Dairy editor views market trends

Jan Shepel, Correspondent

 Subhead: Cream prices, beef market significant factors in coming year

 Paoli — As dairy farmers finish up one of the worst years in recent memory, in terms of farm-gate milk prices, they are looking to the New Year for what they hope will be better times. A group of dairy farmers met in Paoli (in southern Dane County) last week to hear from dairy editor Pete Hardin, and get his take on what may be coming next in the dairy business.

            Hardin, who is the editor and publisher of The Milkweed, a monthly dairy newspaper, predicts that butter and cream prices will be the driving force for the next 10 years in the dairy business.

            It now appears that research vilifying fat from animal sources – especially dairy – as the prime culprit in heart disease, is being debunked in the popular press and in several important best-selling books. Consumer buying trends seem to reflect the fact that people are no longer afraid of higher-fat dairy products.

            Sales of butter is up among consumers and higher-fat milk choices (whole milk and 2 percent) are becoming more popular choices. People are increasingly shunning products like margarine and putting their faith in new research that shows processed products are less healthy than natural products like butter.

“People want that fat in their diet now,” Hardin said, “and I encourage you to manage your herds for higher fat.

            “I’m not saying that everyone should milk Jerseys or breed everything to Jerseys, but within the breed of your choice you can breed for higher components and fat and you can feed those cows to maximize their fat and protein production,” he told the farmers.

The farm group gets together regularly in the wintertime, in a local town hall and call their meetings “Paoli University” or PU.

            Hardin also encouraged farmers to breed their cattle for A2A2 genetics. Though there is no ready market or premium for the kind of milk produced by cows with this genetic makeup, he feels that someday there will be. Producers who are ready for that change will be a step ahead.

            Cows that carry the A2A2 genetics produce what is called A2 beta-casein in the protein of their milk rather than the more prevalent A1 protein. Scientists say that previously, most cows carried the A2A2 genetics but a mutation caused some strains of cows to change. This change was carried forward by many European breeds into the modern dairy system. Guernsey cows reportedly have a higher prevalence of A2A2 genetics and Jerseys are next.

            Some scientists believe that there are health benefits to be derived from the milk of cows which descend from animals that never had that protein mutation – they are still A2A2 and their milk reflects that.

            Cattle genetics companies that test the DNA of their bulls often publish the information on which bulls have A2A2 genetics and Hardin suggested farmers should take advantage of that information and use those bulls. He said there is also a test that is available to test individual cows for A2A2 at a fairly modest fee.

            One company is building its brand on A2A2 milk and baby formula – in New Zealand, Australia and China – and Hardin believes this could eventually become a market force in this country.

Don’t forget beef

  The fact that dairy producers are also beef producers when they sell their cull cows, bull calves or dairy steers makes the beef market an important consideration on the profit line of the farm, he said. Beef prices in early 2015 to the middle of the summer that year were fantastic. Cull cows and baby bull calves contributed significantly to dairy farm income but when U.S. Agriculture Secretary Tom Vilsack announced that the United States would allow imports of beef from Argentina and Brazil, it took only two or three weeks for beef prices to crash, Hardin noted.

            He and others are opposed to the move to bring in fresh and frozen beef from those countries because there are regions in those South American nations where foot and mouth disease (FMD) exists. The virus that causes the disease can survive for six months in frozen meat, according to Hardin.

            Vilsack’s USDA has also proposed rules to import beef from the southern African nation of Namibia where there is also FMD.

            The process of bringing beef in from Brazil has already begun. “That beef began hitting our shores in September,” Hardin said, “and in pretty big quantities.”

            He believes that this offshore influx of beef has fueled the drop in prices for the beef complex. “We have seen a $500-$600 decline in slaughter cow prices from the peak to now,” he said. “That means you’ve taken two kicks in the pants – milk prices and livestock prices.”

            His publication, along with a beef cattle group, is working on a proposal to get farmers to lobby their lawmakers to roll back the USDA rules that allow the importation of beef from these FMD-infected countries.

            “We would like to see them ban imports of beef from these FMD countries until there’s a review of this whole process. I’d hope they would study the ‘logic’ that Vilsack allegedly used to come to this decision,” Hardin said.

            If the United States ever was stricken with FMD, it would immediately shut off all exports of beef, dairy and pork because the disease can strike all cloven-hooved animals. “Imagine if this disease got into the deer population,” he added.

            “If you care about the livestock industry I urge you to contact your Congressional representatives and ask them to go to the incoming Trump Administration and ban these imports until we can take a closer look.”

            Homeland security experts, he added, have said that FMD is the leading bio-terrorism threat to our nation and it puzzles him why the USDA would invite the problem into the country in the form of beef imports from an infected nation -- indeed several nations where the disease exists.

The USDA has proposed a “regional” approach, importing beef only from regions where the disease is not prevalent, but Hardin pointed out that if FMD were found in any corner of the United States, all of our trading partners would likely shut off any imports of our cattle, beef, pork and livestock genetics – the latter a move that would hit Wisconsin especially hard.

“I urge you; please be in touch with your elected representatives, get in touch with people on social media or however you can and talk to them about this situation. If Mr. Trump is going to be true to his rhetoric about unfair trade practices then this is a good place to start,” he said. “This is serious stuff, in my opinion.”

Federal Milk Orders

The way milk is priced is another area where Hardin would like to see major changes and he hopes the incoming Trump Administration might be able to make it happen, though he admits it would likely have to be done in the context of a new Farm Bill. The one we have now is due to be renewed in 2018.

“We have a federal milk order system that dates back to the 1930s. Instead of 10 federal milk marketing orders, I’d like to see about three,” he said. “We need a modern pricing system. There’s too much cream being skimmed off by certain parties.”

            In addition to changes in the number of milk marketing orders, Hardin said he’d like to see changes in the class structure of milk pricing. He believes fluid milk as well as milk used for cheese and yogurt should all be Class I milk because there is as much value in all three of those products. Milk used for butter, powder and ice cream should be Class II, he said.

            The way things work now, cooperatives and dairy companies move farm milk across borders to comply with the old-fashioned pricing system and it is being used in such a way to squeeze money out of the smaller guys, he said.

            Most farm groups and farm observers, including Hardin, agree that the Dairy Margin Protection Program, enacted in the last Farm Bill, is not working as the safety net it was designed to be. He criticized the use of the all-milk price, a USDA-generated average U.S. milk price in the calculations. Hardin said it doesn’t factor in marketing costs, checkoff money, marketing losses, cooperative dues and other expenses that farmers pay with their milk check. “In some cases there can be $2-$3 of total marketing costs per hundredweight and the all-milk price doesn’t reflect that,” he said.

            The program might be more useful if it used calculations of regional milk prices and regional feed prices. “California hay costs don’t have anything to do with Nebraska prices,” he said.

            If certain changes, like those he mentioned, were made, the MPP for Dairy would have “three-quarters of a chance of being an honest program.”

            He believes that it would be easier to take this program and “kick it in the right places and make it better than to try and create a whole new program in the current political environment.

Pete Hardin