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Dairy Industry Faces Number of Challenges

The polar vortex of late January, which caused extreme cold weather in the Midwest and East, did not stop active production of dairy products, but did cause some hauling issues and plant closures. Dairy producers are concerned about the temperature fluctuations and how it will affect cow health, according to USDA market news analyst Jessica Mueller.

Dry milk prices continue to be stable as exports to China and southeastern Asian countries are strong.

Average January 2019 dairy prices were $2.23 for butter; nonfat dry milk is $0.95; cheese was $1.39, and dry whey was $0.48. The milk price for Class II was $15.74 per cwt., Class III price was $13.96 per cwt., and Class IV was $15.48 per cwt. Prices continue to see some fluctuation, but are far from a strong recovery.

Milk production projections for 2019 are slightly higher than 2018, at 220.6 billion pounds, but lower than expected, with low prices continuing.

Dairy group urges FDA to make informed decision

The Food and Drug Administration issued a request last fall for information on how consumers use plant-based foods and beverages, using terms like milk or cheese in labeling of products made from soy, peas, or nuts. The International Dairy Food Association submitted literature and consumer research to help the FDA make an informed decision.

“IDFA appreciates FDA’s efforts to support consumer choice and innovation in the marketplace, and we support FDA’s actions to ensure that the labeling of plant-based products is truthful and does not mislead or confuse consumers,” IDFA said in the comments.

IDFA stressed that the issue of using dairy terms on the labels of plant-based foods and beverages is of great importance to the dairy industry and urged the agency to conduct its review in a transparent and inclusive way.

Whole Milk for Healthy Kids Act proposed

On January 30, 2019, U.S. Representative Glenn ‘GT’ Thompson (R-PA) and Chairman of the House Agriculture Committee Collin Peterson (D-MN) introduced a bill to allow unflavored and flavored whole milk to be offered in school cafeterias.

The Whole Milk for Healthy Kids Act of 2019 (H.R. 832) recognizes the importance of milk to the health and well being of growing children. In 2018, the U.S. Department of Agriculture Secretary Sonny Perdue directed USDA to allow schools to serve 1% flavored milk in school meal programs. H.R. 832 would allow whole milk to be included, as well.

“Milk is the No. 1 source of nine essential nutrients in the diets of our students, but if they don’t drink it, these health benefits are lost,” Thompson said. “Milk consumption has been declining in schools throughout the nation because kids are not consuming the varieties of milk being made available to them. It is my hope that the Whole Milk for Healthy Kids Act will bring a wider range of milk options to American lunchrooms so students can choose the kind they love best.”

Milk producers group urges Farm Bill implementation

The National Milk Producers Federation urged Agriculture Secretary Sonny Perdue to implement the 2018 Farm Bill’s dairy provisions, following the delay due to the federal government shutdown.

“Dairy farmers have just completed a fourth consecutive year of depressed milk prices and are facing an uncertain outlook for 2019,” wrote Jim Mulhern, president and CEO of NMPF. “We believe that the significant dairy policy reforms we worked successfully with Congress to enact in the new farm bill will be critically important to helping farmers better manage difficult periods of low margins.

“Because the dairy provisions of the law simply modify the preexisting margin program, it is clear from Congress’ direction that USDA can move forward to enact the new provisions without conducting a formal rulemaking process,” Mulhern wrote. “We encourage you to utilize this flexibility to help add momentum to the process, especially in light of the fact that the government shutdown has delayed the department’s ability to proceed.”

The new Dairy Margin Coverage program (DMC) offers much more affordable and higher coverage levels than previous initiatives, with all dairy producers able to insure margins up to $9.50 per cwt. on their Tier I (first 5 million pounds) production history. The DMC also offers lower-cost $5 margin coverage, a higher level of affordable catastrophic protection for operations wishing to cover more than 5 million pounds of production.

Study shows need for strong U.S.-Japan trade treaty

A study released January 31, 2019, by the U.S. Dairy Export Council projects that new trade agreements made by Japan will benefit U.S. dairy global competitors while reducing sales of U.S. dairy exports.

Australia and New Zealand have the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in place with Japan. On February 1, a Japan-EU Economic Partnership Agreement took effect.

The study, conducted by Tokyo-based Meros Consulting shows that without a strong U.S.-Japan trade treaty, competitors will seize a cumulative $1.3 billion in dairy sales over the next decade. That would climb to $5.4 billion once the agreements are fully implemented over 21 years, the report said.

The Japanese dairy market is valuable to the U.S. dairy industry, importing $291 million from U.S. exporters in 2017, the last year with complete data. Those strong 2017 sales were a 41% increase over the previous year.

The total made Japan the fourth-largest market for U.S. dairy exports. Dairy demand, especially for cheese, is expected to continue.

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