New Dairy Bill

http://thomas.loc.gov/

In the search box type in "S.1542", click on bill number

Title: A bill to impose tariff-rate quotas on certain casein and milk protein concentrates.
Sponsor: Sen Schumer, Charles E. [NY] (introduced 7/30/2009)

Cosponsors (5)

Sen Feingold, Russell D. [WI]
Sen Klobuchar, Amy [MN]
Sen Murray, Patty [WA]
Sen Sanders, Bernard [VT]
Sen Shaheen, Jeanne [NH]

Presently, caseins and milk protein concentrates come into the country, not as dairy products but, as chemicals. This bill will correct that problem and make the use of these imported products just a little more costly.

This bill, if passed, and it seems Senator Schumer is dedicated to passage, is a step in the right direction.

USDA Raises Support

http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB/.cmd/ad/.ar/sa.retrievecontent/.c/6_2_1UH/.ce/7_2_5JM/.p/5_2_4TQ/.d/1/_th/J_2_9D/_s.7_0_A/7_0_1OB?PC_7_2_5JM_contentid=2009%2F07%2F0355.xml&PC_7_2_5JM_parentnav=LATEST_RELEASES&PC_7_2_5JM_navid=NEWS_RELEASE#7_2_5JM

Well, the latest news is USDA’s announcement increasing the Dairy Product Price Support Program (DPPSP) levels.

Immediately, prices went up on the CME. Well, butter did not go up. And, if you notice in the announcement, there was no increase in the DPPSP for butter. Once again, there seems to be no “official” note of the fact that cows give both skim and cream.

Nevertheless, the rise in cheese and NFDM price will translate into bigger farm milk checks. Will this be enough – probably not.

For a bureaucracy dedicated to status quo any movement is a minor miracle.

Congressional Dairy Caucus

Date Approved: 7/22/2009

Chairs & Co-Chairs: Rep. Joe Courtney, Rep. Peter Welch, Rep. Devin Nunes and Rep. Tim Walz

Staff Contact Name and Information:
John Hollay (Courtney) 202.225.2076, john.hollay@mail.house.gov; Jake Oster (Welch) 202.225.4115, jake.oster@mail.house.gov; Andrew House (Nunes) 202.225.2523, andrew.house@mail.house.gov; Leah Rosales (Walz) 202.225.2472, leah.rosales@mail.house.gov

Low Costs?

(click to enlarge)



http://agriculture.house.gov/testimony/111/h072809/Lang.pdf

“The first chart is a graph of dairy margins (price minus cost) for each of the last 18 months for the 25 percent of producers who are the lowest cost producers in the U.S. These producers have actually made a profit over the last year and a half.”

Is there anyone who thinks the most efficient made money in all but two months of 2009? People who are in a position to know tell me that no more than 1% could possibly, possibly have made any money this year.

Notice, there is no source for the data.

As one looks through all the testimony, there seems to be a level of orchestration to much of the testimony.

Confusing the Problem

(click to enlarge)


The recent House sub-committee hearings on dairy, opening statements are available at:

http://agriculture.house.gov/hearings/statements.html

On July 28, 2009 Tom Suber of the U.S. Dairy Export Council present a graph in his testimony.

http://agriculture.house.gov/testimony/111/h072809/Suber.pdf

The same graph was presented in NMPF testimony on July 14, 2009.

http://agriculture.house.gov/testimony/111/h071409/Wakefield.doc

NMPF and U.S. Dairy Export Council share an office and also share a pile of dairy farmers checkoff money. So, it is not surprising the two organizations would have the same spin.

However, the graph is, in my opinion, misleading because it lumps all dairy products together as solids. There is a world of difference between dairy solids. While we might not be exporting as much NFDM, we certainly are importing a great deal more butterfat.

Furthermore, the CCC purchases of NFDM have effectively taken much of the NFDM from the market.

House Ag Hearing

Today, July 28, 2009 another hearing was held in the House Ag Committee. This hear was different, in that dairy farmers, many dairy farmers went to the hearing in Washington, DC.

According to some who were there, somewhere between 250 and 300 dairy farmers appeared. Now that is different.

Three cheers or maybe four or more need to go to that went to DC today.

USDA Fails to Exercise Oversight

Yesterday, I covered some of the egregious failings to dairy farmers in the Southeast. There is more:

http://findarticles.com/p/articles/mi_m0KFU/is_1_71/ai_113855135/

What is the Southern Marketing Agency (SMA)?

