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An Article Worth Another Read...
Friday, June 28, 2013

The Debate Over Dairy Policy Reform Continues; IDFA Continues to Spew Out Their Propaganda
By Rob Vandenheuvel, General Manager

Last week, we reported on the disappointing news from Washington, DC that the House of Representatives had approved the “Goodlatte/Scott Amendment” to the Farm Bill, which severely weakened the dairy reform proposal (Dairy Security Act) that was approved by the House Agriculture Committee.  We also reported that the House ultimately rejected their amended version of the Farm Bill, putting us in limbo for the time being.  On the other side of the Capitol, the Senate has already approved their version of the Farm Bill, which includes the Dairy Security Act as the dairy reform proposal.

With all that as background, the debate over the future of our dairy safety net policies continues in Washington, DC.  This week, yet another press release was published by the International Dairy Foods Association (IDFA), the main lobbying organization for the nation’s processors.  The press release, which can be found at: http://www.idfa.org/resource-center/market-information/update-on-dairy-markets/details/8297/, attempts to paint the Goodlatte/Scott Amendment as the optimal proposal, going so far as to argue that the Goodlatte/Scott Amendment would actually result in less U.S. taxpayer funds being expended (compared to the Dairy Security Act).

While IDFA likes to cite an analysis by the Congressional Budget Office, their claims simply fail to pass the “logic test.”  Let me demonstrate what I mean:

Click HERE to read the full article.

An Article Worth Another Read...
Friday, May 31, 2013

A Reminder of Just How Shameless the Processor Lobby Is
By Rob Vandenheuvel, General Manager

We’ve all heard the statement before: “Processors need producers and producers need processors.”  There’s a fundamental truth behind that statement, but it glosses over some of the fundamental differences between the producer and processor sectors of our industry.  Every once in a while, we get a clear reminder of just how fundamentally different our priorities are from the processors, and this week was another one of those reminders.

Earlier this week, the International Dairy Foods Association (IDFA) published and distributed a one-page document entitled: “Dairy Security Act Would Raise Prices on Consumers and Reduce Government Nutrition Program Assistance.”  The document is a direct attack on the Dairy Security Act, arguing that the program – which has been included in the 2013 Farm Bills that were approved by the House and Senate Agriculture Committees – would result in milk price increases that “would hurt rather than help middle class Americans when they need it the most.”

IDFA’s shameless propaganda can be found on their website at: http://www.idfa.org/key-issues/category/dairy-policy--economics/farm-bill/details/8229/.  According to the document, the Dairy Security Act “would have raised the price of a gallon of milk by over 35 cents at the peak of the 2009 recession, when more than 15 million Americans were unemployed.”  IDFA is attempting to convey a message that U.S. dairy farmers – who collectively lost billions of dollars in 2009 due to milk prices that failed to cover the costs of producing that milk – have a responsibility to make sure that dairy products are as cheap as possible for all who buy them, and they are shamelessly pointing to government assistance programs as the folks who would have to pay more for their dairy products.

This line of arguments coming from IDFA should both offend and anger every dairy farmer in the country.  Before getting into the specific claims made in the document, let’s get a couple things straight.

Click HERE to read the full article.

An Article Worth Another Read...
Friday, May 10, 2013

2013 Farm Bill: Why the "Goodlatte-Scott Amendment" is the Wrong Policy for our Dairy Industry
By Rob Vandenheuvel, General Manager

Next week, both the Senate and House Agriculture Committees are scheduled to hold “markups” of the 2013 Farm Bill.  During the markups, both Committees will be debating the Farm Bill, considering proposed amendments and ultimately voting on what language should be included in the Farm Bill that is sent to the full Senate and House of Representatives for a vote.

Both of the Committees have released their initial versions of the Farm Bill, and while the overall bills have differences, the dairy portions of the bills are very similar.  Both include provisions from the Dairy Security Act, which is supported by dairy organizations and cooperatives around the country.  As a reminder:

bullet The Dairy Security Act would replace our current “safety net” programs of the Milk Income Loss Contract (MILC) and Dairy Product Price Support Program (DPPSP).
bullet The Dairy Security Act includes two main pieces: (1) the Dairy Producer Margin Protection Program (DPMPP) and the Dairy Market Stabilization Program (DMSP).  Participation in these programs is voluntary.
bullet The DPMPP – often referred to as the “margin insurance program” – would provide dairies that sign up with direct payments when national “milk-price-over-feed-cost” margins fall below certain thresholds.  Dairy farmers could sign up for the basic program or opt for an enhanced program that requires producer premiums, but provides more frequent and larger payments.
bullet The DMSP is a standby program that would only be triggered in during periods of low-margins and would incentivize dairies to temporarily cut back milk production in order to restore milk and dairy product supply/demand balance in the marketplace.  The DMSP only applies to dairies that opt to enroll in the taxpayer-funded DPMPP.

While you can never be exactly sure what amendments are brought up for debate and vote during these markups, it is a certainty that in the House Agriculture Committee, an amendment – known as the Goodlatte-Scott Amendment – will be brought up that would fundamentally change the dairy provisions in the Farm Bill.  For those who are unfamiliar with the Goodlatte-Scott Amendment (which was brought up during last year’s Farm Bill debate, but rejected by the House Agriculture Committee), it would replace the Dairy Security Act with a stand-alone margin insurance program, with higher premiums paid by dairy farmers, but no Dairy Market Stabilization Program.

Milk Producers Council, along with dairy organizations and cooperatives around the country, has supported the inclusion of the Dairy Security Act in the 2013 Farm Bill and asked that the House Agriculture Committee reject the Goodlatte-Scott Amendment.  A letter signed by our coalition of supporters can be found at: http://www.nmpf.org/files/Coalition-of-Dairy-Organizations-Supporting-DSA-050813.pdf.  On the other hand, the Goodlatte-Scott Amendment is being supported by the nation’s processors – represented by the International Dairy Foods Association (IDFA).

Why is Milk Producers Council so supportive of the Dairy Security Act and so opposed to the Goodlatte-Scott Amendment?  It’s actually quite simple.  MPC supports programs that result in MARKET-BASED profitability for U.S. dairy farmers, which is what the Dairy Security Act represents.  The Goodlatte-Scott Amendment does not prioritize market-based profitability, but rather represents a taxpayer-funded corporate welfare system for dairy farmers.

Click HERE to read the full article.

An Article Worth Another Read...
Friday, February 22, 2013

A Look at California "Pooling"
By Rob Vandenheuvel, General Manager

Much of the recent discussion regarding the California milk pricing system has focused on the various monthly minimum prices that are announced by the California Department of Food and Agriculture (CDFA).  The issue of how our Class 4b price is calculated vs. how the Federal Order Class III price is calculated has been a regular feature in this newsletter and other publications.  But it’s important to recognize that those minimum prices are only part of the story.  Dairy farmers in California are paid based on a blend – or “Overbase” – price, which is a weighted-average calculation that includes prices paid for milk in all five classes.

The five minimum prices that are announced each month determine what processors must pay for the milk they need.  However, milk pooling is designed to allow every dairy in the pool to share equally in the pooled revenues from the sale of California milk.  That means that a dairy farmer shipping milk to a fluid plant (Class 1) receives payment based on the same Overbase price as a dairy farmer shipping milk to a cheese plant (Class 4b).

Where the minimum price formulas and pooling collide is the relationship between the various class prices and the overall blended Overbase price.  When a plant’s monthly minimum price is below the calculated Overbase price, that plant is entitled to a “pool draw” to make up the difference.  On the other hand, when a plant’s monthly minimum price is above the calculated Overbase price, that plant must make a “pool contribution” for the difference.  To demonstrate this, let’s take a look at the most recent data available for January 2013:

Click HERE to read the full article.

Press Release
Wednesday, December 5, 2012

MPC Board of Directors Votes to Support Assemblyman Richard Pan’s California Milk Pricing Legislation

CALIFORNIA This week, Milk Producers Council’s Board of Directors voted to support AB 31 (Pan), a bill that would provide much-needed changes to the way California calculates prices for milk produced in California.  The bill, which was introduced this week by California Assemblyman Richard Pan (D-Elk Grove/Galt/Lodi), can be found at http://goo.gl/8Le1u.

Click HERE to read the full press release.

