By Amelia Buragas

WASHINGTON — Congressional negotiators have reached an agreement on provisions of the new Farm Bill. However, the legislation still faces a tenuous future because to become law the, bill must be approved by a president that has threatened to veto it on numerous occasions.

Conference committee members have been negotiating for the past month in an attempt to harmonize differing aspects of the draft Farm Bills approved by the House and Senate. In the meantime, several short-term extensions of the 2002 Farm Bill kept farm programs running since the bill’s original expiration last fall.

“This bill provides support for everything from agricultural research and beginning farmers to protecting our natural resources and helping to feed hungry families,” says Sen. Tom Harkin, chairman of the Senate Agriculture Committee and Senate-House conference committee. “It looks to the future in renewable energy production, and it ensures farmers have the income protection they need.”

Harkin says he is confident the committee has crafted a bill that will be signed into law by President Bush. However, just last week Bush — who is in Texas this weekend for his daughter’s wedding — referred to proposed Farm Bill legislation as “bloated.”

The House is expected to consider the joint bill as early as next week. If the legislation is approved by both the House and the Senate, it will be up to the president to sign it into law.

All sectors of the agriculture industry, including dairy, have urged legislators to finalize the bill in order to eliminate uncertainty regarding the future of commodity and price support programs. And while reception of the conference bill was mixed, most groups welcomed it as a step forward.

“National Milk Producers Federation has always viewed the Farm Bill as a package of items that will benefit America’s dairy farmers, and we are confident that the resulting bill represents the best possible outcome for our members,” says Jerry Kozak, president and CEO, National Milk Producers Federation (NMPF). “We applaud the bipartisan work that has gone into this conference.”

Conference committee members says the joint Farm Bill legislation expands food security programs, protects natural resources and promotes healthier foods while reforming commodity and biofuel programs. The legislation calls for an additional $10.4 billion in spending on nutrition programs, an increase of $1.25 billion in funding to food banks, $1.1 billion to fund programs to support development of renewable energy technologies, and an increase of $6.6 million for conservation program spending, which includes additional funding for the Environmental Incentives Program.

Also among the agreed-to provisions is a proposal to return the Milk Income Loss Contract (MILC) program to its original payment rate, which at the program’s inception in 2002 was set at 45 percent of the difference between the Boston Class I price and $16.94 per hundredweight. The payment rate was subsequently reduced to 34 percent when the program was extended in 2005.

The House version of the Farm Bill had proposed maintaining the 34 percent payment rate, while the Senate called for returning the program to its original level. Sen. Russ Feingold, D-Wis., says the program’s effectiveness had been eroded by the reduced payment rate and skyrocketing production costs.

“I am pleased the MILC provision will help ensure thousands of dairy farmers in Wisconsin will remain competitive as they face a changing economy,” Feingold says.

The conference committee’s version of the Farm Bill also includes a fuel cost adjuster amendment to the MILC program.

Despite what appeared to be early progress in developing new federal agriculture legislation, the process quickly became protracted. Delays in both the House and the Senate have been compounded by frequent veto threats from the White House.

Without the numerous short-term extensions of the 2002 Farm Bill, agriculture policy would have reverted back to permanent authority established in the Agricultural Adjustment Act of 1938 and Agricultural Act of 1949. This could have been disastrous for the dairy industry as government officials say it would have resulted in the dairy price support level more than tripling from the current $9.90 per hundredweight to more than $30 per hundredweight.

CMN

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By Amelia Buragas

KANSAS CITY, Mo. — Dairy Farmers of America (DFA), the nation’s largest dairy cooperative, announced today that it has found evidence of an unapproved transfer of funds between two of the cooperative’s former key executives.

Current DFA President and CEO Rick Smith says the concealed transaction was discovered during an investigation into an unrelated matter and involves a 2001 transfer of $1 million through a DFA affiliate from then-CEO Gary Hanman to then-board chairman Herman Brubaker.

Smith says the money has been recovered, plus interest, from both the parties involved. DFA sent a letter to its dairy farmer members this week informing them of the matter.

“We are saddened and disappointed to advise our members that we recently learned of improper transactions between two former senior members,” Smith says. “This transaction was not approved by anybody, certainly not by DFA’s board. It’s obviously not conduct we condone. The board at that time and the current board were not involved and were unaware of the transaction.”