SMA is a marketing-agency-in common, the primary purpose of which is to seek efficiencies in supplying the fluid milk needs of the southeastern United States. SMA began operations on April 1, 2002, as a Kentucky agricultural cooperative organized under provisions of the Capper Volstead Act. Current members are: Arkansas Dairy Cooperative Association (Damascus, Ark.); Dairy Farmers of America Inc. (Kansas City, Mo.); Dairymen's Marketing Cooperative Inc. (Mountain Grove, Mo.); Lone Star Milk Producers Inc. (Windthorst, Texas); and Maryland & Virginia Milk Producers Cooperative Association Inc. (Reston, Va.).

Initial goals:

1. Promote member cooperation and communication;

2. Seek cost savings in the purchase of supplemental milk;

3. Preserve over-order prices in the Southeast;

4. Seek cost savings in farm-to-market hauling;

5. Seek cost savings in seasonal surplus balancing.

FMMO 7’s “mailbox” price for April 2009, the latest month available, was $13.08. FMMO’s Uniform price for April 2009 was $13.14.

My understanding of how the Southern Marketing Agency works is to skim the cream from dairy farm milk checks.

As a marketing agency in common, USDA has oversight. USDA has failed farmers in the Southeast and that should be easy for anyone to observe.

Fair?

(click on image to enlarge)

http://www.fmmatlanta.com/pdfstorage/an7stat08.pdf

There is no end of people, people who do not milk cows advising farmers to get together and come up with a plan they all can agree with. The one shoe fits all mentality.

Well, let’s look at federal milk market order 7, with headquarters near Atlanta, Georgia. More than half of the milk pooled on order 7 is from many, many miles away. Some farmers milking cows in New Mexico, for instance, get a bigger milk check because their milk is pooled on order 7.

All that means that dairy farmers in order 7, a deficit region, have seen their class I utilization fall along with the bottom line on their milk check.

If the milk pricing system is not broken, how can dairy farmers in a deficit region be receiving so little for their milk.

“Fair is foul and foul is fair” chanted the witches in Macbeth.

Heifers vs Lenders

On Friday, July 24, 2009 USDA National Agricultural Statistics Service (NASS) released its “Cattle” report. As of July 1, 2009 there were 2 % fewer dairy cattle but, the same number of dairy heifers as last year.

There is much hand wringing and some variation of woe is virtually everyone. Keep in mind though, the increase in heifers is nothing compared to the crash in loans to dairy farmers. There are also some reports of feed dealers, with $70 million on the books, unable to obtain money from banks.

Banks who have received TARP funds cannot make business loans to businesses with negative cash flows.

All of means this is likely to play out as a completely different problem than the conventional experts have been predicting

Thin Market

Both farm milk price and wholesale cheese price is tied by formulas to thinly traded cash cheese trading on the Chicago Mercantile Exchange (CME).

Many experts say there is no problem with a thin market, as long there are countervailing forces. But, the fact is, the powerful players can only act in their own perceived self-interest. These people are not saints.

As Lord Acton said, “Power tends to corrupt, and absolute power corrupts absolutely.”

Jim Miller, of the USDA is testimony before Congress on July 14, 2009 said dairy farmers had lost $7 billion.

A genuine market is rich with information. Licensed imports of butter are up nearly 20% over the same first six month period last year. According to USITC butter imports (HTS 040510) January through May of 2009 are up 129.70% over the same period last year.

Meanwhile, people are crunching numbers for CWT applications. Everyone, or at least the so-called experts, claim there is too much milk. Last I knew, cows give both skim and cream.

A thin market is, in the final analysis, an ignorant market.

Follow the Money

(Click on images to enlarge)



















The Center for Responsive Politics produces data on the money flowing into Washington DC.

Of particular importance is the Dairy Farmers of America Political Action Committee (PAC) money.

A recent paper published by National Bureau of Economic Research (NBER) on PACs found PAC money was given as a reward for doing the right thing – in the eyes of the PAC.

At the risk sounding like a co-op basher, the milk pricing system we have, as a matter of record, is a virtual 50/50 design by International Dairy Foods Association (IDFA) and DFA. DFA has so many joint ventures no one can say with any certainty, which side DFA is on.

One can say with confidence, DFA is for the status quo, they like things the way they are.

So, when you go or call Washington, DC, remember someone beat you to the door. Don’t interrupt this as cynical, this is the reality which must be faced. If your representative is on this list, ask why.

Europe vs U.S.