Press Release
Thursday, October 18, 2012

CDFA Secretary Karen Ross Completely Misses the Point
Action, Not Just Words, Is What Dairy Families Need Right Now

CALIFORNIA Today, Milk Producers Council’s General Manager Rob Vandenheuvel put out the following comments in response to a “Statement on Milk Pricing” published by the California Department of Food and Agriculture (http://www.cdfa.ca.gov/dairy/MilkPricingStatement.html):

“As many California dairy families stood on the State Capitol steps this morning demanding a fair price for the milk they produce, the California Department of Food and Agriculture (CDFA), led by Secretary Karen Ross, put out an extremely disappointing ‘Statement on Milk Pricing.’  Over the past several years, California dairy farmers have expressed growing frustration over how CDFA establishes monthly prices for milk sold in the State.  However, what was once just a frustration has now culminated into financial devastation, with scores of California dairies reportedly already in bankruptcy, and the rest in dire financial straits.

“The economic challenges that face dairy families in California and throughout the U.S. are well-documented.  Dairy farms are being squeezed between record high feed costs and milk prices that have failed to cover those costs month-after-month, leaving the dairies swimming in losses.  However, adding insult to injury in California, our Department of Food and Agriculture, which is tasked with establishing on-the-farm milk prices that are in a ‘reasonable and sound economic relationship’ with what comparable milk is being sold for around the country, has overseen more than two years of a steep discount in what a large portion of our milk is sold for in California.  In other words, while the U.S. dairy industry has certainly been having a difficult time, Secretary Ross has seen fit to sit idly by as her State’s dairy farmers go through utter devastation, with CDFA’s own policies much to blame.

“Specifically, dairy farmers point to CDFA’s pricing policies with regard to milk sold to California cheese manufacturers, which is where about 40-45 percent of the State’s milk production is currently being sold.  CDFA announces a monthly ‘Class 4b’ price, which applies to the California cheese manufacturers buying California milk.  A similar system operates around the country, which is known as the Federal Milk Marketing Orders.  That system includes a monthly ‘Class III’ price, which also applies to cheese manufacturers operating under that system and buying milk. 

Click HERE to read the full press release.

An Article Worth Another Read...
Friday, September 21, 2012

An Open Letter to the Dairy Economists at the California Department of Food and Agriculture
By Geoffrey Vanden Heuvel, Dairyman and Vice Chairman, Milk Producers Council

The following open letter was sent to CDFA’s Dairy Economists on September 21, 2012:

Dear Candace, Hyrum and Amber,

Secretary Karen Ross has indicated in recent communications to the California dairy industry that department economists (I presume that would be you) are monitoring the conditions in the marketplace, apparently with the implication that if you see something that requires a course correction you will point that out to her. Since she is relying on you for this information I would like to share a few observations with you.

First I wonder from what point you are doing the monitoring. Some distance upstream from the Niagara Falls there is a sign on the river bank that marks the “point of no return.” What this sign indicates is that if someone falls into the river past this point, there is no way to rescue them because the current in the river is too strong. Once you pass that point you are going over the Falls. I wonder if you are not monitoring the current dairy crisis from below the falls. Looking up at producers breaking over the falls, thinking that when enough of them go broke then you can change course and address the problem. But if that is your vantage point, everyone that has passed the point of no return is going over also.

California dairy producer bankruptcies are occurring every week, but let me assure you that those producers that file for bankruptcy are a small percentage of the producers that are in dire financial straits. And when producers cannot pay their bills and essentially go broke, who gets hurt? Not just the dairyman and his family but also the feed suppliers, the hoof trimmers, the veterinarians, the breeders, the soap suppliers and hundreds of other people in the allied industries. In essence the entire infrastructure of the California dairy industry begins to crumble right along with the bankrupt dairymen. This is why we have a regulated industry to begin with, to prevent this type of damage from occurring.

Click HERE to read the full article.

Background Information

Legal Action Filed Against CDFA on Behalf of California Dairy Families

On August 31, 2012, legal action was filed in Superior Court of California (San Bernardino County), stating that the California Department of Food and Agriculture (CDFA) failed to follow the law in refusing to bring California’s Class 4b price into better alignment with the prices being paid by cheese manufacturers around the country. The “Writ of Mandamus” was filed on behalf of Milk Producers Council, Dairy Farmers of America, Security Milk Producers Association and California Dairy Campaign.

The legal action stems from an administrative hearing held by CDFA on May 31-June 1, 2012. That hearing was held to consider changes to the formula used by CDFA to calculate California’s “Class 4b” monthly minimum price. The Class 4b price announced each month is the minimum price that must be paid for milk being sold to cheese manufacturers. California law requires CDFA to calculate prices that are in a “reasonable and sound economic relationship” with what comparable milk is sold for around the country.

Click HERE for more information.

An Article Worth Another Read...
Friday, June 29, 2012

The Fact Tell the Story - It's About the Milk Price, Folks
By Rob Vandenheuvel, General Manager

Implementing fundamental policy changes in Congress is a difficult task, no matter what industry you’re talking about.  When in comes to dairy policy changes, “difficult” is putting it lightly.  Yet, as we stand here today, the U.S. dairy industry has in front of us an opportunity to make dramatic improvements to our Federal safety net policies with a strong national coalition of dairy organizations and cooperatives supporting the policy proposal being discussed.  For regular readers of this newsletter, you know what I’m talking about: the dairy provisions included in the recently-approved U.S. Senate version of the 2012 Farm Bill, which closely follow a bill introduced last year called the “Dairy Security Act” (a.k.a. the “Peterson-Simpson Bill”).

Of course, a strong national coalition of support doesn’t mean that support has been unanimous.  For starters, a unified processing sector (largely represented by the International Dairy Foods Association, or IDFA) has pulled out all the stops to try and torpedo the effort.  This opposition from the processors has been entirely predictable.  They are understandably very nervous about a policy change that would empower the U.S. dairy producers to collectively respond to negative on-the-farm margins by addressing the fundamental driver of those negative margins – an oversupply of raw milk in the country.

In order to combat this unified opposition by the well-funded lobbying machine of the nation’s processors, it is imperative that the producer community stand as unified as possible behind the pro-producer changes being proposed.  While that unified support is being realized by many of the dairy groups and cooperatives around the country, there continues to be individual organizations that voice opposition to the legislation for one reason or another.

Click HERE to read the full article.

An Article Worth Another Read...
Friday, April 27, 2012

A Big Week In Congress For Dairy Policy Reform
By Rob Vandenheuvel, General Manager

While dairy farmers across the country are continuing to struggle under the economic stress of a milk price that fails to cover the costs of producing that milk, our elected officials that serve on the Senate Committee on Agriculture, Nutrition and Forestry (we’ll use “Senate Ag Committee” for short) took bold and decisive action this week that should give dairies throughout the country reason for some mild optimism.

This past Thursday, the Senate Ag Committee approved their version of the 2012 reauthorization of our nation’s farm policies (known as the “Farm Bill”), with a bipartisan vote of 16-5. Included in the legislative package are provisions from the Dairy Security Act (also known as the “Peterson-Simpson Bill”). As regular readers of this newsletter know very well by now, MPC strongly supports the Dairy Security Act, and we’re not alone. Dairy trade associations and cooperatives from around the country have lined up in support of this legislation to reform our Federal safety net policies. In case you missed it last week (http://www.milkproducerscouncil.org/updates/042012.pdf), MPC co-signed a letter with 28 other dairy organizations/cooperatives from around the country in support of the Dairy Security Act provisions outlined in the Senate Ag Committee’s version of the 2012 Farm Bill.

Click HERE to read the full article.

An Article Worth Another Read...
Friday, January 6, 2012

Establishing the Value of Milk on a California Dairy
By Rob Vandenheuvel, General Manager

There’s been a lot of talk in the past year about the California milk pricing structure. That’s to be expected when we have a structure that cheats the State’s dairy farmers out of hundreds of millions of dollars. But this week, I’d like to take it back to basics. I’d like to address the question of why CDFA even has control over our prices and what responsibilities come with that control.

Many years ago, the California Legislature decided that the price of milk should be regulated by the State of California. They passed laws, instructing the California Department of Food and Agriculture (CDFA) to establish and implement a “Stabilization and Marketing Plan” that “includes, among other things, the establishing of prices to be paid by handlers for any or all of the various classes of market milk.” These laws are published in the California Food and Agricultural Code (“The Code”). That simple fact is the only reason CDFA even has the authority to establish minimum prices for the milk being produced and sold in California.

In delegating that important authority to CDFA, the Legislature didn’t just give them a blank slate. They outlined a set of parameters that CDFA is required – by law – to follow as they establish a minimum value of milk. Those parameters are outlined in Chapter 2 of The Code. There are 18 “Articles” in Chapter 2 dealing with a host of legal requirements CDFA must follow. But the area I will be focusing on today is Article 9, which outlines the “Establishment of Minimum Prices and Provisions of Stabilization and Marketing Plans.”

Click HERE to read the full article.

