This is series of articles that appeared in the Farmshine beginning with March 20, 2009 

Milk marketing: back to the future

                EDITOR’S NOTE: This is the first in a series of articles about milk marketing, in which we have updated with new information and added a historical perspective to the original series of articles published in Farmshine from July through October 2006. The next installment will delve into the layers of milk pricing, utilization, and accounting within the Federal Milk Marketing Order system.

By SHERRY BUNTING

Special for Farmshine

BROWNSTOWN, Pa. – For just about everything related to milk pricing— decades of twisting, turning, and tweaking have given us a tangled mess. Instead of real solutions, we have had one add-on after another. Before we know it, we have a twisted ball of yarn. There is an apparent yearning among dairy producers to somehow untangle these layers and get to the core: But how?

The first questions that come to mind are… If we cannot understand the subtle and circular nature of the complex interactions between the multiple layers and the various formulas affecting milk pricing, how on earth can we hope to improve both the real and the perceived fairness or unfairness of these prices? Why should the milk marketing system be so confusing that producers and processors end up speaking different languages as they fight for precious margin?

When we don’t have a shared understanding or speak the same language, it’s easy to misunderstand what is being said, what is expected, what is truth, what is myth, what we can change, what we cannot change. This situation also makes it easier to sweep under the carpet tough questions that deserve real answers. After all, when a concept is too complicated, people naturally become overwhelmed, lose interest, and give up…

These first three paragraphs were written in July of 2006. What has changed since then? Not much, except the fact that the two hearings initiated that year were finally ruled on by USDA in 2008 and 2009.

First,  processor ‘make allowances’ (the amounts deducted from milk component formulas paid to dairy producers) were increased in 2008, and second, the proposal seeking to “decouple” the Class I/II prices from the Class III/IV formulas was eventually rejected in January 2009.

As has been the case since 1999 when the current version of the Federal Milk Marketing Order (FMMO) system was first voted on by producers, every time USDA devises a plan or puts forward a change, producers must approve it by referendum.

But don’t be mistaken, this is not really a referendum in the true sense of the word. When producers vote, they are voting all or nothing. A “yes” vote approves USDA’s change or plan, whereas a “no” vote completely dissolves the Federal Order.

At meetings held in 2007, USDA officials told a group of Maryland dairy farmers that one of the reasons the agency has had difficulty making constructive change to the Federal Order system is because they have not received a clear signal from dairy farmers about what it is they want.

So we are back at square one.

Dairy farmers, for the most part, are conflicted about what they want because they first of all do not understand what they have. That’s not an insult. Few, if any, people really understand it.

 n fact, paging through archived issues of Farmshine, led to an article written in July of 1999. It was a meeting I had covered in Leesport, Berks County, Pennsylvania where Penn State University dairy marketing and policy expert Dr. Ken Bailey discussed the impact of what was then USDA’s “new” plan to change over to what is now known as “multiple component pricing,” and at the same time, restructure the Class I milk price differentials under then USDA Secretary Dan Glickman’s so-called Option 1-B.

At this 1999 meeting in Leesport, Bailey admitted that it took him several phone calls and 15 pages to try and summarize the complicated formulas which were scattered throughout the original 800-page USDA plan and which describe what was then the “new” manufacturing class pricing system.

Included in the “new” plan were the so-called “make allowances.” Not much was said or written at that time about these amounts to be deducted from the milk component formulas in order to pay processors a set manufacturing allowance for making nonfat dry milk, cheese, butter and whey. In fact, it was not until a few years later that the “make allowances” grew to become a divisive issue as processors asked for these amounts to be raised to cover their rising costs of production.

When the make allowances were eventually increased, producers voted their approval. But remember, the producer vote is not a true vote on the change because it’s all or nothing, a sort of “my way or the highway” deal where voting “no” means the end of the Federal Order.

Of course, producer ownership in milk processing plants—through cooperative membership—further complicates individual viewpoints on the make allowances as well as other milk pricing questions and concerns. Dairymen are told that by giving up some of their negative margin to help the cooperative plant cover its dwindling margin, their equity positions as cooperative members will be improved. Furthermore, non-members are told they will benefit by keeping regional plants to avoid extra costs of shipping milk farther.

But the make allowances are really just the tip of the iceberg. The FMMO system has other issues relating to pricing, for example, the concern about lack of market transparency and competition reflected in the manufactured product prices that are used in the component formulas that determine how dairy farmers are paid each month.

There also lingers, today, the original concerns producers have voiced since 1999 concerning the restructured pricing for Class I. Back in 1999, that change alone was expected to cost Pennsylvania producers, for example, 98 cents per hundredweight. At the same time, the authorization for the Northeast Dairy Compact had expired and was never re-authorized by Congress.

The predicted financial losses to producers in the first year of implementation were expected to come back to dairymen in the form of cooperatives negotiating over-order premiums for Class I. But as even Bailey pointed out at that Leesport meeting back in 1999, the Federal Order system as amended in 1999, was expected to increase the “free market” transparency of the manufacturing class prices, but at the same time, it was expected to make the Class I market “work harder to find its free market equilibrium.”

Back in 1999, USDA viewed the “new” multiple component pricing method as more transparent because it was said to be a more accurate reflection of the value of products made with the milk. Ten years later now in 2009, it has become increasingly obvious that this system lacks the expected level of market transparency. Ten years after its implementation, milk prices have become increasingly volatile. The high price cycles have been followed more quickly by low price cycles with a reduced interval of stability in between.

The larger issue here is the veil of confusion that covers the entire milk-marketing complex. As the industry has consolidated with fewer and larger players, market transparency has become murky, and it stands to reason that the gathering of reliable supply and demand information has become more difficult.

Now, more than ever, anything less than transparency in the marketplace is unacceptable. A tough pill is less tough to swallow if we can clearly read its label to have confidence that we are truly swallowing what we must—to survive.

Reinventing milk

From FDA standards-of-identity to Federal Order pricing…

Who is accounting for milk’s ‘functional’ filtered fractions?

How do imports of MPC figure into the ‘mix’?

What is happening to consumption of nature’s original?

 EDITOR’S NOTE: This is the second part in a series of articles about milk marketing.

By SHERRY BUNTING

Special for Farmshine

 BROWNSTOWN, Pa.—The dairy cycle, since the turn of the century, has become as volatile as it has in some ways become predictable. Prices push higher, then supply catches up, and prices plunge lower. Round-and-round we go.

Meanwhile, the regulated Federal Milk Marketing Orders have become the sacred cow. Start asking questions, and industry leaders and experts are quick to respond: “The problem is not the system. The problem is not the formulas. The problem is not the imports or MPCs. The problem is supply and demand.”