(click to enlarge)


Earlier today July 22,2009 from AP:

Angry dairy farmers block streets in Brussels

By CONSTANT BRAND (AP) – 1 day ago

BRUSSELS — Hundreds of angry Belgian farmers blocked streets with tractors and faced down police outside the European Union's headquarters Wednesday demanding officials help reverse a recent collapse in prices of milk, cheese, butter and other dairy products.

They called on the EU to lower the amount of milk a European is allowed to produce each year to ease a glut that has caused a 50 percent drop in milk prices over the last year and forced the farmers to sell below cost.

The demand was rejected by EU Agriculture Commissioner Mariann Fischer Boel, who said the farmers should instead be given relief grants and loans more quickly.

EU governments agreed last year to phase out milk quotas by 2015 a process that has already led to higher production limits.

"We will not reverse our policy of gently phasing out quotas," she said.

But Fischer Boel said higher quotes were not to blame and milk production was 4.2 percent below the overall limit because of lower demand during the global financial slump.

"The real reason for the crisis is certainly the economic situation in which consumers find themselves," she said.

The protest remained peaceful, but farmers caused traffic mayhem across the Belgian capital, blocking avenues and streets with their tractors.

Riot police with water cannons stood guard behind barbed wire and blocked all roads to the neighborhood housing EU headquarters. The farmers drove their tractors up to the police lines.

"Our problems are quite serious," Yvan Hayez, secretary general of the Walloon Agriculture Federation, which represents farmers in French-speaking Belgium, told reporters after talks with Fischer Boel. "We don't believe that the proposals presented ... will help solve the problem."

He added farmers were struggling to make ends meet after the prices dropped this year. EU figures showed a 50 percent drop in prices.

Milk prices dropped on average from a high of around 40 euro cents per liter ($0.57 per quart) in the fall of 2007 to around 20 euro cents per liter ($0.28 per quart) now, according to EU statistics.

The EU farm chief suggested that EU nations store unsold butter and powdered milk longer to reduce supplies and better promote milk to consumers.

She also recommended early retirement buy-outs for farmers and suggested governments look at encouraging the slaughter of large dairy herds to reduce production.

By all appearances Europe is in better shape than the U.S. regarding farm milk prices. The trend line is flat for Europe and all downhill for the U.S. Yet,in this land of First Amendment rights, dairy farmers in the U.S. are mostly quite.

Common Interest

If you go to: http://agriculture.house.gov/hearings/statements.html today’s (July 21, 2009) testimony will be found. You can also look for testimony from July 14, 2009 and next Tuesday will be yet another hearing on dairy.

Looking at the testimonies thus far, one obvious point stands out: dairy farmers will never agree. Fundamentally, dairy farmers cannot agree. The interest of the small hill farmer in the Northeast is not the same as the large farmer in the Southwest.

From the time of the Reagan presidency, milk policy has, by and large, served the interest of those riding the gravy train. The complicated system is designed, in part, to stymie discussion.

There is clearly a public interest in milk. In an early (1934) Supreme Court case “Nebbia v. New York” Justice Owen J. Roberts, writing for the majority said:

“Under our form of government the use of property and the making of contracts are normally matters of private and not of public concern. The general rule is that both shall be free of governmental interference. But neither property rights nor contract rights are absolute; for government cannot exist if the citizen may at will use his property to the detriment of his fellows, or exercise his freedom of contract to work them harm. Equally fundamental with the private right is that of the public to regulate it in the common interest.”

There is a “common interest” in milk and therefore dairy policy. There is not likely to be much discussion of “common interest” in these hearings and that, I submit, is a massive failure.

More Sanders

(click on images to enlarge)

According to the Bureau of Labor Statistics data the spread between farm and processor has increased 184% June 09 vs June 09.

Equity Gone

Conventional experts are fond of citing loss of exports in pounds. However, it is not pounds it is dollars which have American dairy farmers in a bind. So, lets look at some dollar figures.

To make up for the dollar loss in NFDM exports, only $0.67 per hundredweight out of farm milk price might have been justified from January through May2009. Instead an additional $6.04 per hundred was plundered from farm milk checks. From a farm point of view, the milk should have been poured down a hole instead of selling NFDM to the government.

But, the processors, including processing co-ops have have all the power and sucked in almost a billion dollars extra a month from farm milk checks. It is like an ATM machine. Altogether, $4,872,753,200 extra dollars was removed, January through May 2009, from American dairy farms.

This is not the end of this tale. Equity losses for dairy farms have been staggering. In the past year or so, milk cow and heifer prices have plummeted. Farmers have lost $16,767,000,000 in equity on livestock.