An Article Worth Another Read...
Friday, November 11, 201
1

MPC Announces a Key Addition to the Team: Kevin Abernathy
By Rob Vandenheuvel, General Manager

In case you missed our press release, (http://www.milkproducerscouncil.org/110811_kevinabernathy.htm), the MPC Board of Directors announced this week that we have hired Kevin Abernathy to serve as our Director of Regulatory Affairs.  Kevin – who will be working out of a Turlock office MPC is setting up – is the former Executive Director of the California Dairy Campaign and is a well-known producer-advocate in the world of environmental regulations as they apply to California’s dairy families.

As many of you know, MPC is a producer-funded, producer-driven trade association representing the interests of California dairy farmers.  In our 60+ year history as an organization, MPC has been a leader on important issues such as milk pricing policy, environmental regulations, and many other issues that come up when our state’s dairy farmers intersect with local, state and Federal governments.

Regular readers of our newsletter are certainly familiar with the important issues that MPC is currently involved in.  We have been a leading force in recent years as our industry contemplates taking a new approach to structuring our Federal safety net policies.  Our work on the Costa-Sanders legislation in 2010 has played a key role in helping to shape the current Dairy Security Act (a.k.a. the “Peterson-Simpson Bill”) – a widely-supported dairy policy reform package currently being considered by Congress, and a bill MPC strongly supports.  We’ve also been able to align ourselves with fellow livestock agriculture groups and other interested organizations in a coalition working hard to eliminate federal supports for the long-time-sacred corn-based ethanol industry (California Dairies, Inc., California Dairy Campaign and the Alliance of Western Milk Producers have also joined us in this national coalition).

Click HERE to read the full article.

Press Release
Tuesday, November 8, 201
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MPC Board of Directors Announces Addition of Kevin Abernathy
Organization is Poised to be a Stronger Statewide Representative on Behalf of California’s Dairy Families

CALIFORNIA – Today the Board of Directors of Milk Producers Council (MPC) announced the addition of Kevin Abernathy to the leadership of MPC. Kevin, who will serve as the organization’s Director of Regulatory Affairs, has a long history working in the California dairy industry. His involvement includes:

bulletSeven years as the Executive Director of California Dairy Campaign, a dairy farmer trade association based in Turlock, CA.
bulletMember of U.S. Department of Agriculture’s Air Quality Task Force
bulletServed on countless State and local environmental committees and working groups
bulletSix years as Western States Territory Manager for Brown Equipment Company (BECO)
bulletGraduated from California State University, Fresno with a degree in Animal Science

MPC is a voluntary, non-profit trade association that has been representing California dairy farmers since 1949. The organization provides a full slate of services for its members, ranging from local issues – like obtaining local air permits and navigating state regulations – to national issues – like representing our membership in Washington, DC, on reforms to our Federal safety net policies and repealing subsidies for corn-based ethanol.

“The board is thrilled to have a high-caliber individual like Kevin working with our General Manager, Rob Vandenheuvel, on behalf of our membership,” said MPC President Sybrand Vander Dussen. “I see this as a rare opportunity to combine the unique, individual talents of two industry leaders under one umbrella, in an effort to strengthen the voice of California’s dairy families to an unprecedented level.”

As a voluntary trade association, MPC relies on the financial support of our dairy members and allied industry partners. “We have a strong, committed membership supporting MPC, and we take pride in providing high-quality leadership and representation for our members,” said Rob Vandenheuvel, MPC’s General Manager. “We are looking to provide that same high-quality level of service – now with the addition of Kevin to the team – to a larger membership. The MPC board and staff strongly urge dairies throughout California to consider a membership with MPC. We have serious issues facing our industry, and MPC has been, and will continue to be, a leading pro-producer organization working on our members’ behalf.”

Dairies and allied industry partners interested in joining MPC can download a membership form on our website at www.milkproducers.org. Alternatively, we can be reached at (909) 628-6018 or office@milkproducers.org.

An Article Worth Another Read...
Friday, November 4, 201
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What's the Definition of "Reasonable"? Depends on Who You Ask
By Rob Vandenheuvel, General Manager

Starting on September 1st, a new minimum price formula was established for milk sold to our state’s cheese plants (otherwise known as the Class 4b minimum price).  This new formula included a variable “dry whey factor,” that moves up and down (within a range of $0.25 - $0.65 per hundredweight), depending on what the dry whey markets are doing.  So how are dairy farmers faring under this new formula?

Let’s start with the September and October Class 4b minimum prices.  September was announced at $16.33 per hundredweight; October was announced at $15.78 per hundredweight.  That information alone doesn’t tell us much (other than the obvious fact that dairy farmers can’t afford to be selling our milk to any of the state’s processors at these low prices for very long).

So now let’s look at comparable values for similar milk around the country.  Last month, the Federal Milk Marketing Orders (FMMOs) announced that the September Class III (cheese milk) minimum price was $19.07 per hundredweight.  And this past week, the FMMOs announced the October 2011 Class III minimum price was $18.03 per hundredweight.  Yes, these are substantially higher than our California minimum prices, but even these facts alone don’t tell us what we need to know.

While we are comparing the same quality of milk going into equivalent plants (cheese plants), we need to account for the fact that FMMO minimum price formulas are not identical in structure to the California minimum price formulas.  These formulas vary in how they calculate the underlying value of cheese, the amount of the make allowances and generally how the formula captures those factors.  What we are trying to dissect today is what portion of that difference is a direct result of differences in how the formulas account for the value of whey products being manufactured and sold by cheese plants in California and throughout the country.

Click HERE to read the full article.

An Article Worth Another Read...
Friday, September 23, 201
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The 'Dairy Security Act' Introduced in Congress - Time for Dairy Farmers to Speak Up
By Rob Vandenheuvel, General Manager

For the U.S. dairy farmer, the foreseeable future is a scary sight.  Corn, alfalfa and other feed commodities are continuing at record or near-record highs.  As you can see from the dairy commodity report below, milk prices are already on the decline.  Fred Douma’s September estimated Overbase price in California is $18.24 per hundredweight – a price that no longer sounds all that spectacular (or even profitable) with feed costs where they are today.   And if cheese, butter and nfdm values just stay where they are (or heaven-forbid, go lower), October’s prices will be even lower. 

The U.S. Congress has recognized over the years that the dairy industry is volatile, and created a safety net system that consists of the Milk Income Loss Contract (MILC) program and the Dairy Product Price Support Program (DPPSP).  But given where feed costs are, how much of a “safety net” does a roughly $10 per hundredweight price “floor” feel?  (A $10 per hundredweight milk price today would make the 2009 dairy wreck look minor.)  And with the MILC program limited to covering only 2.985 million pounds per year, could that really be called a safety net in areas of the country where the average dairy would max out its MILC “protection” in maybe a month or two?

Fortunately, there are those around the country and in Washington, DC, that are working hard to help.  Today marked a significant milestone in that process.  A bill was introduced this week in the U.S. House of Representatives called the “Dairy Security Act of 2011” (H.R. 3062).  The bill, which was introduced by Congressmen Collin Peterson (D-Minnesota) and Mike Simpson (R-Idaho), is a slightly modified version of the draft legislation that was floated in July.  It is modeled after a proposal put forth by the National Milk Producers Federation (NMPF) known as “Foundation for the Future.”  Here are the three main pieces of the bill:

Click HERE to read the full article.

An Article Worth Another Read...
Friday, September 9, 201
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From 'Eastern DairyBusiness' and 'Western DairyBusiness': Commentary by Dairyman Doug Maddox
By Rob Vandenheuvel, General Manager

This week, a column written by well-known dairyman and Past-President of the Holstein Association, Doug Maddox, was published on the website of Eastern DairyBusiness and Western DairyBusiness.  The column, which delves into the industry debate over federal dairy policy reform, will be published in the hard-copies of these magazines in October, but thanks to their website, is available for readers now.  Many thanks to Doug Maddox and DairyBusiness Communications for this outstanding perspective on the decisions facing the industry over much-needed updates to our federal safety net policies.

Status quo or survivability?  Support for Peterson proposal is your choice
Dairy’s three-year cycle points to another downturn in 2012. A policy discussion draft, based on the primary components of Foundation for the Future, is the best way to insulate dairy producers against it.
(http://dairybusiness.com/articles/2011-09-06/maddox--status-quo-or-survivability)
By Doug Maddox

As I reflect on the last 12 years, 2000 – 2011, one thing stands out. Volatility, with boom-to-bust years, does not favor the dairy producer. Dairymen have problems agreeing on anything. But, I think we all agree status quo is not a good option. Therefore, it puzzles me that so many well-intentioned people are fighting the dairy policy reform draft for discussion put forth by U.S. Rep. Collin Peterson (D-Minn.).

Click HERE to read the rest of Doug's column.

