Dick Groves
Editor, Cheese Reporter

 

 

 

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SEC Should Go Slow On Climate-Related Disclosures Rule

The US Securities and Exchange Commission three months ago issued a proposed rule that would require registrants to include certain climate-related disclosures in their registration statements, and accepted comments on that proposed rule through Friday, June 17.

Based on at least two factors — the length and complexity of the proposed rule, and the number of comments the SEC received — it would appear that the best path forward would be for the SEC to withdraw the proposal and start over, or at least slow the process.

Let’s start with that first factor: the length and complexity of the proposed rule. For those who haven’t taken the time to read the proposed rule, which appeared in the Federal Register on April 11, it’s pretty impressive, or depressing, depending on your perspective.

The proposal runs a total of 140 pages. In the Federal Register, that means 140 pages, each with three columns of text. In other words, it’s a heck of a lengthy proposal. Perhaps the best way to put the length and complexity of this proposal into perspective is to note that the “Table of Contents” for this proposed rule takes up over two full columns by itself.

But the 140 pages in the Federal Register don’t come close to covering everything an interested party could read to learn more about this proposed rule. There are also a fair number of footnotes; in fact, there are over 1,000 footnotes scattered throughout the proposed rule, many of which reference other sources of information. So if 140 pages of the proposal aren’t enough, you can always check out the sources cited in the footnotes for additional reading.

One other indication of the complexity of this proposed rule: in its comments, the International Dairy Foods Association noted that the Federal Register notice includes “750 complex compound questions,” for which the SEC is seeking input.

That leads us to the other factor that should prompt the SEC to withdraw this proposed rule and start over: the number of comments the SEC received. There are at least two key points here.

First, the SEC’s original comment period ran for all of 60 days. That is, 60 days to comment on a proposed rule that runs 140 pages in the Federal Register and includes some 750 questions.

In light of those facts, approximately 120 organizations representing the vast majority of agriculture, livestock and poultry farmers and ranchers across the US — including a number of dairy industry organizations — requested a 180-day extension, from May 20 to Nov. 16, 2022, to the SEC’s original comment period.

In their request, those organizations stated: “The SEC’s proposed rule, and in particular its expansive Scope 3 requirements is both incredibly complex and represents a wholly new potential reporting and liability risk for stakeholders in a context, before an agency, and under a variety of federal laws and regulations that they have never had to worry about.”
Without an “extensive expansion of the current comment period, the nation’s broad and robust agricultural sector, indeed the entire food supply chain, will have effectively been denied any meaningful opportunity to participate in the SEC’s proposed rulemaking.”

Despite that request, the SEC extended the comment period for all of 30 days, to June 17, 2022.And despite the relatively short comment period, the SEC received quite a few comments. Specifically, the agency received more than 10,000 comments by last Friday.

Some of these comments were relatively short and to the point, asking the SEC to either adopt the proposed rule as is or drop the matter altogether. Other comments run 10 or more pages and include detailed suggestions for changes to the SEC’s proposal.

So this is sort of like the proposal itself: there are so many comments that have been submitted, it certainly doesn’t seem like the SEC can satisfactorily come up with a final rule anytime soon.

Indeed, we can’t help but think maybe the SEC should “imitate” the US Food and Drug Administration on this proposal. That is, just to cite one example, FDA in the fall of 2005 published a proposed rule to provide for the use of fluid ultrafiltered milk in the manufacture of standardized cheeses, then reopened the comment period in late 2007 to seek further input on two specific issues raised by the comments. FDA then reopened the comment period again in April of 2020 to update comments and to receive any new information.

As of this month, the dairy industry has yet to see a final FDA rule on this matter. Maybe the SEC will take a similar glacier-like pace with its proposed climate-related disclosures rule.

Frankly, we’re not optimistic about that happening, which is too bad, considering how the UF milk proposal compares to the SEC’s proposed rule. Specifically, FDA’s original UF milk proposal ran a total of 19 pages in the Federal Register, or 121 fewer pages than the SEC’s proposed rule.

Further, and perhaps more importantly, FDA’s analysis of the potential economic implications of its proposed UF milk rule runs about nine pages, while the “Economic Analysis” section of the SEC’s proposed rule runs about 40 pages.

Maybe what we need is a federal law, or maybe an executive order, stating that the longer the economic analysis for a proposed rule is, the longer the periods should be for submitting comments and then for issuing a final rule.

The SEC’s comment period on this proposed rule was way too short. Let’s hope the same can’t be said when a final rule is eventually issued.

June Dairy Month And $3.00 Butter

It’s June, and that of course means that it’s also June Dairy Month, also known as National Dairy Month. June Dairy Month has been around for decades, but it’s probably safe to say there’s never been one like this one before, at least when it comes to dairy product and milk prices.

And by “never been one like this one before,” we’re referring, primarily, to the fact that the CME cash (spot) butter price reached $3.00 per pound for a couple of days last week. More on that later.

June Dairy Month, according to various dairy historians, dates back to 1937, when it was known as National Milk Month. Dairy Month was created to help boost, or at least stabilize, dairy product demand when milk production was peaking.

Put another way, June Dairy Month was established in part to hike demand during, or near the end of, the annual spring flush. The spring flush was far more dramatic back in that era.

For example, in 1936, the last year before June Dairy Month was created, US milk production in May totaled 10.5 billion pounds, and then in October it totaled 8.1 billion pounds and by December it had fallen to 7.4 billion pounds.

Last year, US milk production totaled 19.9 billion pounds in May, 18.6 billion pounds in October and 18.8 billion pounds in December. From these limited examples of milk production in several 31-day months in 1936 and 2021, we can conclude that the spring flush, for a variety of reasons, isn’t close to what it used to be.

This brings us back to $3.00 butter at the CME last week. For the record, this isn’t the first time butter has reached $3.00 at the CME; it previously reached $3.06 per pound in September of 2014 and then hit $3.1350 per pound, a record that still stands, in September of 2015.

Note that those previous periods of $3.00 butter were in September, long after the spring flush was over. Which prompts the question: What did butter prices look like in June of those years?

Well, in June of 2014, butter prices were relatively high, ranging from $2.1850 to $2.5000 per pound, and averaging $2.2630 a pound for the entire month. In 2015, the CME butter price started the month at $2.0050 a pound, but fell below $2.00 a pound on June 2 and remained below that level for the rest of the month, averaging $1.9065 for the entire month.

For what it’s worth, for the remainder of 2014, butter prices averaged above June’s average every month from July through October, including an average of $2.9740 a pound in September; and for the remainder of 2015 they averaged slightly below June’s average in July (at $1.9056 a pound), then well above that average every month through the end of the year (including an average of $2.8779 a pound in November).

From these (albeit limited) statistics, we can reach at least three conclusions. First, and most obviously, the CME butter price has never before reached $3.00 per pound in June, including in the two prior years in which it topped $3.00 a pound in September.

Second, butter prices historically don’t peak in June; rather, they tend to peak later in the year, when milk production isn’t quite as strong and when holiday food buying is in full swing (among other factors).

Based on the first two weeks of this month, butter prices will shatter the previous record-high average for June ($2.5688 a pound, set in 2017), and could approach the previous record-high average for any single month in any year (the aforementioned $2.9740 a pound, set in September of 2014).

And third, it would be at least somewhat surprising if, among other things, we don’t see butter at or above $3.00 a pound at least a couple of times before the end of the year; and it also wouldn’t be surprising if we see a new record-high average butter price for the entire year.

The previous record-high butter price average, $2.3278 a pound, was set in 2017; that was also the first, and thus far only, year in which the CME butter price averaged above 2.00 per pound every month of the year. Butter prices have averaged above $2.00 a pound in each of the first five months of 2022, and are well on their way to averaging much higher than that in June.

One other point about the years mentioned earlier: $3.00 butter and butter price averages above $2.00 per pound occurred during periods of rising US milk production. Specifically, 2014 milk production was 2.4 percent higher than 2013 output; 2015 milk production was up 1.2 percent from 2014; and 2017 milk production was up 0.4 percent from 2016.

So far this year (through April), milk production has been below a year earlier every month. Also, butter production during the first four months of 2022 was running 4.2 percent below the first four months of 2021.

What these numbers point to is an even greater likelihood that we’ll see $3.00 butter several more times before 2022 comes to an end.

Finally, while butter at $3.00 a pound June is a real eye-opener, cheese prices haven’t exactly been mild by comparison. Indeed, the CME 40-pound Cheddar block price was above $2.20 per pound until Tuesday.

Blocks have only averaged above $2.00 per pound in the month of June twice: in 2014, when they averaged $2.0237 a pound en route to averaging almost $2.11 for the entire year; and in the pandemic-upended 2020, when they averaged $2.5620 a pound en route to averaging just under $2.00 for the entire year.

In short, if we’re seeing $3.00 butter during June Dairy Month, we won’t see cheap butter, or cheese, or milk, anytime soon.

Something For (Almost) Cheese Lover At IDDBA

Walking the show floor at the International Dairy-Deli-Bakery Association’s annual conference in Atlanta this week, we were mighty impressed with how the cheese industry is creating products to meet pretty much every consumer taste imaginable.

There are numerous ways to illustrate this point, too numerous to mention in this space, but we’ll touch on a few. First, the cheese industry is doing a great job of offering products for the growing number of snacking consumers.

As noted in a story in last week’s issue, more and more consumers are snacking throughout the day, from mid-morning to afternoon and also at night. This is a huge market; an International Food Information Council survey found that 73 percent of all consumers snack at least once a day, up from 58 percent just last year.

So what is the cheese industry offering these snack-crazed consumers? Pretty much everything the industry has always offered, with added convenience so consumers don’t really have to do much work to snack on their favorite cheeses.

For the most part, these aren’t really “new” products; instead, company after company is offering some of their current products in new, convenient forms, primarily single-serve portions in sticks and other formats. From mild cheeses like Colby, Monterey Jack and Havarti to fuller-flavored products like Parmesan and sharp Cheddar, it’s never been easier for consumers to snack on their favorite cheeses.

Another way the cheese industry is meeting consumer demand is through additional flavor offerings. Today’s consumers are more adventurous than consumers were, say, 30 or 40 years ago, and the cheese industry is using its creative energy to meet those adventurous tastes.

The industry is doing this in at least three ways. First, the number of flavored cheeses on the market just continues to grow and grow. Thirty-plus years ago, there were relatively few flavored natural cheeses on the market; those few included smoked cheeses, cheeses with jalapeno peppers added, and Dill Havarti (available only as an imported product back then).

Today, just the variety of pepper products has expanded immensely in recent years, as exemplified both by exhibitors at the IDDBA show as well as entries in the recent World Championship Cheese Contest as well as other cheese contests. Everything from ghost and hatch to scorpion and habanero peppers are being added to cheeses these days.

Second, there seem to be more “full-flavored” cheeses on the market. This goes beyond just sharp and extra sharp Cheddar; perhaps the best way to illustrate this is to just point out what we mentioned in this space last week: that Parmesan production has more than doubled since 2010, as has Romano production.

The flavor of these cheeses certainly can’t be described as mild.

And third, the cheese industry’s offerings these days go beyond just products made from cow’s milk, or goat’s milk, or sheep’s milk. These days, there are mixed milk cheeses made with various combinations of these milks, and sold at various age and flavor stages.

For the most part, as with the cheeses noted above, these mixed milk cheeses can’t really be considered mild in flavor.

Yes, indeed, the cheese industry is doing a mighty fine job of meeting the needs of today’s consumers, with one notable exception: walking the IDDBA show floor, we saw very few, if any, cheeses that would fall into the “better-for-you” category.

That is, there just don’t seem to be as many cheeses that are lower in fat, sodium and/or cholesterol as there were 25 or 30 years ago.

Why is this happening? At least a couple of thoughts come to mind.
First, as noted earlier, more and more consumers are looking for bolder flavors, and choosing everything from Parmesan and Romano to multi-year-old Cheddar and smear-ripened cheeses.

Despite considerable research and development efforts starting back in the 1980s and accelerating in the 1990s, there are very few cheeses that are lower in fat and/or sodium and/or cholesterol that could be described as full-flavored. Most of these cheeses can best be described as mild, and less charitably described as bland, flavorless or even (or especially) boring.

And so there don’t seem to be as many of these cheeses around anymore, or at least they’re not being prominently displayed, sampled and promoted at shows like the IDDBA (and likely also won’t be at the upcoming Fancy Food Show).

Second, the science on dietary fat is a lot more debatable today than it was when there was a boom in the number of reduced and lowfat cheese products being offered to consumers back in the 1990s. And while consumers might not be keeping up with all the latest studies in this area, they have, if nothing else, become more cynical over the years as the latest studies seem to contradict the so-called “conventional wisdom.”

For evidence of this point, look no further than the “spreads” market; 30 or 40 years ago, the conventional wisdom favored margarine over butter, but today, the main ingredient in traditional margarine, partially hydrogenated vegetable oil, is no longer considered generally recognized as safe (GRAS) by FDA, while per capita butter consumption reaches its highest level in decades.

So-called “better-for-you” cheeses aren’t going to disappear anytime soon, but judging by what was on display and being sampled at the IDDBA show this week, they aren’t a priority for most companies, or consumers
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‘Other’ American, Italian Cheeses Gaining Importance

As noted in this space last week, “other states” are becoming more and more dominant in the production of cheese and some other dairy products. But they aren’t the only “other” that’s gaining importance in cheese production.

In fact, the production of both “other” American-type cheeses and “other” Italian-type cheeses has grown impressively in recent years (although a bit more inconsistently for the latter category) and are gaining in importance both within their overall categories and as far as cheese production in general is concerned.

Let’s start with other American-type cheeses. This is defined as American-type cheeses other than Cheddar; specifically, according to USDA’s National Ag Statistics Service, this category includes Colby, washed curd, stirred curd, Monterey, and Jack.

How large is this category? According to NASS statistics, this has been a billion-pound category every year since 2010, when output reached 1.05 billion pounds, and production has set new record highs every year since 2008. Last year, production of other American-type cheeses totaled 1.6 billion pounds, and accounted for 11.9 percent of total cheese production.

Also in 2021, production of other American-type cheese accounted for 28.3 percent of total American-type cheese production (meaning that Cheddar accounted for 71.7 percent of total American-type cheese output).

So how do these numbers compare with, say, the turn of the century?
Back in 2000, US cheese production totaled 8.26 billion pounds, with American-type cheese production totaling 3.64 billion pounds, Cheddar output totaling 2.8 billion pounds and production of other American-type cheeses totaling 822.6 million pounds.

Thus, in 2000, other American-type cheeses accounted for just under 10 percent of total US cheese production and 22.6 percent of American-type cheese output.

What about other Italian-type cheeses? This includes Italian cheeses other than Mozzarella; NASS specifically reports production of Parmesan, Provolone, Ricotta and Romano, and also production of other Italian-type cheeses in addition to those specific varieties.

According to NASS statistics, this has been a billion-pound category every year since 2011, when output reached 1.01 billion pounds. After that, production was above 1.0 billion pounds but below 1.1 billion pounds until 2016, then topped 1.2 billion pounds in 2017, fell below that level in 2019 and 2020, then reached a record high of 1.26 billion pounds in 2021.

Last year, other Italian-type cheeses accounted for 9.2 percent of total US cheese production, and 22 percent of Italian cheese production (meaning that Mozzarella accounted for 78 percent of total Italian cheese output).

Back in 2000, Italian-type cheese production totaled 3.3 billion pounds, with Mozzarella output totaling 2.6 billion pounds and production of other Italian cheeses totaling 653.9 million pounds.

Thus, in 2000, other Italian-type cheeses accounted for 7.9 percent of total US cheese production and 19.9 percent of Italian cheese production.

From these statistics, we can conclude that, as noted earlier, other American-type and Italian-type cheeses are becoming more important both in their overall categories as well as for cheese production in general. But what does the future hold?

That might be a bit easier to predict for other America-type cheeses than for other Italian-type cheeses. There are a couple of reasons for this. First, the category of other American-type cheeses basically just includes two cheeses, Monterey Jack and Colby, while the other Italian cheese category, as noted earlier, includes several different varieties and these varieties don’t even fall into the same general classification (some are soft, others are hard).

