The leaders of the House and Senate Agriculture Committees in recent days have been negotiating the framework of the next Farm Bill in an effort to limit the amount of money cut from agricultural spending programs by the so-called joint supercommittee, which itself has been negotiating over how to drastically reduce government spending.

A final Farm Bill framework is expected to be presented by the Ag Committee to the supercommittee in the next few days, although the details of that proposal are not available as of press time for this newsletter.

As part of the Farm Bill negotiations, the Ag Committee leaders have looked at the Dairy Security Act as a means to reduce the dairy budget portion of the Farm Bill by 20%, while providing farmers a better safety net. The Dairy Security Act contains the concepts of NMPF’s Foundation for the Future program.

The joint supercommittee has a self-imposed deadline of November 22 by which to find $1.2 trillion in budget cuts over the next decade. If such an agreement can’t be reached, the cuts will come automatically in an across-the-board fashion.

On October 25, the Commodity Futures Trading Commission (CFTC) approved an improved final rule on position limits for futures and swaps. The rule will impose new limits on the number of future and swap contracts that speculators can hold.

This action is part of the raft of rules that CFTC is writing to implement its part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The legislation was passed last year in response to the 2008 financial crisis, and swept up many agricultural risk management tools with the riskier and more complicated derivatives that played a central role in that crisis.

Speculators in agricultural markets have long been limited on the size of their positions, in order to prevent market distortion and manipulation. Agricultural hedgers often need to buy or sell more contracts than these limits allow, and hedging exemptions have always been extended to ‘bona fide’ (true) hedgers to meet those needs. Because of this, and because these limits will soon be applied to agricultural swaps, it is very important that CFTC has a broad definition of hedging that allows farmers, their cooperatives and their customers to manage price risks beyond the speculative limits.

When first proposed in January, the position limits rule defined hedging very narrowly, and only identified a limited set of hedging practices as legitimate. NMPF worked with other agricultural groups, all urging CFTC to broaden this definition, and provided detailed comments in support of this position.

The resulting final rule is a considerable improvement over the original proposal, providing much more leeway to conduct legitimate hedging, and providing latitude for CFTC to recognize legitimate new hedging practices.

NMPF was specifically recognized within the rule notice itself for convincing CFTC not to require hedgers to unwind cash-settled future contracts before their final settlement. Under the proposed rule, for example, a cooperative that bought Class III futures contracts to hedge a milk price would have had to sell those contracts at least five days before the Class III price was announced. In the final rule, that restriction is eliminated.

Again, this rule is one of many that CFTC will issue by next summer. NMPF has commented on many of them, and continues to work on these rules to allow the dairy industry ready access to sound risk management tools and effective price discovery. If you have questions or specific concerns, please contact Roger Cryan in the NMPF office.

Until the rule is published in the Federal Register, it can be found on the CFTC website.

Last week, Agriculture Secretary Tom Vilsack announced the final round of Fiscal Year 2011 (FY11) funding for the Rural Energy for America Program (REAP). The final round will provide funding for 16 anaerobic digesters, an incredible investment in renewable energy production on U.S. dairy farms. Altogether, the program has provided nearly $21 million in assistance for biodigesters, and leveraged over $110 million in total project development in FY11.

Anaerobic digesters are critical tools for dairy farmers to not only produce renewable energy, but also help mitigate environmental challenges. REAP also provides funding opportunities for energy efficiency measures on the farm, which allows farmers to identify and implement measures to reduce their energy use and realize critical savings for their operations.

With lawmakers negotiating strict fiscal limits on Capitol Hill, NMPF has been working diligently to ensure REAP continues to be a well-funded, strong program for the nation’s dairy farmers. Through the appropriations process and the ongoing negotiations of the Joint Select Committee on Deficit Reduction, also referred to as the supercommittee, NMPF has made it a priority to spare the REAP from the cuts sought out by Congress.

The Environmental Protection Agency (EPA) said last month that it will not seek to revise the standards for dust, alleviating major concerns for farmers and ranchers throughout the country, especially in the West.