An Article Worth Another Read...
Friday, August 12, 201
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Big Development on the Dairy Policy Reform Front
By Rob Vandenheuvel, General Manager

Over the past two weeks, we’ve published articles in this newsletter that took an in-depth look at the facts behind the draft legislation proposed by Congressman Collin Peterson (D-Minnesota) (information on Rep. Peterson’s draft legislation can be found at http://democrats.agriculture.house.gov/press/PRArticle.aspx?NewsID=1118).  The bill would make fundamental reforms to our industry’s “safety net” programs.  Our articles looked at how the reforms in Rep. Peterson’s bill would work and how they would compare to what we have now. If you missed either of those articles, you can find them both on our website at www.milkproducers.org.

This week, news out of Washington, DC forces us to take a look at another equally-important part of the equation – the political aspect.  It was announced this week that Congressman Mike Simpson (R-Idaho) will be co-sponsoring the legislation along with Rep. Peterson (press release: http://futurefordairy.com/sites/default/files/pdfs/FFTF-Legislation-Simpson-Cosponsor-081111.pdf).  This is a huge development for a couple reasons.

Click HERE to read the full article.

An Article Worth Another Read...
Friday, August 5, 2011

Continuing to Look at the Facts Behind Rep. Peterson's Dairy Legislation
By Rob Vandenheuvel, General Manager

As I noted in last week’s MPC Newsletter, it’s been a few weeks now since Congressman Collin Peterson (D-Minnesota) unveiled a “discussion draft” of legislation he plans to introduce in the U.S. House of Representatives in the near future.  The draft legislation largely mirrors the proposal called “Foundation for the Future,” as outlined by the National Milk Producers Federation (NMPF).  Since Rep. Peterson unveiled his draft bill, there’s been a lot of information disseminated among the industry – some of it true, some of it not, and some of it technically true, but certainly intended to sell a specific message.

In an effort to shed some light on the facts surrounding Rep. Peterson’s draft bill, last week I began by looking at the “Dairy Market Stabilization Program” (DMSP), which is one of the three pieces in Rep. Peterson’s bill.  If you missed that article, you can find it at:  http://www.milkproducerscouncil.org/072911_factsondmsp.htm.

This week, I’ll be taking a look at the Dairy Producer Margin Protection Program (DPMPP), the second of the three pieces in the bill.  This is the part of the bill that would create what many are calling the “margin insurance program.”

Click HERE to read the full article.

An Article Worth Another Read...
Friday, July 29, 2011

More Than Two Weeks In...The Naysayers Are Certainly Yelling the Loudest
By Rob Vandenheuvel, General Manager

It has been 16 days since Congressman Collin Peterson (D-Minnesota) unveiled legislative language outlining significant dairy policy reform that he intends to introduce in the U.S. House of Representatives in the near future.  The legislation largely mirrors “Foundation for the Future,” the dairy policy reform proposal developed over the past two years by the National Milk Producers Federation (NMPF).  Since Rep. Peterson unveiled the “discussion draft” of his bill, individual dairy farmers, producer organizations and cooperatives from around the country have been formally staking their positions on the proposed legislation.  MPC has been part of that effort, as our board last week formally endorsed the legislation.

Having legislation written in the U.S. House of Representatives is an essential step in the process of making fundamental changes to our national dairy policies.  Ultimately, any change to our Federal safety net programs will require an act of Congress.  While the last few years have been a time of great debate among dairy farmers and our organizations over the best policy reform ideas to pursue, we are now at the next step of that process – evaluating what Congress is willing/able to approve.  In essence, this debate has shifted from an ideological discussion among the dairy industry to a very real debate among the 535 members of the U.S. House and Senate – the only people in the country who actually have the ability to implement such change.

Click HERE to read the full article.

Press Release
Friday, July 22, 2011

MPC Board Officially Endorses Rep. Peterson’s Legislation Implementing “Foundation for the Future” 

CALIFORNIA – This week, the Board of Directors of Milk Producers Council (MPC) voted to endorse legislation unveiled last week by Congressman Collin Peterson (D-Minnesota), which would implement reforms to our national dairy policies and is based on National Milk Producers Federation’s (NMPF) “Foundation for the Future” proposal.  The “discussion draft” of the legislation, along with a detailed summary of the bill, can be found at: http://democrats.agriculture.house.gov/press/PRArticle.aspx?NewsID=1118.

“With this vote, the MPC Board sent a strong message that it’s time for dairy farmers from coast-to-coast to rally behind a common plan,” said MPC President Sybrand Vander Dussen, a dairyman from Corona, California.  “We have a rare opportunity to get much-needed fundamental improvements for the producer side of our industry, and Rep. Peterson’s legislation is the only shot we have at getting those positive reforms approved by Congress and implemented.”

Click HERE to read the full press release.

An Article Worth Another Read...
Friday, June 10, 2011

A Couple Thoughts on the Dairy Debate Heating Up In Washington, DC
By Rob Vandenheuvel, General Manager

This past week, news out of Washington, DC indicated that we are getting closer to seeing NMPF’s Foundation for the Future introduced in the U.S. House of Representatives as a legislative proposal.  According to an article published this week on FarmFutures.com, Congressman Collin Peterson (D-MN), the highest ranking Democrat on the House Agriculture Committee, stated that “a just-completed Congressional Budget Office scoring shows the proposal would cost taxpayers less than existing dairy policy and therefore would not add to the budget deficit, thus satisfying a key demand of House Republican leaders.”  Rep. Peterson went on to say that if things continue to progress as planned, “…we [will] introduce the bill here within the next week or two.”

Click HERE to read the full article.

An Article Worth Another Read...
Friday, April 8, 2011

Successful Industry Meeting in Visalia - Dairy Producers Get an Up-Close Look at NMPF's "Foundation for the Future"
By Rob Vandenheuvel, General Manager

This past Tuesday, MPC and California Dairy Campaign co-hosted an industry meeting in Visalia to delve into National Milk Producers Federation’s “Foundation for the Future” (FFTF).  As many of you know, FFTF is a topic of industry conversations all over the country, as it is the most prominent industry reform plan out there.

Many of the details about FFTF have been published on www.futurefordairy.com, and whether you were able to attend this week’s industry meeting or not, I strongly encourage every dairyman to learn as much as you can about what’s being presented.  In short, FFTF includes:

  1. A “Dairy Market Stabilization Program” that will empower dairy farmers to collectively respond to supply/demand imbalances by temporarily cutting back milk production when needed.

  2. A “Dairy Producer Margin Protection Program” that will replace the MILC and Dairy Price Support Program as our industry safety net to protect dairy farmer equity in the limited periods when the market stabilization program cannot act fast enough to bring balance back to our industry.

  3. Fundamental reforms of our nation’s Federal Milk Marketing Orders.

The meeting this past Tuesday attracted about 160 people, a vast majority of which were dairy farmers.  The meeting, which was moderated by CDC Executive Director Kevin Abernathy, was broken into five main parts:

Click HERE to read the full article.

ATTENTION DAIRYMEN: MARK YOUR CALENDARS
IMPORTANT DAIRY INDUSTRY MEETING IN VISALIA ON APRIL 5

UPDATE: You can download and print the presentation slides for the April 5th meeting HERE.

On Tuesday, April 5th from 1 – 3 pm in Visalia, MPC will be co-hosting an industry meeting with the California Dairy Campaign (CDC) to get a closer look into the details of a dairy policy reform proposal we are all becoming more familiar with: National Milk Producers Federation’s “Foundation for the Future” (FFTF). As you know, FFTF is a topic of industry conversations all over the country, as it is the most prominent industry reform proposal out there. Many of the details about FFTF have been published on www.futurefordairy.com, and I encourage every dairyman to learn as much as you can about what’s being proposed. But in short, FFTF includes:

  1. A “Dairy Market Stabilization Program” that will empower dairy farmers to collectively respond to supply/demand imbalances by temporarily cutting back milk production when needed.
  2. A “Dairy Producer Margin Protection Program” that will replace the MILC and Dairy Price Support Program as our industry safety net to protect dairy farmer equity in the limited periods when the market stabilization program cannot act fast enough to bring balance back to our industry.
  3. Fundamental reforms of our nation’s Federal Milk Marketing Orders.

While dairy groups around the country continue to evaluate the details of FFTF, the time is right for grassroots dairy farmers to closely examine the plan and hear what the varying arguments are in favor or in opposition to the pieces of the plan. This April 5th meeting will not only include an update on what exactly is being proposed in FFTF, but will also include a debate/discussion about the plan by a panel of California dairymen Geoffrey Vanden Heuvel, Joe Augusto and Joaquin Contente. Whether you are supportive, opposed, or undecided on the prospects of FFTF as a dairy policy reform package, this is a meeting you should plan on attending.