Second, the pattern for the production of other American-type cheeses is very clear: it increases every year. At least that’s been the pattern since 2005, when output totaled 762 million pounds. Yes, production increases in some years have been pretty small — for example, 2020’s output of 1.51 billion pounds was up just 14.1 million pounds from 2019 — but output just keeps growing and growing.

That pattern will in all likelihood continue in the future.

Production of other Italian-type cheeses is a bit more difficult to predict, since there’s such a diversity of products and they’ve all had their production ups and downs over the years, as has the overall category.

To illustrate this point, we went back to 2010, when the largest variety in the other Italian cheese category (based on production) was Provolone, followed by Ricotta and then Parmesan. In 2021, the largest variety in the other Italian cheese category was Parmesan, followed by Provolone and then Ricotta.

Oh, and from 2010 to 2021, production of Parmesan rose by about 250 million pounds, while production of Provolone increased by about 22 million pounds, and production of Ricotta actually fell by about 14 million pounds.

Notably, Romano production more than doubled between 2010 and 2021, although, at 67.7 million pounds, Romano accounts for only 5.4 percent of the total output of other Italian-type cheeses.

So production of other Italian cheeses will continue to experience ups and downs in the future, with a generally rising trend but at least occasional declines for some key varieties.

 

‘Other States’ Starting To Dominate Production

There’s an emerging force in US cheese production these days, an “entity” that’s experiencing rapidly rising cheese output in general and in specific varieties of cheese, not to mention other dairy products, in particular. That emerging force is known as “other states.”

As reported in various stories in our exclusive Dairy Production Extra section this week, “other states” account for a pretty significant percentage of production in various cheese and other dairy product categories. Meanwhile, the number of states whose production is broken out continues to shrink, for the most part.

What exactly are “other states?” In its annual “Dairy Products Summary” reports, as well as its monthly “Dairy Products” reports, USDA’s National Ag Statistics Service doesn’t show individual states when fewer than three plants reported or individual plant operations could be disclosed.

Perhaps the easiest way to illustrate the impact of this is to look at the latest list of cheese-producing states, in the 2022 “Dairy Products Summary” report from NASS. That list includes a total of 12 states.

By comparison, the 2021 report included cheese production statistics for 14 states; the two states included in that report but not included in the 2022 report, South Dakota and Oregon, combined to produce almost 680 million pounds of cheese in 2020.

So, in 2020, “other states” produced about 1.85 billion pounds of cheese, or roughly 14 percent of total US cheese production; and in 2021, “other states” produced 2.9 billion pounds of cheese, or more than 21 percent of total US cheese production. This isn’t just the addition of South Dakota and Oregon to “other states,” but that’s a big part of it.

To put this in some historical perspective, we looked at some past NASS reports to see how many states were broken out in the total cheese production table, and how significant cheese production was for “other states.”

Fifty years ago, NASS reported cheese production for 31 states. Ten of those states had fewer than 10 cheese plants at that time (there were a total of 921 cheese plants in the US in 1971).

US cheese production back in 1971 totaled about 2.4 billion pounds, over two-thirds of which was produced in just five states: Wisconsin, Minnesota, New York, Iowa and Missouri. The other 26 states broken out by NASS accounted for less than a third of US cheese production that year.

Meanwhile, the 19 “other states” were home to all of 15 cheese plants, and produced 30.7 million pounds of cheese that year, or about 1.3 percent of total US cheese output.

In 1996, NASS reported cheese production for a total of 22 states. Once again, five states accounted for over two-thirds of US cheese production (which totaled 7.2 billion pounds that year): Wisconsin, California, Minnesota, New York and Idaho. The other 17 states broken out by NASS accounted for less than one-quarter of US cheese production that year.

And the 28 “other states” produced about 623 million pounds of cheese that year, or about 8.6 percent of total US cheese output.

There are two obvious conclusions from these statistics: first, that the number of states whose cheese production is broken out by NASS is smaller than it was in the past; and second, that these “other states” are accounting for a larger and larger percentage of total production.

This can be seen in a number of other cheese and dairy product production categories as well. For example, NASS now breaks out Cheddar production for just three states: Wisconsin, California and Vermont. In 2021, those three states produced about 1.1 billion pounds of Cheddar, and accounted for less than 29 percent of total Cheddar output. All “other states” produced 2.8 billion pounds of Cheddar, and accounted for over 71 percent of total output.

For Mozzarella, NASS reports production for five states — California, Wisconsin, Pennsylvania, New York and New Jersey — and those five states accounted for almost two-thirds of Mozzarella production last year, which totaled 4.5 billion pounds. All other states produced about 1.6 billion pounds of Mozz, and accounted for just over a third of Mozz output.

A couple of other dairy product categories also stand out for the dominant production of “other states.” NASS breaks out butter production for just two states, California and Pennsylvania, and those two states last year accounted for about 37 percent of total US butter production of 2.07 billion pounds.

All “other states” produced 1.3 billion pounds of butter last year, accounting for around 63 percent of total butter output.

NASS also breaks out yogurt production for just two states, New York and California. In 2021, US yogurt production totaled about 4.7 billion pounds, with those two states producing 1.1 billion pounds, or less than a quarter of total US output.

All “other states” produced about 3.6 billion pounds of yogurt last year, accounting for more than three-quarters of total US yogurt output.

With all of these statistics in mind, what does the future hold for dairy product production in individual states as well as all “other states”? We expect continued volatility here.

That’s not to say that “other states” will become less or more significant in the production of cheese and other dairy products. Rather, the number of states included in “other states” will continue to vary from year to year, as will the significance of their production
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A Fond Farewell To CCC Statistics In WASDE Reports

The US Department of Agriculture released its monthly supply-demand report (formally known as the World Agricultural Supply and Demand Estimates, or WASDE, report) last Thursday and, for the first time in a very long time, the “US Dairy Supply and Use” table in the report didn’t include any reference to the Commodity Credit Corporation (CCC).

This has prompted us to take a look back at the CCC’s long presence in that table, and how its presence evolved over the years, and now has finally disappeared completely.

Historically, USDA’s WASDE reports date back to 1973, and initially focused exclusively on crops such as wheat, soybeans, corn, rice and cotton.

The first time dairy projections were included in the WASDE report was in April 1982, and that’s also the first time a supply and use table for milk was included in the report. That table included two listings for the CCC: CCC net removals (on a milk equivalent, fat-solids basis) and year-end CCC uncommitted inventories for cheese, butter and nonfat dry milk (the three dairy products purchased under USDA’s old dairy price support program).

The timing of that was interesting, given that, just a month earlier (and as reminisced about in this column back in our March 25th issue), USDA had convened a symposium focusing on how to bring the growing US dairy surplus under control.

At that time, the WASDE dairy supply and use statistics and projections were on a marketing year basis (the marketing year began on October 1 of each year, the same as the federal government’s fiscal year). And that first dairy table illustrated the dairy surplus problem; CCC net removals had increased from 8.2 billion pounds (on a milk equivalent, fat-solids basis) in the 1979/80 marketing year to 12.7 billion pounds in 1980/81, and were projected to rise to 13.3 billion pounds in 1981/82.

Also, year-end uncommitted CCC inventories of cheese rose from 196 million pounds in 1979/80 to a projected 818 million pounds in 1981/82, while butter inventories climbed from 266 million pounds to a projected 445 million pounds and NDM inventories rose from 548 million pounds to a projected 1.2 billion pounds over that same timeframe.

What these figures help illustrate is how important CCC-related statistics were back in the era of large government purchases of surplus dairy products. In that April 1982 report, USDA noted that milk production was rising faster than commercial use, and that government purchases under the price support program “are up slightly from a year ago, adding to the large store of CCC uncommitted inventories.”

During the 1980s, there were several USDA programs intended to either reduce milk production or get rid of surplus commodities that were already owned by the CCC.

These programs had at least some success, as illustrated by the April 1987 WASDE report, which projected that CCC net removals would drop from 12.3 billion pounds milk equivalent in 1985/86 to 5.8 billion pounds in 1986/87, and that year-end CCC uncommitted inventories for 1986/87 would fall to 177 million pounds of cheese, 35 million pounds of butter and 40 million pounds of NDM.

In 1990, another footnote was added to the milk supply and use table; this footnote explained that CCC net removals, on a milk equivalent, milkfat basis, included 14 million pounds of butter equivalent exported under the Dairy Export Incentive Program, better known as the DEIP.

Later in 1991, USDA broke its CCC net removals into two separate lines, one on a milkfat basis and the other on a skim solids basis. Both included products exported under the DEIP, which was primarily nonfat dry milk but also butter/butteroil and cheese.

The CCC-related statistics in the WASDE milk supply and use table would remain largely the same for a number of years. There was one addition: dry whole milk was added to the listing of CCC product net removals starting around 1994 (after that product was added to the products exported under the DEIP).

The last time the WASDE milk supply and use table included CCC net removals was in April 2014, and all CCC-related numbers were zero: there were no CCC net removals on either a fat basis or a skim-solids basis, nor were there any CCC product net removals, either under the price support program or the DEIP. Both the price support program and the DEIP were terminated under the 2014 farm bill.

Those statistics in the WASDE milk supply and use table were replaced in May 2014 with “CCC Donations.” Those donations were actually zero every year from 2012 through 2018, then increased to 0.2 billion pounds (skim-solid basis use) in 2019 and 0.1 billion pounds in 2020.

In a footnote that first appeared in the May 2020 WASDE report, USDA explained that “CCC Donations” include purchases made through the USDA Trade Mitigation program; they do not include products purchased under other programs.

And now, USDA has removed “CCC Donations” as a separate category and includes all donations as part of domestic use.

Thus ends an era of CCC-related dairy statistics in the WASDE report that spans exactly 40 years (April 1982 through April 2022), from the lengthy era when the CCC was buying, storing and disposing of surplus dairy products to the much shorter era when it was buying dairy products as part of trade mitigation efforts
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White House Conference Won’t Solve Food-Related Problems

President Biden last week announced that the White House will be hosting a Conference on Hunger, Nutrition and Health this September.

The conference, as reported on our front page last week, aims to galvanize action by food companies, anti-hunger and nutrition advocates and others to achieve the administration’s goal of ending hunger and increasing healthy eating and physical activity in the US by 2030.

Frankly, we’re skeptical that this conference will come close to achieving the administration’s goal. And the reason for this pessimism stems from the results of the first White House Conference on Food, Nutrition and Health, which was convened in 1969 by President Richard Nixon.

Specifically on the issue of nutrition, according to a 2020 article in Current Developments in Nutrition, that 1969 conference sowed the seeds for food-based dietary guidelines and nutrition labeling.

According to the federal government’s website for the Dietary Guidelines for Americans (www.dietaryguidelines.gov), a turning point for US nutrition guidance began in the 1970s with the Senate Select Committee on Nutrition and Human Needs. In its early years, this committee focused on programs designed to eliminate hunger, but more evidence linking diet to the “Nation’s killer diseases” was building and allowed the committee to expand its focus and investigate how nutrition related to the overall health of Americans.

In 1977, after years of discussion, scientific review, and debate, that Senate committee released Dietary Goals for the United States, which recommended, among other things: reducing overall fat consumption from approximately 40 percent to about 30 percent of energy intake; reducing saturated fat consumption to account for about 10 percent of total energy intake, and balancing that with polyunsaturated and monounsaturated fats, which should account for about 10 percent of energy intake each; reducing cholesterol consumption to about 300 milligrams a day; and limiting the intake of sodium by reducing salt intake to about five grams a day.

Three years later, two federal agencies released the first edition of the Dietary Guidelines for Americans, and new editions of the Dietary Guidelines have been issued every five years since then.

Meanwhile, Congress in 1990 passed the Nutrition Labeling and Education Act, and roughly five years later, pretty much all packaged food was required to include the Nutrition Facts panel.

So how has all of this worked out? By at least a couple of measures, not all that well. Specifically, the percentage of overweight and obese people has increased significantly in recent decades, as has the prevalence of type 2 diabetes. These trends are both especially true for kids.

And at least part of the problem is that both the dietary advice being doled out by the federal government, and the areas of emphasis on the Nutrition Facts panel, are doing more harm than good. The latest edition of the Dietary Guidelines for Americans continues to recommend limiting saturated fat intake to less than 10 percent of calories per day, even as that recommendation comes under increasing criticism.

Meanwhile, the federal government’s first Nutrition Facts label requirements included a prominent listing for “Calories from Fat.” That was removed when the Nutrition Facts label was updated a few years ago because, as FDA noted, the type of fat is more important than the amount.

Two things to keep in mind about that point. One, it came after labels were required to list “Calories from Fat” prominently for over two decades. And two, more and more research is concluding that the science is still unsettled when it comes to saturated fat. Milkfat in particular has been described as highly complex, and given the government’s track record on fat — it finally banned partially hydrogenated vegetable oils a few years ago, decades after singling out saturated fat for criticism — it wouldn’t be at all surprising if, someday, recommendations to limit saturated fat intake were dropped altogether.

So as far as dietary guidelines and nutrition labeling are concerned, it’s difficult to see any positive developments coming out of the upcoming White House conference.

On the issue of hunger, prospects are more mixed. On the one hand, the 1969 conference did lead, eventually, to the nationwide expansion of the food stamp and school lunch programs, creation of the WIC program, and permanent authorization of the National School Breakfast Program, according to the Current Developments in Nutrition article.

On the other hand, according to a 2021 report from USDA’s Economic Research Service, 10.5 percent of US households in the US were food insecure in 2020, and 3.9 percent had very low food security. Children were food insecure at times during 2020 in 7.6 percent of US households with children, up from 6.5 percent in 2019.

In other words, while one of President Nixon’s goals back in 1969 was to eliminate hunger, the problem of hunger persists to this day, despite decades of efforts to eliminate it.

Indeed, due to events like the coronavirus pandemic and Russia’s invasion of Ukraine, coupled with ongoing challenges due to climate change, hunger-related problems could very well get worse before they get better.

No doubt the White House conference will convene with the best of intentions; whether its results bring about marked improvements remains to be seen.

25 Years Without The National Cheese Exchange

It’s kind of hard to believe, but it’s now been 25 years since the old National Cheese Exchange held its final trading session in Green Bay, WI, and the cheese industry’s cash (spot) market moved to the Chicago Mercantile Exchange. But an item in last week’s “From Our Archives” confirms that it has indeed been that long since trading ceased at the NCE.

The 25th anniversary of the NCE’s closing serves as a reminder of what a hectic period it was back in the late 1990s when it comes to cash and futures markets for cheese, butter, nonfat dry milk and dry whey, as well as for milk pricing. Things are at least somewhat calmer today, in some ways.

In fact, the closing of the NCE and the move of the industry’s cash market to the CME was just one of a number of changes that have come to the pricing of cheese, other dairy products, and milk over the past 25 years. And it also illustrates that, when it comes to dairy pricing, things don’t stand still for long.

There are at least a couple of points to keep in mind regarding the state of cheese pricing back in 1997. First, cheese trading at the NCE took place just once a week, on Friday morning, in Green Bay.

Interestingly, that “era” of cheese pricing had technically only existed for about 22 years. Prior to June of 1975, the cheese industry’s cash market was called the Wisconsin Cheese Exchange, which had been formally organized way back in 1918.

So, the existence of the National Cheese Exchange actually spanned roughly 22 years, from 1975 to 1997.

Also, the Wisconsin Cheese Exchange wasn’t always based in Green Bay. It was located in Plymouth, WI, from the time of its founding in 1918 until it moved to Green Bay in August of 1956. So the cheese industry’s cash market was located in Green Bay for just under 41 years.

Second, the move from Green Bay to Chicago also brought an end to Friday morning trading. In what ended up being probably the shortest-lived “era” of cheese pricing, the CME’s cash cheese market trading took place on Thursday afternoons, from 1:15 to 1:45 p.m. Central time. The NCE’s Friday morning trading sessions had run from 10:00 to 10:30, and went longer when trading activity warranted.

But weekly cash cheese market trading on Thursday afternoons didn’t last very long at the CME. On Sept. 1, 1998, the CME switched from weekly to daily cheese trading, and also from afternoons back to mornings.
The launching of daily cheese trading at CME wasn’t the only change taking place in cash dairy markets. Also on Sept. 1, 1998, the CME launched a daily cash, or spot, market in nonfat dry milk.

But the CME cash butter market remained a weekly event until 1999, when it started trading three days a week (Monday, Wednesday and Friday), and then joined cheese and nonfat dry milk in daily trading in 2006.

