The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
USDA's Animal and Plant Health Inspection Service has confirmed the nation's fourth case of bovine spongiform encephalopathy (BSE) in a dairy cow from central California. Dairy Profit Weekly reported that the carcass was being held under state authority and will be destroyed. It was never presented for slaughter for human consumption, DPW reported, so it did not present a risk to the food supply or human health. Milk does not transmit BSE.
Samples from the animal in question were tested at USDA's National Veterinary Services Laboratories in Ames, Iowa and confirmed the animal was positive for atypical BSE, a very rare form of the disease not generally associated with an animal consuming infected feed.
FC Stone dairy economist Bill Brooks didn't expect much impact on dairy markets. However, warned that the news could hit beef consumption and thus curb cheese consumption through lower demand for cheeseburgers.
Farm milk supplies are steady to slowly declining. Florida milk exports dropped 24 percent the week of April 16 (190 loads) compared to the previous week (250 loads). Production in the Pacific Northwest, Idaho, Utah and California continues to run ahead of 2011 volumes but is holding steady. Farm milk intakes in the upper Midwest continue to surpass year ago volumes and are holding steady. Arizona production, which is decreasing, reflects the arrival of warmer weather.
Bottled milk demand is steady to lower. Milk handlers speculate the early arrival of warm weather in the northern states decreased several weeks of mealtime milk consumption and pushed the calendar ahead to preferences for iced beverages. Cream demand from ice cream and ice cream mix end users hasn't moved out of the doldrums yet, according to USDA.
In dairy politics, the draft farm bill released April 20 by the Senate Agriculture Committee included the key components of National Milk's "Foundation for the Future" dairy policy reform in preparation for Agriculture Committee markup. Committee Chairwoman Sen. Debbie Stabenow (D-Mich.), along with Ranking Member Sen. Pat Roberts (R-Kan.), released the provisions of the entire farm bill, including the dairy legislative language.
The committee passed the bill April 26, 16 to 5, including the dairy reforms, and now moves to the full Senate for a vote. An amendment was going be offered by Sen. Michael Bennet (D-Colo.) that would strike the dairy market stabilization program and replace it with a stand-alone margin insurance program for dairy producers but it was withdrawn.
IDFA's Jerry Slominski said, "We fully support a margin insurance proposal without it being tied to a program that limits milk supply and manipulates prices. This (Bennet) amendment accomplishes the true compromise we have been urging for a long time." National Milk countered that the amendment would have cost dairy farmers more than $400 million in additional expenses.
DPW also reports that the committee did approve two amendments to the dairy title, without making major changes to the bill. One, offered by Sens. Johanns (R-Neb.) and Casey (D-Pa.), that authorizes a review of the Market Stabilization program at the end of the five-year farm bill lifespan; and a second, offered by Sen. Gillibrand (D-N.Y.), that extends the MILC program through June 2013, at a reduced rate, so there is a safety net in place while the USDA implements the new dairy margin insurance program. The bill was not amended in any way that diminishes the value of the margin protection or market stabilization elements, according to NMPF CEO Jerry Kozak.
Meanwhile, the House Agriculture Subcommittee on Livestock, Dairy and Poultry heard testimony the same day on the dairy provisions. Part of the discussion included a new analysis of the dairy policy changes by Scott Brown of the University of Missouri and the Food and Agriculture Policy Research Institute, which was commissioned by the House Agriculture Committee. Brown said the reforms will have a minimal effect on milk production and dairy product exports, according to a NMPF press release.
Brown's report analyzes the Dairy Security Act, which features a voluntary margin insurance program to protect against low milk prices or high feed costs, with a basic level of coverage available to all producers for free, and a supplemental, expanded level of coverage available for farmers to purchase. If farmers enroll in the Dairy Producer Margin Protection Program, they will also be subject to the Dairy Market Stabilization Program, which asks them to reduce their milk output when margins are very low. NMPF said, "The key take-away from the FAPRI report is that the dairy reforms reduce margin volatility at the farm level, without negatively affecting the supply of milk to either domestic or international markets."
Two other farm groups, the American Farm Bureau Federation and the National Council of Farmer Cooperatives, have endorsed the plan while two Midwest producer groups, the Dairy Business Assn. and the Minnesota Milk Producers Assn. gave it a thumbs-down. The DBA has been vocal in their opposition of the supply control mechanism contained in the DSA, according to DPW, while the MMPA said the proposed legislation must remove all language referring to "Milk Stabilization."
The International Dairy Foods Assn. (IDFA), which also testified at last Thursday's hearing, previously named other dairy leaders who called for the Senate Agriculture Committee to remove the new dairy program from the draft 2012 Farm Bill and instead focus on providing proven safety-net programs, such as revenue insurance, typically used for other commodities.
Those leaders included Miriam Erickson Brown, president and CEO of Anderson Erickson Dairy; Jon Davis, president and CEO of Davisco Foods International Inc.; and David Ahlem, vice president of dairy procurement and policy for Hilmar Cheese Company Inc., who joined the IDFA in opposing the milk supply management program, called Dairy Market Stabilization. They charge that it would raise consumer prices, hurt exports, cost thousands of new jobs and stifle investments in new facilities.
Jerry Slominski, IDFA senior vice president for legislative and economic affairs, said, "Congress has been told that they can attempt to control milk supply and demand without harming consumers and the overall dairy industry, and that is simply not true."
Erickson Brown charged that the plan "will create a chain of events which will limit the milk supply for dairies like AE and result in higher milk prices for consumers. Last year, milk prices increased nationally on average by 11 percent, driving consumers to purchase fewer gallons of milk. A gallon of milk is the foundation for most dairies like ours."
NMPF's Kozak testified that "America's dairy farmers need a dramatically revised safety net in the next farm bill, one that shifts its emphasis from milk prices to margins," and cited the collective loss of $20 billion in farmer equity that occurred between 2007 and 2009. "Current farm bill dairy programs are inadequate," he argued. "Considering the higher cost of production that livestock producers are facing, and will continue to face. With America's farmers more reliant today on volatile export markets, better risk management tools are needed," he said.