half, after dropping to $9.1 billion last year from $19.5 billion in 2017.
“We would have had problems even without the trade war,” said Paul Mitchell, director of the Renk Agribusiness Institute at the University of Wisconsin-Madison.
“A lot of farmers are baby boomers,” he said, adding that many older farmers are opting to retire early or sell before things get worse.
“They are being rational about what they want to do with their lives, and they don’t think the good times are coming back soon,” Mitchell said.
A Warren County dairy farm filed from protection from its creditors under Chapter 11 of the U.S. Bankruptcy code, the third dairy operation since July to go bankrupt in the 25 counties comprising the Western District of the U.S. District Court of Pennsylvania.
R-Dream Farms LLC in Corry, which has about 350 cows, listed assets ranging between $500,000 and $1 million, and liabilities ranging between $100,000 and $500,000.
Springville, New York feed dealer Gramco Inc. was listed as the farm’s biggest creditor at $432,316 followed by John Deere Financial of Johnston, Iowa, $87,796; and farm supply company Platts Mill Inc., of Spartansburg, Pa., $54,390.
R-Dream representative Robert E. Nickerson filed the Chapter 11 bankruptcy petition, which allows the farm to hold creditors at bay during financial reorganization.
Since July, dairy operations Kooser Farms in Mill Run, Fayette County, and Kimmel Brothers, Plumville, Indiana County, both for bankruptcy. For the fiscal year ending July 31, 370 dairy farms closed in Pennsylvania, according to the U.S. Department of Agriculture.
Travelling through Canada’s beautiful countryside, with its green pastures and well-ordered dairy farms, it may not occur to everyone that they’re looking at the engine of one of this country’s key economic success stories.
The reality is that the dairy sector is one of the top two agricultural sectors in 7 out of 10 provinces. Overall, dairy production contributes $19.9 billion to our total annual economic output, and the sector remits $3.8 billion a year in taxes.
In all, dairy production sustains more than 221,000 jobs across the country, adding to the vitality and cohesion of Canada’s communities and our rural fabric. A typical Canadian dairy farm is run by a family, but also relies on many experts to ensure the family business is successful and the animals are healthy and thriving. Professionals who regularly visit farms to provide services include animal nutritionists, veterinarians, dairy herd improvement advisors, farm business management experts, herd classifiers, hoof trimmers, milk graders, milk truck drivers, feed truck drivers, mechanics, and agronomists who provide all kinds of expertise required to run a dairy farm.
The stability and predictability in pricing in Canada have helped dairy producers become key drivers of Canada’s economy. At the same time, they provide a strong foundation of leadership and support for rural Canada and communities across Canada.
A vibrant dairy industry means more jobs, improved access to rural infrastructure, and a stronger economy that benefits all Canadians.
With a September 20 enrollment deadline, USDA’s Farm Service Agency (FSA) said 71.3% of dairy operations with established production histories were enrolled in the new Dairy Margin Coverage (DMC) program as of Monday (September 9), and the agency emphasized the benefits of the program to those still on the fence about signing up.
A new Morning Consult national tracking poll of 2,200 Americans points to a number of revealing consumer preferences for milk and related beverages. When given the option to choose among whole, reduced fat 2%, low fat 1%, skim, other (almond, soy, oat, other plant-based, lactose-free), or “do not consume” milk, respondents overwhelmingly chose 2% and whole milks because they believe they are most nutritious for themselves and their families. Further, 86% of U.S. adults prefer dairy milk over “other” beverages, including plant-based beverages. Additionally, by a margin of more than 2-1, U.S. adults say it’s important to offer low-fat flavored milks with school meals; and by a 3-1 margin, U.S. adults say it’s important to offer 2% and whole milk with school meals. The poll was conducted by Morning Consult in partnership with the International Dairy Foods Association (IDFA).
A whopping 67% of adults across key demographics believe 2% and whole milk are the most nutritious types of milk. Thirty-six percent of adults believe 2% milk is the most nutritious, while 31% believe whole milk is the most nutritious.
At least 86% of adults prefer dairy milk compared to 10% who prefer “other” including plant-based beverages and lactose-free milk.
Strong opinions about offering flavored milk in schools vastly outweigh strong opinions against. Half of the adults believe it is important that the public school their child attends offers low-fat flavored milk with school meals, while just 22% believe it is unimportant. Twenty-nine percent have no opinion.
Adults feel similarly about fuller-fat milk with school meals—by a 3-1 margin, U.S. adults say it’s important to offer 2% and whole milk with school meals: 53% believe it is important that milks like 2% and whole are offered in schools, while just 18% feel it is unimportant. Currently, only low fat 1% and skim milks are allowed in schools.
Overall, more women than men believe it is more important that their children have access to fuller-fat and flavored milks in school.
Forty-two percent of SNAP participants prefer whole milk for themselves or their families. SNAP participants also report that they believe whole milk is the most nutritious (46%), the only demographic to do so. Of the 2,200 respondents, 336 self-identified as SNAP participants.