Recently, EPA Administrator Lisa Jackson announced her plans to retain the current National Ambient Air Quality Standards (NAAQS) for coarse particulate matter (PM10). There is still anxiety by some that this announcement is just a slight victory, while the days of farm dust being regulated further by EPA is not too far down the road.

There have been ongoing efforts in Congress to delay or halt EPA from revising the standards. Legislation has been introduced by Rep. Kristi Noem (R-S.D.) and Sen. Mike Johanns (R-Neb.) that would contain EPA’s regulatory overreach, and virtually exempt farm dust from ever being regulated by the agency. A large coalition of agriculture stakeholders, including NMPF, have signed a letter pledging support for Rep. Noem’s legislation (HR 1633).

With the compliance deadline rapidly approaching, the EPA has proposed to amend the date by which farms must prepare or amend and implement their Spill Prevention, Control and Countermeasure (SPCC) plans to May 10, 2013. Currently, farmers and ranchers are required to have these plans in place and finalized by Nov. 11, 2011. If there are no adverse comments to the proposed delay, the postponement will come into effect after the 15-day public comment period closes.

It important to note that this does not remove the regulatory requirement for owners or operators of farms in operation before August 16, 2002, to maintain and continue implementing an SPCC plan in accordance with the SPCC regulations then in effect. Also, this amendment does not relieve farms from the liability of any spills that occur while there is not an SPCC plan in place.

For detailed information on the proposed amendment, please visit the Government Printing Office website.

NMPF Chairman Randy Mooney of Rogersville, MO, was given his state’s Governor’s Award for Agricultural Achievement last month, which honors outstanding farmers, growers and processors in a variety of agriculture commodities. Missouri Governor Jay Nixon visited Mooney’s farm M&M Dairy LLC to present the award and tour the facilities.

Mooney, his wife, Jan, and partner Kent Miller milk 300 dairy cows at M&M Dairy, which utilizes an innovative grass-based dairy system. This pasture management system was adopted in 1992, and is designed to maximize forage use by intensively managing plant growth and grazing time.

In addition to his role as chairman of NMPF, Mooney also serves as chairman of Dairy Farmers of America and is active in other various dairy organizations.

Members of the dairy industry will be packing their bags next week and heading West to attend the joint annual meeting of NMPF, the National Dairy Promotion and Research Board and the United Dairy Industry Association. The meeting will be held November 14 – 16 at the Town and Country Resort & Convention Center in San Diego, CA, and focus on the theme “Navigating a New Course.”

The activities will begin with a leadership and development program on Monday, November 14 for the Young Cooperators, as well as various board and committee meetings. General programming for all attendees will begin at 9:30 am on Tuesday, November 15th, with NMPF’s Town Hall Meeting, where NMPF staff members will discuss efforts to dramatically reform U.S. dairy policy through Foundation for the Future and the Dairy Security Act of 2011. After the Opening Luncheon, with a presentation by NFL commentator John Lynch, participants will hear from Marci Rossell, a former CNBC chief economist and “Squawk Box” co-host, as well as leading executives from the dairy industry’s policy and promotion groups. The first day will conclude with the annual cheese reception, which will feature the winning entries from NMPF’s cheese competition.

On Wednesday, November 16th, the day will begin with a welcome from Rep. Collin C. Peterson (D-Minn.), the ranking member of the House Agriculture Committee. That will be followed by speakers representing a range of dairy processor, cooperative and promotional organizations. After the Awards Luncheon, the NMPF Focus Session will delve into issues such as immigration reform and antibiotic residue testing. The meeting will end with the annual reception and banquet, which will feature the Hodads, a southern California party band.

Although early registration for the annual meeting has closed, anyone interested in attending may still register (subject to a $150.00 late fee). Visit www.nmpf.org/nmpf-joint-annual-meeting for more information about the meeting. During the meeting, updates will be posted whenever possible on NMPF’s Facebook page, and Twitter users can follow the conversation using #JAM11, led by NMPF’s Twitter handle.

