Obama’s 2013 budget request includes cuts to ag subsidies

February 17, 2012

WASHINGTON — President Obama this week released his budget proposal for fiscal year 2013. The proposal includes $32 billion in cuts over 10 years to agriculture subsidies, which resulted in disappointed reactions from the agriculture sector in a year where the industry is hoping to pass a new farm bill.

The fiscal year 2013 budget request covers the period from Oct. 1, 2012, through Sept. 30, 2013.

Ferd Hoefner, policy director for the National Sustainable Agriculture Coalition (NSAC) — an alliance of grassroots organizations that advocates for federal policy reform to advance the sustainability of agriculture, food systems, natural resources and rural communities — says that the budget proposal follows the “emerging consensus” to do away with direct payments but offers no alternative safety net proposal other than renewing a “largely discredited and expensive” farm disaster program. It also proposes an across-the-board 2-percent cut to farmers’ crop insurance premium subsidies.

“Both the commodity payment and crop insurance proposals fail to target the cuts, and thus their impact would be felt most heavily by small and medium-sized farms,” Hoefner says.

U.S. Agriculture Secretary Tom Vilsack this week noted that in order to help sustain record farm income, the budget invests in research and development to improve agricultural productivity. The budget makes a 23-percent increase in funding for USDA’s “premier” competitive grants program to “support the most worthy projects” and continues support for in-house research and the land grant universities, Vilsack says.

Vilsack notes that since fiscal year 2010, USDA has seen its operating budget cut by $3 billion, or 12 percent, which came on top of a $4 billion contribution to help pay down the debt.

“To manage these reductions while preserving the success we’re seeing in the countryside, we’ve had to take a close look at the way we do business with less money, a smaller staff and more complex programs,” Vilsack says. “Following a department-wide review of operations, we created a Blueprint for Stronger Service to make USDA work better and more efficiently for the American people.” (See “USDA announces consolidation of operations under new Blueprint for Stronger Service” in the Jan. 13, 2012, issue of Cheese Market News.)

• Farm bill outlook

Hoefner notes that “nowhere in the president’s request is any indication given that the farm bill has an important role to play in economic recovery, job creation and improved public health through renewal of funding for innovative programs that expire at the end of 2012.”

With respect to fiscal year 2013 farm bill conservation program spending, the president’s budget proposes to layer further cuts of $432 million on top of the more than $1.25 billion in farm bill conservation cuts enacted as part of the fiscal year 2011 and 2012 appropriations bills, Hoefner says.

Roger Johnson, president of the National Farmers Union (NFU), this week said that agriculture “has and continues to do more than its fair share toward reducing the federal deficit.

“Efforts to cut even more by slashing support for family farmers should be directed elsewhere,” Johnson says.

He also noted USDA’s consolidation earlier this year of 259 facilities across the country due to budget cuts is indicative of a “cut-first, ask questions later” attitude in Congress.

“These budget cuts highlight a reality that we must look for new solutions within the agriculture industry to ensure that farmers and ranchers are protected even as the available funds diminish,” Johnson says. “Farmers need a safety net for difficult times — when markets collapse and disaster strikes.”

Johnson also notes that because the industry is in a farm bill reauthorization year, this will further exacerbate the budget hole for agriculture programs.

“This makes the passage and completion of a farm bill in 2012 an imperative but difficult task for Congress and the administration,” he says.

NFU, NSAC and other groups including the National Milk Producers Federation, American Farm Bureau Federation and Organic Trade Association late last week sent a letter to the Senate and House agriculture committees urging their leaders to pass a farm bill this year.

“We the undersigned have heard calls for an extension of current law; we ask you to reject these calls for delay and aggressively act to ensure that a new, comprehensive farm bill is passed this year,” the letter says.

The letter says farmers need a safety net that works more effectively as well as access to tools that help farmers to be good stewards of natural resources.

“A temporary extension of current policy creates tremendous uncertainty while serving to further none of these needs,” the letter says.

Senate Agriculture Committee chair Debbie Stabenow, D-Mich., this week kicked off a series of farm bill hearings.

Following the release of the president’s budget request, Stabenow noted that last fall, the Senate and House ag committees developed a “fiscally responsible, bipartisan recommendation to cut the agriculture budget by $23 billion while strengthening programs to be more efficient and cost-effective.”

Stabenow says while she is encouraged the president agrees that direct payments are an indefensible program of the past, she does not agree with further cuts to crop insurance, which is a “critical risk management tool.

“I have heard loud and clear that strong, effective risk management is the No. 1 priority of farmers and producers across the country,” Stabenow says. “Farming is a high-risk business, and we don’t want farmers and other small businesses going under because of a few days of bad weather; it jeopardizes the economy and the safety of our national food supply.”

Stabenow adds that the budget request reinforces the need for Congress to pass a strong, fiscally responsible farm bill immediately this year in order to provide farmers with the certainty they need to continue being successful.

“By focusing on streamlining and consolidating programs, I’m working to develop a strong bill that tightens programs to make sure we’re getting the most out of every dollar but not undercutting critical programs that sustain our national food system,” she says. “The farm bill is a jobs bill, and we must make its immediate passage a top priority.”

• FDA funding

Meanwhile, the FDA budget released this week was earmarked at $4.5 billion, a $654-million increase over the 2012 budget. Industry user fees would fund 98 percent of the proposed budget increase.

In addition to recommending new user fees to support the review of generic drugs and biosimilars, the FDA budget also contains increased funding for priorities such as import safety, medical countermeasures and research facilities to protect patients and consumers.

“Our budget increases are targeted to strategic areas that will help speed the availability of new medical products, address the challenges of increased globalization and allow FDA to fulfill its public health duties more efficiently,” says FDA Commissioner Margaret A. Hamburg.

Specific to food safety, the FDA budget request includes $253 million to bolster agency efforts to build a strong, reliable food safety system, as envisioned in the Food Safety Modernization Act. FDA says that with the support of new user fees, the agency will foster a prevention-focused domestic and import food safety system to protect the health of U.S. consumers.

CMN

Several states look at legal avenues for raw milk sales

February 17, 2012

WASHINGTON — Legislation that would widen consumer access to raw milk has been proposed recently in several states.

