Amish dairyman gets OK to continue farming after raw milk incident

April 27th, 2006 Former Farm and Dairy Reporters

SALEM, Ohio – Two months after a Holmes County farmer’s dairy license was revoked, he is now back in business.
Arlie Stutzman’s license was taken away in February after he sold a gallon of raw milk to an undercover Ohio Department of Agriculture agent.
The Amish farmer was eligible to reapply for a license immediately and did so several weeks later, said department spokesperson LeeAnne Mizer.
State sanitarians visited the farm April 17 and inspected the facility to be sure the equipment was functioning and proper health safety measures were being followed, she said.
Stutzman passed the inspection and received a new dairy license.
What happened. Investigators originally visited the operation last fall after an anonymous neighbor contacted the state and alleged Stutzman was selling milk, butter and beef from his farm.
While there, an undercover agent asked to buy raw milk, according to hearing documents.
Stutzman said there was no charge but would accept “whatever you think it is worth.” He filled a gallon jug and took $2 from the agent.
Regardless of whether the milk is sold for $20 a gallon or given away for free, it’s illegal in Ohio, Mizer said.
Milk sold in grocery stores is pasteurized to kill disease-causing bacteria. Because raw milk hasn’t gone through this step, the state bans anyone other than the farm family from drinking it.
During the undercover operation, Stutzman’s wife said they sold raw milk but “they need to be careful who they sell to because of getting in trouble,” according to the agent’s notes.
In addition, Stutzman told investigators about another area farm that may be willing to sell raw milk.
Misbranding. At Stutzman’s hearing earlier this year, state officials focused on the issue of misbranding rather than raw milk’s legality.
Stutzman asked the agent for an empty container to put the milk in, according to the documents.
This meant it violated Ohio Revised Code 917(E) and (F), which says you cannot sell or distribute a dairy product that is not labeled.
Protection. In the future, Mizer said Stutzman would be treated the same as any other Ohio dairy producer.
There will be routine inspections and complaints will be followed up, but he will not be monitored more closely because of his past, Mizer said.
The state, however, is seeking a permanent injunction in Holmes County Common Pleas Court to stop Stutzman from selling raw milk. The hearing is set for June 30.
This will be a way for the state to protect itself in case the issue of raw milk continues to be a problem at the Stutzman farm, Mizer said.
(Reporter Kristy Hebert welcomes feedback by phone at 800-837-3419, ext. 23 or by e-mail at khebert@farmanddairy.com.)

