In recognition of your time, we’ll attempt to summarize recent events or actions making dairy headlines and reported in our weekly digital newsletter, Progressive Dairyman Extra. Then, we’ll try to put that news into perspective and briefly describe how it might affect you.
Finding and keeping a milk market has become less certain for dairy producers. Now, with culling at a record pace, farmers selling cows and other dairy-beef cattle for slaughter could face additional challenges.
Livestock marketing organizations say major cattle buyers will require sellers to be certified through the Beef Quality Assurance (BQA) or Farmers Assuring Responsible Management (FARM) program as early as the new year.
Wisconsin-based Equity Cooperative Livestock Sales Association and Milwaukee Stockyards posted notices on their websites informing sellers they must be certified through BQA or FARM programs to receive bids on cattle from two major companies.
Tyson Foods will implement the requirement effective Jan. 1, 2019; JBS Packerland will implement the requirement a year later, on Jan. 1, 2020. The requirement is to be implemented in all auction markets and all private-treaty transactions. Auctioneers will be required to announce seller certification at the time of sale to receive bids from the two companies.
Bottom line: BQA or FARM certification is becoming necessary to receive competitive bids on dairy cattle sold at public auction.
Last year, schools were allowed an exemption from a 2012 rule that eliminated low-fat flavored milk as an option in school meal and a la carte programs. Under that exemption, schools could begin offering flavored low-fat milk – if the school demonstrated either a decline in student milk consumption or an increase in school milk waste.
Since implementation of the 2012 rule, milk consumption in schools has dropped. Students consumed 288 million fewer half-pints of milk from 2012 to 2015, even as public school enrollments grew.
A final rule – titled “The Child Nutrition Programs: Flexibilities for Milk, Whole Grains and Sodium Requirements” – was published in the Federal Register on Dec. 12, 2018, and becomes effective 60 days later. The rule makes permanent the changes U.S. Ag Secretary Sonny Purdue initiated to streamline the process by which schools can serve low-fat flavored milk.
Specific to dairy, the rule will broaden the milk options in the National School Lunch Program and School Breakfast Program, allowing local operators to permanently offer flavored low-fat milk. For consistency across nutrition programs, it will also allow flavored low-fat milk in the Special Milk Program for Children and in the Child and Adult Care Food Program for participants ages 6 and older.
In addition to addressing fluid milk, the rule provides schools more time to reduce sodium levels in the lunch and breakfast programs, likely allowing cheese manufacturers to make product adjustments without sacrificing product quality, food safety and other critical attributes.
Bottom line: A final rule giving schools greater flexibility in the varieties of milk offered to students could be in place by mid-March, in time to make milk purchasing decisions for the 2019-2020 school year.
DAIRYAMERICA CLASS-ACTION LAWSUIT
As we’ve featured here previously, a $40 million settlement was reached in the lawsuit Carlin et al. v. DairyAmerica Inc. et al. The case stemmed from the misreporting of nonfat dry milk (NFDM) prices to the USDA’s National Ag Statistics Service (NASS) by DairyAmerica Inc., a federated marketing cooperative and the largest U.S. marketer of NFDM. Because those NFDM prices were used in calculating Federal Milk Marketing Order (FMMO) minimum milk prices, dairy farmers were paid lower milk prices than they should have received.
Eligible dairy farmers have until Jan. 28, 2019, to return a claim form for their share of a class-action lawsuit settlement. Qualified producers – those who sold raw milk through a FMMO during the period Jan. 1, 2002 through April 30, 2007 – should have already received a claim form regarding the settlement from Rust Consulting. Farms selling milk to multiple co-ops or marketing milk through multiple FMMOs during the period received more than one claim form.
Producers can accept the milk volume listed in the claim forms or dispute it and provide their own documentation to substantiate the milk volume they marketed. Producers can also opt out of the settlement, leaving options open for other legal action.
As in previous class action lawsuits, dairy farmers may be approached by third-party firms offering to fill out and file the claims in exchange for a percentage of the payment. According to Rust Consulting, the forms can be easily filled out without additional assistance.
After the claim forms are submitted, the court will hold a hearing on March 18 in Fresno, California. At the hearing, the court will consider whether to approve the settlement. As in other class-action lawsuits, attorneys’ fees may take up to one-third of the total settlement, leaving about $27 million to be distributed to eligible dairy producers. In addition to the volume of milk marketed, individual payments will be based on the number of dairy farmers who submit valid claim forms.
Bottom line: Return claim forms by Jan. 28, 2019, to be eligible for a settlement payment in the class-action lawsuit.
TRADE AGREEMENTS AND DAIRY EXPORTS
U.S. President Donald Trump joined Canadian Prime Minister Justin Trudeau and outgoing Mexican President Enrique Peña Nieto in signing the U.S.-Mexico-Canada Agreement (USMCA) during the G20 Summit Meeting in Buenos Aires, Argentina, Nov. 30.
And, during the same meeting, President Trump and Chinese President Xi Jinping declared a 90-day truce in an escalating trade war and between the U.S. and China, with the U.S. putting on hold an increase in import tariffs scheduled for Jan. 1, 2019.
The USMCA still requires approval from Congress and legislative bodies in Mexico and Canada. If ratified, the agreement preserves duty-free market access to Mexico, the number one foreign market for U.S. dairy products.
The agreement also provides incremental increases in U.S. dairy product access to the Canadian market and calls for elimination of the Class 7 pricing system in Canada, a system that effectively closed the market to U.S. ultrafiltered milk.
However, the USMCA doesn’t lift U.S. Section 232 tariffs on steel and aluminum imports, which in turn leaves retaliatory tariffs imposed by Mexico and Canada on many agricultural products, including dairy, as barriers to exports.
The truce in the U.S.-China tariff wars may mean progress can be made in separate trade talks. Retaliatory tariffs sharply curtailed U.S. ag exports, including cheese and other dairy products, to China.
Bottom line: While the USMCA is a start, the ongoing dispute over aluminum and steel must be resolved to eliminate tariff barriers to U.S. dairy exports.
- Progressive Dairyman
- Email Dave Natzke