Respondents with incomes under $50,000 (inclusive of 336 SNAP and 115 WIC participants, respectively, who self-identified) believe more strongly than those with higher incomes (above $50,000) that fuller-fat milks are most nutritious and prefer offering these options as well as low-fat flavored milks in schools for their children.
Variety is key: More than three-quarters (77%) of adults found it important to have a variety of options to choose from when purchasing types of milk.
IDFA Statement on Results
“As the U.S. school year gets underway and millions of American families get back to the routine of juggling the work-school-life balance, maintaining proper nutrition for themselves and their families is top of mind,” said Michael Dykes, D.V.M., president and CEO of IDFA. “Therefore, it is important that policymakers and regulators who influence what we eat stay grounded in the reality of what American families prefer and value. Clearly some policy decisions and discussions—especially those regarding school meals and nutrition programs—are completely out of step with consumer preference and habits, as well as sound dietary guidance. Families recognize that milk provides numerous health benefits, including better bone health, helps to lower the risk of type 2 diabetes and cardiovascular disease, and is the leading food source of calcium, vitamin D, and potassium in the diet of American children. The public’s opinion is clear. Will our policymakers now listen?”
IDFA members are responsible for 90 percent of the milk, cheese, ice cream, yogurt and cultured products, and dairy ingredients produced in the United States and sold throughout the world. IDFA members produce traditional dairy as well as dairy alternative products.
Dairy Consumption Continues to Grow in United States
Data from the Economic Research Service at the U.S. Department of Agriculture (USDA) confirms that U.S. dairy consumption continues to grow, as seen in Figure 1 below. The results from the Morning Consult poll help to underscore a reality that often goes unreported or is misreported—dairy consumption inclusive of milk is growing in the United States.
Nutritional Recommendations and Research on Dairy Consumption
According to the U.S. Departments of Agriculture and Health and Human Services, American children and adolescents over four years old are not consuming enough dairy to meet the Dietary Guidelines for Americans recommendations. As the American Academy of Pediatrics states, “Dairy products play an important role in the diet of children. … In fact, milk is the leading food source of three of the four nutrients of public health concern (calcium, vitamin D, and potassium) in the diet of American children 2-18 years.” Moreover, for individuals who require reduced lactose or lactose-free dairy products, these are widely available.
A growing body of data and research supports dairy’s healthfulness. Of note, a recent recommendation by Australia’s Heart Foundation that healthy Australians can include full-fat milk, cheese and yogurt without increasing their risk of heart disease or stroke is important, official nutritional guidance related to dairy. A study released last summer in The American Journal of Clinical Nutrition came to similar conclusion about the fats in dairy products such as whole milk. As the researcher in that study told The Atlantic magazine: “I think the big news here is that even though there is this conventional wisdom that whole-fat dairy is bad for heart disease, we didn’t find that,” said Marcia de Oliveira Otto, assistant professor of epidemiology, human genetics and environmental science at the University of Texas School of Public Health. “And it’s not only us. A number of recent studies have found the same thing.” This study published in Lancet in 2018 is another example.
Details on Morning Consult Poll
This poll was conducted by Morning Consult, a national survey firm that also publishes analysis of polling and survey data on public policy issues. This poll was conducted from August 16-18, 2019. The interviews were conducted online and the data were weighted to approximate a target sample of adults based on age, educational attainment, gender, race, and region. Results from the full survey have a margin of error of plus or minus 2 percentage points.
The extent of the cuts is unclear, but a number of sources have confirmed to Stuff they have heard about the losses.
It is understood middle management positions are more likely to go than processing plant workers.
A Fonterra spokeswoman acknowledged there would be cuts but would not say how many. “We have been open with employees that with a new strategy comes a new structure. Our new strategy is about being more focused, prioritising New Zealand milk, and being closer to our customers.
DRY CONDITIONS: Dry conditions are continuing to hurt Australian milk production.
Australian milk production continues to fall, despite higher milk prices in a number of regions this season.
Australian milk production continues to fall, despite higher milk prices in a number of regions this season.
The first lot of figures from Dairy Australia for season 2019-20 reveal a continuation of the trend from last season with production down 8.4 per cent in July compared with the same month last year.
Tasmania – which was one of the few bright spots in 2018-19 – has had a poor start to the season with production there down 14.0pc.
South Australia, which had bucked the trend last year, also suffered a big drop – down 13.0pc.
The tough drought conditions are continuing to bite in Queensland (down 13.3pc) and NSW (down 10.6pc).
High water prices and the impact of herd culls are hitting production in northern Victoria, which was down 11.5pc for July.
Falls in Western Australia (down 2.9pc), eastern Victoria (down 3.2pc) and western Victoria (down 6.4pc) were lower than the national average.
The figures for July were released by Dairy Australia on Friday – just a week after it released the 2018-19 season figures, which were delayed as it was forced to revise previously released reports after discovering additional data for northern Victoria and southern NSW.