CLICK HERE TO SEE A FLYER FOR THE APRIL 5 EVENT. As you can see, it will be held from 1 – 3 pm at the Holiday Inn in Visalia (just off Highway 198, 9000 W. Airport Drive). ALL dairy farmers, as well as allied industry folks, are invited and encouraged to attend. So spread the word!

An Article Worth Another Read...
Friday, February 25, 2011

Dairy Revenues Improving, But Doesn't Negate the Need for Fundamental Reform
By Rob Vandenheuvel, General Manager

As we sit here in the first quarter of 2011, we are clearly in the “boom” portion of this boom/bust cycle we’ve gotten so familiar with in the dairy industry.  Dairy commodity values are rapidly moving up and those increases are making their way into the price dairy farmers are receiving for the milk they produce.  Of course, for a variety of reasons, higher grain and feed prices are eating away a healthy chunk of that additional dairy farmer revenue (memories of 2008?), but the additional revenue for our dairies is certainly a welcome sight.

At the same time, our excitement over these higher prices is tempered, as we all have the eerie feeling that we’ve seen this before.  Higher prices, inevitably followed by unbridled expansion in the national milk production, followed by the ensuing collapse in commodity values, and in turn a collapse in dairy farmer revenue.

In the past, some in our industry have been guilty of trying to convince themselves, “this time it’s different; $10 milk is a thing of the past.”  We certainly know better than that as we sit here in 2011.  With grain and hay prices escalating to record levels, the exposure to negative margins on the dairy farm is larger than ever before.  A collapse in the milk price to government-support levels represents such a high risk that dairy farmers are inevitably nervous when watching the volatile dairy commodity markets.

Click HERE to read the full article.

An Article Worth Another Read...
Friday, January 28, 2011

Sifting Through the Processors' Rhetoric...It's All About Control
By Rob Vandenheuvel, General Manager

As the dairy industry continues to discuss and debate options for fundamental reforms to our dairy policies, the International Dairy Foods Association (IDFA), the primary lobbying organization of the nation’s dairy processors, spent this past week spewing out a healthy amount of rhetoric, specifically aimed at a legislative proposal being developed by the National Milk Producers Federation (NMPF).

Click HERE to read the full article.

An Article Worth Another Read...
Friday, December 17, 2010

The "Higher-Of" Calculation in the Class I Pricing Formula - Valuable for Producers
By Rob Vandenheuvel, General Manager

Over the past six months, much has been written in this newsletter and other publications about the various aspects of the “Foundation for the Future” (FFTF) proposal, unveiled by the National Milk Producers Federation (NMPF) in June 2010.  This package is a collection of numerous proposals including: (1) replacing the MILC and Dairy Price Support Program with a new “Margin Protection Program,” and (2) the addition of a Dairy Market Stabilization Program that will help our industry maintain better balance in the supply and demand for our milk.  A third piece of FFTF addresses reforms to our nation’s Federal Milk Marketing Orders (FMMOs).  Today, I will begin delving into one of the details of that proposal that has gotten very little attention thus far by not only media outlets, but also producer groups.

Included in the proposed FMMO reforms is the elimination of the “higher-of” calculation when determining the Class I minimum price.  Currently, the FMMOs use the “higher of” the advanced Class III (cheese) or Class IV (butter/powder) prices to determine the minimum price for Class I (fluid milk).  California’s Class 1 minimum price formula also utilizes a similar mechanism.  What that means is that when the cheese/whey values are higher than the butter/powder values, those cheese/whey prices are utilized to determine the Class I price.  On the other hand, when the butter/powder values are higher, those prices are used.

Click HERE to read the full article.

Press Release
Wednesday, December 8, 2010

Dairy Farmers Urging Congress to Stop Subsidizing the Burning of Our Food

CALIFORNIAAs the debate over extending the expiring “Bush-era” tax rates heats up in Congress, there has been very little talk in the media about efforts by the corn and ethanol lobbies to continue padding their pockets with billions of dollars in taxpayer-funded subsidies.  As news reporters are buzzing about an agreement in Washington, DC on the structure of a tax bill to be considered this month, few are reporting on whether Congress will include an extension of the “ethanol blender’s credit” – a tax credit currently worth $.45 per gallon to the oil/gas companies that blend ethanol with their fuel.  The 2004 legislation that created this temporary subsidy, which is costing taxpayers about $6 billion-per-year, scheduled it to terminate on December 31, 2010.  The corn and ethanol lobbies are attempting to use the broader tax discussion to extend this taxpayer giveaway beyond the six years planned by the original legislation.

Click HERE to read the full press release.

An Article Worth Another Read...
Friday, November 19, 2010

The Word of the Week Is "Ethanol;" An Opportunity Next Month to Add Rational Discussion to the Congressional Debate
By Rob Vandenheuvel, General Manager

Last year, the U.S. produced 13.2 billion bushels of corn – a record year.  This year is on pace to be the third-highest annual production.  This should be great news for dairy and other livestock industries, as corn is a major component of our animals’ diets.  Yet, here we are – with December corn currently trading at more than $5.22 per bushel (which has actually come down from almost $6 per bushel earlier this month).  The current price is almost 50% higher than it was just six months ago and almost three times higher than it was just five years ago!  So why the disconnect?

Click HERE to read the full article.

An Article Worth Another Read...
Friday, October 29, 2010

Key Message Throughout the National Dairy Meetings Is "Unity"
By Rob Vandenheuvel, General Manager

This past week, the National Milk Producers Federation (NMPF) held their annual meeting in Reno, NV.  The key message from NMPF was the importance of unity amongst the industry as we go into the next Congress with hopes of making significant reforms to dairy policy.  Their proposed reforms, known as the “Foundation for the Future” (www.futurefordairy.com) is a collection of proposals aimed at reforming several different government policies surrounding our industry.  For those of you interested in reading the keynote address from NMPF’s Chairman Randy Mooney and President/CEO Jerry Kozak, you can find a transcript at: http://nmpf.org/latest-news/ceo-corner/nov-2010/2010-nmpf-annual-meeting-presentation.

Click HERE to read the full article.

An Article Worth Another Read...
Friday, October 8, 2010

Nation's Processors Reveal Their Strategy: Don't Argue the Facts, Argue Emotion
By Rob Vandenheuvel, General Manager

As the readers of this newsletter know, MPC and a growing number of other producer groups and coops around the country are working hard to promote production management as a strategy for moderating the extreme boom/bust cycles that have become all-to-common in our milk price.  The idea has found support not only as a standalone legislative proposal (The Costa/Sanders Bill, or H.R. 5288 and S. 3531), but also as a part of the “Foundation for the Future” proposal being developed by the National Milk Producers Federation (NMPF).

The producer side of our industry could have easily predicted that the nation’s processors would be opposed to any efforts to give producers more control over our future growth in milk production.  But what we didn’t know is what strategy the processors would use to combat our efforts.  This past week, we got a direct look inside the playbook of the International Dairy Foods Association (IDFA), the powerful national lobbying wing of the processing sector.

Click HERE to read the full article.

An Article Worth Another Read...
Friday, September 24, 2010

Economic Modeling/Analysis Report Published This Week
Tells a Sobering Story About the Future If the Industry Fails to Act
By Rob Vandenheuvel, General Manager

As the regular readers of this newsletter know, MPC has been working with dairy producer groups and cooperatives across the county to fund a broad analysis of the major proposals being made to address this extreme boom/bust nature of the dairy industry.

The modeling and analysis were done by Dr. Mark Stephenson (University of Wisconsin) and Dr. Chuck Nicholson (Cal Poly San Luis Obispo).  Both of these economists are well-known in the industry for their work while they were at Cornell University.

The full report, which is 53 pages long, can be found in its entirety at http://dairy.wisc.edu.  But for those of you who just want a flavor of what the report is about, here is the “Executive Summary” published by the economists along with their full analysis:

Click HERE to read the full article.

An Article Worth Another Read...
Friday, August 13, 2010

Continuing to Delve into the Details of the DPSP
By Rob Vandenheuvel, General Manager

This newsletter continues to commit a lot of space looking at the details of H.R. 5288 and S. 3531.  One of the criticisms of the bill is directed at the fact that it is a program that relies on government involvement.  I can certainly relate to the anti-government sentiment behind these arguments.  Our dairies already face strict government regulations – in how your milk is priced, how you treat your animals, and in how you manage your air and water resources.  So the thought of any more government involvement is understandably enough to raise serious questions.

On that note, this article will take a look at what additional powers the government (USDA) would actually have if we were to implement H.R. 5288/S. 3531.  If you want to see for yourself what the bill would and would not do (rather than letting the critics define the bill for you), the actual bill text can be found at www.stabledairies.com.

