WASHINGTON — President Barack Obama submitted the first formal budget of his administration to Congress this week, and many aspects of it have implications for the dairy industry.

In the fiscal year 2011 budget — which covers the period of Oct. 1, 2010, through Sept. 30, 2011, and proposes spending more than $4.3 trillion — USDA is funded at $149 billion, of which $26 billion is discretionary spending that is subject to annual appropriation by Congress.

USDA’s discretionary budget is down 18 percent compared to 2009 spending levels, while mandatory or entitlement spending — which is set in law every five years in farm bills — is up 28 percent.

More than 70 percent of USDA’s budget is for nutrition assistance programs, while about one-fourth is spent on commodity and conservation programs. The remaining includes research and rural development programs.

“The challenges facing rural communities for decades have grown more acute, which is why the Obama administration is committed to new approaches to strengthen rural America,” says U.S. Agriculture Secretary Tom Vilsack. “We care deeply about farmers and ranchers and have worked hard to maintain the agricultural safety net, while instituting some targeted reductions in farm program payments.”

USDA’s budget documents highlight increases in nutrition spending including the Supplemental Nutrition Program for Women, Infants and Children (WIC) and child nutrition programs. Several new initiatives are highlighted, including a Healthy Food Financing Initiative to promote greater access to food retail outlets in low-income areas and a National Export Initiative with increased funding for trade expansion and market promotion activities.

The proposed increases in USDA feeding programs, such as the WIC and Supplemental Nutrition Assistance Programs, are a net positive for dairy farmers, as they will increase purchases of milk and cheese at a time when some Americans are having trouble paying for those items with their own budgets, says the National Milk Producers Federation (NMPF).

“Additional nutrition program spending is a win-win for farmers and program participants alike,” NMPF says.

According to the International Dairy Foods Association (IDFA), USDA expects lower expenditures of $343 million for dairy support through fiscal year 2010 and $362 million in 2011. These figures combined do not reach total dairy spending of $1.3 billion in fiscal year 2009, IDFA notes.

USDA also anticipates global market conditions to improve gradually, with the United States regaining its competitive position in export dairy markets. USDA’s budget does not indicate any spending for purchases under the Dairy Product Price Support Program or the Dairy Export Incentive Program (DEIP) in fiscal year 2011.

“We will promote the production of food, feed, fiber and fuel, as well as increased exports of food and agricultural products, as we work to strengthen the agricultural economy for farmers and ranchers,” Vilsack says. “This budget increases our funding for export promotion as part of President Obama’s National Export Initiative and provides more support than ever before for competitive research, which can lead to gains in agricultural productivity.”

The budget proposes to limit the farm subsidy payments “wealthy” farmers receive by reducing the cap on direct payments by 25 percent and reducing the Adjusted Gross Income (AGI) payment eligibility limits for farm and non-farm income by $250,000 over three years, IDFA says.

NMPF says it opposes the proposed means-testing of farm program payments, both by reducing the AGI income limits of who may qualify for payments and reducing the potential size of payments themselves.

“These issues were considered and dismissed when Congress approved the Farm Bill less than two years ago, and should not be on the table now as part of the fiscal year 2011 budget,” NMPF says.

For 2011, FDA is requesting $4.03 billion, a 23 percent increase over the agency’s current budget of $3.28 billion. The request includes increases of $146 million in budget authority and $601 million in industry user fees.

Food inspection, re-inspection and registration fees would have to be enacted by Congress before they can be collected. IDFA has opposed inspection fees in the U.S. House-passed food safety bill and has asked the Senate not to duplicate fees paid by dairy processors for state inspection.

FDA’s budget request includes an additional $327 million for food safety, a 30 percent increase over the current funding level, which FDA says it will use for its Transforming Food Safety Initiative.

The initiative includes proposals for new food safety standards, traceability frameworks, import safety checks and better risk analysis to establish “strengthened inspection and response capacity,” FDA says.

Also under FDA’s budget, farms that sell raw milk directly to consumers would not have to pay the proposed FDA fees; however, farms that are pasteurized milk handlers would have to pay the proposed fees. According to Ruth Saunders, IDFA vice president of policy and legislative affairs, the discrepancy has to do with the way FDA defines a regulated facility. Raw milk processing is considered manufacturing and therefore is subject to FDA regulation, she says.

Under the 2011 budget, the Environmental Protection Agency’s (EPA) estimated funding would decrease from $10.3 billion in 2010 to $10.02 billion in 2011.

The budget would boost funding for several programs in which EPA has shown a newly-aggressive tone in the past year, including $43 million in new funding for efforts to reduce greenhouse gases under the Clean Air Act. This includes $25 million in grants to states to help them address greenhouse gases in their permitting activities.

“To meet our environmental challenges and ensure fiscal responsibility, we’re proposing targeted investments in core priorities,” says Lisa P. Jackson, EPA administrator. “This budget cuts spending while promoting clean air, land and water, growing the green economy and strengthening enforcement.”

Obama administration officials have said they would prefer that Congress approve a cap-and-trade plan, but will move ahead with EPA rules if Congress does not complete a bill.

