Dairy farmers and industry leaders from across Minnesota came together Monday (February 9, 2015) to rally around a new effort to help the state’s dairy industry grow and thrive. Under the theme of “Stronger Together,” the gathering bearing the title of Minnesota Dairy Growth Summit reflected the involvement of the University of Minnesota, Midwest Dairy Association and the Minnesota Milk Producers Association.
8:35am The meeting was called to order and facilitated by Mr. Gene Hugoson, Community Outreach Liaison at the University of Minnesota and former Commissioner of the Minnesota Department of Agriculture.
8:40am The Summit was opened by the University of Minnesota President Dr. Eric W. Kaler:
“Complacency means ignoring change in the world around us and expecting the world to change for us, rather than expecting ourselves to adapt to the world’s needs. But by rejecting all that — by rejecting complacency — we mean that we’re going to refuse to accept the status quo.
If we reject complacency, once a problem has been identified, we don’t simply live with it. Rejection of complacency gives an individual power but also responsibility. It takes greater courage to intentionally reject complacency than to rest on one’s laurels, than to be simply Minnesota nice. It takes a certain entrepreneurial spirit.
I know the title of this Summit declares that as a dairy community we are “Stronger Together,” and I pledge to you the University’s commitment to that increased strength, today and for the years to come.”
9:00am Congressman Tom Emmer welcomed the audience.
“The agriculture industry in Minnesota is the quiet driver in our economy, and in large part that is because of people in this room. Congressional district I represent includes Stearns County, one of the leading dairy producing counties in the nation.
Now that we have a Farm Bill, all eyes are on the potential free trade agreements that are currently being negotiated. My office is going to continue to push for better market access for Minnesota dairy farmers in places like Canada and Japan.
You can hear the full speech here.
9:10am Mike Kruger, CEO of Midwest Dairy Association made the case for concerted efforts on dairy development:
“For our part, the Midwest Dairy Association commissioned Blimling and Associates to compile this report, A Path Forward, Challenges and Opportunities for the Midwest Dairy Industry. As you can see the report is extensive, covering over 200 pages of background and insights on the dairy industry in other parts of the world, other areas of the US, and specifically the Upper Midwest.
So does Minnesota have the capacity to milk more cows, process more milk, and sell more dairy products? You bet we do. We’ve already done it. Look at our production levels and cow numbers back in 1990. And, the beauty of it is that dairy farmers…the whole community…the entire state…will benefit.”
9:30am To illustrate the benefits dairy growth brings to communities around the state, the organizers prepared a short video:
The filming of this video continued at the Summit, and many participants were interviewed in the studio set up in the adjacent room.
9:40am Dr. Marin Bozic, Associate Director of the Midwest Dairy Foods Research Center reviewed the trends in the Minnesota dairy sector.
10:10am University of Minnesota Leader Panel with Dr. Brian Buhr, Dean of the College of Food, Agricultural and Natural Resource Sciences, Dr. Trevor Ames, Dean of the College of Veterinary Medicine, and Dr. Mike Schmitt, Associate Dean – University of Minnesota Extension.
10:40am Lieutenant Governor Tina Smith addressed the audience:
“If you think about it, Minnesota is a state made for dairy. … And unlike other states, Minnesota is made for sustainable growth. We are blessed with the natural resources dairies need to be successful. Resources that are available right outside the back doors of Minnesota’s farms. And these dairy farms are delivering economic diversity to Minnesota’s ag economy and Minnesota’s rural landscape, both with the pasture land and the alfalfa feed that is a part of the industry. So I think we have a big competitive advantage over other dairy producing states like California for example, where they need to pump in water and truck in feed in order to support what are really unsustainable levels of milk production. In Minnesota, we can be a top dairy producing state and provide dairy products to the nation and the world and also be good stewards of our environment. To this end, I want to say that the Governor and I understand that there has been some understandable frustration within the dairy industry about this complex overlapping of city, county, state and federal environmental rules and regulations. Regulations that make your business more complex to operate and and more costly to operate. … The Governor and I also understand we got more work to do here. So today I offer to work with you on making improvements to our permitting process. I am really eager to do this with you, and I look forward to finding ways that we can keep on making progress, because I think it is so important. ”
Hear the full speech from Lt. Gov. Tina Smith here.