Click HERE to read the full article.

An Article Worth Another Read...
Friday, July 30, 2010

The Fee is Temporary; The Dividend Is Permanent
Continuing to Explore the "Dairy Price Stabilization Act of 2010"

By Rob Vandenheuvel, General Manager

As regular readers of this newsletter know, MPC continues to work hard to promote the “Dairy Price Stabilization Act of 2010,” which has been introduced in the U.S. House and Senate as H.R. 5288 and S. 3531, respectively.  We’ve written numerous articles about the details of these two bills (all of which can be found on our website at www.milkproducers.org).  Yet I am constantly reminded that there are many folks that still don’t fully understand the bill.  Today, I want to focus on a basic premise in the bill: “THE FEE IS TEMPORARY; THE DIVIDEND IS PERMANENT.”

Click HERE to read the full article.

An Article Worth Another Read...
Friday, June 25, 2010

BREAKING NEWS! U.S. Senator Bernie Sanders Joins Two of His Fellow Senators In Introducing S. 3531, the “Dairy Price Stabilization Act of 2010”
By Rob Vandenheuvel, General Manager

Yesterday, Senator Bernie Sanders (Vermont) introduced S. 3531, the “Dairy Price Stabilization Act of 2010.” Joining Senator Sanders in co-sponsoring the legislation were Senators Patty Murray (Washington) and Patrick Leahy (Vermont).

S. 3531, which can be found on www.stabledairies.com, is virtually identical to the legislation introduced last month in the U.S. House of Representatives by Reps. Jim Costa (California), Peter Welch (Vermont), Rick Larsen (Washington), Joe Courtney (Connecticut), and John Larson (Connecticut). That bill, H.R. 5288, is also titled the “Dairy Price Stabilization Act of 2010.”

“The introduction of this legislation in the U.S. Senate is a huge step forward for the dairymen and organizations who have been working on the ‘Dairy Price Stabilization Program’ for more than a year,” said Rob Vandenheuvel, General Manager of MPC. “After almost two years of devastating losses by our nation’s dairy farmers, the industry greatly appreciates the leadership of these three Senators in introducing S. 3531 and bringing this much-needed industry dialogue to the halls of the U.S. Senate."

Click HERE to read the full article.

An Article Worth Another Read...
Friday, June 18, 2010

Why The Dairy Product Processors Are Opposed To H.R. 5288
By Rob Vandenheuvel, General Manager

Over the past month, this newsletter has taken a look at various aspects of H.R. 5288, the “Dairy Price Stabilization Act of 2010.”  If you missed any of those articles, you can find them on www.milkproducers.org.  Today that series continues with a closer look at the politics of H.R. 5288 – specifically, why are the processors so opposed to the bill?

Click HERE to read the full article.

Press Release
Friday, June 18, 2010

Milk Producers Council Responds to Outrageous Comments by IDFA's CEO

CALIFORNIA – Milk Producers Council was outraged by comments made this past week by Connie Tipton, the CEO of the International Dairy Foods Association (IDFA), the main lobbying wing in Washington, DC for the nation’s dairy product processors.  Ms. Tipton gave a speech on June 16th at a Washington, DC conference, which was printed on the IDFA website and was entitled, “Drawing a Line in the Sand against Supply Management.”  The speech offered sharp criticism towards efforts within the dairy farmer community to develop a better tool for better balancing the production of milk with the consumption.  Ms. Tipton’s full speech can be found at: http://www.idfa.org/news--views/details/4848.

“Coming from a representative of our nation’s processors, these comments should anger every dairy farmer across the country,” said Rob Vandenheuvel, General Manager of Milk Producers Council.  “As an industry, dairy farmers have gone to great lengths to provide our processors with opportunities to profitably operate.  With virtually guaranteed profit margins in the form of ‘make allowances’ and a government price support program that guarantees a buyer for some of their products even when dairy markets collapse, processors have been largely insulated from market risk.

“So why would IDFA, representing many of these processors whom dairy farmers have protected for so many decades and continue to protect, be so strongly opposing efforts to maintain better balance between the production of milk by our farmers and the demand for that milk?  It’s simple: these processors want to control the supply of milk and ultimately control the dairy farmers.”

Click HERE to read the full press release.

An Article Worth Another Read...
Friday, May 21, 2010

Part Two of a Series Delving Into H.R. 5288, the "Dairy Price Stabilization Act"
By Rob Vandenheuvel, General Manager

Last week in this newsletter, you were all introduced to a new piece of legislation, H.R. 5288, the Dairy Price Stabilization Act of 2010. This bill was introduced by Rep. Jim Costa (Fresno) and four of his fellow Congressmen from around the country, and would implement a program we’ve been talking about for quite some time, the Dairy Price Stabilization Program. If you missed last week’s issue, you can find the article at: http://www.milkproducerscouncil.org/051410_dpsa.htm.

While last week’s article summarized what the bill IS, this week’s article is aimed at explaining what this bill IS NOT. In this political era, where buzzwords like “amnesty” and “socialism” are used to shape the debate on various legislative proposals, H.R. 5288 is no exception. One of the most frequent claims by critics of the legislation is that it’s akin to the Canadian quota system – a program that aims to maintain a high value of milk by severely limiting any growth in their milk production. In that system, dairy farmers are assigned a quota, and the only method of increasing your share of the market is to purchase additional quota from a fellow dairymen, which has resulted in extremely high values being attached to that quota; the current cost of buying that quota is reportedly around $30,000 per cow. Not only does that type of program create a huge barrier to any kind of real growth in the industry, but it also locks up a tremendous amount of money in the value of their quota, preventing that money from being invested in improvements and developments in the industry. It essentially puts the Canadian dairy industry in a “straightjacket.”

Clearly, a system structured like that would have tremendous opposition in the United States, including opposition from Milk Producers Council. For years, that type of system has been the de facto definition of “supply management” in the dairy industry, and regardless of the economics of the dairy industry, there has always been (and continues to be) broad objection for putting our industry in a straitjacket like that.

Before explaining how H.R. 5288 IS NOT comparable to the Canadian quota system, let me first remind the readers what H.R. 5288 does:

Click HERE to read the rest of the article.

An Article Worth Another Read...
Friday, May 14, 2010

H.R. 5288, the "Dairy Price Stabilization Act of 2010," Has Been Introduced in the House of Representatives!
By Rob Vandenheuvel, General Manager

This past week, Representative Jim Costa (Fresno) and four of his colleagues in the House of Representatives introduced H.R. 5288, the Dairy Price Stabilization Act of 2010.  In short, the legislation would create a tangible financial incentive for all U.S. dairy farmers to better manage their growth in milk production.  Also co-sponsoring the bill are Reps. Peter Welch (Vermont), Rick Larsen (Washington), Joe Courtney (Connecticut) and John Larson (Connecticut).  The text of the bill and summaries can be found at www.stabledairies.com.

H.R. 5288 is the product of several years of work in developing a production management program that allows our nation’s producers to continue growing to meet our increasing demand for dairy products, while at the same time creating a financial incentive that will help ensure that not all 65,000 producers expand their production at the same time, collapsing the value of milk and dairy products every few years, as our producers have become painfully familiar with.

Click HERE to read the full article.

An Article Worth Another Read...
Friday, November 20, 2009

The Dairy Price Stabilization Program: Bringing it Back to Basics
By Rob Vandenheuvel, General Manager

Since the Spring of 2007, Milk Producers Council has been publicly advocating for a program that would give dairies an incentive to manage their growth in milk production.  The program has been called several things – Refundable Assessment, Growth Management Plan, and Dairy Price Stabilization Program – but the concept remained the same. 

The basic idea is that given the system of pooling we have in the U.S. where producers are paid the same for the last gallon of milk produced as the first, dairies have an inherent incentive to produce as much as possible, regardless of the market demand for dairy products.  This reality means that anytime we have balance in supply and demand (which results in a profitable price), every dairy across the U.S. has the incentive to produce as much milk as possible to “chase” that profit.  And given how quickly our industry can ramp up milk production, the response to profitable prices is an immediate and rapid increase in production.  Since we have no effective tool to get supply back in line with demand, we go through month after month of devastating losses, which eventually result in the necessary production decreases that get our milk supply back in line with demand.  This drives the milk price back up and starts the whole process over again.  That’s the “boom” and “bust” you’ve been feeling over the last ten years, getting progressively worse with each “bust.”

Click HERE to read the rest of this article.

