A Different Dairy Scene in 2015

Volume 139, No. 24, Friday, December 5, 2014

A run of record milk prices, butter prices and cheese prices in 2014 should not wander into the history books without a mention at year’s end. In recent weeks change has come in the form of falling dairy commodity prices in the US and abroad, but dairy farm balance sheets have mended and a prosperous dairy industry starts on the farm.

The coming year will look different in many ways, starting with reduced milk and dairy product prices. Export demand, particularly for milk powders into China, has fallen from record highs. Growing local milk production in China and competing importers with plentiful product at low prices will curb extraordinary dairy exports from the US.

In the end, exports reflect world milk supply and milk production in New Zealand is up a respectable 2-3 percent and European milk production is tracking 5 percent stronger than a year ago. Analysts at Blimling & Associates note that
Russia’s ban on agricultural imports from the European Union could, over the course of a year, stop the sale of more than 500 million pounds of European cheeses. Those lost sales are backing farm milk into milk dryers rather than cheese vats, adding to the surplus of dairy powders for international sale.

2015 will also be marked by a new milk profit safety net, USDA’s Dairy Margin Protection Program. The sign-up period for this new, more market-oriented program ends Dec. 19 and state Farm Service Agency officials in Wisconsin estimate that 40 percent or more state farms will enroll for this inaugural year.

Falling dairy prices may activate margin protection for farms in 2015, even with low feed prices in the margin equation. Yet an active margin protection program is infinitely better than price supports and government purchases of baseline commodities – the extinct programs that retarded US dairy innovation and international sales for decades.

The end of milk production quotas in the EU and the demise of Commodity Credit Corporation purchases in the US will mark 2015 as the year global dairy relied on product innovation and marketing rather than government programs to support sales.

At the state level, Wisconsin has the opportunity to be proactive on several dairy fronts in 2015.

The Wisconsin Department of Agriculture, Trade & Consumer Protection (WDATCP) is proposing two “better government” rule changes for the new year. First, two state regulations for dairy farms and dairy plants have been redrafted into a single, more brief regulation that recognizes the overlapping goals for food safety on the farm and in the processing sector.

And this week, WDATCP also proposed to accept the state sanitarians program from the Wisconsin Department of Health Services. Hygiene inspectors for diverse areas such as campgrounds, restaurants, grocery stores, caterers, hospitals, would merge with food plant inspectors at WDATCP. Dairy inspection would retain its separate corps of specialized dairy plant and dairy farm inspectors.

Wisconsin’s Ag Producer Security program will be scrutinized for change in 2015. Dairy organizations are united in support of a new program that would create a dairy-specific indemnity fund – a fund built by dairy processors that can reimburse farms if a milk buyer fails to pay.

Currently, dairy shares a fund with grain dealers, grain warehouses and vegetable processors in Wisconsin. That fund, nearly two-thirds dairy money, was drained of half its value this summer to pay for a default in the vegetable industry. Nineteen vegetable farmers took five times more money from the fund than vegetable processors had paid in.

Also in 2015, Wisconsin could create a new path for states dealing with federal regulations for phosphorus entering state waters. The Wisconsin legislature passed a statewide variance from tough new phosphorus regulations last spring, and in 2015, the Wisconsin Departments of Natural Resources and Administration will release a report to determine if the social and economic harm caused by these regulations will justify the variance. The variance, which stair-steps down phosphorus limits in wastewater permits, also creates a new fund to help farms reduce phosphorus run-off from fields. It’s an innovative compromise between the environmental and economic needs of the state, and could serve as a model for lower phosphorus limits nationwide.

It’s a year to look forward to. JU

John Umhoefer has served as executive director of the Wisconsin Cheese Makers Association since 1992. You can phone John at (608) 828-4550; Fax him at (608) 828-4551; or e-mail John Umhoefer at jumhoefer@wischeesemakers.org


Other John Umhoefer Columns

 The Truth About Animal Care
 A Regulatory Hat Trick
 Flawed Security Program Bilks Wisconsin Dairy
 Leading Cheese Producers
 Success by the Numbers
 It’s Time for Training
 Exports Trump Farm Bill
 Wisconsin Specialty Cheese Institute’s 20-20 Vision
 Addressing Wastewater Head On
 Knowledge Opportunities Abound
 Say No to an Extreme Raw Milk Bill
 A Generation's Gift
 Government-Induced Uncertainty

 Decades Ahead on Food Safety
 Wisconsin’s Hot Winter
 A Successful Campaign for Babcock
 Ireland: Gearing Up For Growth
 Mired in Wash Water
 Less Government, More Dairy
An Interview With Jim Sartorii
The Other Solids Price Crush

 The Policy Answer Is Exports
 Rolling The Dice On Dairy Reforms
 Productive Changes In Wisconsin

 The Successful Idea Of DBIC
 Cheese Cuts Both Ways:
Consolidation and Growth
 IDFA's Deep Dairy Reforms
 Wisconsin In The Spotlight
 An Overbuilt Foundation

 What the New Governor Means To Wisconsin
 No Man's Land
 Dairy & Wisconsin’s New Leadership

Wisconsin Cheese Is Investing, Expanding
 Talking Competition
 Being Big Dairy
Upper Midwest Prospects in 2010
Upper Midwest Growth: Perspectives From The Farm
Blue Skies or Bust
Pushing Back Against A Tough 2009
Support Demand, Not Price
Dairy: A Good Bet in a Bad Economy
Wisconsin's Future: Growth
Keeping Sustainability Real
Nose Dive
Dairy Dives into 2009
Consider This...
 Fulls Vats
Implement Make Allowances ASAP
Security Reforms
Spring Forward
A Week of Clarity

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