In addition to retrieving the money, Smith says a special committee has been formed to investigate the incident. He says the committee has been tasked with collecting the details surrounding this matter, examining whether any similar transactions could have taken place and determining whether DFA’s internal controls are adequate to prevent future incidents.

Smith says it is too early to say whether DFA will pursue criminal charges, but did not rule it out as a possibility.

“We are preserving our rights and preserving all courses of action as we work through this,” Smith says.

The accusation could tarnish the reputations of two men who served their lives in the dairy industry. A native of Missouri, Hanman served as DFA’s CEO from the cooperative’s creation in 1998 to his retirement in 2005. Hanman also served as CEO of one of DFA’s predecessor cooperatives, Mid-America Dairymen Inc., Springfield, Mo., from 1975 to 1997. Before that he was CEO of the Square Deal Milk Producers Association, Highland, Ill., a dairy cooperative that later became part of Mid-America Dairymen in 1968.

In 2006, Hanman was honored by the industry with the World Dairy Expo Industry Person of the Year award. Hanman was chosen for the award because of his work to unify four dairy cooperatives to form DFA as the nation’s largest dairy farmer-owned cooperative and food company, Dairy Expo officials said at the time.

Brubaker was a part of the dairy cooperative movement for 40 years before his retirement in 2003. A dairy producer from West Alexandria, Ohio, Brubaker served as chairman of the DFA executive committee for five years. He also was chairman of one of DFA’s predecessor cooperatives, Milk Marketing Inc., and chairman of Dairy Management Inc.

Neither Hanman nor Brubaker could be reached for comment as of CMN’s press time. Smith says it is unknown why the payment was made.

CMN

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WASHINGTON — Total U.S. cheese production in March, excluding cottage cheese, was 834.3 million pounds, 0.7 percent below March 2007, according to data released by USDA’s National Agricultural Statistics Service (NASS). (All figures are rounded. Please see CMN’s Dairy Production chart on page 15.)

March cheese production was 6.3 percent above February 2008’s 784.6 million pounds, but when taking the length of the months into account March production was down 0.5 percent on an average daily basis.

Production of the nation’s two most-produced cheeses, Mozzarella and Cheddar, were both down from a year earlier. Mozzarella production totaled 284.5 million pounds in March, a 0.9 percent decline. Cheddar production was down 1.7 percent from March 2007 to 266.4 million pounds.

According to NASS, the nation’s leading cheese-producing state, Wisconsin, saw production rise 0.5 percent in the March-to-March comparison to 211.2 million pounds. Meanwhile, California production fell 10.7 percent to 181.2 million pounds.

Other major cheese-producing states were as follows: Idaho with 67.2 million pounds, up 0.3 percent; New York with 61.6 million pounds, down 6.4 percent; Minnesota with 54.8 million pounds, up 3.2 percent; and New Mexico with 53.0 million pounds, down 2.8 percent.

NASS reports U.S. butter production totaled 154.3 million pounds in March, up 11.5 percent from March 2007. March 2008 butter production was 5.2 percent higher than February 2008, but on an average daily basis, production was down 1.6 percent from the previous month.

California led the nation’s butter production in March with 49.1 million pounds, up 10.8 percent from a year earlier. Wisconsin produced 35.7 million pounds, a 14.8 percent increase compared to a year earlier.

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By Amelia Buragas

MADISON, Wis. — Artisan and specialty cheesmakers need not miss out on the current favorable conditions on the export market, but experts say developing overseas clients takes careful planning and a great deal of patience.

The Wisconsin Specialty Cheese Institute brought in two guest speakers to discuss export opportunities for U.S. specialty cheesemakers during the organization’s May 2 meeting.

Angélique Hollister, manager of cheese and manufactured products, U.S. Dairy Export Council (USDEC), notes it is only recently that the international markets have opened up for U.S. dairy products, whether they be specialty or commodity. She notes that when she joined USDEC in 2000, there were a number of factors working against U.S. producers: a strong U.S. dollar, export subsidies in the European Union and plenty of supply coming out of Australia and New Zealand.

“It was really hard to get buyers from overseas to be interested in our product,” Hollister says.