Related articles:
Raw milk fires up industry
March 16, 2006

Washington farm fined as E. coli source
March 30, 2006

A few questions about raw milk

April 20th, 2006 Judith Sutherland

I have followed the stir regarding drinking unpasteurized milk with interest. Like many of you, I am sure, I grew up drinking milk straight from the cow.
We had a fairly large family and a large herd of Holsteins. Drinking our own milk really wasn’t anything to which we gave any considerable thought – it just made sense to drink the milk we worked hard to produce.
Save some milk. We would often be reminded, as we headed out the door to do the evening milking, “Be sure to take the pitcher with you and save out some milk.”
I remember that as being one of my very first responsibilities – at the end of the milking, to wash well, lift the lid of the stainless steel bulk tank and dip out some creamy milk from that huge churning vat.
I remember once when a man from the community stopped by the barn at milking time to ask if he could purchase milk for an upcoming family get-together.
He had recently retired from dairy farming and this would be the first family feast where they wouldn’t have their own supply of milk with which to make homemade ice cream.
My dad said, with regret, he just couldn’t do this. I didn’t stick around to hear the rest of their conversation, but I remember his apologetic tone as if it were yesterday. Later that night, I asked him about it.
Rules. He said there were all sorts of laws governing the sale of raw milk and he mentioned he also had an agreement with his milk hauler and the dairy. Every drop of milk produced, with allowance for our own use, was to go in the milk hauler’s truck to be hauled to the dairy. He also said if someone in that man’s family became ill, the family could blame it on our milk.
That left an impression on me, obviously, or I wouldn’t still remember it all these years later. I can tell you that without question, we were one healthy family. We rarely required a trip to the doctor.
I wondered why there would even be the question of someone getting sick on our milk, but didn’t question it.
Until now.
I am asking lots of questions to no one in particular. Why is it that some people travel for miles to get unpasteurized milk from the only “legal” places to purchase it – from established dairies owned by people who have sold it this way for years and therefore are protected under the grandfather clause in the state?
Years after that conversation with the retired dairy farmer, my parents visited Young’s Dairy near Yellow Springs, Ohio, mainly in search of a Young’s Dairy milk bottle, since Young is my maiden name.
Willing to travel. Dad discussed what a wonderful operation the Youngs run and he was amazed that people travel quite a distance, some of them on a weekly basis, to purchase unpasteurized milk, simply because they prefer it.
Isn’t it noteworthy that some people feel it is worth traveling for and fighting for and shouldn’t they have the right to consume it if they desire to do so?
I am not asking this for any political reason, I am asking because I am curious. I have long wondered why some are born with the drive to tell others how to do things, right down to what they pour in their bowl of cereal in the morning.

Raw milk fires up industry

March 16th, 2006 Former Farm and Dairy Reporters

SALEM, Ohio – You can’t sell it. It’s that simple.
But some people don’t seem to care.
They want it – and believe in it – so fiercely they’ll do whatever it takes, even if it may bend the law.
Raw milk is one of the hottest topics in Ohio agriculture, stirring controversy as the state issues warnings about health risks and launches investigations.
Meanwhile, raw milk consumers swear they’ll do whatever it takes to get the drink they say is responsible for curing their ailments and ensuring their health.

Healing powers

Nikki Cornell’s daughter inherited overlapping bottom teeth from her mother and grandmother. But last week, as the 11-year-old girl smiled, Cornell noticed those same teeth were straight.
It wasn’t braces or dental surgery. It was the raw milk, her mother said.
And then there’s Cornell’s fianc

Raw milk, local produce, pastured livestock:Farmers and consumers reconnecting

March 10th, 2005 Other News

SLIPPERY ROCK, Pa. –

Raw milk sales in Ohio end

January 30th, 2003 Former Farm and Dairy Reporters

SALEM, Ohio – After a recent salmonella scare, Young’s Jersey Dairy in southern Ohio will no longer sell raw milk.

Young’s was the only farm in the state legally allowed to sell unpasteurized milk.

Ohio Department of Agriculture and Clark County Combined Health District recommended Young’s surrender its raw milk retail license after 55 cases of salmonella were connected to the dairy.

Dan Young, the dairy’s chief executive officer, said another reason they stopped selling the milk is because of insurance coverage concerns.

Human hygiene. Although a batch of milk from late November was originally blamed for the outbreak, it was later determined that it was due to human contamination.

The bacteria did not originate on the farm and is instead believed to have come from Ross or Columbiana counties. Both counties had outbreaks of the same strain of salmonella last year.

The dairy herd tested negative for salmonella, as did the rest of the milk.

Salmonella is a bacteria passed through uncooked meat, unsanitary hygiene, raw eggs and intimate person-to-person contact. Symptoms include vomiting, diarrhea, chills and nausea.

One lawsuit has been filed against the dairy. It involves a 16-month-old who became sick after consuming a dairy product at Young’s.

There have been four other attorney inquiries for medical records, said Charles Patterson, health commissioner in Clark County.

A history. Young’s Jersey Dairy began selling raw milk in the mid-1950s. Although a law later made raw milk sales illegal in Ohio, the dairy fell under the grandfather clause and continued to sell the milk.

Milk sales are only a small part of the Young’s dairy business. Two restaurants, batting cages, a driving range and two miniature golf courses are also part of the operation.

