In this column, Progressive Dairy summarizes issues in the news and attempts to describe how they might affect dairy farmers. Look for more extensive background, details and updates at Progressive Dairy.
Items in this column are compiled from Progressive Dairy staff news sources. Send news items to Dave Natzke
DMC PREMIUMS DUE
What happened?
As of early August, approximately 80% of calendar year 2022 Dairy Margin Coverage (DMC) and Supplemental DMC premiums had not paid as the payment deadline of Sept. 1 approaches.
In a notice to state and county USDA Farm Service Agency (FSA) offices, W. Scott Marlow, deputy administrator of farm programs with FSA, instructed offices to notify dairy operations, via letter by Aug. 15, with a payment deadline reminder and the amount of outstanding premium balance due.
What’s ahead?
Failure to pay the DMC premium will halt future indemnity payments and may affect a dairy operation’s ability to participate in the DMC program in future years. Contact your county FSA office for further information.
Bottom line
With monthly DMC program triggers well above the $9.50-per-hundredweight (cwt) coverage level, there have been no indemnity payments distributed through June 2022. So while in the past producers were able to deduct annual DMC premiums from indemnity payments, that’s not the case this year.
Latest estimates using the USDA’s DMC Decision Tool indicate there is a small chance that indemnity payments for Tier I/$9.50-per-cwt coverage could be triggered in one or more months, August-December 2022.
DFA NORTHEAST LAWSUIT
What happened?
Dairy Farmers of America (DFA) has been named in another lawsuit over alleged antitrust activities related to milk marketing practices in the Northeast. The class action complaint was filed in the U.S. District Court for the District of Vermont on July 27, 2022.
What’s ahead?
The lawsuit was filed in the same court and before the same judge, District Judge Christina Reiss, as previous Northeast lawsuits against DFA that were settled in 2016 (Allen v. DFA) and 2020 (Sitts v. DFA).
The latest lawsuit potential covers all dairy producers in DFA’s Northeast regional dairy market, including Vermont, New York, Connecticut, Rhode Island, Massachusetts, New Hampshire, Maine, New Jersey, Maryland, Delaware and most of Pennsylvania. It includes all dairy farmers, whether DFA members or not, who produced and sold raw Grade A milk within DFA’s Northeast area region any time from at least May 10, 2016, until the present.
The only producers excluded from the suit are producers certified under the USDA’s National Organic Program, as well as approximately 115 dairy farmers who were plaintiffs in the Sitts litigation settled in 2020.
Bottom line
The complaint alleges DFA “attempted to or did monopsonize the market for raw Grade A milk in the Northeast” from at least May 10, 2016. (A monopoly is defined as a situation where there is a single supplier of a good or service; a monopsony is defined as a situation where there is a single buyer.)
Citing ongoing dairy consolidation and increased DFA market share of the Northeast market, the suit blames DFA’s “predatory and exclusionary conduct” involving milk markets. The lawsuit alleges that DFA also took steps to deny its competitors, including other cooperatives and independent farms, access to both DFA and non-DFA raw milk processing outlets by controlling milk hauling.
The complaint also alleges that DFA, in its position as a cooperative involved in both marketing and processing of milk, had a conflict of interest in securing the highest milk prices for members, instead seeking to maximize processing cost efficiencies, leading to reduced milk prices in the region.
“The allegations brought forth in the lawsuit filed in Vermont are baseless and completely without merit,” said Kristen Coady, senior vice president, corporate affairs at DFA. “DFA is a cooperative that was formed by, is owned by and is governed by dairy farmers. Any claim that a farmer-owned, farmer-governed cooperative is motivated to self-inflict damage on its member-owners is preposterous, irrational and blatantly inaccurate.
“Since DFA’s formation, our farmer-owners have worked to build a cooperative that is strategically invested in assets to ensure milk markets and provide additional returns on their investment in their cooperative,” Coady said. “We will, as we always have, continue to make decisions and take actions that are in the best interest of our farmer-owners – now and for generations to come.”
U.S. DAIRY EXPORTS
What happened?
Global economic uncertainty apparently isn’t diminishing foreign demand for U.S. cheese, according to the U.S. Dairy Export Council (USDEC). Multiple factors, especially adequate cheese supplies at competitive prices, put the U.S. in a position to continue export growth in the near term and increase its presence in the international market.
What’s ahead?
USDEC cites multiple factors in driving export growth, especially for cheese and whey exports. First, despite limited milk production growth in the U.S., cheese production has managed to expand. Second, U.S. cheese has been relatively affordable on the global market, both on a spot basis and in futures markets. Third, pricing factors have also favored U.S. suppliers in key buying regions like Mexico and Central America, where cheese prices are more competitive with cheaper alternatives using palm oil instead of dairy fats. Demand in Latin America is further aided by a strengthening peso, raising purchasing power for imports while local milk production remains weak.
Along with the factors mentioned above, the USDEC report said the recovery in U.S. shipping is helping lift overall U.S. export volumes. Mitigation measures, including creation of pop-up container facilities, threats to implement dwell time fees to ocean carriers and the implications of the Ocean Shipping Reform Act, are beginning to make a difference. After declining for most of the final three quarters of 2021, the number of loaded outbound 20-foot equivalent shipping units (TEUs) leaving major California ports has been slowly ticking upward this year.
While the West Coast dockworkers contract remains a big shipping unknown, the improvement in container flow bodes well for U.S. dairy export efforts heading into the back half of 2022 – particularly as more attention is paid to correcting additional supply chain choke points.
Economic growth and inflation (from dairy input costs to retail prices) will continue to create export headwinds, but the supply chain arguably is looking up for the first time since before the pandemic, according to USDEC.
Bottom line
Based on data summarized in the most recent U.S. Dairy Exporter Blog:
- Value basis: January-June 2022 exports were valued at $4.8 billion, up $1 billion (27%) from the same period in 2021.
- Volume basis: U.S. cheese exports grew by 31% (+10,349 metric tons, or MT) year-over-year in June. Through the first half of 2022, U.S. cheese exports grew by 17% (+33,556 MT), easily on pace to smash the previous annual record.
Exports of U.S. whey products increased by 23% (+10,531 MT) as Southeast Asian buyers secured supplies in June. A rebound in Chinese pig prices also supported June whey export volume.
Beyond the major categories, the U.S. expanded its portfolio to include gains in butter, anhydrous milkfat, whole milk powder and evaporated/condensed.
Nonfat dry milk/skim milk powder (NFDM/SMP) was the only major product to see an export decline in June. According to USDEC, the primary obstacle to growing NFDM/SMP exports remains a lack of supply.
- Milk solids basis: January-June exports totaled 1.2 billion pounds on a milk solids equivalent basis, up 2% from the same period in 2021.