Keep in mind that the late-1990s changes were taking place while federal milk marketing order reforms were being contemplated. USDA had released its proposed federal order reforms in January of 1998, with the final order reform rule being released in the spring of 1999, with an effective date of Jan. 1, 2000.

But cash market prices were never part of federal order reform. Up until 1997, the NCE block Cheddar price was being used in the federal order Basic Formula Price (BFP), but in the spring of 1997, USDA’s National Ag Statistics Service started a weekly Cheddar price survey, and those survey prices replaced the NCE/CME cash market price in the BFP formula starting on June 5, 1997.

USDA’s final rule amending federal orders stipulated that commodity prices determined by surveys conducted NASS were to be used in the formulas that replaced the BFP. And by the time USDA released its final order reform rule, NASS had added butter, nonfat dry milk and dry whey prices to its weekly price surveys.

Today, those surveys continue, although they are now conducted by USDA’s Ag Marketing Service, rather than by NASS.

There have been numerous other changes in dairy pricing since the NCE closed its doors 25 years ago, but we’ll mention just a couple of them here. First, it may be recalled that the dairy futures were sort of in their infancy back in the 1990s, although it wasn’t for a lack of available products.

Cheddar cheese and nonfat dry milk futures and options contracts had been launched by the Coffee, Sugar & Cocoa Exchange in 1993, and by the time the NCE closed its doors, the CSCE had added BFP milk futures and options contracts, and the CME was offering butter futures and options contracts. Open interest on those contracts was miniscule.

Today, the CME offers cheese, block cheese, dry whey, butter, nonfat dry milk, Class III and Class IV futures and options contracts, and open interest for at least one of those contracts, Class III milk, is around 35,000.

Meanwhile, dairy commodity trading has gotten a lot more “international” in recent years. This includes, among other things, dairy futures and options contracts offered by SGX-NZX (the Singapore and New Zealand exchanges), as well as dairy futures and options offered by the European Energy Exchange.

And then there’s Global Dairy Trade, which conducts a dairy commodity auction twice a month that includes buyers and sellers from around the world.

Suffice it to say the world of dairy pricing has changed considerably since the NCE closed.

 

Pondering Another Dry Year In Western US

For a number of years now, one of the more thought-provoking speakers at the joint annual ADPI/ABI conference has been Jon Davis, currently the chief meteorologist at Everstream Analytics. His presentation Monday morning in Chicago certainly lived up to expectations.

During his presentation, Davis focused on North America, because that’s where the risk of heat and dryness is highest, globally. That risk affects agriculture in general and livestock in particular.

Over the October-March period, the trend for the western US was dryness, and that was also the case for parts of the southern US, Davis explained. By contrast, the trend for the Great Lakes during that period was wetness. And some of these trends are “very, very likely” to continue.

Looking at water resources in the Americas — it all starts with water, Davis observed, whether it’s for agriculture, livestock, manufacturing, or whatever — the level that we’re at right now is virtually the driest we’ve been at since 2000. That is, for cropland in North America, the dryness is the worst in the last 20 years.

Also, the trend has been dropping for four straight years, Davis continued. And that drop has gotten us where we are today: water resources on average are at their lowest level in the Americas since the turn of the century.

There are two items that are driving this over the last couple of years, Davis noted. One is the La Nina event (colder than normal waters in the equatorial Pacific Ocean), and the other is the negative PDO, or Pacific Decadal Oscillation. Those two items are driving precipitation patterns around the globe.

La Nina and the negative PDO have been in place for the last two and a half to three years. All indications point to the fact that these will continue to be the drivers for the remainder of this year, Davis said. The La Nina event is “firmly in place,” and the negative PDO north of that is also “firmly in place.”

So the trends that we’ve seen lately, including dryness in the Americas, look to continue through the remainder of 2022, Davis said.

Davis then applied this dryness to the US dairy industry. Looking at June, July and August 2021, there was an “arc” of heat and drought from California to the Pacific Northwest to the Northern Plains. And if you go back to the year 2000, looking at heat, last summer was the hottest on average from a dairy standpoint.

The western US is the area where you tend to have the most serious drought conditions, Davis said. It’s been that way for the last two and a half years and, with what’s happening in the Pacific Ocean, it will get worse over the next six months. The risk is in the western half of the US — the Great Plains to California.

So what will another hot, dry summer for the western US mean for the US dairy industry? Well, if you take a look at how some of the western states fared in 2021 milk production-wise, another hot, dry year points to very tight milk supplies and higher prices in 2022.

Specifically in 2021, compared to 2020, milk production in several key western states was as follows: California, up 1.3 percent; Idaho, up 1.1 percent; New Mexico, down 4.5 percent; Washington state, down 4.6 percent; Arizona, down 1.5 percent; and Oregon, down 0.6 percent.

Of course, it’s not just milk that’s produced in the western US. The states of California, Idaho and New Mexico ranked second, third and fourth, respectively, in US cheese production in 2021, and the West region as a whole accounted for about 40 percent of US cheese production last year.

It’s in the area of butter and nonfat dry milk/skim milk powder that the impact of hot and dry weather in the western US could really be felt. In 2020, the West accounted for about 53 percent of US butter production and over 63 percent of US nonfat dry milk production.

Notably, during the first two months of 2022, butter production in the West region was down 2.0 percent from the first two months of last year, while nonfat dry milk production in the region was down 15.2 percent from a year earlier.

It’s worth remembering that the West region, according to the regional dairy product production statistics from USDA’s National Ag Statistics Service, does not include the state of Texas, which is now the number four milk-producing state in the US (as of 2021; it ranked third in both January and February of this year).

At the end of the 2021 growing season (which we’ll consider roughly the end of October), a good chunk of Texas was experiencing no drought conditions, while other parts of the state, particularly the Texas Panhandle, were abnormally dry or experiencing just moderate drought, according to the US Drought Monitor.

Today, most of the western part of Texas, including all of the Panhandle, is experiencing either extreme or exceptional drought. Of course, Texas has experienced exceptional drought conditions before, such as in 2011, but still managed a large milk production increase that year and a small increase the following year.

What’s the bottom line with these predicted hot and dry conditions for much of the western US in 2022? It’s looking like USDA’s forecast of milk production this year being about the same as in 2021 will prove to be accurate, if not a bit optimistic.

From a price perspective, it looks like average butter and nonfat dry milk prices might set new record highs this year, and average cheese prices might also end up setting new records
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US Really Needs A Standalone Food Agency

A recent Politico report on dysfunction across the US Food and Drug Administration’s food safety efforts leads us to the conclusion that it’s time for the US to create a standalone regulatory agency that focuses exclusively on food.

As reported on our front page last week, the Politico investigation, which was based on over 50 interviews, found that FDA’s food safety efforts have received little attention within the agency and have been beset by delays and management challenges for years.

The Politico investigation found that regulating food is simply not a high priority at FDA, where drugs and other medical products dominate, both in budget and bandwidth. Over the years, the food side of FDA has been so ignored and grown so dysfunctional that even former FDA commissioners readily acknowledged problems in interviews with Politico.

There are problems beyond just food safety, the Politico investigation noted. It specifically mentioned the agency’s efforts to amend and update the standard of identity for yogurt, which took over 40 years and ended up being so inadequate that the International Dairy Foods Association and Chobani formally objected to several provisions of the final rule, and the effectiveness of those provisions has now been stayed.

So what’s the solution to this dilemma? Perhaps it’s time to establish a single, standalone federal agency that’s responsible for food safety and other food-related issues, including standards of identity and labeling, to name just a couple.

According to a Congressional Research Service report, the organization of the US food safety system has been debated on and off since FDA was removed from the US Department of Agriculture back in the 1940s.
Since then, a number of congressional and executive branch initiatives have raised the prospect of creating a single federal food safety agency.

For example, in 1949, a presidential commission under the Truman administration proposed transferring federal food safety activities to USDA, and, more recently, the Trump administration proposed to consolidate the federal government’s primary food safety functions into a single federal agency based at USDA.

By contrast, in 1977, a study conducted by the Senate Committee on Governmental Affairs recommended that USDA’s food safety functions be transferred to FDA.

And more recently, the CRS report noted, the Obama administration proposed to establish a single federal food agency as part of its fiscal year 2016 budget request; that proposal wouldn’t have created a new independent agency but would have instead transferred existing food safety functions into a new agency within the US Department of Health and Human Services, where FDA currently resides.

Needless to say, none of these recommendations was enacted; FDA’s Center for Food Safety and Applied Nutrition still oversees the safety of most food products, including dairy products, as well as numerous other food-related issues, while USDA’s Food Safety and Inspection Service regulates meat, poultry, some egg products, and catfish.

To put a bit of an international perspective on what a single food agency looks like, we checked a few other countries to see how they approached food regulations. In Canada, the Canadian Food Inspection Agency has a broad mandate that encompasses food safety, animal health, plant health and international market access. Beyond food safety, the CFIA’s responsibilities include, among other things, labeling (including organic labeling), food licenses, and standards of identity.

Meanwhile, Australia and New Zealand have Food Standards Australia New Zealand (FSANZ), which develops food standards for Australia and New Zealand. The Food Standards Code is enforced by state and territory departments, agencies and local councils in Australia; the Ministry for Primary Industries in New Zealand and the Australian Department of Agriculture and Water Resources for food imported into Australia.

Based on this very limited sample, it doesn’t appear that food and drugs are lumped together in a single regulatory agency outside of the US.
Speaking of the US, the idea of establishing a single food agency has the support of the US Government Accountability Office and the National Academies of Sciences, Engineering, and Medicine, and others within academia, “as documented in myriad studies and reports,” the CRS report noted.

For example, back in 1994, the GAO’s John W. Harman testified at a House hearing that the current food safety system “hampers and impedes efforts to address public health concerns associated with existing and newly identified food safety risks,” and added that the GAO believes that an independent federal food safety agency, operating much like the Environmental Protection Agency, is “the preferred approach.”

More recently, at a meeting GAO hosted in 2016, 19 food safety and other experts agreed that there is a compelling need to develop a national strategy to address ongoing fragmentation and improve the federal food safety oversight system.

Given that the apparent widespread dysfunction on the food side at FDA is exceeded only by the dysfunction in Congress, we’re not at all convinced that there will be any serious effort any time soon to finally create a standalone US food agency. And both industry and consumers will suffer for that
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Going Beyond The Nutrition Facts Requirements

Not that we need to be reminded of this point, but several times in recent months, dairy industry organizations have noted just how much of a nutrition powerhouse dairy products are. And we think dairy marketers could and should do a better job of communicating this point to consumers.

Just to cite one example of these recent reminders: In comments recently submitted to USDA’s Food and Nutrition Service (and reported on our front page on Mar. 25th) regarding transitional standards for milk, sodium and whole grains in child nutrition programs, the International Dairy Foods Association and National Milk Producers Federation pointed out that milk (including lowfat flavored milk) provides 13 essential nutrients.

Further, whole milk contains the same nutrients as all other fluid milk, including calcium, phosphorus, protein, vitamins A, D and B12, pantothenic acid, riboflavin, and niacin, NMPF and IDFA noted. This is true of other dairy products at all fat levels.

But when it comes to communicating this point to consumers, there are a couple of problems. First, the Nutrition Facts label doesn’t come close to requiring the disclosure of all the 13 essential nutrients that dairy products provide.

That’s due at least in part to the fact that the Nutrition Facts label remains more of a negative than a positive conveyor of information. That is, at least some of the information required to be in boldface, closer to the top of the label, tends to be stuff consumers have been told for decades to avoid, such as total fat, cholesterol, and sodium. And of course calories gets top billing.

Down at the bottom of the Nutrition Facts label, four nutrients are required: vitamin D, calcium, iron, and potassium. Not required are several of the nutrients that dairy products are a good source of, including the minerals phosphorus, magnesium, selenium and zinc, among others, and the vitamins thiamin, riboflavin, and vitamin B12, among others.

All of that positive nutrition information — most of the beneficial minerals and vitamins that dairy products contain — isn’t required and therefore isn’t listed on the Nutrition Facts labels of most dairy products.

That leads to the second problem here: very few dairy product marketers appear to be going above and beyond what’s currently required — and what will continue to be required for the foreseeable future — on the Nutrition Facts label.

Keep in mind that there’s a limited amount of information that’s actually required on the Nutrition Facts label. That information doesn’t change very often, although it did change a few years ago, with FDA dropping the requirement to list vitamin A and vitamin C and adding the requirement to list potassium and vitamin D.

But food and beverage companies can also voluntarily list additional vitamins and minerals in the Nutrition Facts label. We are reminded of this point from time to time when we are checking out the Nutrition Facts label on certain products, and can’t help but notice that that label is quite a bit longer than labels that contain only mandatory information.

For example, we recently came across a bag of pistachios that included, after the four mandatory vitamins and minerals, information on the following: thiamin, vitamin B6, phosphorus, magnesium, copper and manganese. The percent Daily Value for these vitamins and minerals ranged from 8 percent for magnesium to 40 percent for copper.

Meanwhile, we also recently came across a can of almonds that included, after the mandatory vitamins and minerals, information on magnesium and vitamin E; the percent DV for these nutrients was 20 percent and 50 percent, respectively.

The point of these two examples is to show that at least some marketers of nutrient-dense products are providing consumers with more than the required amount of information on the Nutrition Facts label. And make no mistake about it, these are nutrient-dense products, not necessarily because of the mandatory nutrition information that’s on their Nutrition Facts label (such as dietary fiber and protein), but also because of their significant content of non-mandatory nutrients.

Dairy products, too, are nutrient-dense foods, as evidenced by not only what consumers can see on the Nutrition Facts label — including protein, calcium and potassium information — but also because of what consumers can’t see on the Nutrition Facts label.

And frankly, we think it would be nice to see more dairy product marketers follow the example of the pistachio and almond marketers and include additional information about nutrients.

Granted, this isn’t necessarily going to be easy, given the already-crowded nature of product labels these days. But certainly some packages have room to spare and can include more information; gallon and half-gallon milk containers, for example, and pretty much any package of cheese that’s more than about eight ounces.

If there’s no room on the product label, it would seem that additional nutrient content information could be posted on company websites. As noted in this space last week, at least some marketers of plant-based dairy alternatives currently do a better job of posting the (usually inferior) nutrient contents of their products than do the majority of dairy marketers.

Many if not most dairy products provide numerous essential nutrients. It’s time to better convey that fact to consumers..

 

Will Interest In Plant-Based ‘Sustainability’ Fuel Malnutrition?

A survey recently conducted for Arla Foods doesn’t bode well for nutritionally adequate diets in the future, and also potentially doesn’t bode well for the future of plant-based dairy alternatives. But it does appear to offer some potential for using dairy’s sustainability and nutrition stories as a way to both market dairy products as well as improve nutritional outcomes.

As noted in a story back in our Mar. 4th issue (please scan the QR Code on above to locate that issue), some two-thirds of consumers in the United Kingdom, Denmark, Sweden and Germany don’t see nutrition as a part of sustainable diets. While the majority of consumers in those countries said that they try to make sustainable choices wherever they can, their attention is mostly on carbon footprint, biodiversity, packaging and animal welfare.

The nutritional value of the food product is to a much lesser extent being considered when choosing a sustainable diet.

So what does this have to do with plant-based dairy alternatives? Well, a random survey of a few plant-based dairy alternatives marketers indicates that sustainability is a big part of their “pitch” to consumers.

Daiya Foods touts its plant-based dairy alternative products as “better for the environment.” Meanwhile, the greenhouse gas (GHG) footprint for Miyoko’s Creamery’s cashew milk cheeses is more that 10 times lower than that of animal dairy cheese, according to the company. And Kite Hill, which makes plant-based cheese and yogurt, among other products, “strives to create foods that are both irresistible and sustainable,” according to the company’s website.

These and many other companies are obviously finding some success in the marketplace. As we reported on our front page two weeks ago, US retail sales of plant-based foods grew 6.2 percent in 2021 to a record high of $7.4 billion, according to data from the Plant Based Foods Association, the Good Food Institute and SPINS.

Specifically for plant-based dairy alternatives in 2021, among other categories, plant-based milk sales rose 4 percent to $2.6 billion; plant-based cheese sales grew 7 percent to $291 million; and plant-based yogurt sales grew 9 percent, to $377 million.