11:00am Minnesota State Leader Panel with Commissioner John Linc Stine, Minnesota Pollution Control Agency, Assistant Commissioner Charlie Poster, Minnesota Department of Agriculture and Harlan Madsen, county commissioner, Kandiyohi County.
Responding to a question regarding the Citizens’ Board involvement with Baker Dairy, Comm. Stine stated: “I favored the idea we give the company more time to go back and talk to the township officials and spend a little more gathering information and building the record for us to make a different decision. That wasn’t the way the board went. And the board has that authority under the law. What I’d like to see happen going forward … is this challenge of aligning decisions at the local government level up to the state decision making authority. And that’s a tricky needle to thread sometimes. Because as you know folks get excited about a variety of different things … and what I’d like to see happen is that our staff and local government staff and companies have a more thorough and effective opportunity to talk about local decision making. We’ve seen a number of large dairies permitted we’ve seen a number of smaller dairy operations that don’t need environmental review come forward and move ahead. But I think it happens when local people, local governments and the experts in the industry in this state work together in a collaborative way to get things aligned. Harlan used the word harmonize earlier, maybe that is a good way of thinking about it.”
11:45am Marin Bozic’s second talk centered on goals and actions for reinvigorating Minnesota’s dairy sector (slides).
12:00-1:15pm The Summit participants formed 14 groups and discussed proposed goals and actions. Trained facilitators led the discussion, and everyone was asked to identify which actions they can take in the next 30 and 90 days. The results are currently being processed and will be reported back to the group in the next few weeks.
“Updated milking center, new technology and more technology coming are some of the main things that attracted me back to dairy farming. Beside those, the sense of pride knowing that I can teach my children how to be stewards of the land, our animals, and all the resources that we have been blessed with.
As Minnesota looks forward to being a part in feeding this growing economy, we will need to put our heads together, collaborate with the main street businesses, government officials, our general society, and continue to do things like breakfast on the farm, opening up our farms to the general public, showing the generation that has been removed from the farm what it is all about. How we take care of our cows, how technology allows us to operate the way we do, and how we as farmers contribute to main street success.
Once society has been brought up to speed with our friendly means of operating, how we contribute to society, and how farming today is not just squeezing teats and pitch forking hay. Then we can move to growing our farms to the next level, adding more levels of technology, transitioning the operations to the next generation via growth, and proving once again that we are people of society by continuing to be a part of our local organizations from church to school and everywhere in between.
Ladies and gentlemen, we indeed have some work to do, however the work that we have done up to today has began the path. Now looking to the Path Forward, together we can grow this industry, and show Minnesota once again that our strong dairy industry becoming stronger, supports our local towns and business. Thank you all for wanting to grow the industry. I see a future in the industry and today’s event proves to me that there are many working to achieve prosperity for our industry. I pledge to do our part and I hope you do the same.”
To learn more background about this meeting, and how you can join the effort, please review this Stronger Together handout.
My group released an update yesterday on our outreach programming regarding the Margin Protection Program:
The launch of the new Margin Protection Program (MPP) is anticipated in about one month. Although the formal release date by the Farm Service Agency (FSA) is unknown, it is well understood that USDA is striving to honor the 1 September 2014 deadline specified in the Agricultural Act of 2014. It also is not known when the enrollment period will begin, or end, relative to the publication of the final rule, but it is a safe bet that the enrollment will begin in September, probably early September and that farmers will have ample time to make an enrollment decision. Thus, while we might not know precise dates, we will be in the thick of it soon.
The purpose of this update is to let interested parties know, with as much precision as we can provide, what to expect and when to expect it. Keep in mind that the information provided below is from the group that USDA has commissioned to provide a decision tool and companion educational materials for the MPP, but it is not an official statement by USDA.
The faculty for the National Program on Dairy Markets and Policy (identified in the footnote below) have been working on a variety of educational materials, in addition to the tool itself. As previously announced, we have decided to not release draft materials prior to the publication of the final rule, but we anticipate being able to release a wide selection and variety of materials very shortly afterwards.