Earlier this week, the Kentucky State Senate passed a bill that would allow cow-sharing as a way for consumers to buy raw milk. The bill would allow consumers to enter into a livestock-ownership agreement with a dairy producer and purchase raw milk produced from that herd. The Kentucky State Senate has sent the bill to the Kentucky House of Representatives, which referred it to its Agriculture and Small Business Committee.

Recently the Indiana State Assembly attached an amendment which would allow the sale of raw milk directly to consumers at small farms to a routine bill detailing the duties of the state chemist. Earlier this year the Senate passed this bill, but the Indiana State House of Representatives passed the state chemist bill without the raw milk amendment that had been included in the Senate bill. The bill now moves back to the Senate for consideration, and it is expected that the House version of the bill will be accepted.

The International Dairy Foods Association (IDFA) this month sent letters to legislators in both Kentucky and Indiana voicing concerns over these bills, citing public health risks associated with drinking unpasteurized milk and the overall reputation of the dairy industry.

In a letter sent this week to Rep. Tom McKee, D-Cynthiana, chairman of the Kentucky House Agriculture and Small Business Committee, IDFA notes that in the past month alone, raw milk consumption has caused 71 people to become ill.

“Increasing the availability of raw milk for direct human consumption will undermine and detract from the overall superior food safety record and safe image of all dairy products and will be detrimental to Kentucky’s dairy industry,” Jerry Slominski, IDFA senior vice president for legislative affairs and economic policy, says in the letter.

In addition to Kentucky and Indiana, raw milk legislation also recently has been introduced in Iowa, Massachusetts and New Jersey.

An Iowa House study bill was introduced earlier this month to allow the sale of raw milk directly to consumers for consumption but not for resale.

The new bill, which is identical to one introduced last year, was referred to the Iowa House Judiciary Committee where it awaits action.

The Joint Committee on Environmental, Natural Resources and Agriculture in the Massachusetts Assembly recently favorably reported a proposed bill which would allow the sale of raw milk directly to consumers by properly licensed producers. The bill now goes to the Massachusetts General Assembly calendar where it awaits action.

In New Jersey, a bill proposed last session to legalize the sale of raw milk to consumers has been reintroduced in this session. It has passed the Agriculture Committee and still must be passed by the entire Assembly, move through the Senate and receive the governor’s signature to become law.

In other raw milk news, the Pennsylvania Department of Agriculture last week cleared The Family Cow, Chambersburg, Pa., to resume production and bottling of raw milk after it passed a final inspection Feb. 6. The Family Cow had voluntarily suspended production and sales after state health officials linked its raw milk products to a Campylobacter outbreak that to date has affected 77 people. (See “Consumers advised to discard raw milk from Family Cow after campylobacteriosis outbreak” in the Feb. 3, 2012, issue of Cheese Market News.) Sales of raw milk for human consumption from licensed dairies are legal in Pennsylvania.

In a letter to customers of The Family Cow, owner Edwin Shank last week said the dairy would begin delivering to all drop points and its stores later that week, and that he understands the caution of state regulators and has not found them hard to work with.

“Cautious, yes, following their rule book religiously, yes, but we understand their job and respect them,” Shank says.

In the wake of this outbreak, Seattle-based food safety advocate and attorney William Marler has called for warning labels to be placed on all raw milk products. Marler says while he recognizes the effort The Family Cow has put into improving the safety of its raw milk by installing advanced testing equipment and updating procedures, he believes raw milk producers should help consumers become more knowledgeable about raw milk’s potential dangers.

“Unlike many others that have been in this position, The Family Cow has owned its mistakes and is clearly trying to create a safer product,” Marler says. “That said, when it comes down to it, dairies like this are selling a raw animal product which could carry an increased risk of foodborne illness.”

Marler says he would like to see a label with language similar to the following: “Unpasteurized milk, also known as raw milk, is a raw agricultural product and may contain harmful bacteria (not limited to E. coli, Campylobacter, Listeria and Salmonella) and can lead to serious injury and even death. Pregnant women, infants, children, the elderly, and persons with lowered resistance to disease (immune compromised) have higher risk for harm, which may include bloody diarrhea, vomiting, fever, dehydration, Hemolytic Uremic Syndrome, Guillian-Barre Syndrome, Reactive Arthritis, Irritable Bowel Syndrome, miscarriage, or death.”

Another Pennsylvania dairy farmer recently was ordered to stop distributing raw milk for human consumption in interstate commerce.

Earlier this month the U.S. District Court for the Eastern District of Pennsylvania awarded summary judgment to the government on a finding that Daniel Allgyer, doing business as Rainbow Acres Farm and Rainbow Valley Farms, violated the Food, Drug and Cosmetic Act and the Public Health Services Act.

An FDA investigation had found that Allgyer, who owns and operates a dairy farm in Kinzers, Pa., was packaging raw milk in unlabeled containers and was then distributing the milk for human consumption in interstate commerce.

FDA warned Allgyer that his conduct violated federal law, but instead of ceasing his illegal operations, the Department of Justice says he attempted to evade federal regulations that prohibit the interstate sale of raw milk by creating a private membership organization that he used to enter into cow-sharing agreements with his customers. In the order granting summary judgment in the government’s favor, the court found that the cow-sharing agreements were “merely a subterfuge” and issued an order enjoining Allgyer and his associates from distributing unlabeled or unpasteurized milk for human consumption in interstate commerce.

CMN

Holland’s Family Cheese plans for new creamery

February 17, 2012

By Alyssa Sowerwine

THORP, Wis. — The City of Thorp, Wis., earlier this week approved a rezoning amendment for 100 acres of land to accommodate an expansion of Holland’s Family Cheese, based here. The approval marks a key step forward for Holland’s, which hopes to break ground on a new dairy and attached creamery just south of Highway 29 in Thorp later this year.

Marieke Penterman, who owns Holland’s Family Cheese along with her husband, Rolf, says the creamery has grown out of its current building.

“We just don’t have the room to produce the amount of cheese our customers are demanding,” she says.