Australian milk production in 2018-19 was 8.8 billion litres, down 5.7pc from 9.3 billion litres the previous year.
Dairy Australia said it anticipates a further drop in national milk production of 3-5pc to 8.3 to 8.5 billion litres during the current 2019-20 season, due to continued high input costs and the reduced size of the national herd.
Fonterra has delayed the publication of its annual financial results saying it needs more time to finalise its accounts.
Photo: 123RF
The results were due to be released next Thursday. The dairy co-operative says it will now publish them no later than the end of the month.
“Fonterra and the Co-operative’s auditor PwC, are working constructively through the normal financial year end accounts and auditing process. However, due to the significant accounting adjustments in FY19 (financial year 2019) … more time is required to complete the audited financial statements,” it said in a statement.
Fonterra chief financial officer Marc Rivers told RNZ Business that the executive team contributed to the delay.
“It is a combination of work that we have to do on our side, to get everything to the auditor, and then to give them sufficient time to analyse everything,” Mr Rivers said.
“This is not just a normal year.”
Last month, Fonterra said it was writing down the value of underperforming assets by as much as $860 million, which would result in a substantial annual loss.
It has confirmed it it still expects the annual loss to be between $590m and $675m – a 37 to 42 cent loss per share.
Among the assets which could be further written down are Fonterra’s infant formula and dairy farm investments in China, its Chilean and Australian businesses.
It said the delay and the writedowns would not affect its ability to operate and pay its bills, including paying farmers for their milk.
The U.S.-China tariff war is pushing farmers out of the business, according to U.S. Dairy Export Council President and CEO Tom Vilsack.
The U.S. Department of Agriculture reported that nearly 3,000 dairy farms quit the business in 2018.
“There are a multitude of reasons, but obviously the tariffs is one reason. We need to continue to focus on domestic consumption as well and we need to take a look at how we essentially price our milk products to be able to make sure that farmers get a decent return,” he told FOX Business’ Liz Claman on “The Claman Countdown.”
Last Sunday, the United States placed a 15 percent tariff on approximately $112 billion of Chinese goods. The U.S. Dairy Export Council visited Chinese officials last Friday to try to preserve their relationship with China after the new tariffs went into effect.
“We tried to convey to them the relationship between our two dairy industries, the U.S. and China industry, is an important one to maintain …So we offered some help in terms of their pork industry that’s been decimated by African swine fever,” he said.
Vilsack hopes that helping to rebuild China’s hog industry will give China the incentive to help his industry avoid retaliatory tariffs.
“We’re going to follow this up with letters to the Ministry of Agriculture and the Ministry of Finance and Commerce in the hopes they take us up on the offer and look for opportunities to potentially work through and around the retaliatory tariffs,” he said.
Vilsack also explained why the ratification of the USMCA trade agreement will help U.S. farmers.
“They can’t wait for the ratification of that agreement because it’s going to open up opportunities for us in Canada, it’s going to preserve our market in Mexico,” he said.
Deep in Northern Ireland’s County Armagh, on a farm tucked into the impossibly green hills and orchards, Philip Toner is feeding his cows.
“This is my life,” he says, walking into the main cow shed, greeted by moos. “I’ve been working this dairy farm for 28 years. My children grew up on it, and now we run it together. My family has actually farmed this land since back in the mid-1800s.”
Toner is 50, lanky and welcoming, with reading glasses perpetually propped on his silver hair. He points to the original 19th-century farmhouse, where his oldest son now lives.
“There’s a lot of history here,” he says. “I would hate to see that something as ludicrous as a no-deal Brexit could put a stop to what we do here.”
British lawmakers are fighting Prime Minister Boris Johnson to prevent a no-deal Brexit, which would mean that the United Kingdom – which Northern Ireland is part of – would crash out of the European Union without an agreement on the terms of their divorce.
Northern Irish farmers who have built lucrative cross-border trade with the Irish Republic are especially worried.
A no-deal Brexit would likely bring back a hard border on the island. That would mean re-imposing customs, which would ravage trade, and creating checkpoints, which could be targeted by militants who want to revive The Troubles, the decades-long sectarian conflict between Protestants and Catholics that left more than 3,600 people dead.
“God forbid that ever happens again,” Toner says. “In Northern Ireland, we don’t need any more polarization of the views that we already have.”
Dairy industry depends on open borders
Thirty-five percent of Northern Irish milk is sold to Ireland.
The Toners sell milk from their cows to a processor that’s partly owned by a company based in the Republic of Ireland. The milk is turned into mozzarella and sold to the U.K. and EU.
Right now, the Irish border is open. That means it’s easy to transport milk – or “lift it,” as Toner says.
“A tanker could be lifting a farmer’s milk in the north. He then drives 300 meters to the next farm, who’s in the south along the same road,” he says. “He then drives another half mile or a mile to lift a third farmer’s milk, who’s possibly back in the north.”
