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 online.
Items in this column are compiled from Progressive Dairy staff news sources. Send news items to Progressive Dairy Editor Dave Natzke.
USMCA: U.S. AND CANADA
What happened?
The dairy trade relationship between the U.S. and Canadian governments is starting 2023 the same way it began a year earlier. In late December, U.S. Trade Representative (USTR) Katherine Tai requested new dispute settlement consultations with Canada over compliance of dairy obligations under the U.S.-Mexico-Canada Agreement (USMCA).
What’s ahead?
The new request expands the U.S. challenge of Canada’s tariff-rate quota (TRQ) allocation measures, contending those measures impose conditions that deny U.S. dairy producers and exporters Canadian market access agreed to under the USMCA. Canada’s claim is that the TRQ allocation measures protect the country’s supply management program.
Bottom line
Implemented on July 1, 2020, the USMCA (called the CUSMA in Canada) gave Canada the right to maintain 14 TRQs on a variety of dairy products. In notices to importers published in June and October 2020 and May 2021, Canada set aside and reserved a percentage of the quota for processors and for so-called “further processors,” which U.S. dairy exporters said violated terms negotiated under the trade agreement. The USTR filed the first USMCA dispute settlement panel request in May 2021.
In December 2021, the dispute panel agreed with the U.S., giving Canada 45 days to comply with new TRQ allocation measures. Global Affairs Canada initiated public consultations regarding proposed changes in March 2022 and published changes in May. Those changes were quickly rejected by the National Milk Producers Federation (NMPF) and U.S. Dairy Export Council (USDEC), and the USTR requested a second dispute settlement consultation with Canada.
CLASS I PRICE, MOVER
What happened?
At $22.41 per cwt, January 2023’s Federal Milk Marketing Order (FMMO) advanced Class I base price hit an 11-month low. However, the “average of” Class I mover formula had the smallest negative impact since July 2022.
What’s ahead?
There’s nothing official yet, but a formal petition seeking a hearing on potential FMMO reforms is expected early 2023. Multiple dairy organizations, including the National Milk Producers Federation and American Farm Bureau Federation, say they’ll seek a return to the “higher of” Class I mover price formula.
Bottom line
Analyzing the Class I mover, the spread in the January 2023 advanced Class III skim milk pricing factor ($9.54 per cwt) and advanced Class IV skim milk pricing factor ($11.62 per cwt) was $2.08 per cwt, the narrowest since July 2022. The August-December 2022 spread averaged $3.97 per cwt.
Based on Progressive Dairy calculations, the Class I mover calculated under the “higher of” formula would have resulted in a January 2023 Class I base price of $22.70 per cwt, 29 cents more than the actual price determined using the “average of plus 74 cents” formula. For the final five months of 2022, the Class I base price would have been about $1.20 per cwt higher under the “higher of” formula.
The economic impact on uniform milk prices within individual FMMOs depends on Class I milk utilization in each FMMO.
WIC DAIRY CUTS
What happened?
As reported in the Jan. 1, 2023 issue of Progressive Dairy, the USDA’s Food and Nutrition Service (FSN) has proposed cutting monthly allowances for milk under the Special Supplemental Nutrition Program for Women, Infants and Children (WIC). The International Dairy Foods Association (IDFA) estimates that the USDA’s proposal would reduce the amount of dairy up to 6 quarts per month for pregnant participants and others. Those cuts could also reduce overall participation in the federal feeding program, according to a survey commissioned by IDFA.
What’s ahead?
The USDA FSN is accepting feedback on the proposed changes until Feb. 21. To read the proposal and find information to submit comments, click here.
Bottom line
Dairy (milk, cheese and yogurt) is the most commonly purchased food group by WIC beneficiaries (78%).
Conducted by Morning Consult, the IDFA-commissioned poll of 534 WIC participants showed that 20% of WIC participants would choose not to re-enroll in the program should the USDA follow through with the cuts to milk and dairy. Three-in-four WIC participants (76%) said they were concerned with the USDA proposal, with one-third (35%) saying they will need to use non-WIC funds to cover purchases of milk and dairy and one-quarter (26%) saying the reduction will make their shopping for milk and dairy products harder. Roughly one-third (34%) were unsure if they would re-enroll in the program following the proposed cuts.
Michael Dykes, president and CEO of IDFA, said the USDA’s proposal flies in the face of the federal Dietary Guidelines for Americans, which says 90% of Americans are not consuming enough dairy to meet daily requirements. Reducing WIC benefits for milk and dairy will make life harder for millions of women, new mothers, infants and children at a time of high food costs and rising food insecurity, he said.
SOUTHEASTERN U.S. FMMOS
What happened?
Also discussed in the Jan. 1, 2023 issue, Progressive Dairy noted the USDA’s Agricultural Marketing Service (AMS) had received a formal proposal to amend intermarket transportation credits in the Appalachian and Southeast Federal Milk Marketing Orders (FMMOs), and adopt new provisions to establish distributing plant delivery credits in the Appalachian, Southeast and Florida FMMOs. The proposal, submitted under the umbrella of the Dairy Cooperative Marketing Agency (DCMA), said the changes would incentivize more orderly movement of milk in the milk-deficit southeastern U.S.
The USDA posted two additional proposals received by the Dec. 19 deadline. One, from dairy co-op Prairie Farms, proposed an assembly performance credit fund and addresses transportation credits. Another proposal, from Tennessee dairy producer Michael Sumners, calls for distribution and reporting changes designed to increase FMMO policy transparency while encouraging locally sourced milk.
What’s ahead?
The USDA is considering initiation of a rule-making proceeding, and a hearing could be held in late February. Additional analysis and specifics regarding a hearing schedule will be provided as they become available.
Bottom line
According to Calvin Covington, a retired dairy cooperative CEO who now does some farming, consulting, writing and public speaking, the proposal requests the maximum transportation credit assessment (assessment applies to Class I milk and paid by Class I buyers) be increased from 15 cents per cwt to 30 cents per cwt in the Appalachian order, and from 30 cents per cwt to 60 cents per cwt in the Southeast order. The transportation credit provides a partial reimbursement of transportation costs to handlers for supplemental milk purchased outside of the two marketing areas.
The proposal for implementation of a new distributing plant delivery credit fund in the Appalachian, Florida and Southeast orders would be modeled after the current transportation fund provision, Covington said. It would provide a partial reimbursement to handlers for hauling costs associated with moving milk from farms to distributing plants within each order, and from selected areas outside of the respective order considered a part of the order’s year-round milkshed. It would be funded by an assessment on buyers of Class I milk. The maximum proposed assessments are: Appalachian – 60 cents per cwt, Florida – 85 cents per cwt, and Southeast – 50 cents per cwt.
The bottom line is: The assessments would add significant dollars to the three FMMO pools. These dollars could be used by handlers to offset hauling expenses year-round, currently paid by dairy farmers.