In addition, Rolf, who manages the dairy cow side of the business, Dutch Dairy LLC, with his brother, Sander, is planning to split the business to manage the dairy on his own at the new location. Sander will still manage the dairy at the former location.

Kimberly Rabuck, general manager, Holland’s Family Cheese, says Rolf will take some young stock and will buy additional cows as needed to start up the dairy at the new location.

The Gouda cheese produced by the company is extremely fresh, as the raw milk comes directly from cows on site, and is pumped into a vat for cheesemaking, where it is made into cheese within five hours, Rabuck notes. The businesses are separate, as Holland’s purchases the milk from Dutch Dairy for cheesemaking.

With the rezoning approval from the city, the company was able to close on the land this week and now will begin the process of applying for a conditions of use permit. In order to do this, the company will need to nail down all the details of how many cows will be on site and other details, Rabuck notes.

If all goes as planned, Holland’s Family Cheese envisions breaking ground on a new, state-of-the-art facility later this year, Rabuck says. In addition to building a new dairy and creamery, the company hopes to make the site an educational center for the city, she adds.

“We want it to be a family friendly area, including a sitting area with a porch, and possibly a small park area for families to bring their kids,” Rabuck says. “We hope it’s another place for families to come and hang out, and for visitors to Thorp to come to learn about local products.”

With this in mind, in addition to making the company’s award-winning Marieke Gouda, Holland’s hopes to offer other locally-made products to visitors and give them a chance to learn about the creamery and other local businesses.

The educational aspect is one reason the City of Thorp approved the rezoning for the expansion, notes Randy Reeg, city administrator for Thorp.

“The council at this point feels this would be a benefit to the city,” he says. “We believe it will draw traffic off of 29 and bring people to the community.”

CMN

U.S., EU partner to recognize organic programs as equal

February 17, 2012

NUREMBERG, Germany — The United States and the European Union have formed a partnership that will recognize the two organic programs as equivalent and allow access to each other’s markets. Formal letters creating this partnership were signed earlier this week in Nuremberg, Germany, by USDA Deputy Secretary Kathleen Merrigan; Dacian Ciolos, European commissioner for Agriculture and Rural Development, and Ambassador Isi Siddiqui, U.S. Trade Representative chief agricultural negotiator. The signing took place at the BioFach World Organic Fair, the largest trade show for organic products in the world.

Under the organic equivalence cooperation arrangement, the EU and United States will work together to promote organic programs, protect organic standards, enhance cooperation and facilitate organic product trade. Officials note the EU-U.S. organic equivalence cooperation arrangement will expand market access for organic producers and companies by reducing duplicative requirements and certification costs on both sides of the ocean while continuing to protect organic integrity.

“This is an historic agreement toward building the organic movement and industry,” says George Siemon, CEO and founding farmer, Organic Valley Cooperative. “Organic Valley as a farmer-owned cooperative continues to support the hard work of USDA to standardize and protect the organic program. Equivalency will expand and enable the organic farming movement on both continents.”

Together, the U.S. and EU organic markets are valued at more than $50 billion. Estimates show that under this agreement, the market for U.S. organics sales to the EU could grow substantially within the first few years, USDA says.

“This monumental agreement will further create jobs in the already growing and healthy U.S. organic sector, spark additional market growth, and be mutually beneficial to farmers both in the United States and European Union as well as to consumers who choose organic products,” says Christine Bushway, executive director and CEO, Organic Trade Association. “Equivalence with the EU will be a historic game changer.”

As of June 1, certified organic products will be allowed to move freely between the U.S. and EU borders, provided they meet the terms of the new arrangement. Under the agreement, the EU will recognize the USDA National Organic Program (NOP) as equivalent to the EU Organic Program and allow products produced and certified as meeting USDA NOP standards to be marketed as organic in the EU. The United States also will allow European products produced and certified under the EU Organic Program to be marketed as organic in the United States.

This arrangement is limited to organic products of U.S. or EU origin produced, processed or packaged within these jurisdictions. Additionally, both programs have agreed to exchange information on animal welfare issues and on methods to avoid contamination of organic products from genetically modified organisms. General country labeling requirements still must be met.

CMN

Analysts look for price bottom for cheese and butter at CME

February 10, 2012

By Alyssa Sowerwine

MADISON, Wis. — Prices for cheese and butter at the Chicago Mercantile Exchange (CME) continued to mostly decline this week, with analysts looking for a price floor to quell the descent.

“Currently there is no concern of shortage or tight supply. It is a buyer’s market,” says Robin Schmahl, commodity broker and owner of AgDairy LLC, Elkhart Lake, Wis.

James Dunn, professor of agricultural economics at Penn State University, says he does not expect cheese to go much lower than its current price level.

“I think it’s in balance with supply and demand,” he says.

However, Dunn adds that he does not see much positive news coming out of the pipeline for the dairy market this year.

“There’s the possibility of a little lower cheese price vs. the price increasing to $1.60 or something like that,” he says.

Closing out the week of Feb. 4 at $1.4950 per pound, Cheddar barrels had a slight 1-cent comeback to $1.5050 on Monday before falling to $1.4750 per pound Wednesday and then bumping up just a quarter cent to $1.4775 on Thursday. Meanwhile, Cheddar blocks, which ended last week at $1.4850 per pound, declined a half cent both Monday and Wednesday to settle at $1.4750, where it remained Thursday. (For today’s market prices, see chart on page 2.)

“Cheese seems to be wiggling around the $1.50 price,” Dunn says.

The butter price at the CME also has been falling. Butter was at $1.4925 per pound to close out the week of Feb. 3 and has continued to decline this week to settle at $1.4325 per pound as of Thursday.

“We do believe there is a short-term potential for another spike to the downside on butter prices, and we’ve heard some, mostly on the West coast, talking of spot prices potentially reaching down near the $1.30 mark,” says Robert Chesler, vice president of the foodservice division of FCStone LLC, Chicago.

Dunn says he anticipates butter to reach a bottom soon, as inventories do not quite reflect a cash butter price as low as its current level.

However, Schmahl notes that seasonally, stocks of cheese and butter increase during the first half of the year as demand is generally slower, resulting in product moving into storage.