While the global economic crisis and its effect on supply-and-demand are surely the drivers of the steep and sudden drop in dairy income we are seeing right now, there is much more to this story.

Congress chose not to deal with the Federal Orders in the 2008 Farm Bill. Because of the complexity of milk marketing and its direct link to what consumers pay for milk, Congress instead authorized a commission to study the current Federal Orders and make recommendations. To-date, USDA officials cannot confirm the status of this commission. Apparently, it has not yet been formed.

System designed to ensure ‘a little more than enough.’

The Federal Order system, as it stands today, has its pros and cons. One element we don’t often talk about is its original design aimed at ensuring ‘a little more than enough’ milk flowing through the pipeline at all times.

An enlightening document—“Understanding FMMOs, from the farm to the table: A brief explanation of the why’s and how’s of Federal Milk Marketing Orders”—is published on the Federal Milk Market Administrator’s website for the Pacific Northwest and Arizona Federal Orders.

Authors of this 103-page document concede that the only way to accomplish the objective of assuring consumers of an adequate supply of milk, is to assure that there is always more supply than demand so consumers always have enough. In effect, whenever dairy farmers begin to fall short on supply, the price leads them back to over-supply to fulfill the purpose of the Federal Order.

Since 2000, we have not seen a year of perfect balance between supply and demand. Price goes down, farmers sell cows or go out of business. Price goes up, fluid demand shrinks and newspapers write about high milk prices.

Some would argue striking a balance can never happen because the system exists, in the first place, to assure abundant supply to consumers. Since 2000, the pricing formulas are said to be based more on supply and demand, but hanging out there in the balance is this original purpose again: seeing to it that there is always a little more than enough.

The “Understanding FMMOs” document specifically states that, “The only way to insure an adequate supply across the year is to have a little more than enough.” In short, the system exists because of these market factors:

1)      It is “not normal” for milk supply and demand to match,

2)      Milk is “more highly perishable” than other commodities,

3)      Milk has a “more inelastic demand” than other food products, and

4)      Milk marketing is “inherently unstable.”

 What about imports?

Graphing the USDA-reported “all-milk” price average for each year from 2000 through the first three months of 2009, and then pulling import data for milk protein concentrate (MPC) in those same years—as compiled from tariff and trade data by the U.S. Department of Commerce and the International Trade Commission—it is difficult to ignore the inverted relationship (see graphs).

In each year that the U.S. all-milk price fell to an average $12 per hundredweight, the data clearly show imported quantities of MPC rose. In fact, from 2004 through January 2009, the overall MPC import trend line has been uphill, but the ebb-and-flo pattern within this overall increase continues to follow (or lead?) the U.S. milk price.

These data do not reflect other types of dairy imports, nor do they reflect our exports, which were sharply higher in 2007 and 2008. What these graphs do indicate, however, is that two things are happening:

1) U.S. product manufacturers are using more MPC, overall. Not only are we importing more of it, we are also making more MPC of our own in this country.

2) There is a tenable relationship between MPC import levels and the farmgate milk price. One could describe this relationship as the “growing pains” of the U.S. dairy industry as it takes steps toward fulfilling demand for what experts predicted back in 2004 would become a burgeoning new market for dairy by 2008.

‘Functional’ milk to the rescue.

In 2005, the New York City-based Beverage Marketing Corporation predicted the “wellness and functional beverage” sector was “poised to grab 85% of incremental beverage growth by 2008 to replace carbonated beverages as the largest nonalcoholic beverage segment.”

From 2004 to 2008, the three fastest growing beverage market sectors were predicted to be ready-to-drink sports nutrition beverages, nutrient enhanced drinks, and energy drinks (in that order), with additional growth potential coming from the low-fat and liquid meal replacement markets.

The demand for healthy food ingredients—from clear whey protein concentrate to creamy-white ultrafiltered milk ingredients, like milk protein concentrate in a variety of protein contents, as well as functional additives and special flavors—began driving innovation of specialized dairy products using specialized dairy-based ingredients.

2008 has come and gone, and as predicted, the market has ushered in a proliferation of new products and re-formulated existing products. Many have a similar common denominator: ultrafiltered (UF) milk ingredients, also known in dry form as milk protein concentrate (MPC). Variations include milk protein isolate (MPI).

Filtering milk to its functional fractions.

According to a 2004 description published by Dairy Marketing Inc. (DMI): “Ultrafiltration (UF) allows food manufacturers to produce lower-carbohydrate versions of milk, ice cream, yogurt and dairy-based beverages to meet consumer demand for these products. Milk that has been ultrafiltered to a three times volumetric concentration factor (3X CF) has had about 65-70% of the carbohydrate lactose removed. What is left behind—the retentate, or UF milk product—delivers high-quality protein ideal for creating lower-carb/higher-protein foods and beverages. UF milk also offers the clean, dairy flavor and nutritional value associated with dairy ingredients overall.”

Dave Barbano, a professor of food science and director of the Northeast Dairy Foods Research Center at Cornell University, wrote in 2004 on the topic: “Milk Protein Products – What are they and what role do they play in lactose-reduced (low-‘carb’) foods?” In his paper, Barbano explains: “The removal of lactose from milk is most commonly done by a physical filtration process called ultrafiltration (UF). This process can be used to produce both low “carb” dairy foods and low “carb” milk protein concentrates (MPC) that provide milk proteins and milk calcium in dairy and other formulated food products (for example, sports nutrition products, protein and calcium fortified beverages, etc.). When low “carb” milk ingredients are used in other foods it expands the consumption of milk protein and calcium… Thus, both liquid and dry milk ingredients with two thirds or more of the lactose removed will become increasingly important ingredients in food manufacturing.”

UF milk is said to have “minimal differences” in flavor and solubility from traditional milk. Yet UF milk has a fresh flavor and intact casein “micelle.” Currently FDA is reviewing requests to change the standards-of-identity for milk and certain milk products to accommodate these technological advances in the dairy ingredient market. At this time, UF milk, MPCs and even MPI, do not meet FDA’s standard-of-identity for the original dairy product, so they must be given an alternate name under current regulations. (This requirement may change as the FDA further defines carbohydrate labeling.)

Specialty products like nutrition-enhanced beverages for those sensitive to lactose, have more freedom in labeling because the UF milk/MPCs/MPIs represent the near complete separation of lactose from protein, to meet the needs of babies troubled by fussiness or gas and adults who previously rely on lactaid to digest the lactose content of regular milk.