We cannot even begin to calculate the real estate losses or the accounts payable.

If a farm in good shape now were to sell out, the taxes would eat up most everything. There has never, in anyone’s memory, been a time like this. Banks have closed their doors to dairy farmers in large part because the is no equity left and no one can promise a relief in farm milk prices soon enough.

Where's the Butter?

(click to enlarge)

If there truly is a surplus of milk in the country where is the cream? Cold storage of butter for May 2009 is 7% less than storage numbers for May 2009. The most logical reason is the cream is going into the cheese vat along with imported MPCs.

Confirming this is imports of butter oils, which are also dumped in the cheese vat to achieve the proper fat to protein ratio. Butter oil imports are up 128.9% year-to-date January through May.

Survey

(click to enlarge)

This is from yesterday's meeting. The answers speak volumes.

The meeting was video streamed and will be available at: http://www.moo-tube.net/live/ for several days. There are some quality issues but, it is not about a show, it is all about facts.

Dairy Farmers Falling Fast

Jim Millers testimony before the House Ag sub-committee on July 14th is available at:

http://agriculture.house.gov/testimony/111/h071409/Miller.pdf

Miller states:

Further, ERS data indicate that dairy farms are among the most highly leveraged in U.S. agriculture: about 70% of dairy farms use debt compared to about 30% of beef and 50% of cash grain farms. Some of the largest dairy farms are the most heavily indebted. Across all sectors and agriculture, dairy ranks third in the average debt to asset ratio behind poultry and hogs. The financial crisis has made the credit needs of dairy producers all the more pressing.

The phrase "behind poultry and hogs." is interesting in that poultry, hogs and dairy have high concentrations of economic power in the hands of a few. One might think officialdom would be very worried about that statistic.

I heard today, at the meeting in Morrisville, one official state he had spent more than 90 hours in bankruptcy court recently. Farmers are falling faster than policy makers could ever imagine.

Leverage

Dairy farmers are highly dependent upon loans. In the current crisis the farms which will be forced out will be those who are most leveraged.

According to the most recent Ag Census, there are more farmers over 70 than under 50. The logical outcome of this crisis is the farmers under 50 will be driven out.

Is this prudent dairy policy?

NMPF

graph by NMPF (click to enlarge)


http://agriculture.house.gov/testimony/111/h071409/Wakefield.doc

National Milk Producers Federation has a vested interest in portraying the current dairy crisis are simply an over-supply problem. After all they have the "solution" by means of their CWT program.

So, in the testimony on behalf of NMPF we have the above graph and the statement:

Some have claimed that the problems we face are a result of a surge in unrestricted imports, particularly Milk Protein Concentrates (MPCs) and casein products, two tariff loop-hole avenues that importers have made strong use of in recent years. NMPF has long called for establishing tariff-rate quotas on MPC and casein, in keeping with our WTO rights and obligations. However, it is important to set the record straight regarding the cause of the problem we are now facing in order to develop the best response tools to address it in both the short and long term.

Then later:

To do our part to address the immediate crisis facing the industry, the National Milk Producers Federation, through its CWT program, has been attacking the supply-demand imbalance directly at its roots, by removing dairy cows from the national herd. Dairy producers have spent $115 million of their own hard-earned money this year on our most recent herd retirement program, the largest one in CWT’s history, and are prepared to spend up to $160 million more in subsequent rounds of our program in the near future.

NMPF graph seems to have no source but, if they had looked at a USDA report, they would have learned that USDA estimated MPCs and casein imports in the first eight months of 2003 to be equal to 5.9% of domestic milk supply.

The CWT program is a money maker for NMPF. For the first four months of 2009 NMPF's CWT program lists $1,066,000 as administration costs. Amazing.

Sanders

Here is a letter from Senator Bernie Sanders of Vermont:

July 15, 2009


The Honorable Thomas J. Vilsack
Secretary
U.S. Department of Agriculture
Jamie L. Whitten Federal Building
1400 Independence Avenue, SW, Room 200-A
Washington, D.C. 20250


Dear Secretary Vilsack:

I have long been committed to ensuring that America’s dairy farmers receive fair prices for the products they produce and maintain a decent standard of living. The dairy industry is a major economic engine in my state and a central part of the fabric of our communities. The dairy industry is in crisis now, however, as record low milk prices force dairy farmers across the country into financial ruin. Since November 2008, the price of milk has bottomed out – plummeting 33% in eight months. This brings farm milk prices to the same levels as three decades ago, with many New England dairy farmers receiving just $1.00 per gallon of milk in nominal dollars. This has all occurred while input costs have remained high. Continued low prices do not just injure dairy farmers; they also harm the thousands of American communities that rely on the dairy industry for economic support. An unstable dairy industry is also bad for consumers that depend on the availability of fresh dairy products in every region of the country.