“So, growing stocks are not a surprise or bearish in themselves,” he says. “The bearishness of the present situation is that buyers are holding back from purchasing cheese and butter for inventory.”

Schmahl notes that growing stocks as a result of increased butter production prompted Cooperatives Working Together (CWT) last week to assist in butter exports, the first butter export assistance since October 2010. (See “CWT assists with 13.8 million pounds of butter, cheese exports for January-June” in last week’s issue of Cheese Market News.)

“The hope is that the butter price will be supported through the increased sales overseas aided by CWT,” he says.

Nonfat dry milk (NDM) also has seen steady declines over the past two weeks. However, following its price decline over the past two weeks from $1.4500 per pound on Jan. 27 to $1.3325 per pound Feb. 6, Grade A NDM bumped up a quarter Wednesday to $1.3350 per pound, where it remained Thursday. Meanwhile, over the past two weeks, Extra Grade NDM has fallen from its long-time perch at $1.4800 per pound on Jan. 30 to $1.2975 per pound Feb. 3, where it has remained throughout this week as of Thursday.

Analysts also have been watching the dry whey market with interest, as prices were higher than expected for some time. (See “Dairy economists watching dry whey, export markets” in the Jan. 27, 2012, issue of Cheese Market News.)

However, the Western dry whey price fell 15 cents last week in USDA’s Dairy Market News’ weekly price survey to 53 cents per pound on the low end. Western prices were at $0.5300-$0.7550 last week, down from $0.600-$0.7550 the week of Jan. 27.

“That definitely startled the market,” Chesler says.

Sara Dorland, managing partner with Ceres Dairy Risk Management LLC, Seattle, says that given the pressure on other dairy markets, she did not think the higher whey price was sustainable, but the drop may have been sooner than many anticipated.

“Where the futures market is today may be overcorrecting at this point,” she says. “The product is still in good demand, and we’re not sitting on a ton of it.”

However, Dairy Market News notes that prices needed to be reduced to get the volumes sold that allowed companies to be more comfortable with inventories at the start of February.

“Many of these contracts indicate that prices may well rebound in the near future as stock levels become more comfortable for them and the pressure to sell more powder immediately is reduced,” Dairy Market News says.

Dairy Market News also notes that production of powder at this time is heavier than many had assumed due to heavier milk production, with much of it heading to cheese and whey output.

“A likely emotional sell-off last week, which we called overdone, reversed course on Monday. We suggested that to some extent, cheese hedgers — and to a greater extent, long liquidation — drove the whey futures market down overzealously last week, and Monday was the beginning of a price recoil,” Chesler says. “While we saw sharply lower prices out of last week’s Dairy Market News weekly report, we would be remiss if we didn’t mention that such a sharp decline on weekly prices — low end of 53 cents — is not necessarily representative of where deals are being done at large. In other words, product may have been off grade or it may have been smaller sales done out of inventory management necessity.”

In this week’s Dairy Market News Dry Products price survey, released on Thursday, Western dry whey is still reported lower at $0.5300-$0.7300. (For this week’s dry whey price, see chart on page 3.)

“We suspect that the recent drop in the low end of prices has spooked the buy side of the market and caused a slowdown, particularly from Asian buyers,” Chesler says. “We saw the top end of prices ease but only slightly and this is all indicative that there is still interest in procuring whey, which is unlikely to vanish, and therefore prices are likely to remain at historically high levels for some time.”

Chesler says he looks for more stabilization in the dry whey market in the coming weeks.

“I think the lower price is an oddity, and while indicative of the direction of the market, not the momentum of it,” he says.

Chesler says he anticipates a dry whey price of 65-68 cents in the coming weeks.

“The market is still very high. When looking at the year, long-term, we’ve been looking at more of an average of 50-53 cents for dry whey. That’s still somewhat high by historical standards,” he says, noting that in 2011, the dry whey price averaged just more than 51 cents for the year. It was lower in previous years as well, except for 2007 when the price reached a record yearly average price of $0.5997.

Chesler says the higher prices are due to export demand to some extent, but he also would contribute them to a diversification of higher-end protein products, including domestically.

“I think overall, the key element to me for dairy markets is that we’ve been in a downward trend for the past six months or so, so the question that should be in everyone’s minds is ‘Where is the bottom?’ And I think we’re close to the tail end of that.”

Analysts also note concerns on the abundant milk supply resulting from a mild winter thus far and higher-than-anticipated cow numbers and milk production.

“Cheese inventories have continued to build due to the increased milk production created by an unseasonably warm winter and a slight dip in demand,” Chesler says. “I anticipate coming weather will decrease that a bit.”

Schmahl notes that even though record milk prices were achieved in 2011, profitability was not great.

“High feed prices kept the milk/feed ratio confined to a low range of $1.73-$2.14, which is certainly nothing to be excited about,” he says.

Dunn notes there have been some issues with feed supply, particularly in the East, including problems with the quality of silage and a bad corn crop this year.

Reports this week also indicated a high feed price forecast in the West.

“Feed prices will be high,” Dunn says.” “The milk price looks OK right now, but once you factor in the feed price, it doesn’t look as good.”

CMN

Lactalis to expand Mozzarella production at plant in Nampa

February 10, 2012

NAMPA, Idaho — Lactalis American Group this week announced plans to increase fresh Mozzarella production at its facility in Nampa, Idaho.

Lactalis notes the production expansion will add jobs and increase the company’s purchase of local and regional dairy.

The Nampa facility has been producing cheese for more than 10 years and is the largest production plant in North America for Groupe Lactalis, the parent company of Lactalis American Group that was founded in France in 1933.

Lactalis says it plans to increase Mozzarella production at the Nampa plant to meet growing global demand.

The $40 million project includes a new facility and will require additional employees.

“I applaud Lactalis for their decision to use their Nampa plant for increased cheese production,” says Idaho Gov. C.L. “Butch” Otter. “Idaho is proud to be home to the company’s largest manufacturing facility, and we appreciate their commitment to buying local agricultural commodities. Our state and region will enjoy the economic benefits of this production expansion for a long time.”