However, there are many other uses for these functional filtered fractions of nature’s original that are motivated by consumer preferences, economics and efficiency.

It is obvious that some dairy-based products use MPCs to target the “health and dieting craze,” the consumer clamor for high protein/low ‘carb’ beverages and snacks.

Some products use MPCs to respond to the demand for liquid meal replacements. Some respond to the market for nutrition-enhanced products (i.e. traditional dairy products like skim milk and non-fat yogurt fortified with MPCs for higher protein nutrition profiles and creamier texture because of the additional non-fat solids).

MPCs also fit the need for greater ingredient stability in extended shelf life and shelf-stable fluid milk products that undergo ultra-high-temperature (UHT) pasteurization for aseptic packaging.

Still other uses for MPCs include the product innovations that seek to add non-fat, low carbohydrate, protein rich solids to improve the rich creamy texture and “mouth-feel” of low-calorie, non-fat soft and frozen desserts as well as beverages. MPCs are not all the same. As protein concentration increases, MPCs can exhibit stronger flavor profiles. In 2007, DMI sponsored lab applications to demonstrate how domestically produced MPCs can contribute mild dairy flavor, boost protein and calcium and improve texture through their creation of a cheesecake filling and a peach yogurt smoothie.

Still other uses for MPCs revolve around improving the efficiency in the function of dry mixes for manufacturing soft and frozen dessert products and the potential to use less stabilizers in the process.

Another example is the improved efficiency processors say they achieve when filtered milk ingredients allow them to produce more cheese with less whey byproduct to deal with or to market a cheese fortified with triple the protein and calcium.

Kraft, Borden, and a host of other “cheese food” manufacturers would like to see the standards-of-identity changed because, as of now, they have had to remove the word “food” from their cheese labels if the product contains MPC.

Kraft, for example, was warned a few years ago to stop adding MPC to the mix for its “Kraft Singles: Pasteurized, processed cheese food.” Today, you will still find MPC on the ingredient list for this product, but Kraft has changed the name to “processed cheese product” versus “processed cheese food.” Problem solved.

Ditto for Kraft’s Velveeta slices and their popular “It’s the cheesiest” Macaroni and Cheese.

For the Borden brand cheeses made by Dairy Farmers of America and proudly displaying Elsie the cow along with a blue ribbon bearing the words: “100% farmer owned,” we find that all nine Borden varieties at a local Wal-Mart—from their special “grilled cheese” slices and standard White American, to their sharp and flavored varieties—all contain MPC, and all are labeled “cheese product” instead of “cheese food.”

MPCs are also found in low-calorie dairy-based desserts like Jell-O puddings, cultured products like Dannon ‘carb control’ or ‘crave control’ yogurts, and a host of similar products.

Back to the beverage market… MPCs are a mainstay of nutrition-enhanced and meal replacement drinks—from ‘Muscle Milk’ for body building and PediaSure’s special “growth promoting” nutritional drink for toddlers to Ensure or Boost for older adults. Cultured drinks like Dannon Light and Fit yogurt smoothies are an example of special dairy-based cultured diet and nutrition drinks containing MPC.

How does it work?

In his 2004 paper on Milk Protein Products, Barbano describes milk’s most basic functional elements. For example: Skim milk contains protein (3.2%), lactose (5.0%), and minerals (0.7%). Ultrafiltration can separate lactose from protein just like a cream separator separates fat from skim milk.

Furthermore, There are two major types of proteins in milk: caseins (which stay with the cheese) and serum proteins (beta-lactoglobulin and alpha-lactalbumin which go with the whey). Of the true protein in milk about 82% is casein and 18% is serum proteins. These proteins, in fact, can also be separated from each other through another process called microfiltration, whereby casein is can be separated from milk serum proteins. This is all done by various membrane technologies that filter the fractions of the milk based on their molecular size.

In essence, ultrafiltration reduces the carbohydrate content of the milk by separating the lactose from the protein. Literature published by DMI describes it this way: “Ultrafiltered (UF) milk can be used to produce a dairy-based beverage with 3 grams of lactose per 8 oz. serving. Regular milk contains 12 grams of lactose per 8 oz. serving. Furthermore, UF milk (or MPCs) make it easier to add dairy proteins to a beverage in order to boost its protein content. Sweeteners are often added to these products as well.

It’s like reinventing milk: boost the protein, hold the carbs, add the non-caloric sweetener.

In some products, like cheese and yogurt smoothies for example, these filtered milk fractions become the specialized dairy ingredients that are often added to “milk” but the milk remains as the product’s main ingredient. In these cases, one can argue the MPCs help move more fluid milk by creating attractive, high-protein beverages consumers are looking for.

In some products, like meal replacement drinks for example, these specialized UF milk ingredients, like MPCs, are themselves the main dairy-based ingredient, reconstituted and combined with other ingredients in a water-based formulation.

The list here is really endless in this brave new world of filtered milk ingredients. Along with the sheer excitement for these dairy innovations, comes the question: What about simple “unfooled around with” milk?

The emerging dairy ingredient market of 2004 has become a runaway freight train, begging still more questions that dairy farmers have every right to ask: Who is keeping track of the filtered fractions? How is the value of these untraded, unsurveyed ingredients accounted for in the milk pricing formulas back to the dairy farm via the rigid and obviously archaic milk classification system of the Federal Milk Marketing Orders? 

Finally, what has happened to worldwide consumption?

According to market research by the British-based Canadean Limited, worldwide dairy drink consumption slowed last year, growing only 0.5% in 2008 compared with 2.4% growth in 2007.

Of greater concern is the report that dairy drink consumption (on a volume basis), in North America, declined 1.9% compared with 0.3% growth in 2007. This is the first outright decline in North American dairy drink demand since 2004. Dairy drink consumption reportedly also declined in Western Europe last year by 0.4%.

Add to this the fact that the growing market for dairy drinks in Asia (nearly half of all global demand) also slowed dramatically in 2008. Growth in this part of the globe was only 0.5% last year compared with phenomenal 5.1% growth in 2007. Did the melamine tampering in China play a role in this decline? Or is the global economic meltdown the main driver? These are the short-term and long-term questions the industry will wrestle with concerning Asian demand for dairy.

Hardest hit by the global slowdown in dairy drink consumption are the value-added drinking yogurts and flavored and fermented milks, which had previously been the fastest-growing categories in the global dairy beverage market, the report said.

Among those categories that continue to show growth are fortified milks, probiotics, low-fat, evaporated, and extended shelf-life products.

As for nature’s ‘unfooled around with’ original? White milk reportedly accounts for 79.4% of global dairy drink demand. Growth in white milk consumption, worldwide, was 0.3% last year compared with 0.6% growth in 2007.

