Digest Highlights

June Class I base price tops $17 for first time in 29 months

The June 2019 Federal Milk Marketing Order (FMMO) Class I base price is $17.07 per hundredweight (cwt), moving above $17 for the first time since January 2017. It is up 65 cents from May 2019 and $1.82 more than June 2018. Through the first six months of 2019, the Class I base price is $15.94 per cwt, up about $1.47 compared to the same period a year ago.

Natzke dave
Dave Natzke
Editor / Progressive Dairy

California ‘Stop QIP’ petition falls short of required signatures

A petition seeking a referendum to consider termination of California’s Quota Implementation Program (QIP) fell short of the qualified signatures necessary and won’t be forwarded to the Producer Review Board (PRB). The California Department of Food and Agriculture (CDFA) issued a notice regarding the petition on May 24.

CDFA staff reviewed the petition submitted on March 29, 2019. (Read: Petition seeks end to California QIP in PD Extra enewletter’s April 16, 2019, Weekly Digest.

While there were 283 signatures submitted with the “STOP QIP” petition – well above the minimum 25 percent (248) of 992 milk producers in California eligible to vote in a referendum – CDFA determined only 197 of the signatures were valid for consideration.

CDFA said 40 of the original signatures were disqualified, citing Grade B milk shippers, dairy farms that had gone out of business, signatures that did not have the petition text included, signatures that did not match CDFA producer files and signatures from individuals who were not listed as an owner in CDFA ownership files.

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Additionally, according to the CDFA notice, rules require that multiple dairies with common ownership be combined to be considered one market milk producer. When the 243 signatures were merged based on the common ownership rule, the number of market milk producers signing the petition dropped from 243 to 197.

While the STOP QIP group was not successful in its initial attempt to force a referendum, it has spawned the creation of a new group, the “United Dairy Families of California,” according to Geoff Vanden Heuvel, director of regulatory and economic affairs with California Milk Producers Council (MPC). Writing in the organization’s latest newsletter, Vanden Heuvel said the group is organized specifically to find an equitable resolution to the quota issue.

Product inventories continue to build

The USDA’s monthly Cold Storage report was released May 22, reflecting volumes of dairy product inventories as of April 30, 2019.

  • Butter stocks were estimated at 290.8 million pounds, up 8 percent from March 31, but 5 percent less than April 2018.
  • Total natural cheese stocks were estimated at 1.4 billion pounds, up 1 percent from March and up 4 percent from April 2018. American cheese stocks, at 782.6 million pounds, were down less than 1 percent from March, but up less than 1 percent from April 2018.

Darigold expands sales, logistics capabilities in Mexico

The rollback of U.S. import tariffs on aluminum and steel from Mexico and the subsequent removal of Mexico’s retaliatory tariffs on U.S. dairy products has already spurred growth in one dairy relationship between the two countries.

As part of ongoing initiatives, Darigold Inc. announced expansion of sales and logistics operations in Mexico, including the hiring of four team members: Eugenio Massieu, director – Latin America; Mariana Lezama C., director – Mexico; Alma Leticia Casillas Torres, trade execution manager; and Sophie Gonzalez Revilla, senior execution coordinator.

Mexico is accessible from the U.S. by rail, truck and maritime vessels, providing opportunities for Darigold to serve customers in Latin America. Darigold is already doing business in Mexico as Darigold Mexico and NW Dairy Pioneers, with offices in Colonia Napoles, a borough of Mexico City.

Headquartered in Seattle, Washington, Darigold is the marketing and processing subsidiary of Northwest Dairy Association (NDA), which is owned by more than 430 dairy farm families in Washington, Oregon, Idaho and Montana. Darigold handles approximately 10 billion pounds of milk annually, operating 11 plants throughout the Northwest.

USDA Economic Research Service employees vote to form union

Employees of the USDA’s Economic Research Service (ERS) have voted to form a union in a step to block Trump administration efforts to move the agency out of Washington, D.C. ERS staff, made up mostly of economists and statisticians, voted 138-4 to unionize, according to Evin Bachelor, law fellow with Ohio State University Extension Agricultural and Resource Law Program.

ERS produces research on agriculture and rural economies that is used by policymakers in determining where to prioritize federal money, personnel and attention. Many universities and agricultural organizations also utilize the data in their own research.

The vote comes after months of tension over the fate of ERS, Bachelor said. USDA leaders have been discussing moving the headquarters and recently announced that locations in Indiana near Purdue University, Kansas City, and North Carolina’s Research Triangle Region as potential relocation sites.

U.S. Ag Secretary Perdue had announced plans last year to place the service directly under the USDA’s chief economist, which would put ERS more directly under the watch of administrators appointed by President Trump. Some staffers have expressed concerns that such a move could reduce the service’s independence.