Checkpoints for customs would make this easy trade impossible. Tariffs would make British milk — including that from Northern Ireland — expensive to buyers in the rest of the EU, including the Republic of Ireland. EU rules would prevent mixing milk from the north and south. Northern Ireland would be left with a glut of milk.
“Where do we go with over 2 million liters of milk per day that Northern Ireland simply couldn’t process?” Toner says, exasperated. “It would have to be dumped? And farmers can’t produce something just to dump it.”
The only Plan B, he says, is “sell now, cull all your cows.”
Philip Toner is concerned about the future of his family’s farm. “There’s a lot of history here,” he says. “I would hate to see that something as ludicrous as a no-deal Brexit could put a stop to what we do here.”
Not just about business: It’s also about keeping the peace
Toner and other farmers here aren’t only concerned about bankruptcy.
They also worry about a return to the sectarian violence that gripped Northern Ireland for decades.
Toner, who’s Catholic, was a boy in 1976, when the Irish Republican Army killed 10 Protestant workers in the nearby town of Kingsmill.
He says his family never cared about politics and got along with their neighbors, no matter what their religion. He considers himself lucky not to have lost family or friends in The Troubles.
“We watched news programs every morning, every evening and heard about somebody else shot,” he says. “If we saw a strange car driving past, we ducked behind a building or a bale of hay to hide. You always felt like a target.”
The 1998 Good Friday Agreement ended The Troubles and the checkpoints.
Both sides of Ireland could finally take advantage of the single market.
“That has brought very obvious economic benefits to Northern Ireland in particular,” says Katy Hayward of Queen’s University in Belfast, an expert on Irish border issues. “And it’s in the natural day-to-day connections — the businesses making deals and the expansion of business across a border — that you see the embedding of trust and cooperation that is really essential to making peace a reality.”
The cooperation is even political. Ian Marshall is a Northern Irish dairy farmer who’s now a senator in the Irish Republic’s legislature in Dublin.
Dairy cooperatives work on both sides of the border, Marshall says, to produce butter, cheese, milk and yogurt.
“You could have a product going to the south, coming back to the north for further processing, going back to the south, going on into Europe,” he says. “And it’s a fresh, perishable product, which is critically important.”
Because the Irish border is still a sensitive place, the EU insists that a Brexit deal must include something called the Irish backstop, which would require the U.K. to follow EU rules until a way to keep the border open could be worked out.
Pro-Brexit politicians say the backstop chains the U.K. to Brussels and prevents it from making new trade deals. British Prime Minister Boris Johnson calls this undemocratic.
In Dublin, Glanbia, an Irish dairy company that’s gone global, is lobbying London to limit the economic damage. Glanbia spokesman Michael Patten says the company is also trying to shield the dairy farmers of Northern Ireland.
“They’ve been an important part of our story,” Patten says. “They’ve been an important part of our supply chain. And we owe it to them to do our best to get this situation sorted.”
One farmer’s Plan B
But at least one Northern Irish dairy farmer is trying to sort his fate out himself.
Dean Wright also farms in County Armagh, just a few miles from Philip Toner. He’s decided to “Brexit-proof” his milk by processing it himself on his own farm. He turns it into high-end cheese, called Ballylisk of Armagh.
Wright shows me around the warehouse where he makes a triple-cream soft cheese that’s like a French Brie.
“But it’s actually a lot more luxurious than a Brie,” he says. “This is the cheese that’s actually stocked in the Queen’s grocer, Fortnum & Mason.”
His cheese is selling well, and it might do even better after Brexit, when French Brie gets more expensive.
“At a small level, like we’re at, you know, we can’t change the direction of the wind, but we can adjust the sails,” he says. “So that’s what I intend to do.”
He’s also looking into selling his cheese to the U.S. (“there’s a lot of Irish people there, so huge market,” he says) and outside Europe.
But Wright does hope that the winds of Brexit keep the Irish border, not far from his home, clear of the checkpoints — and unrest — of the past.
Ireland is small, he says, and he wants his friends down south to keep buying his Irish cheese.
Suppliers also boosted sales to Middle East/North Africa and South America but shipments to China remain down as retaliatory tariffs continue.
U.S. exporters shipped nearly 48,000 tons of milk powders, cheese, whey, lactose and butterfat to Mexico in July, 12% more than a year ago. Dairy products moving south of the border were valued at $134.7 million, up 30%. Nonfat dry milk/skim milk powder (NDM/SMP) and cheese volume were up 9% and 16%, respectively, while lactose shipments reached a record high 6,396 tons, a 74% increase.
Suppliers also moved greater volumes into the Middle East/North Africa region (MENA) in July. Overall volume was up 50%, and value was 56% higher, led by increased sales of whole milk powder (WMP), ice cream, cheese and milk protein concentrate (MPC). Most of the buying came from Arabia, United Arab Emirates and Algeria.