Certainly these products are tapping into a growing consumer desire for more sustainable foods. As Julie Emmett, PBFA senior director of retail partnerships, noted, “More and more consumers are turning to plant-based options that align with their values and desire to have a positive impact on personal and planetary health.”

But are consumers that turn to plant-based dairy alternatives really having a positive impact on their personal health? Not in at least some respects.

As we reported just last week (please see the story on page 19), few plant-based cheese alternatives can be considered good dietary sources of either protein or calcium, according to a study published in the journal Nutrients.

For that study, the ingredients and nutritional content of 245 plant-based cheese alternatives were recorded. And the study found that the median values for the protein and calcium content of the non-dairy cheeses were zero; only 3 percent of the products reached a level of five grams of protein per serving. Also, of the top seven selling brands of non-dairy cheese alternatives, only one-third of the products had calcium fortification.

By contrast, dairy cheese typically contains roughly five to eight grams protein per serving, and 10 to 20 percent of the Daily Value for calcium, which is “substantially more” than the non-dairy alternatives, according to the study.

These findings are reflected in the plant-based products offered by the three companies noted earlier, at least when it comes to protein. That is, several cheese alternatives from Daiya Foods contain zero grams of protein per serving; the cashew milk cheeses from Miyoko’s Creamery contain one to three grams of protein per serving; and Kite Hill’s Garlic and Herb Soft Spreadable Cheese contains two grams of protein per serving.

As an aside, and to their credit, these and some other marketers of plant-based dairy alternatives seem to do a better job of listing the nutrient contents of their products (such as they are) than do the marketers of real dairy products. Consumers looking to compare plant-based products to real dairy products might find it difficult to make such comparisons without visiting an actual store.

Cheese-type products aren’t the only plant-based dairy alternatives that come up short when it comes to nutritional content in general and protein content specifically. Among others, some brands and types of plant-based milks also contain little or no protein.

With this in mind, we can’t help but wonder about the nutritional adequacy of the diets of consumers who switch from traditional dairy to plant-based alternatives. If, for example, someone who consumes the recommended three servings of dairy per day (one serving each of cheese, milk and yogurt) switches completely to plant-based alternatives, they are potentially reducing their protein intake by 20 to 30 grams per day.

And they are also generally consuming inferior forms of protein.
With rising incidence of obesity, type 2 diabetes and other diet-related maladies, it’s safe to say that consumers haven’t exactly been doing a great job of making nutritionally sound food and beverage choices in recent years.

} To the extent that they choose the perceived superior sustainability of plant-based foods over the real sustainability of dairy foods, the incidence of these diet-related maladies will only continue to rise
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It’s A Great Time For Dairy Innovation

The US Department of Agriculture’s announcement in early March of an additional investment of $80 million in the Dairy Business Innovation (DBI) Initiatives led us to conclude that this is a great time for innovation in the dairy industry.

In fact, it’s always a pretty good time for innovation in the dairy industry. This can be illustrated by the simple fact that one of the oldest dairy companies in the US, Borden, got its start way back in the 1850s, when Gail Borden received a patent for his process of condensing milk.
The dairy industry has been inventing and reinventing itself, and its products and processes, ever since.

Still, there’s something about the current era of dairy innovation that seems to stand out compared to the past. Perhaps it’s USDA’s DBI Initiatives program, which was established under the 2018 farm bill and, last fall, awarded $18.4 million to three current Initiatives at the University of Wisconsin, University of Tennessee and Vermont Agency of Agriculture, Food and Markets, and $1.8 million to a new initiative at California State University Fresno.

That money, in turn, helps fuel innovation in at least two ways, as illustrated by activities of the Dairy Business Innovation Alliance, which is led by the Wisconsin Cheese Makers Association and the Wisconsin Center for Dairy Research.

First, the DBIA provides numerous resources for dairy entrepreneurs and small businesses, including market research and technical assistance. And second, it offers two different grant programs to dairy farmers and dairy processors in Wisconsin, Minnesota, Iowa, Illinois and South Dakota.

Keep in mind that this is just one of the DBI programs. The Northeast Dairy Business Innovation Center serves a 10-state region, and the Southeast Dairy Business Innovation Initiatives (SDBII) program recently expanded to cover all 12 southeastern states. And the new Fresno State initiative will serve California, Oregon and Washington.

In short, USDA’s DBI Initiatives is providing a lot of money to help boost dairy innovation at the regional and state levels. And results so far, in the form of grant applications, indicates that there is very high demand for funds that will help fuel dairy innovation in the years ahead.

But this is far from the only broad-based effort to increase dairy innovation. A number of dairy organizations, cooperatives and companies have in recent years also launched “accelerator” programs, aimed at fueling innovation using dairy products and/or dairy ingredients.


For example, the California Milk Advisory Board offers the Real California Milk Excelerator, which focused in 2020 and 2021 on innovation in snack formulations and functional dairy product development, respectively.

Meanwhile, Dairy Farmers of America launched its Accelerator program, now known as the DFA CoLab Accelerator, several years ago. Over the years, through this program, DFA has worked with more than two dozen startups in the ag-tech and dairy food product verticals.

And 301 INC — which describes itself as an energetic and enthusiastic team looking to collaborate with emerging food brands; to roll up its sleeves and work together to create breakthrough innovations and build successful businesses — is a subsidiary of General Mills.

This is indeed a very good time to be a dairy innovator, which is a good thing, because it also seems to be a very good time to be a non-dairy innovator. That is, while the dairy industry continues to innovate in any number of ways, its competitors are also innovating at a rate that’s perhaps unprecedented in dairy industry history.

This “non-dairy” or “dairy alternative” or “animal-free dairy” innovation is taking place in at least a couple of different areas. First, the number of companies producing plant-based “dairy” products has skyrocketed in recent years.

Perhaps the best way to illustrate this is to note that the Plant Based Foods Association was founded just six years ago and represented 52 companies (not all of whom made plant-based dairy alternatives) Today, the PBFA has 225 company and ingredient supplier members, along with 86 organizational affiliate members and nine organization investors.

Oh, and as reported on our front page just last week, according to new data from the PBFA, the Good Food Institute and SPINS, sales of many plant-based “dairy” products continue to increase. Just to cite a couple of examples: in 2021, plant-based “milk” dollar sales grew 4 percent to reach $2.6 billion; and plant-based cheese sales grew 7 percent last year to $291 million.

The other non-dairy innovation sector, perhaps best referred to as cellular agriculture, might not be attracting all that many consumers at this time (due in part to the fact that the sector isn’t really targeting consumers yet), but it certainly is attracting a lot of money.

Just to cite one of many examples: last September, Perfect Day, Inc., the creator of what it claims is the world’s first animal-free milk protein, announced a $350 million Series D funding round intended to fuel the company’s expanded focus across biological engineering, ingredient innovation, and consumer products.

Innovation has always been a key to dairy industry growth, and that’s going to continue in the future. What might be different now is that innovation may also be more tied to industry survival than ever before.

 

Remembering USDA’s 1982 Kansas City Dairy Symposium

Dairy Farmers of America held its annual meeting this week, and the dates and location of that meeting — Mar. 22-23 in Kansas City, MO — triggered memories of another dairy industry gathering held on those same dates, in that same city, 40 years ago. It also reminded us of how much the dairy industry has changed over the past four decades.

That 1982 meeting was officially called the Dairy Economics Symposium (and was commonly referred to later as the Kansas City Dairy Symposium, among other things), and it was convened by the US Department of Agriculture.

US Secretary of Agriculture John R. Block initially announced the symposium in remarks delivered at the Western States Dairy Conference in Seattle, WA, on Mar. 3, 1982. His remarks there specifically focused on the dairy price support program, and how much the federal government was spending under that program (“a quarter of a million dollars every hour”) to purchase surplus dairy products.

At the time Block delivered his comments, USDA’s uncommitted inventory included 581 million pounds of cheese, 920 million pounds of nonfat dry milk and 290 million pounds of butter. USDA’s storage costs were running about $42.5 million per year at those inventory levels, but “those levels are growing,” he said.

At that Seattle conference, Block announced that he had directed his chief economist, Bill Lesher, to schedule a Dairy Economics Symposium later in March 1982 in a “central location.” Lesher’s assignment was “to obtain information, from a wide range of people, about how we can bring this program under control.”

And so USDA convened its Dairy Economics Symposium in Kansas City on Mar. 22-23, 1982. According to the “Proceedings” of that symposium, released in May 1982, representation at the symposium “was widely-based, including most general farm organizations, dairy marketing cooperatives from the major producing areas of the country, dairy processors, and dairy producers. Total attendance was 250, with 50 presenting their views.”

Several months after the symposium, Congress passed a budget reconciliation bill that froze the support price at $13.10 per hundredweight and also gave authority to the secretary of agriculture to provide for a deduction of 50 cents per hundred from the proceeds of the sale of all milk marketed by producers to be remitted by the Commodity Credit Corporation to offset a portion of the cost of the price support program.

Thus began a series of steps, taken by Congress and USDA, to bring the dairy surplus under control and reduce the cost of that surplus to taxpayers. Among other things, over the next several years, Congress: authorized the Milk Diversion Program, which offered direct payments to dairy producers who reduced their milk production from a base; authorized the formation of the National Dairy Promotion and Research Board; authorized the whole herd buyout program; and created the Dairy Export Incentive Program.

So, 40 years after USDA’s Kansas City Dairy Symposium, what’s changed in the dairy industry? Pretty much everything.

For starters, the industry, USDA and Congress are no longer dealing with surpluses, because the dairy price support program was terminated under the 2014 farm bill.

Beyond that point, dairy industry changes over the past four decades can pretty much be gleaned at almost any point in the Kansas City Dairy Symposium Proceedings. For example, the first several symposium speakers were from USDA, and one of them, Bryant Wadsworth of USDA’s Foreign Agricultural Service, talked about US dairy problems in an international setting, noting that, to export significant quantities of US dairy products “would require a subsidy since world market prices are much lower than ours.”

In the context of all the dairy export records the US set last year, and the fact that the US now exports roughly 15 percent of all the milk it produces, that statement from 40 years ago nicely illustrates one major way in which the US dairy industry has changed.

It’s also worth remembering that, for a number of years, the US did subsidize dairy product exports, via the Dairy Export Incentive Program, which was also eliminated under the 2014 farm bill.

Another way of understanding how much the dairy industry has changed over the past 40 years is to look over the list of attendees, and their affiliations. For example, there were representatives from the National Cheese Institute and American Butter Institute, as well as the Milk Industry Foundation, and International Ice Cream Association (then known as the International Association of Ice Cream Manufacturers). NCI, IICA and MIF later joined together to form the International Dairy Foods Association, while ABI is now managed by NMPF.

Meanwhile, Dairy Farmers of America wasn’t in attendance, because it didn’t exist yet. But there were numerous representatives from DFA’s predecessor cooperatives.

Finally, it’s interesting to look through the symposium proceedings and see how little attention was paid to federal milk marketing orders back in 1982. Interestingly, one speaker, Jim Neu of Neu Cheese Company, Hartington, NE, called on USDA to either eliminate the federal order program or lower the price that milk bottlers have to pay for fluid milk.

With that in mind, maybe it’s time for USDA to again convene the dairy industry at a “central location” and deal with problems related to federal orders.

 

‘Dietary Guidelines For Americans’ Really Needs Fixing

Reading through the US Department of Agriculture’s recently released final rule that establishes transitional standards for the child nutrition program requirements related to milk, sodium, and whole grains, we came to the conclusion that any long-term improvements to those standards will require, for starters, some changes to the Dietary Guidelines for Americans.

And we’re not optimistic that will happen.

As reported on our front page back on Feb. 4, USDA’s final rule, among other things, allows local operators of the National School Lunch Program and School Breakfast Program to offer flavored, lowfat (1 percent) milk for students in grades kindergarten through 12 and for sale as a competitive beverage. The final rule also allows flavored, lowfat milk in the Special Milk Program for Children and in the Child and Adult Care Food Program for participants ages six and older. The final rule also modifies the proposed sodium standards.

So what does this final rule have to do with the Dietary Guidelines for Americans? Quite a bit, as it turns out. Just from a “mentions” perspective, the final rule (which was published in the Feb. 7, 2022 edition of the Federal Register) mentions the Dietary Guidelines for Americans approximately 50 times.

For example, regarding the milk standard, in a 2020 proposed rule, USDA had proposed to continue to allow schools the option to offer flavored, lowfat milk in reimbursable school meals. Notably, the agency received a total of 4,684 comments on this proposal, of which 91 supported the proposed rule and 4,585 opposed the proposed rule (eight comments were “mixed”).

Some opponents stated that the proposed change is inconsistent with the Dietary Guidelines for Americans.

USDA said its final rule balances various factors, including the current Dietary Guidelines. But the agency added that, while it appreciates comments on whole milk, allowing whole milk in the school meal programs would not align with recommendations in the latest edition of the Dietary Guidelines.

Regarding sodium reduction targets, USDA noted that the transitional standards in its final rule align with the US Food and Drug Administration’s recent voluntary sodium reduction targets for the food industry, and that FDA’s goal of supporting reductions in sodium intake is consistent with the latest edition of the Dietary Guidelines for Americans.

Consistent with statutory requirements, USDA’s intention is to ensure that the sodium targets for school meals reflect the goals of the current Dietary Guidelines, which recommend reducing average sodium intake from current levels, USDA explained in its final rule.

So, what does the future look like in the areas of milk choices and sodium reduction in child nutrition programs? For starters, keep in mind that USDA’s final rule establishes “transitional standards.” The final rule is intended for two school years only: 2022-23 and 2023-24.

In that final rule, USDA also explains that its long-term goal is to establish regulations that align school meal nutrition standards with the Dietary Guidelines, 2020-2025. The agency intends to issue a proposed rule in fall 2022 which will address school meal nutrition standards for school year 2024-25 and beyond.

That new rulemaking will consider the areas addressed through the final rule and ensure that the long-term standards are consistent with the goals of the Dietary Guidelines, 2020-2025 and nutrition science, as required by the National School Lunch Act.

One problem with that approach is that, by the time USDA finalizes school meal nutrition standards for school year 2024-2025 and beyond, the federal government will already be undertaking the preparation of the next edition of the Dietary Guidelines for Americans.

It’s been less than a year and a half since the federal government (USDA and the Department of Health and Human Services, FDA’s parent agency) issued the latest edition of the Dietary Guidelines for Americans.

Work on the latest edition of the Dietary Guidelines actually got underway roughly two years before the final report was released. That means that work on the next edition could begin within the next year or so, and thus would “overlap” with USDA’s school lunch rulemaking.

Unfortunately, we’re not optimistic that the next edition will offer any relief when it comes to either the fat content of milk and other dairy products, or sodium reduction. This despite considerable evidence that the decades-long dietary advice to reduce saturated fat intake has actually done more harm than good, and that sodium reduction efforts may end up doing the same, particularly when it comes to reducing sodium in cheese products, where it provides many quality and safety benefits.

Finally, it’s worth noting that, at least when it comes to milk served in schools, some members of Congress are trying to bypass the Dietary Guidelines. Among other things, US Rep. Glenn Thompson (R-PA), the top Republican on the House Ag Committee, a year ago introduced legislation that would permit schools to offer students whole, reduced fat, lowfat, and fat-free flavored and unflavored milk.

The Dietary Guidelines will continue to guide child nutrition programs, but when it comes to school milk and sodium, it looks like they’ll continue to guide those programs in the wrong direction.

Consistent Milk Production Growth: Wisconsin Stands Alone

Folks who have been following milk production trends at the state level since at least the 1990s might find the following tidbit somewhat surprising: Among the top 10 milk-producing states, Wisconsin stands alone when it comes to consistent growth in milk production over the past 15-plus years.

Why might this be so hard to believe for industry veterans? Because for many years, Wisconsin’s milk production was stagnant to declining.
This was, in fact, the case starting in 1989, and running for a number of years. Wisconsin in 1988 set a new milk production record of 25.0 billion pounds, and didn’t break that record until 2009.

Between those years, Wisconsin’s milk production declined nine times, including drops of 1.0 billion pounds or more in 1989, 1993, and 2001.
And the last of those declines came in 2004, when output of 22.085 billion pounds was down 181 million pounds from 2003 — and down 2.9 billion pounds from 1988’s record output.