Clark Krause, executive director of Boise Valley Economic Partnership, notes that Lactalis also has a long history of working with area nonprofits by offering volunteers, donations and in-kind contributions.

“The Treasure Valley is fortunate to have companies like Lactalis, which are committed to the economic vitality of our state and our communities,” Krause says.

Construction on the plant will begin in March and will last approximately 10 months. Local construction contractor Hansen-Rice will oversee the expansion effort.

Lactalis expects production in the expanded fresh Mozzarella plant to begin in the spring of 2013.

CMN

February 10, 2012

WASHINGTON — In its “World Agricultural Supply and Demand Estimates” report released this week, USDA bumped up its 2012 U.S. milk production forecast to 199.0 billion pounds, an increase of 500 million pounds from its projection in last month’s report. USDA estimates 2011 production totaled 196.2 billion pounds.

Milk per cow forecasts are raised as milk per cow in the last quarter of 2011 was higher than expected and milk weather in much of the country is supporting increased early year yields. Milk cow numbers also are raised for much of the year as USDA’s “Cattle” report indicated 1 percent more dairy cows on Jan. 1, 2012. However, producers are holding 1 percent fewer heifers for addition to the dairy herd, which is expected to push cow numbers lower later in the year.

With higher forecast 2012 production, cheese and butter price forecasts are lowered. The cheese price in 2012 is now projected to average $1.610-$1.680 per pound, down from $1.655-$1.735 in last month’s report. The butter price is forecast to average $1.570-$1.670, down from $1.605-$1.715 in last month’s report.

The nonfat dry milk (NDM) price is lowered by a penny from last month to $1.360-$1.420 to reflect slightly weaker early year prices. With stronger forecast demand for whey, though, the whey price forecast is increased by a penny to $0.615-$0.645.

The lower cheese price is expected to more than offset the higher whey price, resulting in a reduced forecast Class III price of $16.70-$17.40 per hundredweight, down from the $17.10-$17.90 forecast last month. The Class IV price is forecast lower at $16.25-$17.05, down from $16.45-$17.35 in last month’s report. USDA forecasts the 2012 all-milk price will average $18.00-$18.70, down from the $18.30-$19.10 forecast last month.

In this month’s report, USDA bumped up its fat-basis trade estimates for 2011 due to both stronger-than-expected imports of butteroil and exports of cheese during November. Commercial exports on a fat-basis in 2011 are now estimated at 9.5 billion pounds. The skim-solids export estimate for 2011 also is raised to 34.1 billion pounds largely on relatively strong exports of whey and skim milk powders. This strength is expected to carry into this year, thus the skim-solids export forecast for 2012 is raised to 32.3 billion pounds, up 400 million pounds from last month’s forecast.

CMN

Utah, N.H. bills would ban federal regulation of food

February 10, 2012

SALT LAKE CITY — Lawmakers in Utah and New Hampshire recently introduced bills that would prohibit federal regulation of food or agricultural products produced and sold in these states.

Utah SB 34, sponsored by Sen. Casey O. Anderson, R-Cedar City, would make it a Class A misdemeanor for a person to enforce federal regulation of an agricultural product that remains in Utah after it is made, grown, or produced in Utah. The bill, which also addresses a “Made in Utah” designation for these products, was introduced Jan. 23 in Utah’s Senate Rules Committee, where it awaits further action.

The Utah Office of Legislative Research and General Counsel, however, conducted a legislative review of SB 34 and notes that there is a high probability that a court will find the bill unconstitutional.

“Congress exercises authority over many kinds of agricultural products in Utah under various federal acts,” the Utah Office of Legislative Research and General Counsel say, citing the Federal Food, Drug and Cosmetic Act, the Poultry Inspection Act and the Federal Meat Inspection Act.

According to the legislative review, the bill would conflict with valid federal regulation of intrastate commerce, make it a crime for a government agent to enforce federal law and require a court or the governor to uphold state law in violation of the Supremacy Clause of the U.S. Constitution.

A similar bill also was recently introduced in New Hampshire that seeks to exempt food grown or produced and then sold within the state from federal regulations by establishing a “Made in New Hampshire” brand under state regulations.

New Hampshire’s HB 1650-FN would also provide penalties for both agents attempting to enforce federal regulations and for producers and processors who label their food as “Made in New Hampshire” when it does not meet the requirements for this label. State employees attempting to enforce federal regulations on these products would be guilty of a Class B misdemeanor, and U.S. government employees or contractors attempting to enforce federal regulations on these products would be guilty of a Class A misdemeanor. The bill’s prime sponsor is New Hampshire Rep. Josh Davenport, R-Newmarket.

“Our state depends on the economic vitality of small businesses, and a one-size-fits-all approach forced on the state from Washington would put New Hampshire out of the farm business,” Davenport says. “The state of New Hampshire is perfectly capable of ensuring the safety of its own small farms and food production businesses. Common sense takes care of problems much more efficiently and effectively than central planning in Washington.”

CMN

February 3, 2012

By Rena Archwamety

MADISON, Wis. — Marketing toward nutrition, health and natural ingredients is becoming increasingly visible in grocery aisles. Cereals that claim to help lower cholesterol, heart-healthy mixed nuts and yogurt products with probiotics for good digestion are a few of the many products looking to catch the health-conscious consumer’s attention.

“It’s a very noisy environment. Companies have tried to identify specific attributes they think might be most important to consumers and most differentiating to themselves,” says Brian Wansink, John Dyson Professor of Consumer Behavior at Cornell University and author of the books Marketing Nutrition and Mindless Eating: Why We Eat More Than We Think.

Many people appear to be tuned-in to these messages. According to the Hartman Group research and consulting firm, health and wellness is top-of-mind for consumers, with 92 percent saying that healthy eating is important.

The time is now for the dairy industry to share dairy’s health benefits with consumers, according to Carol Blindauer, senior vice president of health and wellness at the Innovation Center for U.S. Dairy, an organization managed by Dairy Management Inc. (DMI) on behalf of dairy farmers to grow sales for dairy.

“Interest in health and wellness is growing. This is a great opportunity for the dairy industry to take advantage of dairy’s inherent benefits,” Blindauer says. “There’s a lot of buzz on health, wellness and nutrition in other categories. We need to make sure dairy products do the same.”