Exports to South America were higher as well, with expanded sales of cheese (+41% by volume) and NDM/SMP (+79%). Major customers were Columbia, Chile and Peru. On a value basis, total exports to South America were 37% higher than a year ago.
In contrast, sales to Asian markets were lower.
Shipments to China remain limited due to high retaliatory tariffs that make U.S. commodities uncompetitive. At this point, more than 90% of U.S. exports to China are whey and lactose, and China’s overall whey and lactose imports are significantly reduced as a result of African Swine Fever.
Suppliers moved just 15,845 tons of milk powders, cheese, whey, lactose and butterfat to China in July, down 35% from a year ago. Total whey exports were down 41% (with a 65% loss in sales of dry whey) while lactose volume was off 20%. On a value basis, exports to China in July were down 16% from last year.
After buying aggressively earlier this year, importers in Southeast Asia pulled back this summer. U.S. exports of dairy ingredients (SMP, WMP, whey products and lactose) were 30,221 tons in July, down 21% from a year ago. The Philippines, Indonesia and Vietnam all bought less. Total export value was $61.2 million, down 9%. The bright spot in the region was a 30% gain in sales of cheese.
Elsewhere in the region, U.S. exports to Japan and South Korea were the lowest of the year – both in terms of cheese volume and total export value. For America’s second and third-largest cheese markets, volume to South Korea and Japan were down 40% and 15%, respectively, compared with a year ago. Whey shipments to both markets were lower as well. Overall dairy export value to South Korea was down 25%, while sales to Japan were down fractionally.
Overall value of U.S. dairy exports topped $474 million in July, up 10% from a year earlier. In the first seven months of the year, exports were valued at $3.4 billion, up 3% and the highest since 2014.
Total shipments of milk powders, cheese, butterfat, whey products and lactose were 160,361 tons in July, down 6% from a year ago.
On a total milk solids basis, U.S. exports were equivalent to 14.0% of U.S. milk solids production in July. In the first seven months of the year, exports accounted for 14.1% of production.
Brian Wilson (right) works with his son Todd on their family dairy alongside Brian’s father Lindsay. ABC Rural: Lara Webster
One hundred years of doing anything is no mean feat, and even more so when it is a family dairy that has made the milestone.
Despite the many industry challenges, members of the Wilson family in northern New South Wales have refused to allow their passion to die.
Early generations began dairying in 1918 and today three generations still work their Tamworth dairy 365 days a year, milking 170 jersey cows daily.
Third-generation farmer Lindsay Wilson, his son Brian, and grandson Todd continue to carry on their family legacy despite the volatility of their industry and the ongoing drought.
As Brian Wilson watches his own son take on the family business beside them, he has fond memories of his early years on his parents’ first dairy farm at Wingham.
“It was certainly on smaller scale [and] started off milking around 80 cows,” he said.
“It just seemed a lot slower pace back then … we didn’t have to push production as hard as what you do now to make a living.”
These days the dairy manufactures its own milk, with Todd and wife Sarah purchasing the Peel Valley Milk factory and brand in 2017.
That progression has allowed the family to take control of the entire supply chain, which has provided some security in trying times.
“We process our own milk. We’re marketing it, selling it, delivering it to the shops. So we now control that whole supply chain from paddock to fridges,” he said.
“That is a new challenge that we are really starting to enjoy and we are getting rewarded with the quality of some products and winning some awards.”
There is now a sixth generation of Wilson’s growing up on the dairy, and Brian Wilson still remained positive about the future, despite the challenges to overcome.
“Probably since deregulation back in the year 2000 things took a downward spiral and we just haven’t really caught up,” he said.
“We just have so much ground to make up but there are things being put in place now to turn that around.
For the love of cows
For members of the Wilson family it is their jersey cows that keeps them passionate during trying markets and seasonal conditions.
Todd, Brian and Lindsay are all judges and also show their registered cows throughout the year.
For more than 50 years, they have been refining the genetics of their herd, something Brian Wilson hoped would continue into the future.
He said the breeding of cows could be a challenge, but it was also rewarding when the results of the breeding were good.
“I think that gets us through the hard times and we’ve certainly come a long way.”
The family own Australia’s 2016 grand champion cow, Shirlinn Icy Eve.
Back in the game
The number of registered dairy farms in New South Wales has taken a huge tumble from more than 3,600 in 1980 to just 626 at the last count in 2018.
At a time where milk prices are struggling, water is scarce, and feed costs are high, there are not many people entering the dairy industry.
Or re-entering, as is the case for farmers Robert and Narelle Worth from the Hunter Valley region of New South Wales.
More than a decade ago they closed down their operations and left the dairy industry.
“In 2004 we finished dairying. We just got sick of going backwards and prior to that I spent all my life in dairying,” Mr Worth said.
“I’ve had a holiday now.”
They now run a commercial and stud beef cattle operation and cut hay on their 100 hectares on the outskirts of Singleton.