As States Waver in Face of Pressure, Feds Need to Hold Fast in Defense of Food Safety

ARLINGTON, VA — The nation’s top public health organization needs to stand firm in the face of mounting pressures to further legalize the direct sale to consumers of a potentially dangerous product: raw milk, the National Milk Producers Federation (NMPF) said today, as it urged the Food and Drug Administration (FDA) not to waver in the face of pressure tactics from raw milk supporters.

Those supporters were out in force today at the FDA headquarters in Silver Spring, Maryland, urging FDA Commissioner Margaret Hamburg to cease federal efforts to ban the trafficking in raw milk sales across state lines. Current FDA law prohibits the interstate sales of raw milk, although the majority of states allow some form of in-state sales and/or distribution of raw milk.

Raw milk supporters have increased their criticism of the FDA interstate sales restriction “in spite of the clear and compelling documentation that raw milk is a proven means of transmitting serious human pathogens, including E. coli O157:H7, Campylobacter, Listeria monocytogenes, and Salmonella,” said NMPF President and CEO Jerry Kozak. “We hope that Commissioner Hamburg looks at the evidence, and doesn’t just listen to the noise from those who would weaken public health protections.”

While raw milk advocates have made numerous statements touting the benefits of consuming raw milk, these claims mislead consumers and have not been supported by science-based studies, Kozak said.

“Raw milk consumption is inherently dangerous because the product can contain pathogens that are capable of causing foodborne illness,” Kozak said. “Pasteurization is one of the most effective food safety tools developed and, when properly conducted, is the only way to ensure that milk is free from disease-causing microorganisms.”

Kozak said it is particularly concerning that a key constituency in the raw milk movement includes mothers who wish to purchase the product to feed to their children. He noted that more than three-quarters of foodborne illness outbreaks associated with raw milk or milk products involve a child.

“Kids are particularly vulnerable to the diseases caused by the pathogens that may be consumed with raw milk. There are numerous cases where long-term illnesses have resulted from the ingestion of raw milk,” Kozak said. “The FDA needs to stand on the side of protecting public health, especially the health of minors whose parents may not fully grasp the potential consequences of the hazards they are exposing their kids to.”

“Many diseases are not preventable, but where there is a clear and effective prevention against milk-transmitted foodborne illness, why would we allow the myths and untruths to remove that protection?,” Kozak asked.

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 31 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.

ARLINGTON, VA – The National Milk Producers Federation (NMPF) today questioned the selective and simplistic interpretation of new dairy legislation by organizations opposed to the Dairy Security Act (DSA) that Congress is now debating.

On Oct. 24th, the Dairy Business Association (DBA), an organization of dairy producers and corporate interests based in Wisconsin, issued a press release that cited the findings of a review of the congressional dairy legislation by Dr. Mark Stephenson of the University of Wisconsin, and Dr. Chuck Nicholson of Cal Poly-San Luis Obispo.

The release, which was jointly issued by DBA and the Wisconsin Cheese Makers Association (WCMA), noted that with high participation by dairy producers in its safety net programs, the Dairy Security Act could cost the U.S. government “About $2 Billion More than Current Dairy Programs.”

However, on October 25th, a short paper authored by Drs. Stephenson and Nicholson reported that the provisions of the DSA, if enacted with high dairy producer participation, would save the U.S. government close to $700 million. Specifically, the DBA interpretation reported government expenditures of $3.663 billion, versus a baseline of $1.601 billion during 2012-2020, while the recent Stephenson/Nicholson paper shows government expenditures of just $824 million, versus a baseline of $1.592 billion during 2012-2018, under a high participation scenario.

According to NMPF, these contrary findings “clearly illustrate the challenges associated with simplistic attempts to communicate results from complex economic modeling,” said Jerry Kozak, President and CEO of NMPF.

The authors themselves note on page 2 of their paper that, “Each of these assumptions about how producers will respond to the program is highly uncertain.” Those uncertainties are illustrated by the fact that although their paper says that the market stabilization program will be in effect 40 to 45% of the time, the reality is that between 2006, and the present, it would have triggered in only 9% of the time, Kozak said.