MILK MARKETING PART III

Reinvented milk imports pressure ‘real’ U.S. milk

·         Year-to-date 2009 MPC imports up 72% from 2008, 87% higher than 10-year average.

·        Low tariffs, no quotas, no support price for U.S. protein boils down to definition: ‘not really milk.’ 

EDITOR’S NOTE: This is the third part in a Farmshine series about milk marketing.

By SHERRY BUNTING

Special for Farmshine 

BROWNSTOWN, Pa.—On the cover of last week’s Farmshine, we showed readers the inverse relationship between two sets of data: 1) The U.S. monthly average all-milk price, by year, from 2000 through the early part of 2009, and 2) The monthly average quantity of imported milk protein concentrate (MPC), by year, from 2000 through early 2009.  

This week, we have updated the graphic because the U.S. International Trade Commission (USITC) posted February’s trade and tariff data after press-time last week, and the February MPC imports were absolutely too huge to ignore, having pushed the monthly average metric tons from around 5,000 to nearly 7,000—the highest ever.  

For the first two months of 2009, the total volume of MPC imports was 13,230 metric tons, which is 72% higher than for the first two months of 2008 and 87% higher than the 10-year average.

The purpose of this series is not to make people feel worse about the current milk price situation, but instead, to shed light on some of the complex market structures that envelope the issues we hear about. For example, how in the world can we consider a supply management program if we don’t first figure out all the angles on how milk products are processed, further processed, filtered, ultrafiltered, used, and marketed, and the role of global trade for ‘reinvented milk’ in the U.S. supply/demand equation?

As the graphs clearly show, in every year except 2003, the annual trend in MPC imports directly correlates to an opposite trend in the U.S. all-milk price. A 2004 USITC investigation also confirmed this inverse relationship from 1998 through 2002, and the report demonstrated that this inverse relationship did not exist prior to 1998.

In fact, the Commission—in its 2004 report to Congress entitled “Conditions of Competition for Milk Protein Products in the U.S. Market”—pinpoints 1998 as the year when New Zealand’s Fonterra cooperative started ramping-up its milk protein production, which includes: MPC, MPI (milk protein isolate, which is MPC at 90% or higher protein concentration), casein, caseinate, WPC (whey protein concentrate), and WPI (whey protein isolate).

In last week’s Milk Marketing series Part II—“Reinventing Milk”—we talked about these ultrafiltered fractions of milk: What they are, how and why they are used in dairy-based foods and beverages, and what the trends are for worldwide dairy drink demand.

Now, let’s get to the heart of the matter (and forgive the alphabet-soup)…  

TARIFF PROBLEM: U.S. CUSTOMS SAYS ‘NOT REALLY MILK.’

In 2004, milk protein products were classified under the Harmonized Tariff Schedule (HTS), with most milk protein products falling under Chapter 4 (dairy produce; birds’ eggs; natural honey; and edible products of animal origin not elsewhere specified or included). Such goods include MPC, WPC, SMP (skim milk powder or nonfat dry milk), WMP (whole milk powder), and fluid milk or whey. Casein and caseinate enter the U.S. under Chapter 35 (albuminoidal substances, modified starches, and glue enzymes), whereas a few milk protein products are classified in Chapter 21 (miscellaneous edible preparation).

According to the USITC, the reason for virtually non-existent tariffs on milk protein products is because U.S. Customs views them as a “wholly separate type of product.” Why? The reason is the same as that given by the U.S. Food and Drug Administration (FDA) standards-of-identity, and it is the same reason why U.S.-produced milk protein products are not recognized in U.S. dairy programs: Essentially, these products are viewed as ‘not really milk.’

Specifically, the U.S. Customs definition states that even though these products contain only milk constituents, these constituents are NOT in the same proportions as that found in natural milk. (A hair-splitting technicality if you ask me.)

What we end up with are higher tariff structures for SMP and WMP and lower tariffs—with no quantity limits—on MPC and WPC. Plus, casein and caseinate enter the U.S. free of duty. The 2000 WTO Agreement on Agriculture further reduced these tariffs, and the special safeguards (SSG) do not apply to MPC, casein and caseinate because these products are not subject to trade quotas in the first place.

As a result, MPC importers enjoy a very minimal duty of $3.70 per metric ton. In its 2004 report, USITC found that the U.S. market for MPC was roughly 40,000 to 50,000 metric tons, virtually all of which was supplied by imports. At that time, 55% of the U.S. market was supplied by New Zealand, 25% by the European Union, and the remaining 25% by Australia, Poland and India.  

USITC SAYS SUBSTITUTION ‘VERY HIGH.’

From hundreds of questionnaires, the USITC concluded in 2004 that MPC, casein and caseinate are “highly substitutable for U.S.-produced milk protein products” and are “mainly used in the production of processed cheese products (like those made by Kraft and Borden pictured and mentioned in last week’s Farmshine article) as well as other dairy products and bakery products.”

In fact, the report said processed cheese products and specialty nutrition products together use 90% of the imported MPC, with specialty nutrition products accounting for only 24% of the total at that time. Both sectors fall outside of the FDA standards-of-identity rules.

The USITC found technical substitution of imported MPC for U.S.-produced SMP is “very high,” particularly for processed cheese products. “While manufacturers may readily switch from U.S.-produced milk proteins to imported milk proteins, they are somewhat less likely to switch from imported milk proteins to U.S.-produced milk proteins,” the report stated. “Barring significant changes in relative prices, the superior functional properties of imported milk proteins discourage switching to U.S.-produced skim milk powder (SMP), ultrafiltered (UF) milk, whey protein concentrate (WPC), or ingredient cheese from milk protein concentrate.”

The USITC also observed the relative price of these imports, and the negligible tariffs, which make them a “lower cost source of protein than both U.S.-produced SMP and U.S.-produced ultrafiltered (UF) milk.” Thus, the cost factor here is undeniable.

As to the effect on farm level milk prices, the USITC found that when the price of skim milk powder is above the government support price, then increased MPC imports tend to force market prices lower. If the market prices are at the support level, then the impact of imports is reflected in additional government purchases and growth of CCC stocks. In this scenario, the report acknowledged that these imports could cause CCC stocks to rise to a level at which the USDA lowers the skim milk powder support prices (adjustment of the butter/powder tilt).

The USITC report also stated that in 1996—prior to the rapid expansion of milk protein production and exportation by countries like New Zealand—there appeared to have been little or no surplus of milk proteins in the U.S. market. At that time, domestic powder production was almost the same as commercial disappearance and the commercial ending stocks-to-use ratio was at very low levels.  