• Beyond calcium

Consumers long have perceived milk and dairy products as a good source of calcium, but their understanding of the other health benefits of dairy is not as strong. Blindauer cites an internal study from 2009 that asked 1,000 U.S. adults age 18 and over to list nutrients that can be found in dairy products such as cheese, milk or yogurt. More than 60 percent were aware of the calcium content in dairy products, but less than 20 percent knew that milk, cheese and yogurt are good sources of protein. The number of those who were aware of other nutrients in dairy was even lower.

“Consumers understand dairy is an important source of calcium, and calcium helps bone health,” says Gregory Miller, president of the Dairy Research Institute, DMI’s partner in providing technical research. “Now we have to help them understand it’s so much more.”

The dairy industry needs to continue to own and advertise the benefits of calcium, but also make consumers aware of dairy’s other nutrients, Blindauer says.

“There is a growing consumer interest in getting more nutrients per calorie, and that milk has nine essential nutrients is new news to most consumers,” she says. “A lot of other products have to fortify; we have many of these naturally.”

When the Innovation Center for U.S. Dairy talks about leading with health messages in nutrition, Blindauer says the two main areas of focus that have received most interest from industry members are the protein found in dairy products and emphasizing “fresh and natural.”

She notes 54 percent of consumers are trying to add more protein to their diets, according to the NPD Group’s Dieting Monitor Service. But while people are eating more protein, most of that increase currently is not coming from dairy.

“There’s an opportunity to make people aware of protein in dairy foods, and how it can meet their needs,” she says, adding that this message can appeal to both the aging baby boomer population looking to slow muscle loss as they age and athletes looking to build and recover muscle. “It’s a great story for milk, cheese and yogurt to continue to re-frame.”

A few examples already exist in the marketplace where companies are starting to call out the protein content of dairy products, some on the package or point-of-sale, and others on websites. Fage Total Greek Yogurt, for example, offers a “Protein & Diet” link on its website, www.fageusa.com. This page advertises the yogurt’s high concentration of all-natural protein, up to 23 grams in each individual serving, explaining protein’s capacity for muscle-building and a source of sustained energy. Blindauer says the Greek yogurt category had done a tremendous job advertising its protein content.

“Greek yogurt is probably the hero when it comes to talking about protein in the marketplace,” she says. “We’re also seeing it in milk, cottage cheese and some cheese.”

• Fresh cues

In addition to people’s interest in nutrients, a general interest in food that is “fresh and natural” is increasing among consumers. The concepts of “real,” “fresh” and “natural” matter to 38 percent of consumers, and that group appears to be growing, according to the Natural Marketing Institute. Another recent study from market research and strategic consulting company HealthFocus International says 84 percent of the population thinks that knowing a food or beverage is natural makes it a little or much healthier.

“Consumers are redefining health and wellness to a broader definition,” Blindauer says. “It’s not just nutrients, but where a product comes from and how it’s made.”

From its farmstead roots to its limited ingredients, natural cheese is an ideal product to appeal to those looking for “fresh and natural.”

In order to better understand what this growing interest in “fresh and natural” means for dairy, the Innovation Center for U.S. Dairy Health and Wellness Committee did some research and identified four triggers that prompt consumers identify a products as fresh and natural. Blindauer says these cues include:

• A short list of ingredients, so it looks like people could make the product themselves.

“This works very well with natural cheese, which starts with four basic ingredients,” Blindauer says.

• A product that is placed on the store perimeter and/or in the refrigerated section;

• Shelf life and perishability cues — a really long shelf life isn’t perceived by consumers as fresh and natural; and

• The product form and packaging. People were interested in food that was not machine-made or in a manufactured-looking shape. The more home-made, irregular shapes did better.

“All together, those cues can encourage all manufacturers to take a look at their product portfolio. There may be things they can refine, like the number of ingredients on the label or the look of the packaging,” Blindauer says.

“Protein and ‘real, fresh and natural’ are some of the newer positive messaging that provide a great opportunity,” she adds. “The backbone we need to reinforce is that there are multiple nutrients in dairy products.

They are known for calcium, but the combination of calcium, protein and other nutrients gets us mileage with the new consumer, and this new news fits into their lifestyle.”

• In-store strategies

When it comes to advertising the healthfulness of dairy products or other foods, front-of-pack messages and the shape of the package are the best ways to do that at the point of purchase, Wansink says. Examples of front-of-pack icons include “good for you” and “better for you” claims or guiding star systems. However, companies should be aware that these up-front health messages tend to polarize consumers.

For instance, if a product says “gluten free,” some consumers may think that means it tastes really bad, while others might think it’s really good for you and perceive it as being lower in calories than it really is. Wansink suggests putting “gluten free” on an artisan cheese would end up turning off potential consumers.

“You want to make sure the focus on the front of pack is something that’s very important to your market, not something that some percentage of them will take in the wrong way,” Wansink says. “It depends on who the target market is. If it’s a super health-conscious market, it can have a very positive impact.”

When choosing the message to convey, Wansink says people are most concerned with nutrition benefits that are perceived as immediate.

“It’s not nutrition per se,” he says. “What they like are the consequences of nutrition. The consequences that appeal to most consumers aren’t that they might live three months longer if they drink this. But will it make me more full, skinnier, my complexion better. Things that are really immediate, not long-term.”

The Dairy Research Institute offers a quick-reference guide to nutrition claims for dairy products to give companies a basic understanding of nutrition claims and labeling rules. The guide, available at www.usdairy.com/dairyresearchinstitute, specifically addresses nutrition and health-related claims that represent potential opportunities for use with fluid milk, cheese and yogurt products. As regulations vary with different products and are updated, Blindauer says each manufacturer must work with its own legal and regulatory affairs department as well.

“A message that works for one product might not for another,” Blindauer says. “Each and every time, check with your legal department.”

Wansink also notes one thing that has a very powerful subconscious impact on consumers is packaging. This can include colors, shapes or simply the fact that there is a change.