After falling in 2004, Wisconsin’s milk production started to increase — and hasn’t stopped since. In 2009, it finally topped 25.0 billion pounds, breaking the 1988 record, and kept rising, hitting 30 billion pounds for the first time in 2016 and then reaching 31 billion pounds for the first time in 2021, at 31.7 billion pounds.

During that period of uninterrupted growth, Wisconsin “matched” the three billion-pound declines of the 1989-2003 period with three increases of more than 1 billion pounds; those increases occurred in 2012, 2015 and 2016.

Wisconsin’s record of milk production increases since 2005 raises a couple of questions. First, has Wisconsin’s milk production ever posted this many consecutive increases?

The answer to that question is no, with an asterisk. Using milk production figures from USDA’s National Agricultural Statistics Service dating back to 1924, Wisconsin has never before posted 17 consecutive increases in milk production.

The closest the state came to the current streak was from 1973 to 1983, when the state’s milk output increased, uninterrupted by any declines, from 18.4 billion pounds to 23.8 billion pounds, before falling to 23.5 billion pounds in 1984 (no doubt due in part to USDA’s Milk Diversion Program, which ran for all of 1984 and the first quarter of 1985 and paid dairy farmers to reduce their milk production from a base).

So, why the asterisk? As noted, the NASS statistics date back to 1924, when Wisconsin’s milk production already totaled 10.13 billion pounds.
Obviously, Wisconsin posted numerous consecutive years of production increases between 1848, when it became a state, and 1924, but those statistics aren’t readily available and, even if they were, might not be as reliable as more “modern” statistics.

The second question raised by Wisconsin’s record of milk production increases since 2005 is: How does this compare to the other nine of the top 10 milk-producing states? And the answer is: Wisconsin is alone in posting milk production increases every year since 2005. What follows is a look at how milk production in each of those nine states has fared since 2005.

California, of course, is familiar with consecutive milk production increases. After dropping from 11.97 billion pounds in 1977 to 11.86 billion pounds in 1978, California’s milk production increased every year through 2008, when it reached 41.2 billion pounds. But it has actually declined five times since then, most recently in 2017, which was the last time the state’s milk output was under 40 billion pounds.

Milk production in Idaho increased from 10.16 billion pounds in 2005 to a record 16.4 billion pounds in 2021, and the state moved up from fifth to third nationally in milk production. But Idaho’s milk production declined twice during that period: in 2009, and again in 2017.

Texas has moved from ninth to fourth nationally in milk production since 2005, but did experience two declines during the period, in 2009 and again in 2015.

Over the 2005-2021 period, New York fell from third to fifth in milk production, due in part to the fact that it posted three production declines during the period: in 2006, 2009 and in 2018.

Michigan has moved up from eighth to sixth in national milk production between 2005 and 2021, and recorded just one production decline during the period, in 2018.

Minnesota fell from sixth to seventh in milk production during the 2005-21 period, and posted two declines during the period, in 2011 and again in 2014.

The three states rounding out the top 10 are the easiest, as far as tracking down when they recorded milk production declines since 2005, because all three posted production declines in 2021. For Pennsylvania, last year’s decline was the eighth since 2005, which helps explain why the state’s 2021 milk production of 10.1 billion pounds was almost 400 million pounds below its 2005 level.

New Mexico’s 2021 milk production drop was actually the state’s ninth decline since 2005, although the state’s output last year was 853 million pounds higher than in 2005. And Washington’s 2021 milk production decline was its fourth since 2005, although the state’s production in 2021 was almost 900 million pounds higher than in 2005.

Wisconsin’s string of milk production increases in 2005 is not only impressive compared to other states in the top 10, but also compared to its own production performance from 1989 through 2004.

 

Federal Order Make Allowances Will Always Be Outdated

The US Department of Agriculture released a study last month that, as reported on our front page two weeks ago, included average manufacturing costs for four commodity dairy products — Cheddar cheese, dry whey, butter, and nonfat dry milk — that are used in federal milk marketing order price formulas.

From this study, which was conducted by Dr. Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison, we can reach a couple of conclusions. First, current make allowances used in federal order price formulas are outdated, and not just by a penny or two per pound.

Specifically, the current make allowance for cheese, 20.03 cents per pound, is 4.73 cents under the average total processing cost; the current make allowance for dry whey, 19.91 cents per pound, is 6.59 cents under the average total processing cost; the current make allowance for butter, 17.15 cents per pound, is 3.04 cents above the average total processing cost; and the current make allowance for nonfat dry milk, 16.78 cents per pound, is 12.55 cents under the average total processing cost.

That current make allowances are outdated shouldn’t really come as a surprise. These make allowances, after all, have been in effect since Oct. 1, 2008.

And they were already a bit dated when they became effective. Specifically, USDA’s tentative partial final decision on make allowances and other product price formula factors, which was released in June of 2008, explained that, for Cheddar cheese, the California Department of Food and Agriculture 2006 survey of average cheese manufacturing costs “is the best available information representing the manufacturing cost of producing a pound of Cheddar cheese.” Accordingly, the make allowance proposed for adoption for Cheddar cheese was 20.03 cents per pound, including 0.15 cent per pound marketing cost adjustment.

In other words, the current make allowance for Cheddar cheese that became effective in late 2008 was based on 2006 costs. And the other three make allowances that became effective in late 2008 were also based on 2006 costs, specifically a combination of weighted average costs from the CDFA and Cornell Program on Dairy Markets and Policy surveys (the CPDMP survey was also conducted by Stephenson).

In addition to reaching the obvious conclusion that current federal order make allowances are outdated, the USDA study also leads us to conclude that there doesn’t appear to be any way for make allowances to not be outdated in the future. That’s due at least in part to the nature of federal order proceedings.

As noted earlier, make allowances that became effective in late 2008 were based on 2006 cost surveys, but in fact that proceeding dates back to September of 2005, when Agri-Mark submitted a request to USDA for an emergency hearing on changes in the Class III and IV price formulas. Here’s the first paragraph of Agri-Mark’s Proposal 1:

“Agri-Mark’s primary proposal is to update the manufacturing allowances for cheese, whey powder, butter and nonfat dry milk powder. The current allowances were fixed based upon now antiquated cost data from 1998-2000, yet are still used to establish minimum prices for milk under all Federal Milk Orders. Actual manufacturing and other costs have risen dramatically during the past five to seven years but Federal Order provisions have effectively stopped manufacturers from covering those higher costs through higher general sales prices or other means.”

Fast-forward to 2022, change “1998-2000” to “2006,” and much of that paragraph still applies (with the notable exception of butter manufacturing costs, which have actually declined since 2008).
And the costs included in USDA’s new study will undoubtedly be outdated by the time USDA again changes the make allowances in federal order formulas, for at least a couple of reasons.

First, plants that participated in USDA’s study were asked to supply one year’s worth of data. Participating plant data span a 39-month period of time from October 2017 through December 2020. In other words, the newest data in the study is already over a year old.

Second, USDA has yet to so much as schedule a hearing to update make allowances, because, of course, the dairy industry has yet to request such a hearing. Looking back at the previous changes to make allowances, it took almost exactly three years from the time that Agri-Mark submitted its petition until the current (higher) make allowances became effective (although an interim final rule that became effective in early 2007 did raise make allowances somewhat; before those make allowances even became effective, USDA had issued a notice to reconvene the hearing).

That’s due in part to the fact that changes in make allowances are highly controversial. As USDA noted in its tentative partial final decision released in June 2008, the range of proposed make allowances varied more than 30 percent between the highest and lowest proposed make allowance levels for cheese and dry whey, by about 25 percent for nonfat dry milk, and “remarkably varies by more than 60 percent” for butter.

And there are other controversial factors in product price formulas, ranging from the butterfat recovery percentage to the other solids price.

Make allowances might eventually be updated, but they’ll still be outdated. It continues to appear that product price formulas as a whole are similarly outdated
.

A Memorable Year For US Dairy Imports

While US dairy exports tend to garner most of the trade-related “ink” these days — and rightfully so, for the most part, given that they reached a new record high last year and far exceed their levels of a couple of decades ago — US dairy imports have also been setting some records that are worth recognizing.

As reported on our front page two weeks ago, US dairy imports in 2021 reached a record value of $3.6 billion, up an impressive 21 percent from 2020. Dairy imports have now topped $3 billion in value for three straight years.

Looking back roughly three decades, statistics from USDA’s Foreign Ag Service help illustrate that US dairy imports actually reached a couple of significant “value milestones” before dairy exports reached them. As noted in this space last week, US dairy exports first topped $1 billion in value back in 2001.

Dairy imports actually reached that milestone in 1994, when they totaled $1.07 billion in value.

Ten years later, dairy imports reached $2 billion in value for the first time. It wasn’t until 2007 that dairy exports first topped that milestone.
Related to these milestones, while the positive US dairy trade balance is sort of taken for granted these days, it’s worth remembering that the US ran significant dairy trade deficits for many, many years. It was in 2007 that the value of US dairy exports ($2.99 billion) finally topped the value of US dairy imports ($2.46 billion).

Not only has the US run a dairy trade surplus ever since, it’s also reached several other value milestones ahead of dairy imports — including the $3 billion mark in 2008, a mark dairy imports didn’t reach until 2019.

Another US dairy import record that fell last year was the value of cheese imports; specifically, 2021 cheese imports were valued at $1.48 billion, which broke the previous record of $1.3 billion, set in 2019. With the exception of 2009, when they were valued at $967 million, cheese imports have topped $1 billion in value every year since 2005.

Interestingly, cheese imports didn’t top $1 billion in value in 2002, when they reached a volume record of 474.6 million pounds. Cheese imports that year were valued at $788 million. That works out to about $1.66 per pound, compared to last year’s cheese imports of 413.2 million pounds valued at $1.48 billion, which works out to about $3.59 per pound.

Why the huge difference? For one thing, cheese prices were a lot higher in 2021 than they were back in 2002; for example, the CME 40-pound block Cheddar price averaged about $1.18 per pound in 2002 and around $1.71 per pound last year.

Also, the leading sources of US cheese imports in 2002 were different than they were last year, and the volume leaders and value leaders weren’t the same. In 2002, the top five sources of US cheese imports on a volume basis were, in order, New Zealand, Italy, France, Denmark and Lithuania; the top five sources on a value basis were, in order, Italy, New Zealand, France, Denmark and the Netherlands.

Looked at a little differently, in 2002, the US imported 100.1 million pounds of cheese from New Zealand, with a value of $90.1 million; and also imported 61.7 million pounds of cheese from Italy, with a value of $165.3 million.

In 2021, Italy and France ranked first and second, respectively, both in terms of cheese import volumes and values.

Also in 2021, the US set a new record for butter imports: 100.6 million pounds, breaking the previous record of 84.4 million pounds, set in 2019. US butter imports have been on a major roll in recent years, rising from under 12 million pounds in 2013 to 84.4 million pounds in 2019 and then to over 100 million pounds in 2021.

Butter imports also set a new record on a value basis last year, reaching $327.1 million, breaking the previous record of $257 million, set in 2019.

At least one other dairy product import category exceeds butter in value, if not in volume: casein. In 2021, US casein imports were valued at $361.9 million, which means that casein accounts for about 10 percent of the total value of US dairy imports.

Notably, casein imports aren’t what they used to be, on either a volume or a value basis — or, for that matter, on a “controversy” basis. On a volume basis, the US for many years imported well over 100 million pounds of casein annually, including 231 million pounds in 1985 alone. On a value basis, casein imports as recently as 2014 topped $400 million, accounting for about 14 percent of total imports on a value basis.

As far as controversies are concerned, casein imports are basically generating none these days. By comparison, from roughly 1979 through the mid-1980s, casein imports were the focus of, among other things, a US International Trade Commission study (conducted for the House Ways and Means Committee, which has jurisdiction over trade issues), at least two House Ag Committee hearings, and a USDA report entitled Effects of Casein Imports.

More recently, imports of milk protein concentrates generated a considerable amount of controversy in the early years of the 21st century, but not much lately. Imports of Chapter 4 MPCs have fallen from about 117 million pounds in 2000 to 88.7 million pounds in 2021, while US production of MPCs has risen from zero pounds in 2000 to 206 million pounds in 2020.

Dairy imports will continue setting new value and volume records, and generating little controversy.

 

A Memorable Year For US Dairy Exports

USDA’s Foreign Ag Service has released year-end statistics for US dairy exports, and as reported on our front page last week, it was a record-breaking year, in many ways, for US dairy exports.

For starters, US dairy exports in 2021 reached a record-high value of $7.7 billion, which broke the previous record for US dairy exports of $7.08 billion, which was set back in 2014.

If nothing else, this helps illustrate how volatile US dairy exports have been over the past couple of decades. Exports first topped $4 billion in value in 2011, then topped $5 billion in 2012, $6 billion in 2013 and $7 billion in 2014.

Following that impressive run, dairy exports dropped to $5.2 billion in 2015 and to $4.7 billion in 2017, before going on another impressive run to reach last year’s new record. It’s worth noting that US dairy exports first topped $1 billion in value early in this century (in 2001, to be exact).

Another impressive aspect to this dairy export record is the wide range of significant US dairy export markets. Specifically, the US has one billion-dollar export market (Mexico), and two markets that import more than $500 million worth of dairy products from the US (Canada and China).
There are another 15 countries that import over $100 million worth of dairy products from the US.

By contrast, back in 2001, when US dairy exports first topped $1 billion in value, there were just three countries that were importing more than $100 million worth of US dairy products: Mexico, Canada and Japan.

Cheese exports enjoyed a record-breaking year in 2021, in both volume and value terms. In terms of volume, US cheese exports last year reached a record 890.3 million pounds, which broke the previous record of 810 million pounds, set back in 2014. Considering that US cheese exports first topped 100 million pounds in 2000, the fact that exports have now topped 800 million pounds twice in the last eight years is mighty impressive.

Also impressive is that fact that the US exports more than 200 million pounds of cheese to one market (Mexico), more than 100 million pounds of cheese to one market (South Korea), and more than 10 million pounds of cheese to 16 additional markets.

By contrast, in 2000, when US cheese exports first topped 100 million pounds, no market was importing more than 22 million pounds of cheese from the US (Mexico was the top market, at 21.95 million pounds). And only two other countries, Canada and Japan, were importing more than 10 million pounds of cheese from the US.

If nothing else, the growth in cheese exports over the past two decades helps illustrate the importance of new (in the case of South Korea, among others) or improved (in the case of Mexico and Canada, among others) trade agreements with US trading partners.

In addition to setting a new record for cheese export volume, the US also set a new record for cheese export value last year: $1.8 billion, which broke the previous record of $1.7 billion, set in 2014. That means at least a couple of things: that cheese exports are far more than just a “niche” market; and that cheese exports account for a significant portion of total US dairy exports on a value basis (more than 23 percent last year).

The US dairy industry set several additional records last year. Among other products, nonfat dry milk exports reached a record high of 1.97 billion pounds, breaking the previous record, which was set in 2020, by 182 million pounds.

The US has now exported more than 1 billion pounds of nonfat dry milk/skim milk powder for nine straight years. This is pretty amazing, considering that, as recently as the early years of the 21st century, pretty much all of the NDM/SMP that was exported by the US was subsidized under the old Dairy Export Incentive Program, which was ended by the 2014 farm bill.

Two decades ago, how important was the DEIP, as far as NDM/SMP exports were concerned? Just to cite one example: for the year 2002, FAS figures show that the US exported about 164 million pounds of NDM/SMP, while statistics from USDA’s Economic Research Service indicate that commercial exports of NDM/SMP (defined as total exports minus DEIP exports minus government donations to foreign countries) totaled just 1.0 million pounds.

Meanwhile, the value of US exports of NDM/SMP reached a record $2.5 billion in 2021, topping the previous record of $2.0 billion, set in 2020.
That accounted for almost a third (32.6 percent, to be exact) of total US dairy exports on a value basis. Not bad for a product the US had to either subsidize or give away to foreign countries 20 years ago.

In addition to cheese and NDM/SMP, the US also set new records last year for lactose, ice cream and yogurt exports, among others.

All of these export records help illustrate the importance of at least two things: persistence on the part of the US dairy industry, which has benefitted greatly from the formation of the US Export Council more than 25 years ago; and finalizing new trade agreements, which will help open up new markets for US dairy exports.