I would like to present you with a number of immediate policy options that I believe would help dairy farmers. The first two of these options are of the highest priority.

1. Make Adjustments to Prices Using the Federal Milk Marketing System: As you know, 7 U.S.C. § 608c(18) gives the Secretary of the U.S. Department of Agriculture powers to raise regional milk prices based upon a number of factors including, but not limited to, the “price of feeds, the available supplies of feeds, and other economic conditions which affect market supply and demand for milk.” Given the price of feeds, the canola feed shortage, the cost of gasoline, monopoly conditions in the chain of distribution, and the depressed economy, we hope that you will use your authority to make adjustments to prices using the Federal Milk Marketing Ordering System after holding the required hearings. This policy change would be at no cost to taxpayers; it would, in face, save taxpayers money on MILC payments. The change would come only at the expense of a small handful of processors who continue to make record profits even while dairy farmers are going out of business. Dean Foods, by far the largest of these, had profits of $76.2 million in the first quarter of 2009, up 147.4% from its $30.8 million of profits in the first quarter of 2008. We suggest that given such extreme conditions, a blend price of $18 per hundredweight would be appropriate.

2. Increase the Dairy Product Price Support Program Levels: Several offices have discussed the idea for you to use your authority in the Farm Bill (Section 1501) to move the support price for dairy products. We strongly support these proposals. We understand that the National Milk Producers Federation (NMPF) has put together a proposal requesting such increases, but we feel the particular increases NMPF requested are inadequate. We would request a six month or longer increase to the following levels: $1.37 for cheese blocks; $1.33 for barrels; $1.27 for butter; and $0.97 for non fat dry milk powder from the $1.13, $1.10, $1.05, and $.80 where they are currently. This could raise the blend price and additional $1.50 to $2.00. CBO estimates these increases would cost $804 million.

3. Set Standards for Quality of Milk: As you know, your office has the authority to set standards for the quality of milk. We propose that you should use this authority to not allow Grade B milk to be processed for human consumption. Such a change would improve the quality of milk, reduce the supply, and directly impact prices. In addition, we ask that you change the regulations to reflect a higher quality of milk by establishing 450,000 SCC (somatic cell count) as a minimum standard for accepted milk quality by all dairy producers.

4. Have USDA Purchase More Hamburger Meat for Nutrition Programs: Because dairy prices are so low, farmers are bringing dairy animals to slaughter in large numbers. As you know, for farmers, the second largest income generator, besides the sale of milk, is the sale of calves and cull cows. If milk prices do not increase substantively, many dairy herds – particularly larger herds – will be liquidated in coming months. Can the USDA initiate an emergency program to purchase hamburger meat for domestic and international nutrition and hunger programs – to help floor prices for dairy culls? This would be an indirect way to help dairy farmers.

5. Milk Protein Concentrates: As you know, milk protein concentrates (MPCs) are powdered milk products containing between 40 and 90 percent complete milk protein. MPC and casein (another additive) were not subject to Section 22 restrictions of the Agricultural Adjustment Act of 1933 and therefore they were not subjected to WTO agreements. U.S importers are exploiting this to their advantage thereby pushing prices down by brining in this additional additive instead of using domestic product. A nearly 500 page 2004 report by the U.S. International Trade Commission found that low milk prices in 2000 and 2002 were a result of growth in U.S imports of milk protein products. These imported products compete primarily in the production of dairy products. What can we do to stop these MPC imports that are hurting our dairy prices? Our understanding is that without MPC imports, there would be very little milk surplus in the country and prices would be better. Would you support legislation to regulate MPCs like any other agricultural product?

6. Canola meal: The FDA has quarantined large quantities of canola meal, an important food for dairy cows, moving into the US from processing plants in Canada due to presence of salmonella. The meal was been stopped at border crossings in New York, Vermont and the Pacific Northwest. Two companies that process the bulk of canola meal used in the U.S. are all taking steps to disinfect their Canadian plants. It appears that FDA will require a series of five “clean” tests before product is allowed across the border. The impact of the quarantine is being felt widely throughout Northeast grain manufacturers. The U.S. does not process enough canola seed to generate the meal needed to satisfy the demand currently in the market place. Can you work with the FDA to see if there is anything that can be done to expedite the resolution of this problem, while protecting public health, which is adding just another cost to dairy farmers?