“Some economic models are acutely sensitive to the assumptions used in the analysis – as is the case with the Stephenson/Nicholson model. Unfortunately, the more sensitive the model, the more likely that dramatic differences in outcomes will result from relatively minor changes in the assumptions underlying the analysis,” he said.

Because of the great variation in reported results, “it must be concluded that changes in the assumptions used in the analysis occurred between the issuance of the DBA release, and the subsequent appearance of the authors’ own papers. Consequently, it is extremely difficult to utilize any background information or results from this study in a substantive public policy discussion,” Kozak said.

Drs. Stephenson and Nicholson themselves noted the limitations of their model with respect to how the DSA would affect net farm operating income (NFOI) due to lower prices:

“It is important to note however, that the current volatility imposes costs on farms (that is, it usually requires changes in management and financing that have costs) and can result in substantial equity loss and a higher probability of business failure. These costs and risks are not directly included in our analysis, so it is not possible to conclude on the basis of reduced average NFOI that dairy farmers would be worse off under the proposed legislation.”

“Such caveats by economic researchers are often excluded by those attempting to focus on specific outcomes which serve their messaging purposes. This certainly appears to be the case regarding the press release issued by the Dairy Business Association and the Wisconsin Cheese Makers Association,” Kozak said.

“No one’s interests are well served when the debate surrounding efforts to reform federal dairy policy is subjected to selective or less than complete reporting of pertinent research,” said Kozak.

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 31 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.

For the November CEO's Corner, we are including the joint presentation made November 15th, 2011 by Jerry Kozak and NMPF Chairman Randy Mooney at the NMPF Annual Meeting in San Diego, California.

 

Jerry Kozak (JK):

Good afternoon, everyone. Thanks for joining us today. I know that our presentation is all that’s standing between you and the cheese reception, so we’ll try to make this short and sweet. Let us begin by reflecting not on the time of day, but on the time of the year.

Last Friday was Veteran’s Day: the 11th day of the 11th month of 2011. So it’s appropriate that we start this speech by acknowledging and thanking the veterans in our audience. Let's have our veterans stand, and let us thank them for their service to our country.

Randy Mooney (RM):

And next week, of course, is Thanksgiving. I want to thank my wife Jan for her support as I serve in this role. I should also thank Gail Kozak, for allowing Jerry to spend the time and effort that goes into his role. I know that requires a whole lot of patience and support. It’s also worth pausing a moment to reflect on the things for which we are grateful. Certainly, 2011 was a better year for dairy farmers than the previous two years, and we can be thankful for that. That said, the U.S. economy continues to stumble along, and farmers have every right to be nervous about what that means for consumer demand, and dairy prices.

Closer to home, I think the thing we should be very grateful for is the unity that our organization has shown during the past two years that we’ve been working on major dairy policy reform. It’s been a long road since the creation of a Strategic Task Force in June 2009 designed to come up with a better safety net for dairy farmers…and yet, the end is now in sight.

Release Date: May 10, 2007

U.S. Dairy Industry Welcomes Lifting of Mexican Retaliation Tariffs

The National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) today hailed the full and complete lifting of retaliatory tariffs by Mexico in the cross-border trucking dispute. This action came after the U.S. Department of Transportation (DOT) implemented a pilot program to allow a selected number of Mexican carriers to operate on the U.S. side of the border under strict safety standards.

“These actions mean that dairy products on Mexico’s retaliation list will now be free of the 20-25% tariffs that were restricting access to our best foreign market,” said Tom Suber, president of USDEC. Mexico’s retaliation against a total of $2.4 billion in U.S. exports had come after successfully challenging the U.S. ban on Mexican trucks that has remained in place, despite a 1994 U.S. commitment under NAFTA to lift it.

“It is a huge relief to cheese processors and their dairy farmer suppliers that their products will no longer be caught in the crossfire of a dispute not of their making,” Suber said. “We are convinced that the DOT program will lead to a permanent solution to this 17-year long dispute, in a manner that will uphold strong safety standards for U.S. roads.”