Clean Air Act greenhouse gas regulation has been a controversial subject among those in the dairy sector.

Last week, several organizations including Dairy Farmers of America and NMPF sent a letter to Sen. Lisa Murkowski, R-Alaska, praising a bipartisan disapproval resolution she recently introduced that would stop EPA from regulating emissions under the Clean Air Act. (See “Alaska senator challenges EPA Clean Air Act on heels of opposition from dairy industry” in last week’s issue of Cheese Market News.)

This week, three U.S. Representatives — Collin Peterson, D-Minn., Ike Skelton, D-Mo., and Jo Ann Emerson, R-Mo. — also introduced legislation to prevent EPA from regulating emissions under the Clean Air Act.

The bill would make clear that EPA cannot regulate greenhouse gas emissions under the Clean Air Act and also would amend current law to stop EPA from punishing American farmers for deforestation taking place in foreign countries.

“I have no confidence that EPA can regulate greenhouse gases under the Clean Air Act without doing serious damage to our economy,” Peterson says. “Americans know we’re way too dependent of foreign oil and fossil fuels in this country — and I’ve worked hard to develop practical solutions to that problem — but Congress should be making these types of decisions, not un-elected bureaucrats at the EPA.”

Congress will consider the president’s budget during its annual appropriations cycle and when considering changes to current programs, such as the Child Nutrition Act, IDFA says.

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WASHINGTON — As the National Organic Program (NOP) continues to consider regulations for organic livestock proposed in 2008 but not yet implemented, organic dairies and organizations recently have made appeals both for and against these proposed standards based on how they believe the regulations could help or hurt the organic dairy industry as a whole.

The proposed Access to Pasture rule, published Oct. 24, 2008, in the Federal Register, would require organic livestock producers to graze their cattle for the entire growing season, but not less than 120 days. They also would be required to provide their animals with at least 30 percent dry matter intake (DMI) from pasture.

On Jan. 8, representatives from Aurora Organic Dairy, a major processor of private label organic milk, and Straus Family Creamery, a California organic processor and dairy, met with several officials from USDA and the Office of Management and Budget to express concerns over the proposed rule.

The two organic dairy companies highlighted a USDA report and other data about forage and DMI rations that they said suggest 60-80 percent of organic dairy farms would not be able to comply with the 30 percent DMI standard.

In a later comment, Albert Straus, founder and president of Straus Family Creamery, says he is concerned that certain requirements in the proposed rule may have negative unintended consequences.

“I fully support strict pasture regulations to maintain the integrity of the organic standards and ensure that factory farms are not allowed in the organic industry,” Straus says. “My concern is that the proposed rule takes a one-size-fits-all approach which ignores regional diversity, dictating farm management without regard to geographic and climate differences in this vast country.”

Straus says according to the proposed rules, farmers in Northern California would be required to have cows on pasture during rainy weather, which would compromise the herd’s health as well as land and water quality.

“Ironically, these pending regulations would be at odds with the California Regional Water Quality Control Board’s regulations protecting water quality in our streams, lakes and bays,” Straus says.

Others, however, say current organic standards need to be better enforced, and legitimate organic operations should not have trouble following the proposed new standards.

“I graze five-and-a-half months a year, my cows are outside year round; I have no problems with the proposed standards,” says John Mattos, who milks Jerseys and Jersey crossbreeds in Sonoma County, Calif., in a news release from organic watchdog organization The Cornucopia Institute.

The Cornucopia Institute in January also submitted comments to the Office of Management and Budget regarding the proposed organic livestock regulations. Cornucopia says the lack of enforcement of current organic regulations has contributed to a rise in CAFOs (concentrated animal feeding organizations) in the organic sector that have put other organic producers at risk.

“If large operators succeed in blurring the lines so that consumers can no longer choose organics as an alternative, much stands to be lost economically by all industry participants,” Cornucopia says in its comments.

“Strictly enforcing the current rules, and adopting workable new regulations, at this point in time, will not force any of the scofflaws out of business,” Cornucopia adds. “Although it might very well force them to go back to conventional production if they can’t, or are unwilling to, meet the federal organic standards.”

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WASHINGTON — With December preliminary numbers now in, annual U.S. cheese production, excluding cottage cheese, topped 10 billion pounds for the first time in 2009, according to data from USDA’s National Agricultural Statistics Service (NASS). (All figures are rounded. Please see CMN’s Dairy Production chart.)

Preliminary 2009 production totaled 10.105 billion pounds, 1.7 percent more than the 9.935 billion pounds produced in the United States in 2008, according to NASS. When accounting for the fact that 2008 was a leap year, 2009 production was up 2.0 percent vs. 2008.

Though there was a year-over-year gain, 2009 ended with cheese production being down. December 2009 total cheese production was 862.0 million pounds, down 0.1 percent from December 2008’s 863.1 million pounds, NASS reports. December cheese production was up 2.2 percent from November 2009’s 843.6 million pounds, but when adjusting for the length of the months, December production was down from the previous month by 1.1 percent on a daily average basis.