Raw milk accounted for 1 1/2 percent of the operation’s sales, Young said.

The dairy will now replace its raw milk with pasteurized milk.

Controversial. Raw milk has often been the source of controversy. Government officials say milk must be pasteurized, the heating process intended to kill bacteria like salmonella.

Raw milk activists say pasteurization also kills essential vitamins, destroys enzymes and promotes pathogens.

Patterson said he is unsure whether pasteurization would have made a difference in this case. The salmonella may have entered the milk after pasteurization would have taken place.

Cross contamination can take place even in pasteurized milk, he said.

Continuing investigation. The number of salmonella cases stands at 55 and the investigation continues into how the strain got to Young’s.

The main effort is to ensure there aren’t more secondary cases, Patterson said.

“As far as we’re concerned, the outbreak is over, and Young’s restaurant is as safe to eat at as any other in [the area],” Patterson said.

(You can contact Kristy Hebert at 1-800-837-3419, ext. 23, or by e-mail at khebert@farmanddairy.com.)

To sell or not to sell raw milk: Regulatory agencies state their case

November 14th, 2002 Former Farm and Dairy Reporters

SALEM, Ohio – A recent court case in Wisconsin where two farms tried to get around state laws regarding raw milk sales sparked interest in Ohio and Pennsylvania’s stance on the subject.

Raw milk activists say pasteurization, the heating process intended to kill germs, also kills essential vitamins, destroys enzymes and promotes pathogens, and therefore, pasteurized milk is not as healthy as raw milk.

On the other hand, government officials say laws limiting the sale of raw milk are in place because raw milk has the potential to carry diseases such as tuberculosis.

To this, raw milk activists counterclaim that these diseases are due to poor animal nutrition and unsanitary farm practices rather than the raw milk itself.

Last farm standing. Ohio’s laws prohibit farms from selling raw milk to the ultimate consumer. There is a clause, however, that if a farm was already selling raw milk prior to the law, it could continue.

The only farm still falling under this grandfather clause today is Young’s Jersey Dairy in southwest Ohio. This means that Young’s is the only farm in Ohio legally permitted to sell raw milk.

Pennsylvania. Pennsylvania’s laws are less restrictive than its neighbor to the west.

Producers can apply for a permit to sell raw milk from their farms. Pending testing by the Pennsylvania Department of Agriculture Bureau of Food Safety, producers receive a permit to sell raw milk from the farm, according to the bureau’s chief of milk sanitation, Jim Dell.

This testing includes a test two times each month for standard plate count and coliform; a monthly test for somatic cell count; a test of the water supply at the time of the permit and every six months thereafter; a standard farm inspection every three months; and a test on milk handling every three months.

The standard plate count must be less than 20,000 per milliliter; the standard for coliform is less than 10 per milliliter.

Dell said the farms with permits routinely meet the standards, and these standards are the same that must be met for pasteurized milk. However, there may be pathogenic organisms present in raw milk that aren’t found in pasteurized milk, he said.

Liability issue. There are approximately 30 farms in Pennsylvania that have a permit, Dell said, and he would like to keep the number near this level.

He said this isn’t a popular permit to give out because of the producer’s liability if anything should be wrong with the milk.

In the eight and a half years that Dell has been with the division, there has been one outbreak of illness linked back to raw milk. Two people were ill in this incident.

But also in the same eight and a half years, Dell said there has also been one illness outbreak that was “possibly” linked to pasteurized milk.

Wisconsin case. In the Wisconsin case of Clearview Acres LLC and MidValleyVu Farms vs. the Wisconsin Department of Agriculture, Trade and Consumer Protection, it was determined that “cow-share agreements” are illegal.

Producers were using these agreements as a means to sell raw milk.

Under these agreements, consumers were able to buy part ownership of a dairy cow. The producer then leased the cow from the owner and produced raw milk. The owners could then pick up the raw milk from the farm.