“There’s a lot of fluctuation with your income,” Mr Worth said.
“It’s good when it’s good and when it’s bad, it’s bad.”
Looking to the future
When the rain comes, and the drought finally breaks, they expect the income from hay and cattle to take a hit.
“It is going to rain, the drought will break and that’s going to stop a lot of the hay income,” Mr Worth said.
“When it rains, cattle prices are going to go through the roof, so you can’t deal in cattle. You won’t buy and sell cattle, so we were looking for a stable income where we have a little of regular income all the time.”
They have been eagerly watching the dairy industry from the sidelines and said now was the time to get back in the game.
“So, we’re going to go back to milking cows — only 35 — and then as the drought breaks and as our water secures up in the river, we will look to double our numbers,” Mr Worth said.
A certain of percentage of the dairy herd will also be surrogates for their stud’s speckle calf embryos.
“So we’ll have the milk, the dairy, beef and the stud embryos all from the one package of the dairy,” Mrs Worth added.
While many have questioned their decision and even said the couple was foolhardy to do it, they are ready to get back into the sheds in less than a month’s time.
“There is more than one processor that is happy to take our milk at this stage,” Mr Worth said.
“I’ve seen the milk prices start to rise a little bit [and] Australia is getting short of milk, so I think the tide has turned a little bit,” he said.
FONTERRA Australia has suffered its smallest July milk intake in at least seven years.
The company said its milk collection for the first month of the 2019-20 season was 5.4 million kilograms of milk solids, a decline of 28.9 per cent from last season.
The previous July low Fonterra has experienced in the past seven years was in 2016, when six million kg MS was received.
In its latest Global Dairy Update report, Fonterra said milk intake “continues to decline, impacted by intense competition for milk supply and the continued impact of the poor conditions on-farm”.
“The drought in 2019 has led to an increase in cow cull rates, a significant number of farm retirements and a continuation of historically high input costs resulting in a material reduction to the Australian milk pool in FY19 (the 2018-19 financial year) versus FY18,” the company said.
Dairy Australia last week finalised national milk production for 2018-19 at 8.8 billion litres, a decline of 5.7 per cent from the 9.3 billion litres recorded the previous season.
The 8.8 billion litre production figure was up on Dairy Australia’s previous estimate of 8.45-8.65 billion litres.
Dairy Australia senior industry analyst John Droppert said milk production forecasts were based on data provided voluntarily by Australian processing companies.
“Data collection over the past year was made more difficult by the significant decrease in production in some regions, unprecedented turnover in supply contracts between different processing companies and some new entrants in the processing market,” Mr Droppert said.
Dairy Australia anticipates a further drop in national milk production of between 3 per cent and 5 per cent to 8.3-8.5 billion litres during 2019-20, due to continued high input costs and the reduced size of the national herd.
The national herd has fallen from 1.56 million cows in 2017-18 to about 1.45 million cows at the end of last season.
The U.S. dairy industry is competing to win market share in China and Japan, countries with growing demand for dairy, projected to continue for years to come .
U.S. Dairy Export Council President and CEO Tom Vilsack embarked on a seven-day trip (August 28 to Sept. 3) to China and Japan to build relationships in vital markets for the future of the U.S. dairy industry.
What follows is a visual, one-stop travelogue, displaying images and summaries from social and news media reports about Vilsack’s trip as well as contextual information about dairy demand growth in China and Japan.
JAPAN
CHINA
BEIJING — U.S. Dairy Export Council President and CEO Tom Vilsack met Friday with officials from Chinese government and agriculture to deliver a message that the U.S. dairy industry remains committed to this high-potential market despite the challenge of retaliatory tariffs.
“We want an ongoing relationship with China,” Vilsack told employees from USDEC’s China and U.S. offices before a whirlwind day of meetings. “We are in this for the long haul. We want to be here 10 years from now, 20 years from now and 50 years from now.
“At some point, our governments will figure out these trade issues and when they do we want to be in the best position possible for our member companies and farmer-funders.”
The move towards plant-based food and drink items are impacting the dairy and meat industries. Nationwide, the dairy industry took a $1.1 billion hit last year.
Cows at Working Cows Dairy have some tough competition from products like veggie burgers, almond and oat milk. This trend is hurting some dairy farmers across the country.
“I think a lot of the people go away from the animal product because they think the animal gets misused,” says owner Rinske de Jong. “Because we’re animal welfare approved, that’s not the case with us.”
Working Cows Dairy in Slocomb has seen a bit of a decline in recent years. But owner Rinske de Jong says mainly because getting to their farm takes time.
“Our milk is still a lot better product than the almond milk or the soy milk or whatever because you have all these crazy additives added to it. It’s really not good for people. You have the carrageenan and other additives which thicken the milk,” said Rinske.
So while others are switching to a more plant-based lifestyle, de Jong argues the benefits of her natural grazing cattle far outweigh any of the cons.