NASS will further revise December production numbers in next month’s production report and revised data for all of 2009 will be made available in the agency’s annual dairy production summary due out at the end of April.

In December, Mozzarella was the most-produced cheese in the United States, up 3.6 percent from December 2008 to 290.1 million pounds. Total Italian-type production, of which Mozzarella is the largest component, was up 2.5 percent from the previous December to 373.1 million pounds, pulled down by a decline in production of other Italian-type cheeses.

For the year, NASS says Mozzarella production totaled 3.285 billion pounds, up 1.4 percent from 2008 (up 1.7 percent when adjusted for leap year). In 2009, Italian-type cheese production totaled 4.221 billion pounds, 1.5 percent more than in 2008 (up 1.8 percent when adjusted for leap year).

Cheddar was the second-most produced cheese in December and in 2009 as a whole despite a significant drop in the December-to-December comparison.

In December 2009, U.S. Cheddar production fell 8.3 percent from the previous December to 259.9 million pounds. Production of other American types of cheese, however, lifted the American-type category so that production was down only 2.6 percent from December 2008 to 349.4 million pounds despite Cheddar’s decline.

For the year, NASS says Cheddar production totaled 3.171 billion pounds, 0.7 percent more than in 2008 (up 1.0 percent when adjusted for leap year). American-type cheese production totaled 4.168 billion pounds, up 2.4 percent from 2008 (up 2.7 percent when adjusted for leap year).

Wisconsin led the nation’s cheese production in December with 221.2 million pounds, up 2.0 percent from a year earlier, NASS reports. California followed with 175.9 million pounds, a 2.3 percent decline from a year earlier. The next four cheese-producing states were Idaho with 67.8 million pounds, down 1.3 percent from a year earlier; New York with 59.8 million pounds, down 8.4 percent; New Mexico with 57.0 million pounds, up 11.5 percent; and Minnesota with 54.8 million pounds, down 4.6 percent.

U.S. butter production in December totaled 149.6 million pounds, according to NASS, a 4.3 percent decline from December 2008. This brought total U.S. butter production in 2009 to an estimated 1.568 billion pounds, 4.6 percent lower than 2008’s production (4.4 percent lower when adjusted for leap year).

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WASHINGTON — In 2008, more than 200,000 organic milk cows in the United States produced 2.76 billion pounds of milk, according to the 2008 Organic Production Survey released this week by USDA’s National Agricultural Statistics Service (NASS).

The 2008 Organic Production Survey is a follow-on survey to the 2007 Census of Agriculture. It is the first organic production and practices survey conducted on the national level by USDA and NASS.

The survey counted 14,540 U.S. farms and ranches that either were USDA certified organic or were exempt from certification because their annual sales totaled less than $5,000. These operations included 4.1 million acres of land, of which 1.8 million acres were pasture or rangeland.

“This was USDA’s first wide-scale survey of organic producers, and it was undertaken in direct response to the growing interest in organics among consumers, farmers, businesses, policymakers and others,” says Kathleen Merrigan, USDA deputy secretary. “The information being released today will be an important building block for future program and policy development.”

Of the 14,540 nationwide organic farms, a little more than 2,000 farms were home to a peak total of 219,031 milk cows during 2008. Cow’s milk sales from these farms totaled more than $750.1 million. Goat’s milk sales totaled $800,919 from 43 organic farms.

California produced the most organic cow’s milk at 501.8 million pounds and $133.5 million in sales during 2008. That year organic milk cows in California peaked at 36,561 head on 96 farms.

Wisconsin produced the second most organic cow’s milk in 2008 at 329.0 million pounds, generating $85.1 million in sales. The organic milk cow herd in Wisconsin peaked at 27,719 cows on 479 farms in 2008. Texas, Oregon and New York rounded out the top five organic milk-producing states.

Nationwide, 2008 sales of all organic agricultural products totaled $3.16 billion. California led the nation in organic sales, with $1.15 billion or 36 percent of all U.S. organic sales. Nearly 20 percent of all organic farm operations were in California.

Most U.S. organic producers sold their products locally, with 44 percent of sales taking place less than 100 miles from the farm. Nearly 83 percent of organic sales were to wholesale channels, including processors, millers and packers. Slightly more than 10 percent of sales were direct to retail operations, including supermarkets. Only 7 percent of sales were direct to consumers via farm stands, farmers’ markets, community supported agriculture and other arrangements.

The nation’s certified and exempt organic farms had higher average sales and production expenses than those of U.S. farms overall. Organic operations averaged $217,675 in sales, 61 percent higher than the $134,807 for all farms as reported in the 2007 Census of Agriculture. Production expenditures averaged $171,978 per organic farm, 57 percent higher than the nationwide average of $109,359 for all farms.

Challenges survey respondents indicated included regulatory, production, management and marketing issues. However, more than 78 percent of the respondents indicated that they plan to maintain or increase their organic production over the next five years.

For complete results of the survey, visit www.agcensus.usda.gov/Publications/2007/Online_Highlights/Organics/.

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