7. Examine Spot Cheese Market and Reexamine the Use of the NASS Survey for Setting the Federal Milk Pricing Formula: We will soon be sending a letter to the CFTC regarding my concerns that traders on the spot cheese market at the Chicago Mercantile Exchange (CME) are keeping the price of milk artificially low through manipulations in the interest of profits. This concern was raised in a 2007 GAO report. In fact, on December 16, 2008, the CFTC announced that Dairy Farmers of America, Inc. (DFA), its former chief executive officer Gary Hanman, and its former chief financial officer Gerald Bos, would pay a $12 million civil penalty for attempting to manipulate the price of the June, July and August 2004 Class III milk futures contracts through purchases on the CME spot cheese market. In addition, Frank Otis, former President and CEO of a DFA subsidiary, and Glenn Millar, former Executive Vice President of the subsidiary, were fined $150,000 for aiding and abetting DFA’s speculative position limit violation. That same GAO report also had recommendations for USDA. Will you reexamine the GAO’s recommendation to change how the minimum federal milk pricing formula is set? Can you share with us the audit of the National Agricultural Statistical Survey which USDA conducts? Would you consider switching away from the NASS and using the Consumer Price Index, the CME, and the cost of production as a way to set minimum milk pricing standards? Many farmers believe this mix would be a more realistic way to determine minimum prices.

This is only an initial list of ideas that I believe could help dairy farmers.

I greatly appreciate your consideration, and I look forward to working with you on them and any other ideas you have to help America’s struggling dairy farmers.

Sincerely,


BERNARD SANDERS
United States Senator

Missing Data

(click on images to enlarge)


In the above letter to National Family Farm Coalition, Secretary of Agriculture Vilsack states:

“The 2008 commercial disappearance number, 193 billion pounds quoted in your letter, actually includes commercial exports of dairy products on a milkfat basis (184.3 billion pounds domestic use and 8.8 billion pounds of commercial exports). On a nonfat milk solids basis, commercial disappearance in 2008 was 190.2 billion pounds on a milk equivalent basis (163.6 billion pounds domestic commercial use and 26.6 billion pounds of commercial exports). As you can from these data, domestic marketings are more than adequate for domestic use, and commercial exports have become very important to farm milk prices.”

Probably Vilsack never saw the letter. Some staffer handled the details. Certainly, Vilsack did not do the research.

The fact is, the “commercial disappearance” data put together by USDA do not include milk protein powders.

According to a USDA AMS report released in 2004, the USDA estimated those proteins equaled 5.9% of the domestic milk supply. Now, the above data shows the exports only amount to 4.8% of domestic production.

Of course, imports of those dairy proteins have increased 25% in the intervening year while milk production has only increased 11.1%.

Draw your own conclusions.

Presentation

I will be giving a presentation on July 17, 2009 at SUNY Morrisville, Morrisville, NY from 10:00 - 2:30 with a short break for lunch.

The meeting will be at the gymnasium in the Student Activities Building. At the light in Morrisville turn South onto Eaton St. and left onto Chenango St. Parking lot on the left.

Needless to say there are some people quite worked up.

CME NFDM Trading

(click to enlarge)

In 1998 spot cash trading of nonfat dry milk (NFDM) began. As can be seen from the above, on an annualized basis, the Chicago Mercantile Exchange (CME) is determining milk powder prices nationally.

In the entire period shown above and continuing to the third week of May 2008, there was one load traded. Since than time there have been a few more but, not many loads traded.

CME charges a fee based on volume. CME is self-regulating. Obviously, CME knows dairy trading at the CME is not legitimate.

Co-ops

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=browse_usc&docid=Cite:+7USC291

The Capper – Volstead Act became law in 1922 – another time of depressed farm prices. Case (United States Grocers, Ltd. v. United States, 186 F. Supp. 724, 733 (N.D. Cal. 1960) law clearly indicates the purpose of the Capper – Volstead Act is to enhance the farmer’s bottom line.

Perhaps, the most important section of the Act is “Provided, however, That such associations are operated for the mutual benefit of the members.” Here we come, once again, to the problem of transparency.

Who can say with certainty, as opposed to belief, their co-op benefits all members? This is not to say none do. Some do a terrific job. The point is how do you know?

If Americans thought critically, advertising, as we know it, would not work. If dairy farmers thought critically, virtually all the dairy co-ops would be out there doing something right now. Now is the time to hold some feet to the fire and not blindly accept meaningless slogans.