“We do not use any type of synthetic fertilizers, pesticides, herbicides, synthetic medicine. We use herbal remedies to treat cows with illness. We use just pure cow manure to fertilize the land,” said milk processor Jonny de Jong.
Some doctors like Beth Weever at AllSouth Care however, think these milk substitutes are a healthy alternative, especially for people with a dairy sensitivity. She says they still provide vital nutrients such as Vitamin D and Calcium and can be sugar-free.
But for the de Jong family, organic milk, beef, and cheese products are the only answer to a healthy lifestyle.
What a remarkable coincidence that the federal Minister of Agriculture announced a $1.75 billion payout to dairy producers just before a federal election in the province that has the most small-scale dairy farmers. You can guarantee that those cheques will arrive promptly before the upcoming election day. It will help Liberal party fortunes not only in Quebec, but in Ontario and the Maritimes. If only canola, pork and beef producers could be so lucky to have the same caring government looking after their economic hardships, but unfortunately most of them live in western Canada and they have a habit of not voting Liberal. Not to worry, the federal Minister of Agriculture has said that she will stand “shoulder to shoulder” with canola producers. One suspects that means a shoulder to cry on, not any real cash support. How comforting that is to growers as federal government ineptitude in the Huawei princess case destroys their $3 billion canola market. But then that’s politics and in Alberta we know all too well that we are not PM Trudeau’s favourite voters.
The payout announcement cited that an average 80 dairy cow producer will receive a cheque for $28,000 starting this year. Therein lies the problem, what is that sum supposed to do, just giving it to small scale dairy producers only prolongs what really needs to be done. The payout is also not directly tied to any mandatory reduction of dairy production quotas by either the producers or the dairy commission. In effect the feds are paying producers to keep on doing what they are doing regardless of the impact of trade agreements. That’s a recipe for over production which will contribute to even more financial problems for producers. Unfortunately, milk consumers will not benefit from that situation with lower prices, however taxpayers according to the feds will be stuck making payouts for the next 8 years, it bogles the mind.
What is needed is a marketing plan to reduce milk production as the market is demanding. The payout should have gone into a fund to buy out small scale producers and their dairy quotas primarily in eastern Canada that have fewer than 100 dairy cows. The dairy industry in Canada will only become more competitive and efficient if the average dairy farm has 1,000 to 5,000 dairy cows. That is what is happening in the USA and it needs to happen in this country. Most other sectors in agriculture continue to consolidate to take advantage of technology and economies of scale, the dairy industry can do the same even under supply management. However, the problem with dairy industry supply management is that it is controlled by Quebec and to a lesser extent Ontario and the Maritimes – the homes of most small-scale producers. Western Canada is almost powerless to change that arrangement. Heck its rumoured that for many years western dairy producers paid millions into some sort of price stabilization scheme for Quebec producers. Looks like just another equalization scam that favoured that province.
What gets aggravating is that whenever the inequality of the share of national dairy quota is brought up, Quebec agriculture apologists claim that it is their traditional right to that national milk production entitlement – sounds familiar. The supply management of milk marketing has worked well for the industry and the rural economy, but it needs to be radically transformed so that the dairy industry is not trapped into a marketing model that hasn’t changed much since the 1970s. Supply management will work much better for the public and the industry if dairy production is allowed to consolidate into large-scale commercial operations in areas of the country where they are economically feasible. Paying multi-millions of taxpayer dollars to keep small-scale dairy farmers in business is unwise and only continues to question the credibility of supply management.
This column has advocated many times that Alberta is ideally positioned to establish large-scale multi-thousand dairy cow operations. The climate, geography, feed production, technical expertise and experience with very large-scale cattle production are all here particularly in southern Alberta. But all of that would be a massive threat to the established dairy production business of eastern Canada. The only way to stop the western movement of commercial dairy production has been to use supply management quota restrictions to block such an economic migration. Those restrictions can be overcome, but only through a monumental political effort by the Alberta government.
Growth in export markets has long been lauded as the measure of success in American agriculture. Last year U.S Secretary of Agriculture Sonny Perdue credited exports for being a “major driver of the rural economy, generating 20 percent of U.S. farm income and supporting more than a million U.S. jobs.”
Those statistics conceal a hidden truth that most farmers know first-hand: exports don’t actually bring better prices. In dairy, exports have reached historic highs – now topping 15 percent of the total U.S milk supply — but that growth has failed to provide farmers a livable wage.
In a recent webinar hosted by Wisconsin Farmers Union through the Dairy Together initiative, dairy economist Chuck Nicholson explained, “Price impacts of export growth tend to be limited. One of the reasons for that is the milk supply response. If we have opportunities to sell more product, typically the industry can respond fairly readily.” In other words, opening new markets generates demand in the short term, but farmers quickly ramp up supply right along with it. Any price increase is quickly neutralized.
Nicholson’s analysis shows that for every 1% increase in dairy components exported, the all-milk price increases by only 10 cents.