Wisconsin laws say dairy producers may consume their own raw milk from the farm but it is illegal to sell it unless it is an “incidental sale.” The agreements violated “incidental sales.”

Nevertheless, the court acknowledged that owners of a milk-producing license were able to consume raw milk. Therefore, a legal means for people in the state to obtain raw milk is to set up a corporate entity.

In this situation, consumers would become shareholders of the operation, and as a co-owner of the license, they would be able to consume raw milk from the farm.

Uncompromising. Neither of these situations sit well with Ohio law.

Shares bought in a cow for the purpose of being able to take milk for personal use violates Ohio law regulating milk sales to the ultimate consumer, according to Charles Twining, assistant chief of the dairy division at Ohio Department of Agriculture.

A cow-sharing agreement in Ohio would not entitle a person to take milk from the farm’s milk supply, Twining said.

He said the only way for people who want raw milk to legally obtain it in Ohio, other than at Young’s Jersey Dairy, is to set up their own dairy farm or travel to a state where it is legal.

Keeping up with demand. The demand for raw milk is an ongoing issue and raw milk activists regularly contact ODA with their opinions on why the milk should be available. Twining said the milk is illegal because of the potential for disease and the “harmful bacteria” caused by raw milk.

Despite these warnings, Young’s Jersey Dairy, 6880 Springfield-Xenia Road, Yellow Springs, sells approximately 2,600 gallons of raw milk each month. Each gallon sells for $2.90, according to the Ben Young, of the dairy.

“Pasteurization is the heating of milk to 160 degrees for about 16 seconds,” he said. “Its primary purpose is to kill bacteria that may be harmful. The problem is that during this process, other elements of the milk are altered or destroyed.

“There are many enzymes present in milk that aid in digestion and absorption of fats, calcium and sugars. Nearly all these enzymes are destroyed during pasteurization.”

The dairy has been selling raw milk for more than 44 years without any health problems, Young said.

Far and wide. Most raw milk customers live within 10 miles of the farm, however there are also regular customers from Dayton, Cincinnati and Indiana. Some people drive up to 60 miles for the raw milk, Young said.

Young said some customers say that they have trouble digesting pasteurized milk and they are better able to digest raw milk.

Young also said that producing quality milk requires “clean, healthy, properly fed cows; clean, dry and well-ventilated barns; and clean, sanitized utensils.”

“Other bacteria in milk can be minimized by properly cleaning the udders before milking and sound milking practices,” Young said. “Milk produced under these conditions will be low in bacteria and therefore pasteurization is not necessary.”

Young’s Jersey Dairy can be reached at 937-325-0629.

(You can contact Kristy Alger at 1-800-837-3419, ext. 23, or by e-mail at kalger@farmanddairy.com.)

Farm and Dairy’s week in review: 4/11

April 11th, 2015 Katie Woods

Here are this week’s top stories from Farm and Dairy:

1. Pick a chick: Choose the best breed of poultry for your backyard

There are hundreds of chicken breeds available. Every poultry enthusiast will offer a different answer when you ask which poultry breed is the best. Before you purchase chicks this spring, decide your preferences and take your available resources and space into consideration before making your decision.

Online columnist Ivory Harlow offers several pointers for choosing poultry, ranging from choosing breeds that will do well in your climate to choosing breeds you like.

2. Research shows raw milk dramatically increases risk for illness

Researchers at John Hopkins Center for a Livable Future (CLF) conducted a study, revealing adverse effects of drinking raw milk. The results showed that children, pregnant women and the elderly are at the greatest risk of illness caused by raw milk.

It’s estimated that 3.5 percent of the U.S. population drinks raw milk, but the team of researchers determined that raw milk consumption accounts for over half of milk-related foodborne illness.

3. Consider that pipeline’s impact to your pasture and hay fields

Before negotiating an agreement with a pipeline company to build on your property, you should contact an experienced attorney.