However, just eight years later, these factors have nearly reversed with a weak dollar, subsidy reform in the EU and tightened supplies in Australia and New Zealand due to prolonged drought conditions. As a result, U.S. cheese exports grew from 48,000 metric tons in 2000 to 99,400 metric tons in 2007. According to USDEC, 2.3 percent of the U.S. cheese produced last year was exported.

The United States’ largest export market is Mexico, accounting for 34 percent of cheese exports. Hollister notes that U.S. producers enjoy duty-free access to the Mexican market through the North American Free Trade Agreement (NAFTA), so it is the natural first choice for many producers looking to export for the first time. Cheese exports to Mexico totaled 33,600 metric tons in 2007. Japan and Canada accounted for 10 percent (10,100 metric tons) and 9 percent (8,800 metric tons) of U.S. cheese exports in 2007, respectively.

Hollister notes that U.S. exports were up 40 percent from 2006 to 2007, and the Middle East showed the largest percentage of growth, increasing by 77 percent year over year.

“People are very open to our products in this market,” Hollister says, noting that U.S. products and popular culture have high exposure in the Middle East through television and other media sources. U.S. cheese exports to the Middle East totaled 8,100 metric tons in 2007.

Exports to Southeast Asia were up nearly 50 percent from 2006 to 2007 and totaled 3,700 metric tons in 2007.

The demand and potential is there, Hollister says, adding that exporting specialty cheese can be very challenging.

“But if you’re committed, the reward is great,” she says.

Christopher Gentine, The Artisan Cheese Exchange, Sheboygan, Wis., says one challenge facing exporters of specialty cheese products is the need to receive a premium price to make the transaction profitable. He says patience and education are key to overcoming this hurdle.

“There is less price resistance in specialty cheese when importers can appreciate the quality,” Gentine says of foreign buyers.

Gentine founded The Artisan Cheese Exchange to work with specialty cheesemakers as a partner in the development of export relationships and business. He notes developing overseas relationships can be very time consuming. For example, a product his company began representing in October 2006 had its first international order this spring.

“But once you develop a relationships, they are very loyal,” Gentine says. “And you really only need one product to catch on to have a pretty nice piece of business.”

Hollister says specialty cheese companies interested in exporting cheese must consider whether or not the product meets appropriate labeling guidelines and whether the target market has restrictions on product ingredients. Gentine also suggests spending time doing research on target markets to figure out where a company’s products make the most sense.

He adds that entering well-respected contests such as the World Championship Cheese Contest hosted by the Wisconsin Cheese Makers Association or the American Cheese Society’s Annual Cheese Contest can garner instant worldwide exposure. In addition, USDEC provides financial support to U.S. entries in the World Cheese Awards held in London to promote U.S. cheese overseas and to prove that U.S. cheesemakers stand toe-to-toe with the best in the world.

However, Hollister says not all artisan cheeses are suitable for export due to shelf-life issues as well as being incongruous with local flavor trends. Most importantly, she says developing foreign relationships takes a great deal of patience.

“Building relationships with overseas customers takes time,” Hollister says. “Potential customers will ask a lot of questions.”

Gentine notes transit time can be considerable when dealing with exports — shipping time from the West Coast to Japan is 25 days, which takes nearly a month off the shelf-life of products.

Another challenge facing specialty cheesemakers is consumer perception. Hollister says consumers in foreign countries often identify the United States with process cheese as they are most familiar with U.S. products through interaction at international quick serve restaurants such as McDonald’s or Burger King.

“They are completely unaware of what you guys are making,” Hollister told the room of artisan and specialty cheesmakers.

As a result, USDEC began a specialty cheese program in 2006 with the objective of raising the image of U.S. cheese worldwide. The program’s flagship markets are the United Kingdom (UK) and Japan.

Hollister says trade missions have generated interest in the UK, but that negotiations have been difficult. However, the program has not been without its success as Rogue Creamery, Central Point, Ore., recently announced it would be shipping its Rogue River Blue cheese to countries in the European Union.

Hollister says USDEC chose to focus on Japan because of its position as a trend setter for other Southeast Asian countries. She says the program has made considerable progress, noting that more than a dozen U.S. artisan cheeses are now regularly sold at upscale supermarkets, cheese shops, restaurants and department stores.

Gentine also has spent time building relationships in Japan and says that if export business generally takes a long time to build, “in Japan it takes a very long time.”

“But they really appreciate quality,” he says.

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