Silly

A recent post “Science or Spin” drew a comment from one of the authors of the article I criticized, which I now have with the post. Since many may not go back here is what she wrote:

John-

You state that "Nowhere in the article is there any mention of rbST". There's a reason for that - the article is based on data from our recent paper in the Journal of Animal Science comparing U.S. dairying in 1944 to 2007. The use of rbST was covered in a previous paper in the Proceedings of the National Academy of Sciences.

If you're going to criticize (sic) the work, may I suggest that you actually read the papers in future? Otherwise you might look a little silly.

Dr Jude Capper

This is the paper: http://jas.fass.org/cgi/content/full/87/6/2160

Actually, I had read both papers and believe both are typical of much which comes from academics – develop a computer model, put in the assumptions to reach the desired conclusion and voila, a “new study.”

There is a very good reason why I lumped rbST into the post. In the introduction, the authors, two out of three have had financial involvement with Monsanto’s Posilac®, state, “To achieve an economically and environmentally sustainable food supply, agriculturalists need to identify systems and practices that make the best use of available resources and minimize the potential environmental impact (Capper et al., 2008).” Well the Capper et al, 2008 is the so-called rbST study.

Then, on the fifth page, “This improvement in productive efficiency facilitates the dilution of maintenance effect, by which the total resource cost per unit of milk is reduced (Bauman et al., 1985).” Dale Bauman, of Cornell University was a/the lead researcher in the development of rbST. The 1985 reference was about rbST as witnessed by, “A recent longterm study involving treatment with recombinant or pituitary bGH for 188 d has demonstrated that the increases in milk yield persist without any evidence of stress or health effects (D. E. Bauman, P. J. Eppard, M. J. DeGeeter and G. M. Lanza, unpublished data).”

So, I will stand by seeing the two spins as academic Siamese twins joined by intention. The intention is obvious. Of course, I may just be silly.

No News

On July 14, 2009 there were be a subcommittee hearing on dairy, I understand. If you look at: http://agriculture.house.gov/index.shtml

you will not find a word about the meeting.

It is my understanding there will be a very, very short list of people testifying. International Dairy Foods Association, National Milk Producers Federation,and Western United Dairymen will be the only ones testifying.

Those three organizations have agendas and they will be promoted.

In the final analysis, America needs a fully, informed discussion of what is in the public's interest.

Revolving Door

http://www.bizjournals.com/stlouis/stories/2009/07/06/daily47.html

The headline reads: "Ex-Monsanto VP hired as FDA adviser"

Michael Taylor probably did as much as anyone could have to get rbST approved by FDA. He wrote the labeling "recommendation", which people wanted seen as law>

Now he back again at FDA - some things never change.

Odd though, the head of FDA vetoed legislation in Kansas which was favored by Monsanto, as one of her last official actions as governor.

The broom sweeping through Washington seems far too small to get the job done.

Science or Spin?

At:

http://www.qcsunonline.com/news/dairy-34328-clovis-look-house.html

is an article titled, “Ag Sense: Carbon footprints: Fact vs. fiction.”

The article cites a Cornell study which promotes the use of rbST as salvation to dairy methane. Nowhere in the article is there any mention of rbST.

No one should get too excited about the merits of the study which is based upon skewing and assumptions. The study claims an average of 10 pound gain in milk production per cow from the use of rbST. However, there is no rbST bump in production per cow since rbST adaption. This is spite of Monsanto's claim for number of cows injected.

There is another serious problem with the study. Dropping technology and utilizing a pasture system will not take us back to 1944. I know of one organic Jersey herd with grazing and all home grown grain which pushes 15,000 pounds per cow.

According to some studies a well managed pasture system capture more air pollution per acre, in the Northeast, than an acre of rain forest.

Finally, with today's grain price and milk price, I would like to see the actual data, not assumptions, that rbST pays.

Help

Exciting news:

“WASHINGTON, July 6, 2009 – Agriculture Secretary Tom Vilsack today announced initial allocations under USDA’s Dairy Export Incentive Program (DEIP) for the period July 1, 2009, through June 30, 2010. The program helps U.S. dairy exporters meet prevailing world prices and encourages the development of international export markets in areas where U.S. dairy products are not competitive due to subsidized dairy products from other countries.”

The release continues:

“Of the 2008-2009 DEIP allocations announced in May 2009, 48,176 metric tons of nonfat dry milk; 19,235 metric tons of butterfat; and 2,878 metric tons of cheeses remain uncommitted. These balances will be made available through the issuance of new Invitations for Offers.”