An Article Worth Another Read...
Friday, October 9, 2009

The Dairy Safety Net: Mend It, Don’t End It
By Geoffrey Vanden Heuvel, MPC Vice-President

Dairy producers are in terrible shape right now. Clearly, the government’s current dairy safety net is not working as it should. On September 21, National Milk Producers Federation put out a press release informing the rest of us that they are working on “sweeping changes” to the structure of the dairy industry as we know it. They are proposing eliminating the support price program and the MILC program and replacing it with a still undefined “revenue insurance” program, as well as essentially deregulating class II, III and IV in the federal order program and replacing that with a “competitive pay price” as the class I mover. In fairness to National Milk, we will let them flesh out their proposal before we make any substantive comments on it but the question for today is can the current program be fixed.

Click HERE to read the rest of this article.

An Article Worth Another Read...
Friday, October 9, 2009

Transferability of "Bases" - A Hot Topic for the Dairy Price Stabilization Program
By Rob Vandenheuvel, MPC General Manager

As the readers of this newsletter are well-aware, there is a growing debate throughout the country about what we can do to address the massive milk price volatility that has become commonplace in the dairy business. An idea gaining national support amongst producer groups is the Dairy Price Stabilization Program, or the DPSP. MPC has been promoting the DPSP for quite some time, and one recurring question that comes up is, “why doesn’t the program allow for full transferability of a dairy’s ‘base’?”

Click HERE to read the rest of this article.

An Article Worth Another Read...
Friday, September 11, 2009

Are Dr. Sexton's Arguments Credible?
By Rob Vandenheuvel, MPC General Manager

It’s been a more than a month since I’ve written in this newsletter with any detail about the Dairy Price Stabilization Plan.  However, behind the scenes there has been much activity.

The U.S. dairy industry is in the midst of a national debate.  Everyone – from producers to processors – recognizes that the growing milk price volatility that has become commonplace in our industry is extremely harmful.  However, when it comes to potential solutions, there is a battle of ideas and ideologies circulating.

While the Dairy Price Stabilization Program (or DPSP) has been garnering more and more support amongst dairy producers, there has been an effort by some to discredit the idea.  I’ve published several “Frequently Asked Questions” and responses in this newsletter in an effort to foster real debate over the issues that have been raise (these and more information can be found at www.milkproducerscouncil.org/gmp.htm).  But recently, those opposing the DPSP have enlisted a new spokesman – Dr. Richard Sexton. 

Click HERE to read the rest of this article.

An Article Worth Another Read...
Friday, May 29, 2009

Cornell University Report Highlights the Continuing Threat of Milk Price Volatility
By Rob Vandenheuvel, MPC General Manager

This week, Cornell University’s Program on Dairy Markets and Policy released the full report on their analysis of the Growth Management Plan.  Drs. Mark Stephenson and Chuck Nicholson included an expansive discussion of milk price volatility and how it has gotten dramatically worse with each boom/bust cycle.  The readers of this newsletter have heard it before, but it bears repeating: volatility is undoubtedly the single largest threat to this industry.

This year is shaping up to be the worst year ever experienced by those currently in the dairy business.  There’s no way to sugarcoat it – this year , dairy farmers will collective take billions of dollars in equity built up over the decades they’ve been in business, and convert it into bank loans.

There will be some producers that decide to get out of the industry – either by choice or by force.  And while that is extremely unfortunate, the real question I’m asking today is aimed at those who are staying in: With the massive boom/bust cycles that have become common in this industry, how do you plan to build your equity back up?  And with the banks feeling the pain in this wreck, are they going to be there for you the next time to get you through that wreck?

Sure, there will be profitable times once we come out of this wreck, and Cornell’s model predicts that as well.  But are the good times going to be long enough to make up for the massive hemorrhaging of equity that is currently taking place?  Are your pockets really deep enough to not only survive this wreck, but survive the next one as well?

Click HERE to read the rest of this article.

An Article Worth Another Read...
Friday, May 15, 2009

A Big Week for the Growth Management Plan
By Rob Vandenheuvel

This week brought some very big developments in our continuing efforts to build national support for a program like the Growth Management Plan (GMP).

As I’ve reported in our newsletter in recent weeks, the Holstein Association USA has taken the concept of the Growth Management Plan, added some additional detail and unveiled it as the “Dairy Price Stabilization Program” (DPSP). A summary of the DPSP can be found on their website at: http://www.holsteinusa.com/association/dairyprice.html.  Like the GMP, this program would create a tangible, financial incentive for dairies to manage their milk production. This simple incentive would give dairymen a reason to manage how much milk is going into their tanks – something that most dairymen across the country have no incentive to do.

The involvement of the Holstein Association in this discussion is a tremendously positive development, as they represent 30,000 members from every dairy area throughout the U.S. At the MPC board meeting this week, our board voted unanimously to support the efforts of the Holstein Association and work together to build national support for the DPSP.

Another huge development this week was the announcement by National Milk Producers Federation that they are setting up a task force that will, among other things, examine proposals like the Dairy Price Stabilization Program. NMPF is a national leader in the dairy industry, and having them engaged in this debate is a huge step forward. If you haven’t already seen their press release, you can find it on their website: http://www.nmpf.org/latest_news/press_releases/task_force051109.

According to a letter this week from DFA President and CEO Rick Smith to his members, the DFA corporate board is also setting up a task force to look at “supply management/price stabilization programs and policies.” As the largest cooperative in the U.S., DFA carries tremendous power in our industry. With that power comes tremendous responsibility. It is extremely encouraging to see them actively involved in exploring these proposals that would address the fundamental problem of milk price volatility.

And finally, today a group of producers from the northeast U.S. – Dairy Farmers Working Together – formally announced their support for the Dairy Price Stabilization Program. You can read the press release on their website: http://www.dfwt.org.

Across the country, the long-term future of the dairy industry is being mapped out as we speak, and California’s industry leaders need to be engaged in this process. Every producer in California ought to be calling their co-op and trade association leadership and asking them what they are doing to address the single largest threat to this industry – massive boom/bust volatility in our milk price. Our leadership needs to hear from you, the producers.

May 1, 2009

Major Development for the Growth Management Plan
By Rob Vandenheuvel

This week, the Holstein Association USA, which boasts 30,000 members nationwide, unveiled the “Dairy Price Stabilization Program.”  This program is virtually identical to the Growth Management Plan (GMP), which readers of this newsletter have been hearing about for quite some time (and for those that haven’t, I would encourage you to check out http://www.milkproducerscouncil.org/q&a_gmp.htm).  Like the GMP, the “Dairy Price Stabilization Program” would create a tangible financial incentive for dairies to manage the amount of milk they produce, thereby keeping a better balance of supply and demand (more information on the “Dairy Price Stabilization Program” will be provided in upcoming articles).

MPC is extremely excited about this development, and supports the work of the Holstein Association.  The opportunity to make positive changes to our national dairy industry is upon us, and folks throughout the country are recognizing that.  As I wrote in our newsletter last month, MPC has been meeting with producer groups from all over the U.S. and there is increasing momentum for implementing a program like what MPC and the Holstein Association are promoting.

Our leadership in California needs to be engaged in this debate.  An industry task force that MPC President Syp Vander Dussen serves on is meeting next Monday (May 4th), and I would urge the task force members to move quickly and come up with industry recommendations.  We have a window of opportunity for rallying the dairy industry around positive change and we just don’t know how long it will last.  We have all seen the short memories this industry tends to have.

So whether our industry leaders support the Growth Management Plan or not, it is time to take a position.  Because one thing is abundantly clear: if we do nothing, we are guaranteeing ourselves that at some point in the near future, we’ll be right back on the losing end of this extremely volatile milk price.

April 17, 2009

A Closer Look at the Growth Management Plan
By Rob Vandenheuvel

While the GMP is nothing new for the regular readers of our newsletter, the current economic condition of the dairy industry warrants a fresh look at this simple and achievable policy proposal.  As a reminder, the presentation made by Dr. Chuck Nicholson from Cornell University on their analysis of the GMP can be found at http://www.milkproducerscouncil.org/021909gmp.pdf.

First and foremost, what is the Growth Management Plan (GMP)?

The GMP is a proposal that would create a national program that fundamentally changes the inherent incentives in the U.S. dairy industry that promote constant production growth regardless of the market’s ability to absorb that growth.

Why should we be considering a Growth Management Plan?

Dairymen are no different from any other businessmen – they respond to incentives.  What incentives currently exist in the highly-regulated dairy industry?  The incentive to grow, grow, grow.  Every morning, dairymen across the country wake up with one question in mind – how do I get the most amount of milk into my tank?  There is little or no thought about the market demand for the milk you are producing.

While this type of produce, produce, produce mentality makes a lot of sense to individual dairymen, it makes absolutely no sense to the dairy industry as a whole.  Producers need to realign the incentives in our industry and the GMP would do this.  The proposal would create a real, tangible, financial incentive for dairy producers to watch and manage the amount of milk that goes into their tanks.