The formation of a union does not mean that ERS employees will be able to prevent the changes being proposed at the administrative level. However, it increases the likelihood that ERS employees have a seat at the decision table as a united group.

Farm Credit East Dairy Farm Summary reveals 2018 struggles

It’s no surprise, but Northeast dairy farmers saw lower earnings and another year of cash flow shortfalls in 2018, according to Farm Credit East’s 2018 Dairy Farm Survey. The survey contains data from 305 dairy farms in Connecticut, Maine, Massachusetts, New Hampshire, New Jersey and New York.

Among dairy farms sampled, net earnings were negative, averaging -$40 per cow in 2018. That was down from an average profit of $291 per cow in 2017. Most of the decline was attributed to a $1.13 decline in the average milk price, from $18.32 per cwt in 2017 to $17.19 per cwt in 2018.

Costs were nearly flat from 2017 to 2018. Net cost of production increased to $17.72 per cwt, 26 cents greater than 2017. Among specific cost categories, feed expenses increased from $1,590 per cow in 2017 to $1,630 in 2018, labor costs decreased 5.2 percent per cow and 4.3 percent per cwt, and fuel expenses increased by 15.2 percent per cow after a similar increase the prior year. Total costs, including depreciation and family living, averaged $20.36 per cwt, only 3 cents per cwt greater than 2017.

Affecting the income side of the ledger, milk production decreased slightly, with a small decline in milk sold per cow offsetting a small increase in average cow numbers per herd. Milk sold per worker increased 4.6 percent due to more cows per worker.

Cash flow was short of meeting all financial commitments (e.g., operating expenses, debt repayment, family living and income taxes) for a fourth consecutive year. The average cash margin was -49 cents per cwt.

Many farms had to make up for this cumulative cash deficit through borrowing, restructuring payment terms or increasing vendor payables. Total debt per cow increased from $3,814 in 2017 to $4,257 in 2018.

For more details, visit the Farm Credit East website and click on “Reports” under the Farm Credit East Knowledge Exchange tab.

Bill creates indefinite moratorium on agricultural mergers

A bill to indefinitely halt large acquisitions and mergers in the food and agriculture sector has been reintroduced in the House. The Food and Agribusiness Merger Moratorium and Antitrust Review Act, introduced by U.S. Rep. Mark Pocan (D-Wisconsin), is a companion bill to one introduced previously in the U.S. Senate.

“Out-of-control consolidation has enabled big agricultural firms to control prices at every stage of the food chain, from farming to distribution, and Congress must do more to allow local farmers and food systems to be competitive, while establishing greater market transparency for the American consumer,” said Pocan. “Today, corporate profits are soaring, but many middle-class families, farmers and food workers continue to struggle. Establishing a moratorium on ag mergers will not only strengthen our antitrust laws, but it will also expand economic security and opportunity to more of our communities.”

A coalition of 219 farm, food, rural, faith and consumer advocacy organizations delivered a letter to Congress endorsing the moratorium. The letter said a wave of consolidation has contributed to falling farm prices, declining farm incomes, stagnant wages for food workers, rising food prices and economic stagnation in rural communities.

As originally introduced last September, the House bill blocks any acquisitions or mergers that create business entities with more than $160 million in annual sales or total assets. It also establishes a commission to study the impacts of consolidation in the food and agricultural sectors on farmers, rural communities, workers and consumers. The commission would recommend changes to federal antitrust statutes or other laws and regulations “to restore a fair and competitive agricultural marketplace.”

Land O’Lakes, Mars Wrigley seek dairy sustainability solutions

Land O’Lakes Inc. and Mars Wrigley are seeking proposals to accelerate on-farm dairy sustainability, with the winning entry eligible to receive up to $200,000 to implement the idea, product or service on a Land O’Lakes member dairy farm.

Entrepreneurs and companies are invited to submit their sustainability solutions, designed to help reduce on-farm greenhouse gas emissions, by June 24. Then, select participants will be invited to an August 2019 “Empower Possibilities” event, where they’ll present their ideas to a panel of industry experts.

Participants will receive input, coaching and advice from dairy and ag tech leaders to help bring their products and services to scale on the farm. With support from Mars Wrigley, up to $200,000 in funding will support the implementation of one of the selected solutions on a Land O’Lakes member dairy farm.

“Across the dairy sector, entrepreneurs are developing new tools every day to help dairy farmers in all aspects of stewardship, including achieving reductions in greenhouse gas emissions,” said Pete Kappelman, senior vice president of member and government relations for Land O’Lakes. “Dairy farmers are innovative and forward-thinking, and Land O’Lakes is well-positioned to deploy on-farm solutions that can help our dairy-farmer members focus on business results, while also safeguarding natural resources.”  end mark

Dave Natzke