WHAT HAS CHANGED SINCE 2004?

From 2004 through 2008, a few things have changed. On the supply side: MPC imports have increased, and to a lesser degree, U.S. production of MPC and UF milk has also increased. On the demand side: The specialty nutrition area has blossomed with new food and beverage innovations, which have increased the uses for concentrated milk proteins. Other uses, such as in yogurts and ice cream mixes, have also been cultivated, and as result, the International Dairy Foods Association (IDFA) is seeking changes to FDA’s standards-of-identity in order to use more MPC in more products because of its ‘functional’ properties.

It’s important to note here that industry promotion and development of some of these product innovations are, in part, paid for by U.S. dairy farmers through the milk checkoff via Dairy Marketing Inc0 (DMI). The point is to increase the other uses for filtered milk fractions to boost demand, overall, for milk.

Even though the number of products using SMP, UF milk, ingredient cheese and WPC have increased significantly since 2004, so have the MPC substitutions for these products. As demand for MPC increases, U.S. production of this product has also slowly expanded; however, MPC imports have also increased.

To get a handle on displaced U.S.-produced product, the USITC, in it’s 2004 report, compared MPC on a skim milk protein basis, finding that the 66 million pounds of imported MPC used in 2002 were equivalent to displacing approximately 183 million pounds of domestically produced SMP (conversion factor of 35.9%).

Using the same math today, the 124 million pounds of imported MPC in 2008 are equivalent to 348 million pounds of domestically produced SMP. At the same time, the federal government has purchased more than 218 million pounds of SMP (nonfat dry milk) from October 1, 2008 through April 17, 2009. 

WHAT HAS NOT CHANGED SINCE 2004?

In 2004, the USITC reported that U.S. dairy policies “may limit the competitiveness” of U.S.-produced MPC. The Commission predicted U.S. production of concentrated milk protein products would likely “remain limited so long as the current structure of the Federal Orders and Dairy Price Support Program remained in effect.”

The reality today is that, even though the U.S. is making more concentrated milk protein products than back in 2004, the conditions for competition have not significantly changed. Concentrated milk proteins are still not recognized by the Federal Orders and are not addressed by the Dairy Price Support Program. Furthermore, countries that export these products continue to subsidize them, and U.S. companies that import these products continue to enjoy negligible tariffs and no quotas.

In fact, the 2004 USITC report stated that, “If conditions become such that U.S. producers can be competitive with other countries in the production of concentrated milk protein products, then the degree of direct substitution between imported and U.S.-produced milk proteins could increase as imported and U.S.-produced milk proteins could compete in the same form (i.e. U.S.-produced MPC versus imported MPC as opposed to U.S.-produced skim milk powder versus imported MPC.)”

Meanwhile, the U.S. dairy industry and DMI continue to promote the innovations and products that use these concentrated milk proteins, even though U.S. producers are still not operating under conditions where they can be competitive with other countries in the full-out production of these concentrated milk proteins to secure our market share.

We are in a situation where the industry is asking itself: What comes first? The proverbial ‘chicken’ or the ‘egg’… the demand or the production … the regulatory change or the dividend back to farmers.

The regulatory side of the equation has severely lagged behind the innovations in the marketplace. And within this void are the countries already exporting these products to the U.S. This is a real problem for the competitive position of the American dairy farmer in this new growth market for ‘reinvented milk.’  

‘WHEYING’ IN ON DEDUCTIONS.

In the case of whey protein, the current situation is showing up on the milk checks of U.S. dairy producers as a flat-out deduction. Not only is there no government support price for whey, but there is this government-mandated make allowance of 19.91 cents per pound that producers must pay to processors, which reflects their arbitrary cost for converting milk’s ‘other solids’ to dry whey or WPC.

According to a half dozen Pennsylvania dairymen who have shared their milk check deductions with Farmshine, the value of ‘other solids’ is ranging from a monthly deduction of minus-$200 for a 60-cow herd to minus-$3,300 for a 700-cow herd.

It is obvious that dairymen have been caught holding the bag since whey prices began their free-fall in December. Meanwhile, the U.S. has imported more substitutable milk protein products than ever before from December 2008 through February 2009.

Even though the U.S. is a major producer and exporter of WPC and WPI, the USITC indicated in its report that the U.S. is also a significant importer of both.

In addition to substitutable MPC imports, the trend of WPC imports is up by 122% in the first two months of 2009. But at the same time, other whey product imports are running well below year ago, so the net average increase in all imported whey products is more like 30%.

On the export side, in December and January WPC sales abroad were down, but they did improve in February. The Foreign Agricultural Service (FAS) reports that U.S. whey exports for the first two months of 2009 were up 16% from the same period in 2008. USDA says those exports accounted for 39% of total whey produced in January and February.  

MORE IMPORTS VS. NEGATIVE SOLIDS DEDUCTION—COINCIDENCE?

December, January, and February were absolutely huge, record-breaking months for imported MPC. So what we have is a dramatic increase in MPC imports occurring in the same months in which dairy farmers have been experiencing ‘negative solids’ deductions on their milk checks. Is this a coincidence?

Even more troubling, according to USDA reports, the rock-bottom prices for dry whey and WPC have prompted a slow-down in U.S. dry whey production. Yet the whey make allowance is paid on the ‘other solids,’ regardless of whether the market encourages conversion of these solids to products for sale. Even though dry whey production has slowed, and dry whey exports have improved, and U.S. dry whey inventories are diminishing, we still have the USDA-calculated dry whey product price for the first two weeks of April at more than a penny per pound below the make allowance of 19.91 cents.

Do milk protein imports add to the supply side of this negative equation? The 2004 USITC report gives a clue to the answer as it identified WPC as one of several main dairy-based ingredients for which imported MPC can be substituted. 

MEANWHILE: NO TARIFF ON IMPORTS AND NO ‘SNUBBER’ FOR WHEY.

When multiple component pricing and ‘make allowance’ rules were introduced with Order reform in 2000, a ‘snubber’ was considered for the whey make allowance. Dr. Cameron Thraen, Ohio State University dairy policy expert, describes the ‘snubber’ as a provision that would have stopped the ‘negative solids’ deduction at zero.

“If we go back before 2000, we priced milk in this country without the make allowance rule. We relied on a competitive market situated in the upper Midwest to arrive at these prices. In 2000, we got rid of that system and went to this rigid system,” Thraen explains. “One of the things that was considered at that time was a ‘snubber,’ which is a term for a provision in the pricing formulas. If it were in place today, then the pricing rule would say that when the whey wholesale price drops below the 19.91 cents per pound make allowance, there is no negative deduct, and the impact on the milk check would have just stopped at zero.”