We will be posting information on our DMaP website, with MPP-Dairy specific information beginning at the URL www.dairymarkets.org/MPP and on http://www.farmdoc.illinois.edu/farmbilltoolbox/ . From these pages, you will have access to the tool itself, as well as educational materials that will include videos and downloadable documents. The educational library will include short formats to provide a quick overview of various topics and longer formats that offer more detail. In addition to basic information about the MPP-Dairy program and the decision tool, we will have information to help producers think about their particular risk profile and the variety of options that are available for financial risk management. The farmdoc Farm Bill Toolbox has some materials concerning the MPP but also a host of informative articles and tools related to other new programs in the Agricultural Act of 2014.
The announcement goes on to discuss a number of questions regarding eligibility, producer meetings, MPP payments, etc. You can download the full document here.
If you are interested in doing any analysis involving historical “Actual Dairy Production Margins”, as defined in the Agricultural Act of 2014, you may find this file of interest. In this excel file, John Newton and I have prepared clean data for NASS All-Milk, NASS Corn, NASS Alfalfa Hay and AMS Soybean Meal prices from January 2000 through April 2014. In order to make the data easily replicable, we used NASS’s Quickstats database for information on milk, corn and hay. For soybean meal we used the AMS Livestock and Grains Portal. A separate sheet in the file contains screenshots that will familiarize you with the source of this data.
Included in the file are each of the 9 MPP-Dairy coverage options and the indemnity schedule based on the historically observed prices. Note that had MPP-Dairy been in effect the price dynamics may have been altered.
For dairy analysts that want to dig deeper and compare preliminary, revised and final prices, as well as data currently (May 7, 2014) in quickstats database, you may find the file with such data here.
How would have the Margin Protection Program for Dairy Producers worked over the past 14 years?
Dr. John Newton (University of Illinois) offers this handy dashboard you can use to play with different scenarios – different coverage levels, production history, and coverage percentage. John’s gadget is cool in itself, but is really a teaser trailer for a much more comprehensive tool the Dairy Markets and Policy group is preparing for dairy producers. I hope our group will be able to successfully compete to get some of the funds authorized under the Agricultural Act of 2014 for decision-support tools. It would really help us deliver a tool that is very necessary for dairy producers to make a solid decision regarding their participation in the Margin Protection Program.
Press Ctrl+ to zoom in – the dashboard scales well and is really neat when enlarged.
Further resources on dairy programs in the Farm Bill:
1. DMAP Information Letter 14-01: The Dairy Subtitle of the Agricultural Act of 2014
2. Dr. John Newton’s FarmDoc webinar: “Introduction and Strategic Implementation of the Dairy Producer Margin Protection Program” (slides) (downloadable dashboard)
Brian W. Gould and John Newton discuss new dairy programs and the role of LGM-Dairy in the new policy environment.
Number of the week: 6
In order to avoid the “dairy cliff”, the 2002 Farm Bill was extended 6 times in spring 2008, before the 2008 Farm bill was finally passed. This year, the 2008 Farm bill has expired, the new Farm Bill has not been passed, yet there is no agreement to extend the 2008 Farm Bill into 2014.
“So this is Christmas. And what have we done? Another year over. And a new one just begun.”
As John Lennon asks, what have we done this year? Well, one thing we did not get done is a new Farm Bill. As I am writing this, the four leaders of the Farm Bill Conference Committee seem to be converging on compromise bill language that they hope will be acceptable to a majority in both the Senate and the House of Representatives. One of the few issues still left unresolved is the design of the new dairy policy. For the last two years, the debate has been framed as a binary choice between two proposals best known under nicknames, the Dairy Security Act and the Goodlatte-Scott Amendment. Are these two proposals really the only two possible outcomes? Let us remind ourselves how the Milk Income Loss Contract was born. This policy instrument, a foundation of U.S. dairy safety net over the past decade, was not contrived by any stakeholder group, and it did not go through public debate. Instead, it was contrived by the leaders of the 2002 Farm Bill Conference Committee. As a poet once said, “what’s past is prologue”, and as the 2014 Farm Bill Conference Committee negotiates the new dairy policy, we should at least consider the possibility that the final outcome could be neither DSA nor Goodlatte-Scott, but something completely different.
The delay in completing the new Farm Bill negotiations means that the final votes will not happen until the first few weeks of January. For a brief period of time, U.S. dairy policy will be based on an antiquated law passed more than 64 years ago. Legally speaking, the Agricultural Act of 1949 requires the Secretary of Agriculture to implement measures that would result in milk checks nearly doubling, with per hundredweight milk price just under $40. So should we fear higher prices for dairy foods? Should we fear $8-a-gallon milk, or as the mainstream media likes to call it, the “dairy cliff”?