It is critical for landowners to understand how soil and water resources could be affected by pipeline construction. When negotiating, landowners can select which forages they want reestablished. They can also reference ODNR standards for pipeline construction that address issues such as erosion, compaction and drainage.

4. Mt. Pleasant Community Garden volunteers share gift of fresh produce

In North Canton, Ohio, garden volunteers at the Mount Pleasant Community Garden, started in 2011 by the Mount Pleasant Church of the Brethren, have donated more than 43,000 pounds of fresh produce to the Stark County Hunger Task Force. The produce has served more than 27,000 people in need in Stark County.

The group welcomes anyone interested to join them in their charitable work, by planting, pruning, weeding, harvesting or weighing the produce.

5. April’s gardening to-do list

April brings more sunshine and warmer weather, two welcome gifts for gardeners. This month, it’s important for gardeners to finish cleaning up their lawns, prune their shrubs, bushes and trees and get their soil ready for planting.

Some cold-weather plants can be transplanted during the month of April, and others can be directly sown, depending on the location. Otherwise, the countdown is on for May and June planting.

Why farming changed the way I eat, part three

February 13th, 2014 Ivory Harlow

In this third and final installment of Why farming changed the way I eat, I want to talk about the dairy in my Farm and Dairy.

Read part one

Read part two

Farmers know “pasteurized prepared cheese loaf” isn’t cheese

Although it’s first three ingredients are reminiscent of cheese: milk, water, salt- pasteurized prepared cheese loaf also contains a careful concoction of chemicals for composition, pigments for color, and preservatives to increase shelf life. Manufacturers call it Velveeta, Cheese Whiz, and Nacho Cheese, but farmers call it crazy.

Unlike lab-made cheese loaf, the ingredients and method to make real cheese are simple. Real cheese has much more in common with butter, sour cream, and yogurt than it does with plastic. This is important because the purpose of eating is to provide the body with authentic nutrition.

Consumers demand real milk

Fresh milk bottleReal cheese starts with real milk. The market for raw milk, for hobby production of cheese and other dairy products, is growing fast. Unfortunately, it is illegal to sell raw milk in Ohio and several surrounding states. The exception is Pennsylvania, where the retail sale of raw milk is legal.

Three high profile raw milk cases made Ohio a primary battleground for raw milk legislation. Dairy Farmers Paul and Carol Schmitmeyer, Gary and Dawn Oaks, and Arlie Stutzman all had run-ins with the Ohio Department of Agriculture in 2004-2006.

The best way to get the milk is buy the cow

Each small success is a step in the right direction. Although selling raw milk is still illegal in Ohio, herd shares are legal by court decision. There are no laws to regulate herd shares in Indiana, Kentucky, and Virginia.

Dairy farmers can meet consumer demand for real milk by entering into herd share agreements with customers. In essence, a herd share agreement designates a farmer to manage customers’ dairy animals. Management includes boarding, care, sanitation and milking of the animals. The customer pays a boarding fee to establish ownership, plus an additional fee for a monthly share of the herd’s production.

How farming changed the way I eat

All this leads into how farming changed the way I eat. The farm was already producing eggs and meat for protein and plenty of produce when my husband and I decided to add dairy. I wanted to make nutritious, high-quality cheese and other dairy products and I needed real unadulterated milk to do so. It was important to me that the milk came from animals under my care, so that I could personally oversee their health and the cleanliness of the operation.

We decided small ruminants would be a better fit for our farm than cows. As the sole dairy maid of the herd, I felt more comfortable managing 150 lb. sheep or goats than 1,500 lb. cows.

We debated the virtues of sheep and goats. Both milks are high in fat, which is great for cheese making. Although hard Pecorino Romano is typically made from sheep milk and soft Chevre is made from goat milk, you can use any milk to make any dairy product or drink plain. We finally decided on Alpine Dairy Goats because of their reputation for consistent production and mild flavored milk.