During Federal Order reform, processors (and apparently USDA) felt as though milk producers should pay this negative value, when it occurs, so they can get the marketplace signal quickly and adjust their production accordingly.

Yet, at the same time, there are no special safeguards on imported substitutable milk protein products.

Graphic Caption –

There is one notable change in the reprinting of these graphs from last week’s Farmshine cover: February’s import data became available after press-time last week, and as you can see, 2009 is starting out with a bang in terms of monthly metric ton imports of milk protein concentrate (MPC). With February’s large volume now added to this graph, the year-to-date quantity of MPC imports for the first two months of 2009 (13,230 MT total, averaging 6600 MT per month) is up 72% from the first two months of 2008 and 87% higher than the 10-year-average.

Photo caption:

In addition to the conversation raised here at home by this ‘Muscle Milk’ in my fridge, my family has been sampling the other MPC- or MPI-containing products purchased for last week’s Farmshine cover photo. I have to say: The nutritional meal replacement drinks—chocolate Boost and strawberry Ensure—are pretty tasty. The Dannon Light and Fit yogurt drink was okay, but a little ‘chalky’ compared to regular yogurt drinks that have long been a hit in this household, but are lately harder to find at the store. We also made grilled cheese sandwiches with Borden’s special “Grilled Cheese Melts,” which, like the five other brand name and generic packages of individually-wrapped processed cheese ‘product’ now take up space in my fridge, receiving a thumbs-down on flavor and texture, from my family anyway.)

‘Not really milk?’

By Sherry Bunting

“Did you know that stuff you have in the fridge is not really milk?” asked my husband Scott with a sly smile and a ‘gotcha’ look. He thought he had a revelation for me—the dairy promoter in the family— about the ‘stuff’ in the fridge.

He had just finished drinking the contents of the bottle labeled ‘Genuine Muscle Milk,’ a chocolate-flavored nutritional shake I had purchased for Farmshine’s cover photo last week portraying a sampling of products containing milk protein concentrate or milk protein isolate. Days earlier, he had watched me set up that photo on our kitchen table and rightly assumed I was writing about milk.

To understand the dynamics of this conversation, you have to realize that Scott is not a dairy farmer—never was—and he doesn’t share my level of involvement in the dairy industry, as he is an excavator by pedigree and by trade.

Nevertheless, he loves milk. Finding the ‘Genuine Muscle Milk’ tasted a little off-flavor and being one to read labels far more than I do, he was anxious to enlighten me on his discovery about the ‘stuff’ in the fridge.

“I just wanted to make sure you weren’t promoting something as ‘milk’ when it’s not really ‘milk.’ It doesn’t even contain ‘milk,’” he continued to prod for my response.

His question made me think back on something I had read that was written in 2004, when the mainstream beverage market for filtered dairy ingredients was just beginning to burst open. A nutrition and food expert from Germany had said in a nutrition industry magazine article that delving into the functional fractions of milk to glean new product categories held great opportunities for the dairy industry, but at the same time, he cautioned that milk “has always enjoyed a healthy image, and some people are not really happy if something as valuable as milk is played around with.”

With this in mind, I began explaining to my husband the concept of ‘milk protein concentrate’ or ‘milk protein isolate,’ and how these ingredients are actually the concentrated protein, ultrafiltered ‘functional’ fractions of natural milk that have had most of the lactose or ‘carbs’ removed.

Alas, my explanation was in vain. As his eyes glazed-over with boredom (or confusion), he simply sighed, and said: “Yeah, like I told you… It’s not really milk.”

Columbia County dairymen provide perspective on current issues

Reckoning with the first ‘zero-balance’ milk check in three generations of history on the farm 

By SHERRY BUNTING

Special for Farmshine

BLOOMSBURG, Pa.—Never in the history of three generations at Robbins Farm has there ever been a ‘zero balance’ on the milk check… until now.

“Normally, we can average anywhere between $5000 to $10,000 after deductions, but for February, we actually had an ‘insufficient funds’ final milk ‘check’ that was a negative-$2155,” says Columbia County dairyman Boz Robbins. He and his brother Andy are partners in the 250-cow dairy and are currently milking just 210 cows.

After the standard deductions for trucking, Mid-Atlantic Marketing Services, American Dairy Association, and National Dairy Promotions, Robbins Farm also has their mortgage with Farm Credit deducted from the milk check as well as their loan with the Farm Service Agency. (While visiting farms throughout Pennsylvania in March, I found that Robbins Farm is not alone in receiving a ‘negative’ final milk ‘check’ for February shipments. I was told, repeatedly, of other dairies that had similar ‘insufficient funds’ notices in March for their February milk.)

“February is always a close month with one less pickup, and we budget for that, so we have always had enough to pay our bills at the end of the month,” Boz affirms. “This is the first time we came up short.”

Like many dairies these days, Robbins Farm is down in cow numbers and in milk production because they have been forced to cut expenses wherever they can in order to preserve some sort of cash flow. If the money isn’t there, then some things are eliminated because they simply cannot be paid for… whether or not they directly improve production. These are the cash-flow realities dairy farmers are dealing with on a daily basis in these economic times.

Thankfully for Boz and Andy Robbins, the final March milk check was a positive number, but not by much. For the two months of February and March combined, they received a net value of little more than $1000 for their milk from 210 cows.

Furthermore, the March deduction for the nonfat solids—at 3 ½ cents per pound—amounted to a loss of nearly $700, which is like losing a whole week’s pay considering their net income for the 355,500 pounds of milk shipped in March was a mere $3544—that’s just under $1 per hundredweight to pay cost of production, not to mention accounting for the negative $2000 in net value from the month before.

“We’ve had $9 and $11 milk before, but we have never had an ‘insufficient funds check’ before,” Boz explains. “It’s the low price of milk combined with the inputs, refinances, and expenses being so much higher today.” He also points out that when farmers have to go out and get operating loans to cover such losses and pay their expenses, this “makes the payment (coming out of the future milk checks) higher yet.”

To cover expenses, Boz had to take money out of his fund for the field crops. His seed is paid for, but now he’s in the position of having to figure out where to get the dollars for the crop inputs like fertilizer, chemicals and fuel. For dairy farmers who hire custom operators, they must also have the money to pay them promptly. In fact all of these inputs are expenses that must be paid promptly, since the businesses selling these goods and services are usually not positioned to extend credit.