“Lighter-color packaging for lower-fat milk has had a very positive impact without people saying, ‘this tastes terrible.’ Another strategy is altering packaging so it looks different than how it used to,” Wansink says. “These things make people rate a product differently, and rate the health of the product differently.”

For example, when McDonald’s switched from milk cartons to plastic milk jugs, the change affected consumers in three different ways, Wansink says.

“One was the convenience factor. Then there was the not-gross-to-drink-out-of factor, since it was not made of paper. Third was that ‘there is something different about this, it must be better.’ Healthier, more fresh, cooler. You make one change like that, and it can move people,” he says.

• New paradigm for health

Miller says the Dairy Research Institute constantly is working to grow its body of research, building opportunities for health and nutrition claims from the data it has compiled.

“In nutrition, we have a lot of really great research going on,” he says. “It’s focused on metabolic health, looking at body weight, body composition, and the role of dairy foods in reducing diseases such as type 2 diabetes and cardiovascular disease.”

Other recent data indicate dairy foods do not raise blood cholesterol levels as much as would be predicted based on dairy’s fat content, Miller says, adding that more research needs to be done in the future to show the benefits in consuming milkfat.

For dairy companies wanting to advertise the health and nutrition benefits of their products, Miller suggests starting by quoting some of what the most recent Dietary Guidelines are saying about dairy foods.

“The Dietary Guidelines are saying ‘dairy first,’” he says. “Even with lactose intolerance, you don’t need to skip dairy. Try lactose-free milks, hard cheeses that are low in lactose, yogurts that help with digestion, or consume smaller amounts of milk with meals. This really helps consumers.”

Miller adds that research is showing that positive, enabling messages about nutrient-rich foods such as dairy help consumers improve their diets.

“If they can choose more of those nutrient-rich foods, put it in their diets, it tends to displace nutrient-poorer foods,” Miller says. “Cheese only contributes about 5 percent of the calories in a diet, but it also is contributing 21 percent of calcium, 11 percent of phosphorus, 9 percent of the protein, 9 percent of the vitamin A and 8 percent of the zinc.

Nutritionists say ‘choose the calories you eat from the company they keep.’ Cheese gives quite a few nutrients per calorie.”

After decades of being told to avoid things like sodium, certain fats and added sugars, Miller says the paradigm is turning toward choosing nutrient-rich foods rather than nutrient avoidance.

“Consumers are really tired of being told what not to eat,” he says. “They are ready to hear a more enabling message around eating more nutrient-rich foods. They’ll get it.”

CMN

Bel Brands USA to construct new plant in Brookings, S.D.

February 3, 2012

CHICAGO — Bel Brands USA, headquartered here, this week announced plans to build a new 170,000-square-foot manufacturing facility in Brookings, S.D., to produce its Mini Babybel cheese.

“The robust South Dakota dairy industry and its hard-working Midwestern values make Brookings an ideal location for our new plant,” says Lance Chambers, president and CEO, Bel Brands USA. “Bel Brands has experienced significant growth over the past few years, and this new plant is essential to expanding our production capacity to meet the growing demand for our Mini Babybel cheeses.”

Bel Brands manufactures and markets The Laughing Cow cheese wedges and Mini Babybel as well as Boursin, Merkts, Kaukauna and other natural cheese spreads. The U.S. subsidiary of Paris-based Fromageries Bel currently has two other production facilities in the United States, located in Leitchfield, Ky., and Little Chute, Wis.

Chambers notes that Bel Brands USA has more than doubled its size over the last four years, with three of the company’s key brands — Mini Babybel, The Laughing Cow and Boursin — fueling much of the growth.

The company will invest approximately $100 million to build its new manufacturing plant on a 48-acre parcel of land along 32nd Avenue near the I-29 corridor in Brookings, S.D. Plant construction is planned in two phases. Bel Brands USA will break ground on the first phase this summer and expects to hire around 200 employees when the first phase becomes completely operational by 2014.

Phase 1 will have a production capacity of approximately 22 million pounds.

The second phase of the plant, which is contingent on anticipated increased market demands, is expected to be built in 2016-2017 and will bring another 200 jobs to the area.

“I am thrilled to welcome Bel Brands to South Dakota,” says state Gov. Dennis Daugaard. “The impact of this project goes beyond the creation of up to 400 jobs. It goes beyond the estimated annual $500 million economic impact once the plant is fully operational. And it goes beyond the opportunity for our dairy operations to expand both capacity and market share.

“Having an internationally recognized company like Bel Brands as our newest corporate citizen tells the world that South Dakota is open and ready for business from anywhere around the globe,” he adds.

Chambers says Bel Brands is excited to become a part of the Brookings community and looks forward to providing new opportunities for economic growth and employment in the area.

“We wish to thank Gov. Daugaard, the Governor’s Office of Economic Development team, the Brookings Economic Development team, Mayor (Tim) Reed and the city of Brookings for their tireless effort in helping us select Brookings as the site for our new plant,” he says.

Mayor Reed notes that Bel Brands’ project will complement the city’s efforts to build upon regional advantages, such as the South Dakota State University Dairy Science program, while adding value and creating new economic opportunities for regional agricultural producers.

Chambers notes that Corporate Social Responsibility (CSR) is an integral part of Bel Brands’ global development policy. One of the pillars of Bel’s CSR initiative is to be actively committed to economic, social and environmental sustainability in the local communities in which the company operates.

Jones Lang LaSalle and T.C. Jacoby and Co. represented Bel Brands in the site selection process.

In addition, Francine Moudry, previously director of operations for Bel Brands’ Leitchfield, Ky., plant, recently was appointed project director to lead the planning and construction of the new Brookings manufacturing facility and is relocating to the Brookings area.

CMN

Total U.S. cheese production climbs 1.7 percent in 2011

February 3, 2012

WASHINGTON — Total U.S. cheese production in December, excluding cottage cheese, was 929.5 million pounds, a 2.4-percent increase over December 2010’s 908.0 million pounds, according to preliminary data released Wednesday by USDA’s National Agricultural Statistics Service (NASS). (All figures are rounded. Please see CMN’s Dairy Production chart.)

December 2011 cheese production was up 0.9 percent, on an average daily basis, from the 891.8 million pounds produced in November 2011, according to the report.