We can rephrase that question to the following – do we need another short term Farm bill extension, to avoid the ‘dairy cliff’? The House of Representatives passed a bill last week that would extend the 2008 Farm bill for one month, to allow enough time for the Conference Committee to complete its work. The Senate did not agree to extend the bill. Why might the Senate not wish to do such a simple and non-controversial action? In order to understand their motivation, you need to recall what happened in Spring 2008, when 2008 Farm bill was being finalized. As the figure above illustrates, 2002 Farm bill was first extended for 3 months. Then, when all deadlines were again broken, another one-month extension was passed. Four more extensions were enacted, each one only one or two weeks in duration. Short-term extensions are simply not credible, and once that path is chosen, there is nothing to stop yet another and another short-term extension.
The odds of January retail milk prices reflecting the 1949-based support prices are about as high as having your gallon of milk turn into pumpkin at the stroke of midnight on December 31. Sec. Vilsack made it clear that the ‘dairy cliff’, will not happen, as long as a new Farm Bill is agreed to quickly. By refusing to go along with the House plan, the Senate is signaling – the fear from ‘dairy cliff’ is not grounded in reality, and it is time to close the book on the 2014 Farm bill.
This week’s Minnesota in Numbers was produced with financial support from Dairy Star and Minnesota Milk Producers Association.
Number of the Week: 2
University of Minnesota undergraduate team placed second at the National Collegiate Dairy Products Evaluation Contest in Cheddar Cheese.
From left to right front row: Alyssa Pagel, Ashley Adamski, Molly Erickson and David Potts.
Back row: Dr. Tonya Schoenfuss, Megan Parker, Claire Burrington, Jill Tomczak, Liz Reid and Kenny Smith
The Collegiate Dairy Products Evaluation Contest was started in 1916 as the Student Butter Judging Contest. Today, in addition to butter, 3 member student teams, and individual graduate students, judge milk, cottage cheese, Cheddar cheese, vanilla ice cream, and strawberry yogurt. The goal is to score the products as similar to the evaluation of the industry expert judges. The students get an appreciation for sensory evaluation and the key quality aspects of dairy products through this experience, making them valuable future employees for dairy product manufacturers.
After a 15 year hiatus from competition, the University of Minnesota dairy products judging team was formed again in 2012 under the leadership of Dr. Tonya Schoenfuss of the Department of Food Science and Nutrition. While the team is still in a building phase, they are already achieving notable results. At the Midwest regional contest the team won first place in both the ice cream and yogurt categories beating the competition from Wisconsin, Iowa and South Dakota. Eleven teams competed at the national contest held last month at the International Dairy Show in Chicago. Alyssa Pagel and Jill Tomczak, both Food Science undergrads, finished 3rd and 4th in Cheddar, respectively and the undergraduate team was 2nd in Cheddar Cheese. Go Gophers!
This week’s Minnesota in Numbers was produced with financial support from Dairy Star and Minnesota Milk Producers Association.
Number of the Week: 1600
USDA estimates Minnesota October 2013 milk yield per cow at 1600lbs.
Minnesota milk yields per cow have been steadily increasing over time, growing on average 1.98% per year since the World War II. Perhaps a more interesting way to examine yields is to plot them against a measure of farm profitability, rather than time. In the scatterplot above, on the horizontal axis we measure the difference between Minnesota year-on-year growth in milk yields and the national yield growth. On vertical axis is the dairy Income-over-feed-costs (IOFC) margin, as will be defined in the new Farm bill. There is a noticeable inverted relationship between these two measures over the last seven years.
For example, in August 2012, national IOFC margin was $2.98, which is more than $5.00 below the historical average. The U.S. average milk yield per cow that month was 1,785 lbs, 5 lbs less than in August 2011. In contrast, Minnesota yield in August 2012 was 1,620, which is 50 lbs higher than in August 2011. Minnesota yield growth that month was 3.46% higher than the national yield change. In contrast, in January 2008, IOFC margin was $11.96, almost $4.00 over the historical average. National yield in January 2008 was at 1,723 or 17lbs over January 2007. In Minnesota, January 2008 yield was 1,610, or 15 lbs less than in January 2007. Since 2007, the correlation between IOFC margins and the difference in Minnesota vs national yield growths has been modestly negative at -0.42.
