Checkoff or check out

Are commodity assessment programs helping farmers?

Sarah Lloyd readily admits: She is frustrated.  

Lloyd and her husband, Nels Nelson, operate the 400-cow Neldell Farms dairy with Nelson’s brother and parents near Wisconsin Dells, Wisconsin, where the Nelsons have milked cows for more than 100 years. The family has contributed to the National Dairy Promotion and Research Board, or Dairy Checkoff, since the checkoff was established in 1983. Lloyd believes the checkoff harms small dairy farms like Neldell. 

The Dairy Checkoff collects 15¢ per hundredweight of fluid milk produced at the farm level. Like many farm checkoff programs, oversight for the Dairy Checkoff is done by a group of farmer board members. The dairy board is one of the agencies that decides how milk checkoff proceeds are spent. Lloyd maintains that – while the Dairy Checkoff is effective at promoting consumption of dairy products – it aims to increase milk production. That notion is counterintuitive when the cost to produce a gallon of milk exceeds the price dairy farmers get for their product.

“The culture of the dairy community is about getting higher yield,” Lloyd says. “Why aren’t we competing on the cost of production, or margin per cow? What if my cows produced 5 pounds less milk per day, but I made money on every one of those pounds they produced?”

Lloyd reckons Neldell Farms loses a dollar for each 100 pounds of milk the farm yields. 

What – wonders Lloyd, who served on the National Dairy Promotion and Research Board for one term – is the Dairy Checkoff doing to keep farms like hers in business?

Tom Gallagher, chief executive officer of Dairy Management Incorporated, argues farmers are victims of an archaic means of marketing milk in a global economy. Farmers get paid based on the amount of milk produced, yet milk consumption has declined more than 35 pounds per U.S. citizen since 2010, according to the USDA. Overhauling the pay scheme to a formula that includes cheese, dry, and frozen products – all of which enjoy higher per capita consumption – would benefit dairy farmers, Gallagher says. 

He credits the Dairy Checkoff with keeping dairy foods relevant. “We single-handedly took the initiative to save cheese on pizza in 2009,” says Gallagher, whose firm leverages checkoff dollars to manage the National Dairy Council and American Dairy Association – both of which were formed to increase consumption of all dairy products. “Cheese on pizza since then has driven the growth in dairy consumption in the U.S. market,” he says. In 2019, Americans consumed more dairy foods per person than at any point since 1960. 

Minnesota dairy farmer and DMI board member Charles Krause credits the checkoff with pumping more dollars into product development, plus developing new markets overseas, boosting dairy nutrition research, and improving care of dairy cows.

All these are important attributes, but Lloyd points out that dairy farmers are going through tough times while the companies that use dairy products are recording profits.

“As a producer, I’m not making any more money even though I invest in this mandatory checkoff. 

“Something is wrong in the supply chain if private companies are doing well and my neighbor’s children are on free and reduced-price lunch programs at school,”
she says.

How checkoffs work

By design, checkoff programs work much the same way across commodities, says Harrison Pittman, director of the National Agricultural Law Center at the University of Arkansas. “They are promotion and information programs that collect a per-unit assessment of a commodity.” 

The money is invested by boards of directors made up of farmers into programs that boost research, promotion, education, or marketing of these products. Some checkoffs are refundable (including wheat and corn checkoffs in most states) while others are nonrefundable. None of the checkoff collections are allowed to be used for lobbying purposes, according to rules set forth by USDA’s Agricultural Marketing Service. 

Many checkoff programs were created in the 1985 Farm Bill and are instrumental in boosting export markets, developing new products for commodities, and improving yield. Farmers have recouped their checkoff investment many times over, says Harry Kaiser, an economist at Cornell University in Ithaca, New York. For 35 years, Kaiser and his team have used a technique called econometrics to measure return on investment (ROI) of many checkoff programs. The ROI is impressive, Kaiser says:

Beef: $1 creates $11.20 

Soy: $1 creates $12.34

Pork: $1 creates $25.00

Collective firepower

“In general, checkoffs represent a flow of investment into different aspects of the agricultural industry that could never be obtained in other methods,” says the law center’s Pittman. “No amount of political firepower would generate half of what’s produced in the checkoff programs.”