The first week of May 2009 ended with CME block Cheddar price at an average of $1.1570 per pound. The DEIP program took hold and the first week of June 2009 ended with block at $1.1495 per pound average. The first week in July 2009 ended with an average of $1.1150 per pound.

If this is a trend, the Secretary's announcement is not cheering.


By the way. When MILC started, the program was based on $16.94 per hundredweight. Inflation should have bumped up the base to $20.12

Hay in California

At the moment, dairy quality hay is fairly low in price. Could that change? If the rumors are true, Saudi Arabia and UAE have contracted to buy 50,000 acres of California hay for export.

At the same time hayland in the middle of the Central Valley is being converted to higher value cash crops, since farms on the West side are short on water.

This is not to say hay prices will take off in California. Who has the money to buy hay? Hay will simply be another part of the picture in the murky crystal ball of dairy.

July 4th

http://www.maylin.net/Fireworks.html

Thomas Jefferson wrote:

"1785 Aug. 23. "Cultivators of the earth are the most valuable citizens. They are the most vigorous, the most independant, the most virtuous, and they are tied to their country and wedded to it's liberty and interests by the most lasting bands." (TJ to John Jay, B.8.426)"

Banks

Little is said about dairy loans and the banks holding the loans. Here is an exception:

http://www.americanchronicle.com/articles/yb/132549213

“Widely known for its dairy lending, New Frontier Bank financed many large dairies, including Johnson's Dairy in Eaton, which had about $60 million in personal and business loans before it filed for bankruptcy last year. Diamond Dairy in Mead defaulted on a $6.2 million loan from the bank. It's (sic) reach into Texas and Florida were likely dairy loans, as well.

When the federal government shut down New Frontier Bank on April 10, more than $107 million in agriculture loans at New Frontier were from 30 days past due to non-accrual stage, when they were so far overdue they stopped accruing interest. Construction loans fared no better, with more than $317 million past due from 30 days to the non-accrual stage. Late commercial and industrial loans came in at $32.5 million.

The Federal Deposit Insurance Corp., through an Oklahoma financial agency, announced the sale of the agriculture loans this week, about 50 percent of which are non-performing. The loan mix of dairy, feedlots, farmland and livestock, contains 58 percent Colorado loans, 19 percent in Texas and 9 percent in Florida.”

A chapter 7 dairy bankruptcy in New Mexico has some interesting numbers. The total assets listed are $89,321.00. The liabilities are listed as $3,223,499.34. Of the liabilities, $ 2,856,271.00 in unsecured nonpriority claim is held by AG New Mexico ,Clovis, N.M. AG New Mexico is part of the Farm Credit system.

Banks who have loaned to dairy farms must be spending plenty of time seeking out therapist.

Contrary Data

(click to enlarge)

The U.S Department of Commerce has a Bureau of Economic Analysis (BEA) which publishes a wide variety of useful data. One of the more useful collections is called “Personal Consumption Expenditures” (PCE). The PCE tracks 362 categories of items and how much people spend on those items.

For dairy there are two categories, “Fresh milk and cream” and “Processed dairy products.” Added together they pretty much cover dairy purchases.

As can be seen in the above graph expenditures rose and then, after September 2008 began to fall. The drop is actually less steep then it might seem and amounts to a drop of 4.7 per cent.

The Bureau of Labor Statistics keeps track of individual prices, and creates the Consumer Price Index (CPI). Lumping all dairy products together and comparing the same time period, September 2008 through May of 2009, the CPI data indicates an 8.1 % drop in prices.

This means consumers actually bought more dairy products in May 2009 than in September 2008.

You will please take note, this runs contrary to common expert opinion.

WMP Price falls again

(click on graph to enlarge)



Fonterra had their monthly internet auction of whole milk powder (WMP) today, July 1, 2009. And, probably to no one’s surprise, prices fell again - another three per cent.

The weighted average for all contracts was $0.8295 per pound in U.S. dollars. That is roughly the NASS price for NFDM with the cram thrown in for nothing. The fist such auction was held on July 1, 2008 and the weighted average was $1.9936. In other words the most recent sale value was 41.6% of the first.

Oceania is quick to blame the dairy export incentive program (DEIP) and the EU export subsidies. However, things were headed down hill long before the DEIP program was restarted.

Before the DEIP came along, however, many in dairy world trade were blaming the Fonterra, and their internet auction for the fall in powder price. As the graph, provided by Fonterra, above shows the fall started long before DEIP.