One question raised by all of these records: What happens next? Volatility in dairy exports indicates that it’s never easy to predict future trends, but there are a couple of cautionary notes we’ll mention here.

First, dairy exports in December 2021, at $594.7 million, were at their lowest value since February. And second, many of the records broken last year were set back in 2014. Will it take several more years before 2021 records fall?

An Impressive Leap For US Cheese Production

US cheese production last year, as reported on our front page this week, reached a new record high of 13.6 billion pounds. There are several reasons why this latest cheese production record is impressive.

First of all, US cheese production has now set a new record for 30 consecutive years. This is by pretty much any definition an industry that’s very much in an expansion mode.

To put these 30 straight cheese production records in some historical perspective, we went back to 1920, shortly after USDA’s National Ag Statistics Service started tracking cheese production (the online NASS statistics start with 1919, when cheese production totaled 479.4 million pounds, or roughly what the US now produces every two weeks).

What we found was that, in every decade prior to the start of the 21st century, US cheese production declined at least once. Specifically, cheese production declined three times each in the 1920s, 1930s and 1940s, then fell four times in the 1950s. In the 1960s, 1970s, 1980s and 1990s, cheese production declined just once each decade.

And cheese production hasn’t declined since 1991, which means that it didn’t drop in either of the first two decades of the 21st century. That’s pretty impressive.

Another impressive aspect of last year’s cheese production increase is the percentage: 2.8 percent. That far exceeds the cheese production percentage increases of 2020 (0.9 percent) and 2019 (0.8 percent).

Going back a bit further, last year’s 2.8-percent cheese production increase actually looks pretty normal. From 2010 through 2021, cheese production increases ranged from a low of 0.8 percent in 2019 to a high of 3.8 percent in 2017. And there was one other 2.8-percent increase in addition to last year; that increase occurred back in 2015.

If the two 2.8-percent increases are considered “typical,” going back to 2010, there have been five increases that were below the typical increase and five increases that were above the typical increase.

A pessimistic “spin” on last year’s percentage increase is that it should have been higher; after all, cheese production had posted increases of less than 1.0 percent in both 2020 and 2019, meaning that cheese production was “overdue” for a bigger increase.

But that ignores the fact that cheese production had increased 3.1 percent in 2018 and 3.8 percent in 2017. In other words, cheese production followed two years in which percentage increases were greater than typical with two years in which percentage increases were less than typical. Last year’s increase was typical, and if nothing else, production was overdue for a “typical” increase.

Yet another impressive aspect of last year’s cheese production increase is the sheer volume of that increase: 371.1 million pounds. That means that the US last year increased its cheese production compared to 2020 by more than 1.0 million pounds per day.

Last year’s cheese production increase was also far greater than the increases in 2020 and 2019, which were 116.1 million pounds and 99.9 million pounds, respectively. In fact, 2021’s increase exceeded the combined increases of 2019 and 2020 by some 155 million pounds.

Going back a bit further, 2021’s cheese production increase is still impressive. Going back to 2010, there have been three cheese production increases greater than last year’s 371.1-million-pound rise, and eight increases less than last year’s rise.

More specifically, since 2010, cheese production increases have ranged from 99.9 million pounds in 2019 to 458 million pounds in 2017. There have been three increases of less than 200 million pounds, including two of the last three years, and two increases of more than 400 million pounds (including 2017 as well as 2014).

There are at least a couple of additional points to keep in mind when trying to put last year’s cheese production increase in some historical perspective. First, 2020 was a leap year, meaning, of course, that there was an extra day that year, and one less day in 2021 compared to 2020.

That makes last year’s production increase a bit more impressive, and really makes 2017’s 458-million-pound increase look impressive. But going back to the turn of the century, cheese production increases in the year following leap year haven’t always been that impressive; those increases were 216 million pounds in 2013, 161 million pounds in 2009, 276 million pounds in 2005 and just 2.6 million pounds in 2001.

Also, last year followed a year in which the world was turned upside down due to the coronavirus pandemic. That undoubtedly played at least a small role in 2020’s relatively small cheese production increase, which in turn paved the way, to some extent, for last year’s much larger production increase.

The reality is, cheese production has always been impacted by a wide variety of dairy-specific and more general “upheavals,” and the numbers do, in part, reflect that. For example, cheese production fell in 1984, when USDA’s Milk Diversion Program provided payments to dairy producers who reduced their milk production.

More generally, cheese production fell in both 1931 and 1932, which were early years of the Great Depression, and also declined in 1943, during World War II.

The bottom line is that, here in the 21st century, cheese production increases are expected pretty much every year. The only uncertainty seems to be how close to “typical” these production increases actually are.

 

Federal Order Milk Volume Isn’t What It Used To Be

USDA’s Agricultural Marketing Service last Friday released its “Market Summary and Utilization Report, December 2021,” and, according to that report and as reported on our front page this week, receipts of producer milk in the 11 federal milk marketing orders in 2021 totaled 136.8 billion pounds.

There are various ways of looking at that statistic, starting with the fact that it’s lower, by 982 million pounds, or 0.7 percent, from 2021. It’s also lower, by 19.7 billion pounds, from the record volume of milk pooled on federal orders in 2019.

In fact, it’s the lowest volume of milk pooled in federal orders since 2017’s 135.5 billion pounds. It’s worth remembering that 2017 was the last full year in which there was no California federal order and its roughly 2.0 billion pounds of pooled milk every month (the California order became effective in November 2018).

Here’s another way to look at the volume of milk pooled on federal orders last year: US milk production in 2021 totaled 226.3 billion pounds, meaning about 60.5 percent of the US milk supply was pooled on a federal order last year.

By comparison, milk marketed through federal orders accounted for 63 percent of all milk sold in 2020, 72 percent of all milk sold in 2019, 65 percent of all milk sold in 2018, 64 percent of all milk sold in 2017 and 64 percent of all milk sold in 2016.

Keeping in mind that, as noted earlier, the California federal order became effective for the final two months of 2018, the percentage of milk marketed through federal orders was lower in 2021 and 2020 than it was in 2017 and 2016, the last two full years without the California order.

It’s worth keeping in mind that the past two years have been unique in federal order history, with massive amounts of milk being depooled from Class III several months in both years.

In 2021, for example, the monthly volume of milk pooled in Class III ranged from under 1.4 billion pounds in both February and April to 6.3 billion pounds in December, while in 2020 the volume of milk pooled in Class III ranged from under 1.3 billion pounds in November to 4.6 billion pounds in January. Class III volume totaled 37.6 billion pounds in 2021 after totaling 32.9 billion pounds in 2020.

The volume of milk pooled in Class III peaked in 2019, at 64.2 billion pounds, but even that year saw wide variation in monthly Class III volume, with a low of 2.4 billion pounds in November and a high of 7.7 billion pounds in March.

Last year’s Class III volume was down almost 27 billion pounds from that 2019 peak. Although the last two years are statistical anomalies, at least to some extent, it doesn’t appear that federal orders are as important to cheese makers as they once were.

As evidence of that point, we note that monthly Class III volume on the Upper Midwest order hasn’t topped 2.0 billion pounds since May of 2020. Back in 2019, monthly Class III utilization on the order topped 2.9 billion pounds twice — in March and June.

Perhaps in 2022, with Class IV prices forecast to be higher than Class III prices, we’ll see more milk being pooled in Class III than in the recent past.
Or maybe Class III volumes will never reach their 2019 levels.

Speaking of Class IV, thanks largely to the California order, that class has seen significant growth, and not all that much depooling, in recent years. In 2017, the last full year without the California order, a total of 20.8 billion pounds of milk was pooled in Class IV in the 10 federal orders.

That volume rose to 30.5 billion pounds in 2019, the first full year of the California order, and then jumped to a record 41.5 billion pounds in 2020 before falling to 37.3 billion pounds in 2021. The drop last year was due primarily to large volumes of Class IV milk being depooled in the California and Southwest federal orders in November and December.

As noted earlier, with Class IV prices expected to exceed Class III prices this year, we’ll see if the Class IV depooling that took place in November and December 2021, when Class IV prices exceeded Class III prices, continues.

Of the four classes of milk, Class II has arguably seen the most stability over the past decade. Class II volume ranged from 14.7 billion pounds in 2014 to 18.2 billion pounds in 2017, but thanks largely to the California order, reached 19.6 billion pounds in 2020 and then 19.9 billion pounds in 2021.

But even with large volumes of milk being depooled, Class II utilization has remained under 15 percent over the past decade.

This brings us to Class I, which, as statistics show, is becoming less important in the federal order program. Specifically, in 2011, a total of 44.4 billion pounds of milk was pooled in Class I, and Class I utilization was 35.0 percent. By 2017, Class I volume had fallen to 40.6 billion pounds, and Class I utilization was down to 30.0 percent.

Class I volume got a nice “bump” in 2019, the first full year of the California order, reaching 43.9 billion pounds, but utilization fell to 28.0 percent. And in 2021, Class I volume even with the California order, at 42.1 billion pounds, was lower than in 2013. Class I utilization was 30.8 percent.

What we’ll likely see in 2022, among other things, is Class I volume continuing to fall, and, if December 2021 is any indication, more Class IV depooling and higher Class III volumes. And in 2022 and beyond, we may never see federal order volumes reach their record 2019 level.

Milk Pricing Definitely Needs Modernizing

The International Dairy Foods Association on Tuesday released a lengthy, informative and very interesting working paper — which was written by Dr. Marin Bozic of the University of Minnesota and Blimling and Associates — on modernizing US milk pricing. The goal of IDFA’s paper is to provide a third-party assessment that spurs frank, creative discussion about the real pricing and policy issues requiring the industry’s attention.

In addition to releasing the working paper on its website (www.idfa.org), the working paper was the focus of a well-attended session at IDFA’s Dairy Forum Tuesday morning. Dave Carlin, IDFA’s senior vice president, legislative affairs and economic policy, moderated the session, which featured Bozic and Phil Plourd, president of Blimling and Associates.

There are a couple of key points to keep in mind about IDFA’s working paper. First, as noted above, is its purpose to spur discussions about the real pricing and policy issues requiring the industry’s attention. Frankly, the list of those issues is long and seems to be getting longer all the time, and includes, among many other things, depooling and negative producer price differentials, inadequate make allowances, and the use of dry whey prices in the Class III formula.

But there are a couple of broader issues that are what should really drive milk pricing reforms, and these issues are detailed in IDFA’s working paper. First, fluid milk consumption is declining.

This is common knowledge in the dairy industry, but what isn’t always appreciated is how important this is as far as federal orders concerned. Class I utilization has moved from more than 60 percent in the 1950s to less than 30 percent recently, IDFA’s study noted. Class I utilization was still over 40 percent in the late 1990s, which was the last time federal milk marketing orders were significantly reformed.

What does this mean? Here’s what the IDFA study noted: “With fluid sales waning, and milk used for manufacturing increasing, if regulations are not modernized, the percentage of US milk covered under the current system will steadily decline over the next decade.”

While the US dairy industry is often thought of as highly and homogeneously regulated, the reality is that, when it comes to minimum pricing, the industry is far less regulated than many think, and is becoming less so all the time, the working paper pointed out.

It cites several reasons why that’s the case: cooperatives are exempt from making minimum payment to member owners; there are significant unregulated areas (Idaho being the largest example) in the US where manufacturers may feel regulated prices influence competitive procurement, but they do not have to participate in the system; and the aforementioned declining fluid sales are diluting the benefits of participating in the regulated system, which means more manufacturers are choosing to step outside of the regulations.

Second, exports are becoming more important for the US dairy industry.
Indeed, the industry has now reached the point where it exports more milk solids than are consumed in the form of fluid milk, the study explains. Needless to say, that wasn’t the case when federal orders were last reformed.

Oh, and as the working paper also pointed out, trends in milk supply growth and domestic demand suggest more than half of all additional skim solids produced over the next decade will need to be exported.

As the working paper points out, if the US dairy industry wants to enhance export potential for all players without regard to geography or ownership structure, it may wish to consider regulatory or legislative changes that address the rigidity of current federal order provisions. It’s worth keeping in mind that none of the key US competitors in the dairy export business are regulated by anything resembling the federal order program.

The other key point to keep in mind about IDFA’s working paper is what exactly that document is: a working paper. As IDFA’s Carlin noted, the working paper doesn’t include any policy recommendations; IDFA members will develop these, as will other organizations in the dairy industry. That’s where the real work will have to take place.

And the dairy industry will have to come together on this issue. As US Secretary of Agriculture has noted more than once in recent months — including just last week at a House Ag Committee hearing — the industry has to come to a consensus opinion on the issue of milk pricing reforms.

Historically, consensus hasn’t always come easy for the dairy industry, and that will probably also be true when it comes to modernizing US milk pricing. We recall, just to cite one example, how controversial changes to federal order make allowances were more than a decade ago. Imagine what might happen when the entire pricing structure is debated.

The good news here is that the IDFA working paper makes clear what the facts are in this situation: that fluid milk consumption has been, is, and will continue declining; and that exports are becoming a more and more important market for US dairy products.

These points are irrefutable, and are thoroughly detailed in IDFA’s working paper. How the dairy industry responds to those irrefutable points remains to be seen.

The working paper does point out that doing nothing equals gradual deregulation. Specifically, the question is, is it better to leave the system intact and allow the free market to reward those who are in position to step outside of federal orders, continuing down a path of gradual deregulation?

 

French Dressing, Dairy Products, And Standards Of Identity

The US Food and Drug Administration last week announced that it is revoking the standard of identity for French dressing. This got us wondering: If FDA can revoke a standard of identity for French dressing, might the agency also start revoking standards of identity for dairy products?

In short, the answer to that question is no. And there are several reasons why FDA won’t be revoking its standards of identity for dairy products anytime soon.

First and foremost among the reasons why FDA’s dairy standards are safe (if somewhat outdated in some respects) for the foreseeable future: the agency’s action to revoke the standard for French dressing came in response to a petition submitted by the Association for Dressings and Sauces (ADS).

We aren’t aware of any such petitions being submitted by industry organizations to revoke any dairy standards of identity.

Related to this point, in its petition recommending that FDA repeal the French dressing standard, the ADS noted that the standard “no longer serves honesty and fair dealing in the interest of consumers...” This is, in fact, one of the reasons we have standards of identity: to promote honesty and fair dealing in the interest of consumers.

And it’s a key reason why standards of identity for dairy products aren’t going away anytime soon. It may be recalled that, way back in 1995, FDA and USDA’s Food Safety and Inspection Service began a review of its regulations pertaining to standards of identity, and that in 2005, the two agencies published a proposed rule to establish a set of general principles for food standards.

The adherence to these principles will result in standards that will “better promote honesty and fair dealing in the interest of consumers,” the agencies noted in the summary of that 2005 proposed rule.

And while the Association for Dressings and Sauces doesn’t believe the French dressing standard of identity doesn’t serve honesty and fair dealing in the interest of consumers, comments submitted by dairy organizations over the years in response to various standards-related undertakings don’t reveal any widespread belief that that’s the case with dairy standards.

Regarding timelines, we note with interest that the Association for Dressings and Sauces initially petitioned FDA to revoke the standard of identity for French dressing 24 years ago this month, in a citizen petition dated Jan. 13, 1998. The effective date for FDA’s final rule revoking the French dressing standard is effective on Feb. 14, 2022, or 24 years, one month and one day after the ADS submitted that petition.

Therein lies another reason FDA won’t be revoking dairy standards anytime soon: when it comes to standards of identity, the agency moves extremely slowly, when it moves at all. In the final rule it published last week on French dressing, FDA noted that it received that ADS petition in 1998, then published a proposed rule in December of 2020 that would revoke the standard for French dressing. This is not a fast-paced process.

And the dairy industry is all too familiar with the pace of action, or lack of action, on standards-related regulatory proceedings. Last June, FDA issued a final rule amending the federal standard of identity for yogurt.

The process of amending the yogurt standard got underway in February 2000, when the old National Yogurt Association petitioned FDA to amend the yogurt standard. More than two decades later, FDA finally published a final rule to do just that.

There’s another pending dairy standard-related undertaking that’s taken even longer, and has yet to reach a conclusion.