That firepower is in the hands of farmer board members, adds Polly Ruhland, chief executive officer of the United Soybean Board, which has 78 board members.

“All checkoffs are completely run by farmers, who understand farming, and they have staff members who do what farmers are seeking,” says Ruhland, who came to the USB three years ago from the National Cattlemen’s Beef Association. Farmers pay .5% of the net market price of soybeans into the Soybean Checkoff. Member states receive roughly half the checkoff, while the USB gets the rest, subsequently investing that money in a myriad of projects to boost domestic and global demand, generate new products, and educate consumers and food companies about using soy products. The Soybean Checkoff has helped develop feedstuffs for poultry, aquacul

ture, and pigs in markets throughout the world. “There are a whole host of uses for soybeans spanning the globe. These are uses that could not be discovered by individual farmers,” she explains. 

Minden, Iowa, farmer Kevin Ross agrees. The past president of the National Corn Growers Association adds that farmers need to hold their checkoff board members accountable.

“You elect people to represent you on these boards. And if you don’t like the job they’re doing, you get to ask them about it,” he says. Representing their industry is something farmers take seriously. “The dollars we all put in are very well stewarded, and we are committed to doing the greater good for the industry.”

Soybean checkoff turned $2 million into $245 million

Soybean farmers invested $2 million into a planned Mississippi River dredging project that will help all farmers efficiently move products to key export destinations. Through the Soybean Checkoff, the money is used in planning, analysis, and design of the project, which was announced earlier this year by the U.S. Army Corps of Engineers.  

“That $2 million investment opened the door to a $245 million investment from the federal government and the State of Louisiana,” says Meagan Kaiser, USB treasurer and a soybean farmer from Bowling Green, Missouri. She cites USB research that shows dredging the river could save 13¢ per bushel of freight, while increasing the load by up to 500,000 bushels per ocean vessel, improving efficiency. 

The project, which will deepen from 45 to 50 feet a 256-mile stretch between Baton Rouge, Louisiana, and the Gulf of Mexico, will go to contract later this year and is estimated to be complete in 2024. 

“By dredging the lower Mississippi we can load ocean containers heavier, adding more bushels per load. It’s good for the farmer, it is good for the environment, and improves reliability to overseas consumers,” Kaiser says. 

Kansas wheat checkoff shaped the future

In 2012, the Kansas Wheat Commission (KWC) opened the doors to the $15 million Kansas Wheat Innovation Center, a sprawling complex of office, laboratory, and greenhouse space near the Kansas State University campus in Manhattan. Wheat farmers paid for the building through the 2¢-per-bushel Wheat Checkoff. It is home to the KWC plus Heartland Plant Innovations, a for-profit company that has developed a method for creating wheat doubled haploids, which helps reduce development time for new wheat varieties. 

The Kansas Wheat Alliance, which helps promote wheat varieties developed at KSU, also has offices at the center. In September, Grain Craft – one of the nation’s largest wheat flour mills – announced it would move analytical, milling, rheological, and application activities into newly finished laboratory space in the facility. Other businesses housed at the building include KSU’s Wheat Genetics Resource Center and the Kansas Association of Wheat Growers. In all, nearly 30 full-time and part-time employees work at the innovation center. 

Justin Gilpin, chief executive officer for the KWC, says farmer leaders of the commission were forward-thinking when developing plans for the innovation center in the early 2000s. Grower leaders knew the facility had potential to capitalize on federal and state grants that helped equip laboratories and research space, and attract world-class wheat leaders and researchers.

Beef's bold way forward

For years, beef was considered taboo by dietitians because it was thought to be bad for heart health. Researchers at Pennsylvania State University, however, have found that eating lean beef daily as part of a heart-healthy diet actually lowered LDL cholesterol levels, also decreasing risk for heart disease, says Penny M. Kris-Etherton, distinguished professor of nutrition at Penn State College. 