At Robbins Farm, Boz is the crop man and his brother Andy is the cowman. “We’re the third generation here,” says Boz. “And if prices stay this way, there probably won’t be a fourth generation.”

Andy’s sons Jai and Jason are employed off the farm, one as a mechanic and the other as a loader-operator. Boz’s son Eric is headed to Penn Tech in Williamsport, where he plans to study architectural drafting.

The brothers both thoroughly enjoy dairy farming and would love to see their sons more involved. But the financial picture and the seven-day, 365 days a year workload is a tough sell to the younger generation. With the volatile down cycles, it’s difficult to create a business environment where the next generation can be appropriately compensated and have the opportunity for some weekends off as well.

Boz is active in the Columbia County Farm Bureau, serving on the board. In fact, he participated in the legislative visits to Harrisburg in March, where many agricultural concerns were discussed with Pennsylvania senators and representatives.

He shared several concerns on the horizon that will make an even more difficult situation for dairymen. From the new regulations that have dried up rendering outlets for cattle mortalities and new regs being considered for operating large farm equipment on public roads, to proposals for turnpike tolls on Route 80 that would affect their hauling costs for milk going out and feed coming in—the costs to the dairy farmer for the basics of doing business are steadily growing. They also talked to legislators about the 18% cut in agriculture versus an 8% cut in other areas of the Governor’s budget for Pennsylvania.

One of the big issues he and others discussed with their legislators is the attack on animal agriculture by the Humane Society of the U.S. “We could be facing the loss of therapeutic treatments for our cattle,” Boz reports. “I ask people: Does your mother get a flu shot? It’s the same principle.”

“Most farmers cannot afford to misuse medicine. But they also can’t wait until the animal is totally down to treat her,” adds his brother Andy. “We reserve the use of medicine for sick animals, but to continue doing a good job with animal health, we must have access to over-the-counter products.”

Boz is outspoken about the milk marketing system and is quick to point out that even though USDA says producers vote all of these systems into existence, “We really don’t. It is all done by block voting through the cooperatives because they represent 70 to 80% of the dairy farmers and cast one vote for all,” he says, adding that the vote is always ‘yes,’ because if they ever voted ‘no’ to a USDA change in the Federal Order, that would end the Federal Order completely.

Robbins Farm ships milk to Readington Farms Inc. bottled for the Shop-Rite supermarket chain. Their milk goes 100% to the fluid market and can end up on store shelves in any of seven states, including New Jersey and New York.

“We are fortunate in that we automatically get the premium, even though the milk isn’t always sold in Pennsylvania,” Boz reports. “Our independent milk company (Readington Farms) actually just raised our premium to $1.50 per hundredweight because they know the milk price is too low.”

In light of this fact, Boz is very disappointed with the Pennsylvania Milk Marketing Board’s recent decision to deny the expansion of the over-order premium to Pennsylvania milk sold out of state.

“They had the chance to vote for all producers in Pennsylvania and they did not,” he declares. “That over-order premium (as it stands now) only covers 17% of the milk from dairy farms in this state. They could have taken the first step, and others would have followed. It really bothers me that they did not stand up and be wholesome to their dairy farmers. I’m convinced if they had voted ‘yes’ to expanding the premium, they would have gotten no flack for it.”

To this point, Boz cites the fact that in the Northeast we have “Pennsylvania and New York being among the largest milk producing states in the country. If the premium for Pennsylvania milk had been expanded, New York would have followed,” he asserts. “The PMMB had the chance to start something good, but they blew it.”

Asked where the milk price needs to be to cover costs on the dairy farm, Boz says that, “It’s hard to get a grasp on that right now with input costs fluctuating. But milk producers will not make any money until it is at least $16 to $17 per hundredweight, and that’s only if input prices stay right where they are.”

“That covers basic expenses,” he adds, noting that to cover the barns, debt load, reinvesting in the business, and return to management, “the price should be more like $25 per hundredweight.”

Responding to a question on the concept of supply management or quota systems, Boz indicated he believes they could work, but at the same time, he says that, “It would hit everyone at a bad time if implemented right now.”

He observes that many farms, including Robbins Farm, have cut back on herd numbers. He also acknowledges the importance of allowing for regions to get back some of the market share they have lost, and he believes that a supply management system would have to go back 10 years to make a base and somehow coordinate that with present capacities and the future.

In spite of the current economic hardships, Boz and Andy Robbins are committed to continually improving their dairy farm in ways they can afford. In fact, part of their mortgage reflected in the milk check deductions is in relation to rebuilding in 1996 after half of their 1976 barn collapsed. Then in 1997, they rebuilt the milking center and holding area after a fire.

Their barns are clean and comfortable and their obviously healthy calves are housed in clean well-ventilated pens. They also have in place a Dairy Profit Team through a grant from the Center for Dairy Excellence.

With somatic cell counts currently at around 200,000, they continue to work on improving the herd’s udder health and milk quality—even though they already receive the maximum premium for their milk and would not receive any additional bonus for further reductions in SCC.

“We’re always working to make a better quality milk product,” says Andy. “We drink our own milk, and we take personal pride in our product. We want the best quality product we can get going out the door.”

Captions:

Columbia County 5679(BozRobbins) –

Boz Robbins, at his desk, goes over the final milk check for March shipments after printing a copy of his “insufficient funds” report for February shipments. In March, Robbins Farm was among many dairies receiving negative milk value for February production after standard deductions as well as mortgages on facilities and FSA operating loans were also subtracted.

Columbia County 5676(Robbins)

While the milk truck takes the last April pickup from Robbins Farm, Boz and his brother Andy reflect on the past two months and the concerns they have about the future.

Columbia County 5696(Robbins)

Andy (left) and Boz Robbins take personal pride in the quality of the milk they produce and are currently milking 210 cows with capacity for 250. They love dairy farming and are not alone in feeling the pressure of ever-increasing costs and regulations coupled with a more than 40% loss in their milk income this year. This facility was built in 1976, and since then, they have survived the collapse of half the barn in 1996 and a fire that destroyed the milking parlor and holding area in 1997. Insurance helped, but part of the debt load they carry relates back to rebuilding after these events. In most any other business, the price of goods sold is based, in part, on having a return to assets and management that allows for proper maintenance and improvements. How are dairymen to continue reinvesting in their dairy farms with such dramatic, out-of-control swings in the cost of their inputs and the value of their output?

NFFC hails proposed legislation, joins Farm Aid

to inform consumers as dairy crisis deepens 

By SHERRY BUNTING

Special for Farmshine

WASHINGTON, D.C.—While Congress is set to debate its supplemental spending bill, which sources say will contain some additional dollars for farm credit through the Farm Service Agency (FSA), the National Family Farm Coalition (NFFC) is pressing forward with declarations that more needs to be done to bolster the dismal position of U.S. dairy farmers.