It was back in December of 1999 when the American Dairy Products Institute petitioned FDA to amend the definition of “milk” in the standards of identity for cheese and related cheese products to include fluid ultrafiltered milk. FDA published a proposed rule to provide for the use of fluid UF milk in the manufacture of standardized cheeses and related cheese products in October of 2005, reopened the comment period on that proposed rule in December of 2007 on two specific issues raised by comments on that 2005 proposal, then reopened the comment period on that 2005 proposal in April of 2020.

According to the federal government’s latest regulatory agenda, FDA could release a final rule on the use of fluid UF milk in standardized cheeses and related cheese products later this year.

While FDA won’t be revoking the dairy standards of identity anytime soon, it’s also unlikely dairy standards will be changing much in the near future. And that’s too bad, both from an industry perspective as well as from a regulatory perspective.

Just from a regulatory perspective, in addition to concluding that the standard of identity for French dressing no longer promotes honesty and fair dealing in the interest of consumers, FDA also noted in its proposed French dressing rule that revocation is consistent with section 6 of an executive order issued 11 years ago this month, which requires agencies to periodically conduct retrospective analyses of existing regulations to identify those “that might be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them,” accordingly.

Now seems as good a time as any for FDA to examine its standards of identity for dairy products, since they appear to be at least somewhat outdated and burdensome. But revocation isn’t necessary.

 

Canada Certainly Knows How To Make Dairy Trade Interesting

Canada’s dairy industry definitely isn’t one of the largest in the world, nor is Canada among the world’s leading dairy exporters. But Canada does seem to have a larger-than-life presence in one dairy-related area: generating controversy over its dairy trade policies.

We were reminded of this while writing up last week’s lead story, which concerned a ruling by a US-Mexico-Canada Agreement dispute settlement panel that Canada is breaching its USMCA commitments by reserving most of the in-quota quantity in its dairy tariff-rate quotas for the exclusive use of Canadian processors.

Before getting into some of the controversies Canada’s dairy policies have generated over the years, it should be noted that Canada’s trade policies are hardly alone in this respect. US, European Union and New Zealand dairy trade policies have all come under criticism for various reasons over the past, well, pretty much for as long as dairy products have been traded.

But Canada seems to stand out when it comes to generating formal, and informal, complaints about its dairy policies or, more precisely, about its dairy policies that impact trade.

To help put this point in some historical perspective, we went back to the mid-1990s, shortly after the North American Free Trade Agreement, predecessor to the USMCA, went into effect, and also right around the time the Uruguay Round Agreement, which established the World Trade Organization, was finalized.

So, back in our Feb. 10, 1995 issue, we reported that US Trade Representative Mickey Kantor, in a letter to Roy MacLaren, Canada’s international trade minister, requested consultations with the Canadian government concerning the Canadian government’s applications of customs duties higher than those specified in NAFTA to certain agricultural goods, including a wide range of dairy products. The higher tier tariff levels of tariff-rate quotas established by Canada in connection with the Agreement Establishing the WTO are of particular concern, Kantor noted.

A year later, a panel of arbitrators was appointed to decide whether Canadian tariffs on US dairy products violate NAFTA. This was the first such panel appointed under NAFTA, similar to how the USMCA panel looking at Canada’s dairy TRQs was the first such panel since that agreement took effect.

That point alone tells us something about US-Canada dairy trade relations.

In December of 1996, all five members of that dispute settlement panel supported Canada’s view that it could apply high tariff rates, in excess of 100 percent, under its WTO tariff schedule, to US agricultural imports notwithstanding pre-existing obligations under NAFTA. That decision disappointed both US dairy industry organizations as well as Clinton administration officials.

Less than a year later, US Trade Representative Charlene Barshefsky accepted a petition from IDFA, NMPF and USDEC asking the US government to challenge Canada’s dairy export pricing scheme before the WTO.

In 1995, Canada had implemented a new dairy pricing system using several special milk price classifications, those US dairy groups explained. Under this system, milk used to produce dairy products that were exported was priced much lower than milk used to produce the same dairy products sold in Canada.

After formal consultations between the US and Canada failed to resolve the US assertion that Canada was using unfair dairy export subsidies, the US asked the WTO to establish a dispute settlement panel to resolve the matter. The WTO did just that in the spring of 1998.

In March of 1999, that WTO dispute settlement panel determined that Canada’s dairy product export pricing scheme, as well as its fluid milk market access barriers, were indeed inconsistent with its WTO obligations. Canada appealed that WTO ruling.

In October of 1999, a WTO Appellate Body upheld the WTO decision that Canada’s dairy export pricing system is a subsidy program and therefore subject to limitations specified in the 1994 WTO agreement, but did conclude that Canada’s administration of its TRQ for fluid milk was consistent with its WTO commitment.

Less than a year and a half later, the US and New Zealand requested that the WTO reconvene a dispute settlement panel to examine whether Canada had complied with WTO rulings on its dairy product export subsidies. Both the US and New Zealand didn’t believe that Canada had taken the necessary steps to bring its dairy export subsidy program into compliance with WTO agreements.

And then in December of 2002, a WTO Appellate Body upheld an earlier WTO panel’s finding that Canada had provided export subsidies for milk in excess of its WTO commitments.

Fast-forward about a decade and a half, and Canada came under considerable criticism from US dairy organizations and others for its Class 7 milk pricing scheme, which US groups said would unfairly subsidize Canadian dairy products in its domestic and global markets. In the USMCA, Canada agreed to eliminate its milk price classes 6 and 7.
And now Canada’s TRQ administration has been rebuked by a dispute settlement panel.

From this brief and limited history, we can reach two conclusions. One, Canada’s dairy trade policies have generated considerable controversy in the past. And second, we probably haven’t seen the last of such policies.

 

Congress: Where Legislation Goes To Die

It’s an election year, and that means members of Congress will in all likelihood be far more interested in getting re-elected than in passing any significant legislation. And that means that bills introduced in 2021 that could potentially impact the dairy industry or the broader food industry have little or no chance of being passed by both the House and Senate and signed into law.

As always during an election year, all 435 members of the US House of Representatives are up for re-election this year (although several members have decided not to run again). Meanwhile, 34 Senate seats are up for grabs this fall.

As is often the case in an election year (and in numerous non-election years, for that matter), there’s at least a decent chance that Congress won’t get around to passing very many bills this year. That could mean that some dairy- and food-related bills likely will die before ever arriving on President Biden’s desk for his signature.

Let’s start with the Dairy Pricing Opportunity Act, which was introduced in the US Senate several weeks ago (for details, please see the front-page story in our Dec. 3, 2021 issue). This bipartisan bill, which was introduced by two Democrats and one Republican, would require the US secretary of agriculture to initiate a national hearing to review federal milk marketing orders within 180 days after enactment of the legislation.

While this bill garnered a fair amount of support from dairy and farm organizations, its chances of making it out of Congress would appear to be slim. That’s due at least in part to the fact that no similar legislation has been introduced in the House. Also, while the bill was introduced by three senators, none of the other 97 senators have signed up as co-sponsors.

One somewhat related bill that has been introduced in the House and is likely to go nowhere this year is the Dairy Pricing and Policy Commission Act, which would direct the US secretary of agriculture to establish a Dairy Pricing and Policy Commission.

Like the Dairy Pricing Opportunity Act, the Dairy Pricing and Policy Commission Act is bipartisan, having been introduced by a Democrat and co-sponsored by a Republican. But it has yet go gain any co-sponsors, nor has any similar legislation been introduced in the Senate.

One piece of legislation that would appear to have a better chance of making it through Congress this year is the DAIRY PRIDE (Defending Against Imitations and Replacements of Yogurt, milk, and cheese to Promote Regular Intake of Dairy Everyday) Act.

This measure’s chances appear better than some other bills for at least two reasons: first, it has been introduced in both the House and the Senate, with sponsorship by both Democrats and Republicans; and two, it has a decent number of co-sponsors (six in the Senate, beyond the two original sponsors, and 40 in the House, beyond the two original sponsors).

But we’re not optimistic about this legislation making it through Congress this year, in part due to the fact that similar legislation was introduced in both the House and Senate back in March of 2019 and didn’t make it through the 116th Congress. We see no reason why this legislation will fare any better in the 117th Congress.

Another bicameral, bipartisan bill introduced in Congress last year was the Food Date Labeling Act, which would establish a food date labeling system under which “BEST If Used By” would communicate to consumers that the quality of the food product may begin to deteriorate after the date and “USE By” would communicate the end of the estimated period of shelf life, after which the product should not be consumed.

This legislation faces at least two problems. First, while it is in fact bipartisan and bicameral, the measure is being sponsored by exactly three members of Congress: one Democrat and one Republican in the House and one Democrat in the Senate. There are zero co-sponsors in either chamber, meaning roughly 532 members of Congress are either unaware of or don’t really care about this bill.

Second, like the DAIRY PRIDE Act, the Food Date Labeling Act has been introduced before; specifically, it was introduced in the House (with the same sponsors as the 2021 bill, and four co-sponsors) in July 2019 and got nowhere; and in the Senate (with the same sponsor as the 2021 bill, with no co-sponsors), and got nowhere.

Arguably the dairy-related legislation that has the best chance of being passed by both houses of Congress and signed into law this year is the Ocean Shipping Reform Act. This measure is already “halfway home,” having been passed by the House last month by a vote of 364 to 60.

There is at least one reason to be optimistic about this legislation’s chances for enactment this year: it enjoys widespread bipartisan support.
In the House, it was opposed by just two Democrats while being supported by 212 Democrats, and opposed by 58 Republicans while being supported by 152 Republicans. In this era of hyper-partisanship, that’s pretty impressive.

One minor problem with the Ocean Shipping Reform Act: it has yet to be introduced in the Senate. However, it should be noted that the House bill was introduced back on Aug. 10 and overwhelmingly approved roughly four months later, so conceivably this bill could find its way to Biden’s desk in the not-too-distant future. And Biden has endorsed the legislation.

What this all adds up to is that, here in 2022 (and in most other election years as well), Congress will again live up (or down) to the old (and cynical) observation: The opposite of progress is Congress
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A Few Dairy Expectations For 2022

Making predictions in pretty much any business can be a hazardous undertaking, and that’s true for the dairy business as well. But there are a few predictions we feel reasonably comfortable making for the dairy industry heading into 2022.

First of all, we expect discussions about the need to reform federal milk marketing orders to heat up in 2022. Despite widespread dairy producer dissatisfaction with how the new (as of May 2019) Class I formula performed in 2020, and ongoing dissatisfaction with everything from depooling to the continuing use of dry whey in the Class III price formula, nothing on the federal order policy front actually changed in 2021.

There were at least a couple of notable developments on the federal order reform front, however. First, the Senate Agriculture Committee subcommittee with jurisdiction over dairy policy held a hearing in September on the growing need to modernize the federal order system.

And less than two months after that hearing was held, three US senators introduced the Dairy Pricing Opportunity Act of 2021, which would require USDA to initiate national hearings to review federal orders within 180 days after enactment of the legislation.

While we don’t expect that legislation to get much if any traction in the Senate next year, we do expect discussions and debate to heat up over another legislative undertaking: the next farm bill. Many provisions of the 2018 farm bill expire in 2023, so 2022 is certainly not too early to begin shaping the next farm bill.

And from a dairy industry perspective, a farm bill section requiring federal order reforms might be the only way such reforms are accomplished.
There is precedent for this: the 1996 farm bill included a section on the consolidation (to not less than 10 and not more than 14 orders) and reform of federal orders.

The problem with waiting until the 2023 farm bill to start the formal process of reforming federal orders is that such a delay would likely mean that any federal order reforms probably wouldn’t be implemented until around 2026. After all, the consolidation and reform required under the 1996 farm bill didn’t take effect until the beginning of 2000.

In the area of dairy prices, 2022 might see a return to more extreme volatility than was experienced in 2021. There are numerous ways of looking at this, but we’ll mention just a couple.

First, the CME cash market price for 40-pound Cheddar blocks here in 2021 (as of Thursday) has ranged from a low of $1.4575 per pound back on June 9 to a high of $1.9800 a pound on Dec. 30. That, of course, stands in stark contrast to 2020, when the block price ranged from a low of just $1.00 per pound to a high of $3.00 per pound.

Given recent trends in milk production, milk cow numbers and output per cow, not to mention domestic and international demand, we wouldn’t be all that surprised to see the block market rise above $2.00 per pound sometime in 2022. So, if the block price reached, say, $2.30 a pound sometime during 2022, all it would have to do is drop below $1.77 a pound at some point to exhibit more volatility than was the case in 2021.

There is some precedent for something along these lines to occur in 2022.
The last time the block price was above $1.80 per pound at the end of the year (not including 2019, since that was followed by the unprecedented, pandemic-upended 2020) was in 2013, when blocks ended the year at $2.00 per pound. That was followed by an eventful 2014 in which the block price set numerous new record highs, including $2.4225 per pound in early April and $2.4500 per pound in mid-September, before dropping down to $1.4950 in the final week of the year, for an eye-opening price range of 95.5 cents.

Reflecting the relative lack of volatility in cheese prices in 2021, the federal order Class III price during the first 11 months of the year has ranged from a low of $15.75 per hundredweight in February to a high of $18.96 per hundred in May — a range of $3.21 from low to high. By contrast, in 2020, the Class III price ranged from a low of $13.07 per hundred in April to a high of $24.54 per hundred in July, a range of $11.47 per hundred.

If cheese prices end up being more volatile in 2022, the Class III price would naturally reflect that volatility. Add in the fact that dry whey prices are ending the year above 70 cents per pound, and it’s looking at least somewhat likely that milk prices will be more volatile in 2022 than they have been in 2021.

Speaking of money, the dairy industry can expect money to continue to flow from the federal government to the industry in 2022, thanks to various bills passed in 2021 and 2020. Just two weeks ago, US Ag Secretary Tom Vilsack announced that USDA is providing up to $1.5 billion to states and school districts to buy food, including dairy products. Earlier this month, Vilsack announced that USDA is deploying $100 million under the new Food Supply Chain Guaranteed Loan Program to make available nearly $1 billion in loan guarantees.

Finally, we expect the last two Merriam-Webster Words of the Year — pandemic in 2020 and vaccine in 2021 — to continue to garner headlines and controversy, and continue to impact the dairy and pretty much every other industry in 2022. Those impacts could range from slowdowns in food service sales to more panic buying by consumers.

If nothing else, 2022 could bring about some combination of what the dairy industry experienced in 2020 and/or 2021

Inflation Is Everywhere, Except in the Dairy Case

The folks at Merriam-Webster (which describes itself as “America’s leading provider of language information”) have declared “vaccine” to be their “Word of the Year” for 2021, following up on their declaration of “pandemic” as the word of the year in 2020.

While vaccine no doubt benefitted from generating headlines, and controversy, since the beginning of 2021 (the first COVID-19 vaccine in the US was administered a year ago this month, and vaccines continued to be rolled out throughout 2021), another word seems to be garnering as much if not more attention here in the final weeks and months of the year: inflation.

The recent concerns over inflation stem, at least in part, from the federal government’s monthly Consumer Price Index report. Last month, for example, the US Bureau of Labor Statistics reported that the all items index rose 6.2 percent for the 12 months ending in October 2021, the largest 12-month increase since the period ending November 1990.

And then earlier this month, the BLS reported that the all items index rose 6.8 percent for the 12 months ending in November 2021, the largest 12-month increase since the period ending June 1982.

So these are undoubtedly inflationary times, which is something not everyone is all that familiar with. That’s fairly obvious, since the CPI statistics indicate that inflation hasn’t been this bad in many years.

These CPI figures apply to all items, and in the last couple of months the BLS has noted that the CPI increases were broad-based, with increases in the indexes for energy, shelter, gasoline, used cars and trucks, and new vehicles among the larger contributors.

Oh, and also food. In November, the CPI for all items stood at 277.9 (1982-84=100), up 6.8 percent from November 2020, while the CPI for food was 285.5, up 6.1 percent from November 2020, and the CPI for food at home was 266.4, up 6.4 percent from a year earlier.

Yes indeed, these are inflationary times for the food industry, with the CPI for meats, poultry, fish and eggs up 12.8 percent, to 299.2, for the year ending in November 2021, the index for cereals and bakery products up 4.6 percent, to 295.9, and the index for fruits and vegetables up 4.0 percent, to 318.4.

But there’s a notable exception to this food price inflation: dairy products. In November, the CPI for dairy and related products was 233.2, up just 1.6 percent from November 2020. So not only is the dairy CPI well below other food categories, it’s also increasing at a rate well below other food sectors.