The preliminary numbers from NASS put 2011 U.S. cheese production at 10.61 billion pounds, an increase of 1.7 percent compared to 2010 total cheese production. USDA will release revised data later this year.

In December, Italian-type production topped 400 million pounds, up 3.5 percent from December 2010 to 408.6 million pounds. Production of Mozzarella, the most-produced Italian-type cheese, experienced a 4.0 percent increase vs. a year earlier, climbing to 321.0 million pounds.

NASS reports production of American-type cheese rose 1.2 percent in the December-to-December comparison to 370.7 million pounds in December 2011. Production of Cheddar, the largest component of American-type production, totaled 274.7 million pounds, down less than 0.1 percent from December 2010.

Wisconsin led the nation’s cheese production with 230.2 million pounds in December, up 3.5 percent from its production a year earlier. California followed with 195.5 million pounds, a 2.7-percent increase from a year earlier.

The next four cheese-producing states were Idaho with 75.7 million pounds, up 1.3 percent from a year earlier; New York with 68.6 million pounds, up 5.9 percent; New Mexico with 64.7 million pounds, down 2.8 percent; and Minnesota with 52.1 million pounds, down 1.9 percent.

NASS reports U.S. butter production totaled 165.9 million pounds in December, a 5.2 percent increase over December 2010’s 157.7 million pounds. The preliminary data put total U.S. butter production in 2011 at 1.81 billion pounds, a 15.4 percent increase vs. 2010 butter production.

California led the nation’s butter production in December with 58.1 million pounds, up 8.3 percent vs. its production a year earlier.

CMN

CBO releases long-term budget, economic outlook

February 3, 2012

WASHINGTON — Early this week, the Congressional Budget Office (CBO) released “The Budget and Economic Outlook: Fiscal Years 2012 to 2022,” projecting a $1.1 trillion budget deficit for fiscal year 2012 if current laws remain unchanged.

CBO prepares the baseline projections each January, and they span the next 10 years. The office notes that the projections are not a forecast of future events; rather, they are intended to provide a benchmark against which potential policy changes can be measured.

CBO notes as specified in law, the projections generally incorporate the assumption that current laws are implemented; however, substantial changes to tax and spending policies are slated to take effect within the next year under current law.

According to CBO, an “alternative fiscal scenario” — which could include expiring tax provisions and automatic spending reductions required by the Budget Control Act — would result in far larger deficits and much greater debt than is shown in CBO’s baseline. Deficits would average 5.4 percent of gross domestic product (GDP) over the projection period, rather than the 1.5 percent reflected in CBO’s baseline projections. Debt held by the public would climb to 94 percent of GDP in 2022, the highest figure since just after World War II.

CBO’s report estimates that the nation will spend $164 billion on mandatory agriculture programs over the next decade, a decrease of about $14 billion from last year’s projections.

The International Dairy Foods Association (IDFA) notes that, as in previous years, the CBO numbers reveal that the majority of agriculture subsidies go to producers of feed grains, rice, peanuts and cotton. Direct payments are estimated to be nearly $60 billion over the next 10 years, with corn receiving more than $22 billion and wheat nearly $11 billion. Crop insurance subsidies to protect yield and revenue are expected to continue to increase, reaching nearly $89 billion over the next decade.

CBO estimates for dairy support programs decreased significantly to just $443 million, less than 0.3 percent of total commodity support from USDA. This is down from CBO’s estimate last year, which had projected dairy spending at just under $700 million, IDFA notes. Most of the projected dairy spending will be for payments under the Milk Income Loss Contract Program (MILC).

IDFA notes that dairy basically is excluded from the $89 billion that is reserved for crop insurance, with the exception of the Livestock Gross Margin-Dairy pilot program that will cost less than $10 million in 2012.

In addition, facing overall federal budget pressures, Congress is expected to make cuts in agriculture spending as part of the next farm bill, and direct payments are squarely on the chopping block, IDFA says.

Even though dairy spending is less than a fraction of a percent that is available for crop commodities, the House and Senate agriculture committees are looking to reduce dairy spending by about 20 percent.

Ruth Saunders, IDFA vice president of policy and legislative affairs, notes that over the last decade, the dairy industry chose not to move toward risk management programs, and the funds for these programs were targeted to crop producers.

“As a result, dairy spending has significantly declined and spending for revenue protection for other commodities increased dramatically, even though dairy producers had lower net income compared to the other sectors.”

IDFA notes it believes this decline is the prime reason that efforts to establish milk production controls are finding support in Congress. IDFA opposes controls on milk production.

“I think this baseline will affect the policy debate going forward,” says Jerry Slominski, IDFA senior vice president of legislative affairs and economic policy.

CBO notes that there are many developments that could produce economic outcomes that differ from its current forecast, including:
• The forces that have restrained the economy’s recovery could fade more rapidly than anticipated;
• A significant worsening of the banking and fiscal problems in Europe could spill over to U.S. financial markets and greatly weaken the U.S. economy; and
• Changes in fiscal policy that diverge from those in CBO’s baseline could affect economic growth.

CMN

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“More and more the U.S. dairy industry is getting a front row seat for world commodity volatility. Seasonality and preferences of the Far East, for example, are responsible for U.S. dairy price fluctuations perhaps more than we’d like to give credit to and seemingly more than we know about today. Decisions being made not only by companies here in the United States, but in all corners of the world, will have reverberating impacts on our U.S. prices and our U.S. dairy industry.”

— Dave Kurzawski, senior broker with the Chicago-based Downes-O’Neill division of FCStone, Chicago

By Kate Sander

STAMFORD, Conn. — Jarlsberg has been exported to the United States for more than 45 years and is America’s top-selling brand of specialty cheese. But its longevity and market penetration do not preclude innovation.

One of the few cheeses to have the distinction of being both a brand and a type of cheese, Jarlsberg — with its mild, nutty unique taste unlike any other domestic or imported cheese — can boost a regular hamburger to a “Jarlsberger” — a use annually promoted by Norseland Inc., the exclusive importer and sales and marketing agent for the Norwegian cheese in the United States as well as an importer of several other specialty cheese brands.

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