“Low milk prices and high costs of production are reeling in the effects on dairy farmers and putting U.S. production of dairy foods at risk,” said Wisconsin dairy farmer and NFFC dairy subcommittee chair Paul Rozwadowski during a media teleconference on Tuesday (May 19). “Dairy farmers are selling out at devalued prices. There are delays in planting crops as loans are difficult to obtain due to eroded equity and the devaluation of farmers’ assets, and dairy farmers are having trouble paying their bills.”

NFFC has been hopeful that a new administration in Washington would be inclined to bring about relief to America’s dairy farmers. They have called upon Agriculture Secretary Tom Vilsack to implement an $18 per hundredweight floor on the price of milk—money that would come from processors, not taxpayers.

Arden Tewksbury, a Pennsylvania dairy farmer and director of Progressive Agriculture, discussed U.S. Senate Bill S. 889 introduced by Senators Arlen Specter and Bob Casey (Pennsylvania), which would give some long term support by reforming the way milk is priced to include a cost of production formula.

He noted that last week 23 members of Congress sent a letter to Secretary Vilsack indicating the need to change the milk pricing to reflect cost of production.

Farm Aid, a supporter of NFFC, has also joined the efforts by striving to enlighten consumers and get them to take action by signing a petition at their website (www.farmaid.org/dairyfarmers). The petition (reprinted in this week’s Farmshine) predicts a loss of 20,000 of the nation’s 60,000 dairy farms by year-end and calls upon Secretary Vilsack to take immediate action in using his authority under Section 608c (18) of the Agricultural Marketing Agreement Act of 1937 to adjust farm the milk price to “reflect the price of feeds, the available supplies of feeds, and other economic conditions which affect market supply and demand for milk and its products.”

“If ever there was a time for the Secretary of Agriculture to use this power, it is now,” the Farm Aid petition states. “You have the power, and the responsibility, to change the fate of countless hardworking men and women for the better, and they need you to do the right thing.”

            According to Jennifer Fahy, a representative of Farm Aid who participated in Tuesday’s media teleconference, this petition and its signatures by farmers and consumers nationwide will be hand-delivered to Vilsack on June 2, at the start of June Dairy Month.

Farm Aid, based in Somerville, Massachusetts, is also working with dairy farmers across the country to put on a rally May 30 in Manchester, Iowa.

Through both the petition and the rally, Farm Aid leaders hope to involve as many consumers as possible in this effort “to join with and stand alongside dairy farmers to turn this crisis around,” said Fahy. “We also want to find out why processors are paying dairy farmers half the cost of milk a year ago and charging more than three times that amount to consumers.” Fahy noted that Dean Foods reported first quarter 2009 earnings that are double the fluid milk giant’s earnings a year ago.

“I’ve been in the dairy business over 50 years and this is the worst crisis I have ever witnessed between the low milk prices and high cost of production. This did not just start yesterday or three months ago,” said Tewksbury as he traced the dairy policy roadmap from 1974, when the door was first opened to substantial imports, to the support price freeze in 1981, to Federal Milk Marketing Order Reform in 2000, which he called: “A processors dream and a dairy farmers nightmare.” Since then, said Tewksbury, “we have seen low prices in three out of the last five or six years.

“We have tried the USDA Federal Order hearing process,” he continued. “We have tried to prevent the make allowance, and then we tried to modify the make allowance. We went to Congress in 2007 with legislation (introduced at that time by Senators Specter and Casey). But it was tied up in the Senate Ag Committee and never made it to the floor. Now these two senators have reintroduced this legislation as the Milk Marketing Improvement Act of 2009.”

Tewksbury described Senate Bill S. 889 as being similar to the proposed 2007 legislation. One improvement in the 2009 version is that the pricing formula is geared a little differently to be more favorable to the upper Midwest compared with the 2007 proposed legislation. Another difference, he said, is that the 2009 bill addresses dairy imports.

“Imports of milk protein concentrate (MPC) are accelerating, to say nothing about the casein imports,” said Tewksbury. “Here we are today with MPC and casein imports raising havoc in the U.S. market” amid a global economic crisis.

He noted that Monday on the Chicago Mercantile Exchange there were no products sold… “There were no bids,” he said. “And this is what our current Order pricing is based on. We must have a new pricing formula, and we do insist that it has to be a pricing formula that considers the dairy farmer’s cost of production. If supply management is considered, it must also address imports.”

NFFC media teleconference organizers said that they are working with several others in Congress to sponsor introduction of the Milk Marketing Improvement Act of 2009 in the U.S. House of Representatives as well. They have also garnered support from organizations such as the National Farmers Organization (NFO) and Farm Aid. In addition, several county commissioners from Pennsylvania and New York have approved and sent resolutions to Congress in support of this legislation.

Ohio dairy farmer and president of the Ohio Farmers Union, Bryan Wolfe, talked about the credit crunch exacerbating the situation on dairy farms today. “There are loans approved by FSA—the lender of last resort—but no money available from FSA to make good on those loans,” said Wolfe, who noted that FSA estimates the increase in loan applications is 77% above year ago. He also cited a Wall Street Journal story this week, which identified the difficulty farmers are having in receiving the necessary credit to plant their crops.

“There are scores of applications approved, but no money to see them through. We’re hopeful the Senate’s supplemental spending bill will put funding into these FSA direct loans to farmers,” said Wolfe. “We are very concerned about farmers this week trying to get crops in the ground without access to credit for their inputs.”

The teleconference organizers highlighted the fact that a combination of approaches is necessary. Credit is critical in the short term, milk pricing formulas are key in the longer term, and there is great concern for the rural communities that depend on strong agriculture and strong dairy farms for their economic survival.

IMAGE CAPTION:

At www.farmaid.org, just below the trademark Farm Aid logo of a blue tractor with the American flag waving and the photos of music artists John Cougar Mellencamp, Willie Nelson and Neil Young who founded the organization and the Dave Matthews Band who joined in 2001, this image appears front and center—alerting website visitors to take action on behalf of dairy farmers. A click of the “Take Action” button brings vistors to the portion of the website aimed at consumers, where they can read and sign the following petition that will be hand-delivered to U.S. Ag Secretary Tom Vilsack on June 2. The “Missing” milk carton goes on to identify the missing person as:

Name: Joe

Occupation: Dairy Farmer

Last seen: Selling dairy cattle to try and save his farm.

Photos and image by Farm Aid at www.farmaid.org