How should we interpret this data? Why do yields in Minnesota seem to grow faster than the U.S. yields when margins are lower? The causality here likely runs in reverse, not from margins to yields, but from yield shocks to margins. When upper Midwest experiences unanticipated good weather and our milk yields grow more strongly than national yields that creates a downward pressure on IOFC margins. When heat stress or poor harvests create a situation not conducive to milk production growth in Midwest, and our yield growth lags behind national, milk shortage results in temporarily elevated IOFC margins as markets send signals that more milk is needed.
Bear in mind that the relationship between IOFC margins and yields is a rather complicated one and the explanation offered above is hardly the only mechanism that could be in play. For example, if less efficient producers tend to exit the industry when margins are low, we could see higher state-level yield growth in poor times even as the state dairy herd is contracting. For analysis that can speak about causality more convincingly one would need to go beyond state-level reports and use individual farm data.
October 2013 Milk Production Report
This week’s Minnesota in Numbers was produced with financial support from Dairy Star and Minnesota Milk Producers Association. Maggie Jennissen assisted in assembling the data.
The purpose of the proposed Dairy Market Stabilization Program (DMSP) is to shorten the duration of low-margin periods and reduce government outlays on dairy margin insurance. However, DMSP can only achieve those goals if producer participation in the proposed dairy safety net is sufficiently high. In 2012, farms with over 1,000 cows accounted for only 2.9% of operations but produced 50.6% of the milk. Therefore, it is of particular interest to understand views of large herd operators regarding participation in proposed dairy programs. To that end, a survey was conducted of dairy farm manager participants at the Dairy Today magazine’s 2013 Elite Producer Business Conference held on November 11-13 in Las Vegas. Eighty-six surveys were completed. The respondents averaged a herd size of 3,351 cows and 2,449 acres of operating farmland.
To examine the influence of program implementation rules on participation rate, participation likelihood was measured under two scenarios: 1) sign up by January 15 for the calendar year that just began and 2) sign-up by March 15 for the forthcoming fiscal year (Oct 1 – Sep 30). Both implementation rules provide the same inherent risk protection effectiveness, but the former rule allows producers to utilize more information about how much risk they will likely face. A sign-up rule that essentially coincides with the start date allows producers to use easily, and more reliably forecasted margins to strategically adjust margin coverage levels. Thus, they can choose less insurance when risks seem small, and buy high coverage levels when low margins are imminent.
For a January 15 signup date for a calendar year program, the share of survey respondents either neutral or leaning towards participating in the Senate and the House versions of the dairy title was 66% and 78%, respectively. Assuming March 15 as the signup date for a fiscal year program, the share of producers neutral or leaning towards participation was 55% and is equal for both the House and the Senate versions of the bill. One way to interpret this is that up to 20% of large producers did not perceive the new safety net as necessary for viability of their business, but would be willing to engage in opportunistic participation in some programs if there are gains to be made.
This survey provides only limited evidence on stated attitudes of large herd operators; nevertheless, it is possible to make at least partially informed or conjectural projections of a U.S. participation rate. If we assume that all producers leaning positive will participate in the Farm bill dairy programs, and that half of undecided producers will also sign up, between 35% and 47% of large herd operators would sign up for the Senate version of the dairy programs, but the House version would see enrollment between 40% and 57%. Because both programs offer higher margin insurance subsidies for the first four million pounds of milk, it is reasonable to assume that participation rate among producers with smaller herds will be higher. If 85% of producers with herds under 200 cows sign up, and if assume participation rate of producers with herds between 200 and 1,000 cows is 1.5 times the surveyed participation rate of large herd operators, then we can estimate that the total participation in the Senate proposed dairy programs will be 50% of U.S. milk production, if the program is implemented with a March 15 sign up date for a fiscal year coverage period. For the alternative scenario of a January 15 sign up date and a calendar year insurance period, the speculative estimate is that slightly over 60% of U.S. milk would sign up. Bear in mind that market conditions at signup, the extent to which respondents really do as they stated in the survey, implementation details, and any program changes that might occur in conference committee will likely have significant effects on participation rates. Perhaps the best way to view these results is as a prior or preliminary estimate that will be updated as new information arrives.
Read more in the DMAP Briefing Paper Chris Wolf and I released today.