This prompted us to wonder both about the past and about the future, from the perspective of dairy price inflation.

As far as the past is concerned, thanks to statistics provided by USDA’s Economic Research Service, we went back to 1974 and looked at changes in the CPI for all food, food at home and dairy products, among other things.

If nothing else, these figures help illustrate how severe inflation was, particularly in the 1970s and the early 1980s compared to roughly the past 30 years. Just from 1974 through 1981, the CPI for food at home posted increases of 14.9 percent in 1974, 8.2 percent in 1975, 10.5 percent in 1978, 10.8 percent in 1979, 8.1 percent in 1980 and 7.2 percent in 1981.

Meanwhile, during that same period, the CPI for dairy products increased 18.6 percent in 1974, 8.1 percent in 1976, 6.8 percent in 1978, 11.6 percent in 1979, 9.8 percent in 1980 and 7.2 percent in 1981.

But after rising 6.5 percent in both 1989 and 1990, the CPI for food at home has posted considerably more modest increases almost every year over the past three decades. Specifically, from 1991 through 2020, the CPI for food at home posted just one increase of more than 5 percent; that was in 2008, when the CPI for food at home jumped 6.4 percent from 2007. And there were just two increases of more than 4 percent during that period: 4.2 percent in 2007 and 4.8 percent in 2011.

The dairy CPI during that 1991-2020 period posted six increases of 5 percent or more, including an 8.0-percent rise in 2008. But the last of those increases was in 2011, when the dairy CPI rose 6.8 percent.

And in the five years prior to last year’s 4.4 percent increase, the dairy CPI fell 1.3 percent in 2015, declined 2.3 percent in 2016, rose just 0.1 percent in 2017, fell 0.5 percent in 2018 and increased 1.0 percent in 2019. Sort of the opposite of “inflationary.”

So what does the future look like for the dairy CPI, and for the CPI for food at home? According to the latest monthly ERS Food Price Outlook report, which was released Tuesday, the CPI for food at home will rise 2.5 to 3.5 percent this year and 1.5 to 2.5 percent next year, while the dairy CPI will increase 1.0 to 2.0 percent this year and then in 2022 will range from a decline of 0.5 percent to an increase of 0.5 percent.

The dairy CPI’s current situation and 2022 prospects contrast sharply with many other food categories, particularly meats, poultry, fish and eggs. As noted earlier, the CPI for that category was 299.2 in November, so it’s already considerably higher than the dairy CPI. And after rising 6.0 to 7.0 percent this year, the CPI for meats, poultry and fish is projected to increase 2.0 to 3.0 percent next year.

Eggs, meanwhile, match dairy’s 2022 forecast range of minus 0.5 percent to plus 0.5 percent, but that’s on top of this year’s increase of 3.5 to 4.5 percent.

Yes, inflation is and will remain rampant, except when it comes to the dairy case
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US Butter Trade Seems Nicely Balanced, At Least For Now

During the first 10 months of 2021, the US exported 83.4 million pounds of butter, up an impressive 122 percent from the first 10 months of 2020.
Also during the first 10 months of 2021, the US imported 81.9 million pounds, up 9 percent from a year earlier.

In other words, the US butter trade right now is pretty well balanced; the US is exporting roughly the same volume of butter as it’s importing.

This prompts several questions. Among them: Has US butter trade always been this balanced?

To answer this question, we looked at butter export and import statistics dating back to 2000. What’s notable over the 2000-2021 period is how the US has gone from running a butter trade deficit to running a trade surplus, then running a trade deficit again, and now being pretty much in balance.

This pattern can be broken down into several periods. Over the 2000-2006 period, the US ran a butter trade deficit, with butter exports ranging from 3.0 million pounds in 2002 to 18.5 million pounds in 2006 and butter imports ranging from 16 million pounds in 2000 to 45.5 million pounds in 2001.

The US butter trade deficit was over 10 million pounds every year over the 2000-2005 period, with the exception of 2003, when it was 8.8 million pounds, but by 2006 it had narrowed to just 1.5 million pounds (imports totaled 20 million pounds, exports totaled 18.5 million pounds). Butter trade was well-balanced in 2006.

The butter trade situation changed dramatically starting in 2007, when the US exported a then-record 72.6 million pounds and imported 17.3 million pounds, for a trade surplus of 55.3 million pounds. From 2007 through 2014, US butter exports only dropped below 50 million pounds once (49.4 million pounds in 2009), topped 100 million pounds four times (in 2008, 2011, 2013 and 2014), and reached a record 178.4 million pounds in 2013.

Meanwhile, butter imports languished during all but the last year of that 2007-14 period, running below 20 million pounds every year from 2007 through 2013, including a low of just 8.1 million pounds in 2010.

Thus, the US ran significant butter trade surpluses during the 2007-14 period. And by “significant” trade surpluses, we mean surpluses of more than 100 million pounds during the aforementioned years in which US butter exports topped 100 million pounds.

The butter trade situation turned again in 2015, with butter exports dropping to 37.3 million pounds, their lowest level since 2006, and imports rising to 42.9 million pounds, their highest level since 2001.

Butter imports continued to rise after 2015, reaching 84.4 million pounds in 2019 before falling to 83.4 million pounds in 2020. Butter exports, meanwhile, only topped the 50-million-pound mark once over the 2015-2020 period, reaching 58.2 million pounds in 2018.

Based on the first 10 months of 2021, the US is on track to run its first butter trade surplus since 2014. And since butter trade balances seem to run in streaks, the US may be entering a new period of butter trade surpluses.

While this analysis has thus far focused on butter trade quantities, what about butter trade values? How has the US fared in this respect in recent years?

The easiest way to answer this question is to simply look at butter trade values during the first 10 months of this year when, as noted earlier, US butter exports exceeded imports by only 1.5 million pounds. On a value basis, however, the US ran a large butter trade deficit: butter exports were valued at $147.8 million, while butter imports were valued at $265 million.

Going back to 2010, there was only one year in which the value of US butter imports was less than $2.00 per pound; that was in 2012, when imports totaled 15.3 million pounds and the value of those imports was $29.3 million. In 2019, when the volume of butter imports reached 84.4 million pounds, the value of those imports hit $256.9 million, or over $3.00 per pound.

Meanwhile, US butter exports were valued at or below $2.00 per pound from 2011 through 2015, above $2.00 per pound from 2016 through 2019, and then $1.82 a pound last year and $1.77 a pound during the first 10 months of this year.

Finally, how does the US trade balance for butter compare to the trade balance for, say, cheese? That’s actually a much simpler answer than was the case for butter.

Over the 2000-2020 period, the US ran a significant cheese trade deficit from 2000 through 2009, and that deficit was more than 300 million pounds in some years; in 2002, for example, when US cheese imports reached a record 474.6 million pounds, cheese exports totaled 118.6 million pounds, for a cheese trade deficit of 356 million pounds.

Starting in 2010, however, the US started running a cheese trade surplus, which has topped 400 million pounds twice (in 2014 and again in 2020), and that surplus will probably approach 500 million pounds this year.

One other interesting point about the cheese trade balance: it turned in pretty dramatic fashion. The US ran a cheese trade deficit of about 118 million pounds in 2009, then ran a cheese trade surplus of about 76 million pounds the following year. Unlike butter, there haven’t been any years in which cheese trade was balanced.

The US butter trade situation is currently pretty well-balanced, with exports and imports roughly equal, but recent history tells us that this situation won’t last long
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The End Of An Era For Kraft

For as long as anyone in the cheese industry can remember, the name “Kraft” has been synonymous with cheese. But Kraft became at least a little less synonymous with cheese in late November when, as reported on our front page last week, the company sold its natural cheese business to Lactalis.

That’s not to say Kraft is no longer involved in the cheese business. While selling brands such as Cracker Barrel, Athenos, Hoffman’s, and Polly-O (Athenos is now owned by Emmi Roth USA, while Polly-O is now owned by BelGioioso Cheese), Kraft Heinz will retain its Kraft Singles, Velveeta processed cheese, and Cheez Whiz processed cheese businesses in the US and Canada and its Kraft, Velveeta, and Cracker Barrel macaroni and cheese, Kraft sauces, and cream cheese, including Philadelphia cream cheese, businesses worldwide.

These are certainly not small “niche” products. Philadelphia cream cheese is the undisputed brand leader in cream cheese, production of which topped 1.0 billion pounds last year. And Velveeta certainly has gone beyond “niche” status, with its 75 or so products ranging from traditional and well-known blocks to slices, shreds and sauces as well as in pasta and shell (macaroni and cheese) products, and Velveeta Skillets.

But it’s probably safe to say that Kraft’s overall presence in the cheese business will never be the same again. That presence, it should be noted, dates back over a century, to when J.L. Kraft started buying cheese in Chicago and reselling it to local merchants. It’s difficult if not impossible to find Kraft’s fingerprints all over the US (and global) cheese industry over the past 110-plus years.

From our perspective, one of the easiest ways to illustrate this point is to simply look at some back issues of this newspaper. And indeed, it’s difficult to page through more than just a few editions without stumbling upon some sort of Kraft-related news.

Before illustrating this point, it should be mentioned that Kraft has been known by several different names over the years, including, among others, Kraft-Phenix Cheese, Kraftco Corporation, Kraft General Foods and, currently, the Kraft Heinz Company.

So, back in our Oct. 26, 1929 issue, we reported that contracts had been awarded by the Kraft-Phenix Cheese Corporation, of Chicago, for the enlargement of their plant in Beaver Dam, WI.

Five weeks earlier, we reported that Kraft-Phenix Cheese had announced that it would increase its cheese plant capacity in Denison, TX, by an enlargement program, which will increase its daily milk consumption from 20,000 pounds to 75,000 pounds. The company was expected to begin an enlargement program in September 1929, it was announced by C.H. Kraft, who recently visited Denison from Chicago. C.H. (Charles Herbert) Kraft was one of J.L. Kraft’s brothers.

Several decades later, Kraft was again in the news, but for less-positive developments. Specifically, Kraft came under considerable criticism for its role in trading at the old National Cheese Exchange.

A University of Wisconsin-Madison study released in March 1996 concluded, among other things, that there was evidence that Kraft (which at that time was owned by Philip Morris Companies, Inc.) chose to sell cheese on the NCE “at a loss when it could have more profitably made the sales elsewhere. Such conduct constitutes trading against interest, the practice of purposely not selling at the profit-maximizing price.”

Two months later, in May of 1996, two subcommittees of the House Agriculture Committee held a hearing on that UW-Madison study. And less than a year later, the NCE closed and the cheese industry’s cash market moved to the CME in Chicago, where it remains today.

In the area of industry trade associations, Kraft has long been involved both on boards of directors as well as serving as officers. For example, Kraft leaders served on the board of the National Cheese Institute, and as presidents of that organization, for many years.

Yet another cheese-related area in which Kraft has had considerable impact is patents. Indeed, Kraft has been receiving patents for cheese-related inventions for more than 100 years, starting with a patent awarded to James Lewis Kraft himself in June 1916 for a process of sterilizing cheese and an improved product produced by such process.
The object of that invention was “to convert cheese of the Cheddar genus into such condition that it may be kept indefinitely without spoiling, under conditions which would ordinarily cause it to spoil, and to accomplish this result without substantially impairing the taste of the cheese.”

In the early decades of Kraft, the company received several other patents related to process cheese, including a patent in 1936 awarded to Norman Kraft, another of J.L. Kraft’s brothers, for an apparatus for heat-treating cheese. In more recent decades, Kraft has received patents for, among many other things, a method for making large sized blocks of cheese, methods for making lowfat cheeses, methods for making cream cheeses, and methods for making various processed cheese-type products.

Finally, and perhaps most importantly, it’s difficult if not impossible to list all of the plants that Kraft has owned or procured cheese from over the years, but the company’s long-time focus on improving cheese quality has benefitted the entire cheese industry.

The Kraft name will live on, both as a brand and as a company. But Kraft’s outsized presence in the cheese industry has been relegated to the history books
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It’s Back To The 1980s, Briefly, For CME Block Market Activity

Last week was quite the week for 40-pound Cheddar block spot (cash) market activity at the CME. To briefly recap the Thanksgiving holiday-shortened week: there was no block market activity whatsoever during the three trading sessions; there were no sales, no unfilled bids and no uncovered offers. Nothing.

This lack of activity brought back some memories of cheese cash market activity during at least some years back in the 1980s. And a check of recent years indicates that this year’s Thanksgiving Week trading more closely resembled the 1980s than the 2010s.

At first glance, such a comparison seems preposterous. After all, the cheese industry’s cash market back in the 1980s was the National Cheese Exchange, which met only once a week, on Friday mornings in Green Bay, WI, while the cash market these days is the CME, and trading takes place daily.

Not only that, but with daily trading, there are sometimes (often?) more changes in the CME block price in a single week than there were during an entire year of trading at the old NCE.

While that might seem impossible, or at least highly unlikely, it’s actually true: in 1981, 1982 and 1983, there were exactly four changes each year in the NCE block price, while the CME block price, just in the month of November, actually changed five times during the week of Nov. 8-12, and also changed five times during the week of Nov. 15-19.

And this pattern of daily block price changes occurred at least one week in almost every month prior to November. The one month this year in which there were no weeks with five changes in the block price was September, which actually only had two weeks with five days of CME spot market trading (the first and last week of September had three and four days of trading, respectively, and the first full week of that month had no trading on Monday due to the Labor Day holiday).

And both of those full five-day weeks in September saw four changes in the block price, tying 1981, 1982 and 1983’s annual number of changes.

Back to Thanksgiving Week, and trading activity during the 1980s compared to the past several years. At the NCE, trading during Thanksgiving Week took place on Wednesdays, rather than on the traditional Fridays.

So, in 1980, there was no block market activity at all at the NCE (although, notably, 20 cars of barrels were sold that day, all at $1.3100 per pound, which left the barrel price unchanged, just like the block price).

A year later, one car of blocks was sold at $1.3525, which lowered the price by 1.75 cents. So in 1981, one of the four block price changes actually took place during Thanksgiving Week (for what it’s worth, the other three block price changes that year took place in January, July and October).

NCE block trading returned to Thanksgiving Week “normal” in 1982, with no activity at all on blocks and the price holding steady at $1.3725 per pound. Of the four block price changes that year, one occurred in September, one in October and two in December.

And in 1983, there was again no block market activity during Thanksgiving Week, with the block price being unchanged at $1.3650 per pound. Of the four block price changes that year, one occurred in January, one in September and two in December.

Price changes became more frequent at the NCE starting in 1984 (although that’s not really saying much, given what transpired, or didn’t transpire, in the previous four years), but Thanksgiving Week remained quiet, for the most part. In 1984, there was no block market activity at all (although, reminiscent of 1980, 17 cars of barrels were sold, all at $1.3075 per pound, which left the price unchanged).

The block price was also unchanged at the NCE during Thanksgiving Week trading every year through 1990, although there was some activity during some of those years. On Wednesday, Nov., 26, 1986, for example, five cars of blocks were sold at $1.3050 per pound, which left the price unchanged at that level. But in other years, such as in 1988, there was no block market activity at all.

By contrast, in recent years, at the CME and with daily spot market trading, price changes during Thanksgiving Week have been the rule, rather than the exception.

Over the 2015-2020 period, the three CME trading sessions held during the week of Thanksgiving saw the following block market price changes: 2020, two price increases and one day of no change; 2019, three price increases; 2018, two price declines and one price increase; 2017, one price decline and two price increases; 2016, one price increase, one price decline and one day with no change; and 2015, two price increases and one price decline.

Based on that somewhat limited comparison, it’s safe to conclude that Thanksgiving Week 2021 block market activity at the CME more closely resembled Thanksgiving Week in the 1980s than Thanksgiving Week in the 2010s.

It may be recalled that the cheese industry’s cash market moved from the NCE in Green Bay to the CME in the spring of 1997, and shifted from weekly trading to daily trading in September 1998. That means that in 1997, there was one cheese trading session at the CME during Thanksgiving Week.

So what happened on Wednesday, Nov. 26, 1997? A total of 24 cars of blocks were sold (along with 23 cars of barrels), and the block price increased three-quarters of a cent, to $1.4325. So even when CME spot trading was weekly, it was more active than last week
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