It’s alright to be little bitty

A micro-dairy is unconventional because it produces less than 50 gallons of milk a day. That translates to less than 10 cows or about 25 goats. This spring we plan to extend the barn, expand our herd, and build a separate dairy parlor. Although our micro-dairy won’t hold a candle to many of the big beautiful dairy farms in southern Ohio, being little bitty is alright with me because it allows me to dedicate time to other areas of the farm like poultry and produce.

Diversification is critical to my farm’s sustainability and profits.

Conclusion

The last three posts of Farm Forward have explained why farming changed the way I eat. Although it wasn’t my intention to evangelize the issues of sustainable protein production, local, regional and in-season eating or to start a debate about raw-milk legislation, I hope readers have paused to consider all the above.

If you are a producer or beginning farmer like me I hope you saw a bit of yourself in my story. The future of farming means working together to bring good and wholesome food to tables everywhere.

If you are a consumer you can start by looking at the sticker on your fruit and choosing something grown a little closer to home. Better yet visit a friendly farmer, farm stand or farm market and buy direct. Meat and herd shares and CSAs are a great way to eat sustainable, local, in-season food and support the farm families that grow it.

Experts analyze dairy policy in 2014 farm bill

February 11th, 2014 Other News

(By Marin Bozic, John Newton, Andrew M. Novaković, Mark W. Stephenson, and Cameron S. Thraen.)

COLUMBUS — The dairy subtitle of the new agricultural act offers a total revamping of the safety nets that have been in place for the dairy sector going back to the middle of the 20th Century.

The Margin Protection Program for Dairy Producers (MPP) might be considered a variation of the countercyclical payments (MILC) that began in 2002, but it is notably different in two important ways.

Related: The 2014 farm bill brings dairy policy change

First, it substitutes Milk Income Over Feed Costs for farm price as the measure by which we economically evaluate market conditions and support dairy farms. Second, it does not restrict eligibility for the program by farm size. Larger farms have to pay a higher premium, but they are not categorically limited in participation.

The Dairy Product Donation Program uses the mechanics of the old Dairy Price Support Program to purchase dairy products, but it really does so as an extension of existing programs that allow USDA to purchase dairy products on behalf of a variety of food assistance programs.

Advocates of a new approach argued that the limitations of existing programs were vividly revealed during the economic events of 2009, and repeated in 2012. Hence, they argued, bold new programs are needed. Whether the programs proposed here will prove to be the answer farmers seek is something that will be debated and estimated, but we won’t really know unless and until they are tried.

Introduction

The Agricultural Act of 2014 was passed by the U.S. House of Representatives Jan. 29 and was passed by the Senate Feb. 4 and signed by the president Feb. 7.

The dairy provisions of the act are primarily a variation of H.R. 2642. Existing safety net programs are repealed and replaced with two new programs:

  1. The Dairy Product Price Support Program (DPPSP), effective immediately.
  2. The Milk Income Loss Contract (MILC), effective once the new Margin Protection Program for Dairy Producers becomes operational, or Sept. 1, 2014, whichever is earlier.
  3. The Dairy Export Incentive Program (DEIP), effective immediately.

(Note that the DPPSP, passed in the Food, Conservation and Energy Act of 2008 (i.e. 2008 farm bill) is repealed, but the permanent Dairy Price Support Program that is contained in the 1949 Agricultural Act is not. MILC and DEIP do not have underlying permanent authority and are forever gone.)

Continued programs

Certain other authorities are continued, including extensions of:

  1. The Dairy Forward Pricing Program — allows non-cooperative buyers of milk who are regulated under federal milk marketing orders to offer farmers forward pricing on Class II, III, or IV milk, instead of paying the minimum federal order blend price for pooled milk.
  2. The Dairy Indemnity Program — provides payments to dairy producers in the unlikely event that a public regulatory agency directs them to remove their raw milk from the commercial market because it has been contaminated by pesticides, nuclear radiation or fallout, or toxic substances and chemical residues other than pesticides. Payments are made to manufacturers of dairy products only for products removed from the market because of pesticide contamination.
  3. Certain provisions to augment the development of export markets under the National Dairy Promotion and Research Program.