Click HERE to read the rest of the Q&A

And if you have a question comment of your own, please email it to gmp@milkproducers.org.  We want to hear from you!

February 20, 2009

Cornell University Releases Updated Analysis of the Growth Management Plan
By Rob Vandenheuvel

This week, the Cornell University Program on Dairy Markets and Policy (CPDMP) released an updated economic analysis of the Growth Management Plan (GMP).  The analysis was done by Drs. Mark Stephenson and Chuck Nicholson.

If you recall, the Growth Management Plan is a concept conceived by Milk Producers Council in the Spring of 2007 (at a time when the dairy industry was nearing the end of the devastating economic wreck of 2006) as a tool to minimize the massive volatility in the national milk price.  The program creates a financial incentive for dairy producers throughout the U.S. to manage their milk production.  CPDMP originally analyzed the program in April 2007, and their analysis showed that if implemented, the GMP would be effective in minimizing the volatility that seems to be getting worse with each cycle.

With U.S. dairies again facing massive losses in equity, MPC recently asked CPDMP to once again analyze the program.  Drs. Stephenson and Nicholson were able to model how the program would react to certain price "shocks," such as the rapid escalation of feed costs and the sudden loss of demand due to the world economic slowdown.  Their updated analysis showed that in fact, the program would be very effective - not only in minimizing the volatility during "normal" times, but also in recovering from "shocks" like the economic slowdown much more quickly.

On February 19, 2009, Dr. Nicholson presented the results of CPDMP's analysis at an industry forum hosted by Western United Dairymen in Modesto.  Producer response at the forum was very positive, and MPC will continue to work with our fellow industry groups to promote this simple, yet effective program.

You can see Dr. Nicholson's powerpoint presentation by clicking HERE.

An Article Worth Another Read...
January 16, 2009

Was This Wreck Predictable?  You Be The Judge
By Rob Vandenheuvel

Almost two years ago, on April 27, 2007, Geoffrey Vanden Heuvel published an article in this newsletter entitled, “Staying Profitable – An Idea.” The article opened with the following introduction:

“The dairy industry has gotten into a Boom and Bust cycle, which is getting increasingly violent with every passing turn. We had a downturn in the year 2000 and recovered in 2001. We had a downturn in 2003, that was, at least for me, twice as severe as the year 2000 downturn. We recovered in 2004/05 and went into another downturn in 2006, which we are just starting to recover from in 2007. The approximately 16 months of downturn in ‘06 and early ‘07 has been twice again as severe in terms of equity lost as was the 2003 downturn. Realistically we are probably looking at about 12 - 24 months of prosperity before we go back into the soup again. If nothing changes it is likely that the 2009 downturn will be horrific.” (Geoffrey Vanden Heuvel, 04/27/2007)

Fast forward to now. As you can see above, Fred Douma is projecting the January overbase price to be $10.40 – a level not seen since the summer of 2006. And while the milk price may be at the same level as it was in 2006, the cost of production has jumped from the $12-$13 per cwt range to the $17-18 per cwt range since then. It’s fair to say that Geoffrey’s prediction two years ago that 2009 would likely be even worse than 2006 has now painfully become a reality.

Click HERE to read the rest of this article.

An Article Worth Another Read...
January 2, 2009

Discussion Continues on a Possible California Federal Order
By Rob Vandenheuvel, General Manager of MPC

This week, MPC Vice-President Geoffrey Vanden Heuvel was interviewed on DairyLine Radio on the growing discussion regarding a possible California Federal Order.  Below are some excerpts from the radio interview:

bullet“California is no longer isolated.  For many decades we were able to do our own thing; we had a low cost of production relative to the rest of the country and we had a Class I market that nobody else could reach because we were isolated from the rest of the country.”
bulletThe barriers have been broken down the last 10-15 years and plants and dairies have been built just over the border "for the specific reason of exploiting the fact that the state order cannot regulate interstate commerce.”
bulletOfficials who run the state order have decided to “keep discounting the California Class 1 price to a point where it makes no economic sense to bring any milk in here.”
bulletFor California dairy producers, that means that the amount of revenue they would normally expect to come in from Class 1 sales is not going to be there, which amounts to millions of dollars and “happens at a time when the cost of production advantage that California historically has had, has evaporated as well.”
bulletIt has become very expensive to produce milk in California and competitors like Texas, New Mexico, and Idaho “can fully match us in cost of production so something absolutely has to change and a federal order is a very viable option for California and we need to take a hard look at how to do that.”
bullet“We could continue to sell our milk cheap.  It would be foolish to do that but we’ll see whether the leadership of California is willing to step up and take a serious look at a federal order. They have not been willing to do that so far but there’s nothing so powerful, as an idea whose time has come. This is clear.”

DairyLine also published a written article following the interview which noted that "Western United Dairymen has notified DairyLine that they will hold industry wide meetings for California dairy producers and processors in February to present an in depth analysis of the federal order issue."

The interview can be heard by clicking HERE.

An Article Worth Another Read...
December 26, 2008

More Thoughts on a Possible California Federal Order
By Geoffrey Vanden Heuvel, MPC Vice-President

In the past few issues of this newsletter, we have laid out some of the arguments for why California should seriously consider developing a California Federal Milk Marketing Order (FMMO). As we’ve explained, it is truly the ONLY way we can recapture the class 1 revenue we are currently losing to out-of-state milk. CDFA recently reduced our class 1 price by $0.35 per cwt in an apparent attempt to slow down that milk coming from out-of-state. But will that price reduction slow down that milk and bring any additional class 1 processing capacity back to the pool? Absolutely not. The only thing that hearing decision accomplished was taking almost $2 million a month from producers, gift wrapping it, and giving it to the class 1 processors in the state. It bought us absolutely no additional processing capacity. How much further are producers willing to slash our milk price in an effort to cling to what’s left of our class 1 market?

Despite the undeniable arguments in favor of developing a California FMMO for the industry to consider, there are some in the industry that have doubts.  A number of questions have been raised regarding a possible California FMMO, and I’d like to respond to a few of those today.  Click HERE to read the Q&A printed in the December 26th issue of MPC's newsletter.

An Article Worth Another Read...
November 21, 2008

More Comment on "The Magic of Pooling"
By Geoffrey Vanden Heuvel, MPC Vice-President

Syp Vander Dussen, in his outstanding articles the last couple of weeks, explained the “magic of pooling” concept. He wrote, “If I produce one extra load of milk, which of course will go to powder (and possibly to the CCC), it will have a value of less than $10 to the pool, but I will receive a blend value of approximately $16.00 cwt for that load. But remember, the income to the pool bucket is about $10.00! That $6.00 loss is shared by all! Stated in again another way, it is in the best interest of every producer to produce as much milk as he can, always, because the lower value for that excess product is borne by everyone.

What Syp is pointing out is the fatal flaw in our milk pricing regulation: the price risk associated with increased production is not borne directly by the person making the production increase; it is transferred to the group at large. Basic economics tells us that supply and demand for any product is kept in balance by each individual participant’s calculation of risk verses reward. The “magic of pooling” transfers the risk to the entire group and the individual is left with the “reward.” Because of this reality, it is perfectly rational for each individual producer to grow production indiscriminately, while at the same time it is obviously irrational for dairy farmers collectively to produce more milk than can be profitably marketed.

Click HERE to read this full article.

An Article Worth Another Read...
November 14, 2008

My View on Milk Production Increases
By Sybrand Vander Dussen, MPC President

The dairy industry in California continues in its addiction of over-production of milk.  Dairy producers seem to have only one clear focus; produce more milk.  As costs go up, as milk prices decline, we produce more milk.  As coops battle to place milk and milk products, we produce more milk.  With 3x milking, rBST, advancing genetics, gender-specific semen, we produce more milk.

In a perfect world, where the milk we supply and the demand for those products remained somewhat in balance, this would be a strong sign of a vibrant and healthy industry.  But the reality is, dairymen produce in an unrestrained fashion with no consideration of demand, leaving the industry in a perpetual state of overproduction which causes a myriad of problems, all of which should be unnecessary.

Click HERE for the rest of the article.

An Article Worth Another Read...
October 24, 2008

Some Background About the CME and How It Works
By John Kaczor, Editor of the MPC Newsletter

Not a week passes without reference to what has happened to Cheddar cheese and butter prices (and occasionally, nonfat dry milk prices) on the CME. It’s important to follow those prices because they are the most current indication of changes in cheese and butter prices – two of the major three products that are used in milk price formulas in California and federal orders, and (we are told) by plants in unregulated areas that compete with plants that are regulated.

Click HERE to read more about the CME and how it works.

 

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