The DOT pilot program announced in April provided for a 30-day comment period and another period of approximately 30 days to assess the comments received. Subsequently, DOT published a final Federal Register Notice, which outlined the implementation process for the project. Based on this notice, a final agreement was signed by the U.S. and Mexico, and Mexico immediately reduced its retaliatory tariffs on all products by 50%. Removal of the remaining tariffs only awaited today’s Mexico Federal Register announcing the Mexican President’s action of accepting that the first Mexican carrier as eligible to operate across the border.

Jerry Kozak, president and CEO of NMPF, also applauded the actions by both sides to resolve the dispute, and urged members of Congress to allow the program to work.

“We appreciate the efforts by officials in both governments to follow through on the March agreement by Presidents Obama and Calderon to address concerns on both sides of the border, and allow us to once again fully service the fast-growing Mexican dairy market,” Kozak said. “We now hope that political pressures to nullify the arrangement can be resisted so that the thousands of jobs that were lost due to the blow to our exports can be recovered,” he added.

The U.S. Dairy Export Council (USDEC) is a non-profit, independent membership organization that represents the export trade interest of U.S. milk producers, proprietary processors, dairy cooperatives, and export traders. Its mission is to enhance international demand for U.S. dairy products and assist the industry to increase the volume and value of exports. USDEC accomplishes this through market development programs that build overseas demand for U.S. dairy products, resolving market access barriers and advancing the industry’s trade policy goals. USDEC activities are supported by staff in Mexico, Japan, South Korea, China, Taiwan, Hong Kong, Southeast Asia, South America, Middle East and Europe. Website: www.usdec.org.

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 31 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.

The National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) applaud the passage Wednesday by the House and Senate of three free trade agreements (FTAs) with South Korea, Panama and Colombia.

“We wish to thank President Obama and his trade team, and leaders in both houses of Congress, who worked hard in recent months to make these favorable votes possible,” said Jerry Kozak, president and chief executive officer of NMPF.

“The FTAs will expand U.S. dairy exports and, when fully implemented, will create thousands of export-supporting jobs in the dairy industry,” said Tom Suber, president, USDEC. “We hope that all necessary steps can be taken in the coming months by all four countries so that the agreements may enter into force at the beginning of the year and benefits to the U.S. economy can begin to be felt immediately.”

“The U.S. dairy industry stands ready to assist in any way possible to help ensure that the FTAs take effect as soon as possible,” added Kozak. “Our producers are excited about the new export opportunities that will be realized once the agreements take effect, especially the trade pact with South Korea. The export gain for dairy from the Korea FTA in the first few years after implementation will be approximately $380 million per year, on average, and the gains from the Colombia and Panama FTAs will add another $50 million annually.”

Suber pointed out that the agreements will not only help expand export sales for such products as cheese, whey, skim milk powder, and other dairy products, they also will prevent foreign competitors from taking market shares that the U.S. industry has developed in each of the countries in collaboration with USDEC. “In international trade, unless we continue to move forward, we risk falling behind our competitors,” he said. “These agreements will ensure that, for America’s dairy farmers and processors, export sales will continue to expand, not contract.”

The leaders noted that the agreements are all about giving dairy farmers greater market opportunities and better prices so that more can remain profitably in business. But Kozak also pointed out that it is not solely about bolstering milk prices for producers; it is also about expanding sales and jobs in the dairy processing and transportation sectors. “We estimate that as many as 10,000 additional jobs, both on and off the farm could be created by the Korea agreement alone,” he said.

The U.S. Dairy Export Council (USDEC) is a non-profit, independent membership organization that represents the export trade interest of U.S. milk producers, proprietary processors, dairy cooperatives, and export traders. Its mission is to enhance international demand for U.S. dairy products and assist the industry to increase the volume and value of exports. USDEC accomplishes this through market development programs that build overseas demand for U.S. dairy products, resolving market access barriers and advancing the industry’s trade policy goals. USDEC activities are supported by staff in Mexico, Japan, South Korea, China, Taiwan, Hong Kong, Southeast Asia, South America, Middle East and Europe. Website: www.usdec.org.

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 31 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 40,000 dairy producers on Capitol Hill and with government agencies.