New programs

The new programs are:

  1. The Margin Protection Program for Dairy Producers (MPP) — a voluntary program that pays participating farmers an indemnity when a national benchmark for milk income over feed costs (the actual dairy production margin or ADPM) falls below an insured level that can vary over a $4 per cwt. range.
  2. The Dairy Product Donation Program (DPDP) — a program that requires the secretary of agriculture to immediately procure and distribute certain dairy products when the ADPM falls below a the lowest margin level specified for the MPP. These products would be targeted for use in domestic, low-income family, food assistance programs.

In addition, there is language related to the promulgation of a federal milk marketing order that covers California. The act also repeals the authority for a federal milk marketing order review commission. Originally authorized in the Food, Conservation and Energy of 2008, the commission was never funded and never appointed.

Margin protection plan

The new MPP contains several basic elements that combine to determine how, when and how much money dairy farmers can receive in periods of financial stress.

The main items are:

  1. An Actual Dairy Production Margin, which is a national estimate of dairy farm income from the sale of milk less an estimate of an average cost of feed for a hypothetical but nationally representative dairy herd.
  2. An Actual Dairy Production History (ADPH) for each participant.
  3. A coverage percentage, which is simply a percentage of the ADPH selected by each producer, to determine how much of their eligible milk they wish to cover. The resulting quantity applies to the calculation of total premiums and indemnities.
  4. A coverage level, which is a $/cwt. figure that defines the degree of margin protection desired by a participating farm. It corresponds to a range of outcomes as measure by the new Actual Dairy Production Margin.

Issues and challenges

While the new dairy title was designed in good faith and with great attention to detail, some unintended consequences may still occur:

  1. While market conditions may rapidly change, MPP premiums never do. The upside of this provision is that the MPP can serve as a protection against protracted low margin periods that cannot be managed using CME futures and options contracts. 

    A possible adverse side effect is the crowding out of private risk markets by subsidized government-provided margin insurance. In other words, if dairy farmers use the MPP heavily and stop participating in CME futures markets, those markets will lose valuable participants and liquidity that could threaten their viability.

  2. The MPP provisions may inadvertently result in a policy framework that gives advantage to “lumpy” over “incremental” growth at the farm level. 

    As described earlier, insurable production at any single location is determined by a combination of the historical milk production over 2011-2013 and the subsequent growth in national milk per cow.However, producers who choose to grow their business by building a brand new separate dairy operation at a new location would likely be able to enroll that operation in the program under the provisions governing “new entrants.” The act, as is commonly done for crops programs, includes a reconstitution provision.

    This purpose of this provision is to allow USDA to prohibit or control farmers who attempt to gain more benefits by reorganizing their business structure. USDA will clearly specify what producers may and may not do with respect to how they expand their milk production and qualify it for the MPP program. Nevertheless, it is likely that some opportunity will exists for new dairy farm businesses started by people already in dairy farming.

  3. There are several reasons why producers faced with very low margins may find it optimal to reduce milk production by culling. 

    First are the basic economics of milking a cow. When a cow’s production no longer justifies the cost of feeding and keeping her, she will be culled. Second, even if the cow is carrying her own economic weight, culling of cows on the margin may still be necessary due to cash flow needs on the farm.Third, cows on the margin may be culled or culled early because of favorable cull cow prices, which is currently the situation due to tight beef supplies. Because indemnities received under MPP should lessen cash flow challenges, culling that might otherwise have occurred is forestalled.

    This is consistent with the whole point of the program, but the effect is to maintain milk production and potentially prolong the duration of low margin periods. This is no different than the effect of the MILC program.