To determine diet effects on vascular health, Kris-Etherton and her colleagues tested four diets, with 36 participants between the ages of 30 and 65:

Healthy American Diet, which consisted of 0.7 ounces of lean beef per day 

DASH diet, which had 1.0 ounce of lean beef per day 

BOLD diet, which contained 4.0 ounces of lean beef per day

BOLD+ diet, which had 5.4 ounces of lean beef 

All participants followed each diet at different times throughout the study period. Subjects were randomly assigned an order to follow each of the four diet plans for five weeks each, with a break of one week in between each new plan. Blood pressure was taken at the beginning and end of each diet period.

The BOLD+ diet was more effective at reducing blood pressure when compared with the other diets tested.

“This evidence suggests that it is the total protein intake – not the type of protein – that is instrumental in reducing blood pressure, as part of a DASH-like dietary pattern,” the researchers said.

Barb Downey, a cattle rancher from Wamego, Kansas, and member of the Federation of State Beef Councils board of directors, part of the Beef Checkoff governing body, says research like this helps dietitians prove that beef belongs in a healthy diet. 

“Consumers like beef, and they want to eat it. They just are looking for permission,” she says.

Pork checkoff helped mitigate COVID-19 crisis

When COVID-19 forced the shutdown of pork processing plants, crisis management plans established years ago by the Pork Checkoff were put into place to lessen the impact. 

“We made $3 million immediately available to state pork associations so that they could work on issues relevant to their state,” says Bill Even, CEO of the National Pork Board, which administers the Pork Checkoff. 

Plant closures led to a slowdown in processing and, in turn, to a backlog of market-ready pigs. That thousands of pigs were depopulated at a time when grocery stores were low on pork could have been a public relations nightmare. Checkoff funds helped provide the tools producers needed to make decisions on their farms. The checkoff also launched a new marketing platform called “Real Pork,” to help with consumer confidence, Even says. 

The pork industry also has invested time and effort to develop crisis response plans with the USDA, which paid off during COVID-19 because the impact of foreign animal disease or a pandemic can be economically devastating. Within 24 hours of the news from Germany that a wild boar tested positive for African swine fever in September, the German pork industry lost over $1 billion. 

In the past 10 years, the Pork Checkoff has invested over $60 million on swine health and production research including foreign animal disease, plus $15 million for research at the Swine Health Information Center for new and emerging diseases.

Where checkoff money goes

The USDA’s Agricultural Marketing Service manages nearly two dozen commodity checkoff programs. While each has similarities – collecting a set amount of money from each unit of product sold – the rules between commodities can be quite different. Here is how the money is collected and dispersed in several key commodities. All checkoff programs listed below are nonrefundable.

The checkoff programs for corn and wheat are state-based. Each state collects a checkoff, keeps much of the money in-state, and pays dues to several national promotion and market-development programs. For corn, these national programs include the U.S. Grains Council and National Corn Growers Association and in wheat, the U.S. Wheat Associates and Wheat Foods Council. In most states that collect a corn or wheat assessment, growers can request a refund on their checkoff.

Cattlemen’s Beef Board

Assessment Rate

$1 per head on the sale of live domestic and imported cattle, and a comparable rate on imported beef and products 

Budget

$43 million

Governing Body

99-member Cattlemen’s
Beef Promotion and Research Board

Established

1985

National Pork Board

Assessment Rate

40¢ per $100 of market value

Budget

$28.43 million

Governing Body

15-member National Pork Board

Established

1985 

United Soybean Board

Assessment Rate

0.5% the net market
price of soybeans 

Budget

$85 million

Governing Body

78-member United Soybean Board

Established

1991

National Dairy Promotion and Research Board

Assessment Rate

15¢ per hundredweight on milk (domestic); Importers pay 7.5¢ per hundredweight on dairy products.

Budget

$233 million

Governing Body

37-member National Dairy Board

Established

1983

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