Despite the limited impact on milk prices, the U.S. Dairy Export Council aims for a goal of exporting 20% of the U.S milk supply, a 5% increase from 2018 levels. USDEC claims that export growth benefits everyone in the industry: farmers, consumers and everyone involved in the complex dairy supply chain. But Nicholson’s analysis suggests that may not be the case.
“The primary benefits will go to farms that are growing because they are the ones that will be supplying that additional product that goes into export markets. Other benefits will go to supply chain partners like the processors and exporting companies that are also part of facilitating trade flows of dairy products outside the U.S.”
Exports do contribute to farm income, but the profits are not distributed equally among dairy farmers or throughout the supply chain. Nicholson explains the income distribution issue this way: “The average milk price does not increase that much by increasing exports. So farms that are not growing are going to see milk revenues that look a lot like the revenues we would see if we weren’t exporting very much. The place where there is a difference is farms that are growing will see a larger demand for their milk. The benefits are not higher prices, but bigger quantities.”
That’s why many farmers feel pressured to expand their operations to stay afloat. But others cannot or do not want to manage a large dairy operation. For them, higher prices are the only way to stay in business. Since the price bottomed out in 2014, 7,339 U.S dairy farms have called it quits. If we want to save the 37,000 dairy farms that remain, as well as the rural communities they support, we need higher prices. If higher prices are the goal, then exports are not the answer. To bring real prosperity to dairy farmers and rural communities, we need a national system to balance milk supply with profitable demand. Visit the Dairy Together website to learn more about the grassroots movement to bring fair prices to family farmers.
Bobbi Wilson serves as government relations associate for Wisconsin Farmers Union, a grassroots organization that is committed to enhancing the quality of life for family farmers, rural communities and all people through educational opportunities, cooperative endeavors and civic engagement. In that role, she helps lead Dairy Together, an initiative to secure fair prices for family dairy farmers. Learn more at the website.
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The global report provides an understanding of the current macro supply and demand trends affecting the dairy sector.
In the vacuum created by the postponement of Fonterra’s financial results by a fortnight, experts have begun to weigh in on its future in Australia.
A growing number of dairy farmers across the country want the federal government to regulate the volume of milk their industry produces annually.
Dairy exports appear to be holding strong despite the decline in volume headed for China. Figures from the U.S. Dairy Export Council demonstrate solid numbers for dairy exports in July. Mexico was the largest importer of American dairy products, receiving nearly 48,000 tons of milk powders, cheese whey, lactose, and butterfat. While volume to Mexico increased 12 percent from a year ago, the value of dairy exports to Mexico increased 30 percent.
Like my family before me, and following after me, I’ve always taken great pride in being a dairy farmer, and in the reputation of the New Zealand dairy industry internationally.
Gus Tafel of Sidehill Farm in Hawley carefully measured grain from a trough for his cattle’s breakfast — a specific amount based on each cow’s milk production. In their stalls, the cows strained at the scent of food, swinging their heads from side to side in excited anticipation.
Sixty-five-year-old David Duprey has been a dairy farmer almost his entire life. It’s the life he has built, the life he knows, and the life he’s not yet ready to give up, even if it’s not the most lucrative.
Credit rating agency S&P Global Ratings believes Fonterra would be “willing and able” to adjust its milk prices paid to farmers in future in order to support debt servicing requirements.
Wisconsin’s self-proclaimed moniker as “America’s Dairyland” is taking on fresh meaning in the 21st century thanks to a growing market for milk from an animal that bleats rather than moos. While the state’s traditional dairy cattle industry continues to 
Growth in export markets has long been lauded as the measure of success in American agriculture. Last year, U.S Secretary of Agriculture Sonny Perdue credited exports for being a “major driver of the rural economy, generating 20 percent of U.S. farm income and supporting more than a million U.S. jobs.”
Federal Reserve Bank of Minneapolis
Federal Reserve Bank of Minneapolis
USDA
Travelling through Canada’s beautiful countryside, with its green pastures and well-ordered dairy farms, it may not occur to everyone that they’re looking at the engine of one of this country’s key economic success stories.
A new Morning Consult national tracking poll of 2,200 Americans points to a number of revealing consumer preferences for milk and related beverages. When given the option to choose among whole, reduced fat 2%, low fat 1%, skim, other (almond, soy, oat, other plant-based, lactose-free), or “do not consume” milk, respondents overwhelmingly chose 2% and whole milks because they believe they are most nutritious for themselves and their families. Further, 86% of U.S. adults prefer dairy milk over “other” beverages, including plant-based beverages. Additionally, by a margin of more than 2-1, U.S. adults say it’s important to offer low-fat flavored milks with school meals; and by a 3-1 margin, U.S. adults say it’s important to offer 2% and whole milk with school meals. The poll was conducted by Morning Consult in partnership with the International Dairy Foods Association (IDFA).
Economist Peter Fraser draws a ruler over Fonterra’s performance.
The U.S.-China 
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