    The extent to which these kinds of countercyclical subsidy programs impact milk supply is subject to debate. Existing research about this effect is inconclusive. Further research will no doubt examine if this effect will or does materialize and to what degree.

  4. Actuarially fair premiums imply that the premium equals the expected long-term indemnity — insured businesses, in total, do not get more than they put in. 

    LGM-D is based on actuarially fair premium calculation methods. Observers of that program know that its premiums vary each month, depending on the outlook for milk and feed prices, and they generally have been high enough to give most farmers pause.We cannot say how heavily subsidized the premiums for MPP are, but it is easy to guess that, over a period of several years, the indemnities paid out will exceed the premiums collected. Indeed, it is quite possible that the level of taxpayer subsidy will be very large. If this is true, it implies that the MPP will reduce, and quite possibly very significantly reduce, market risk in dairy farming.

    It will not reduce the risks of disease or local weather effects faced more individually or regionally, but it would reduce the risk of price changes that are disadvantageous to all farmers.

    To the extent this is true, it could give incentives for investments or production decisions that otherwise would be deemed too risky.

    This means more production than would otherwise occur, which in turn means a lower price structure for milk.

    These kinds of effects are not unique to MPP. They can and historically did occur with the Dairy Price Support Program. The issue is not the design of the program, per se, but the extent to which a program subsidizes long term risks.

  5. To the extent the DPDP is triggered, it could send distorted market signals to various dairy product sectors, in essence inflating the true underlying demand for products that were sold to the government for donations.
  6. The MMP operates from a margin formula that defines income or returns over feed costs. Declines in the MMP margin can come about from any combination of movements in milk prices vs. costs. 

    In 2009, the situation could be described as declining milk prices relative to feed prices. In 2012, this situation might more aptly be described as rising feed prices relative to milk prices. The trigger for the use of DPDP does not distinguish the cause of a low MMP margin.

Much of the public discussion of the previous versions of a new dairy program seemed to assume that a low margin necessarily means a low milk price, meaning low relative to historical patterns of milk price.

An incremental government demand presumably will increase the milk price relative to feed prices and thereby raise the margin.

However, if the margin is low as a result of rising and high feed prices with an already adequate or even high milk price, as was the 2012 drought experience, it is not clear how effective these purchases will be in boosting the milk price and in turn the MMP margin.

It is not clear how much an already high milk price can be further accelerated. Clearly, strengthening dairy product demand will not reduce high feed prices in such situations.

(Marin Bozic is assistant professor in the Department of Applied Economics at the University of Minnesota and associate director of Midwest Dairy Foods Research Center. John Newton is assistant professor in the Department of Agricultural and Consumer Economics at the University of Illinois Urbana Champaign. Andrew M. Novaković is the E.V. Baker Professor of Agricultural Economics in in the Charles H. Dyson School of Applied Economics and Management at Cornell University. Mark W. Stephenson is director of dairy policy analysis and director of the Center for Dairy Profitability at the University of Wisconsin. Cameron S. Thraen is associate professor in the Department of Agricultural, Environmental and Development Economics at Ohio State University.)

Another DFA settlement: This time, co-op to pay $46 million to plaintiffs

March 22nd, 2013 Other News

KANSAS CITY, Mo. — In an agreement that covers only a portion of a class action lawsuit, Dairy Farmers of America will pay $46 million to buyers of certain dairy products between 2004 and 2006.

The settlement agreement covers a part of a class action lawsuit against DFA’s trading activity on the Chicago Mercantile Exchange in 2004.

The milk marketing co-op released its statement on the agreement March 22, saying “DFA makes no admission of wrongdoing and will pay $46 million to the plaintiff class.”

“Our farmer leadership and management team have worked diligently to put certain old issues behind us and resolve pending litigation,” the official co-op statement said, nearly word for word of the statement DFA released in January when it agreed to pay $158.6 million to settle a class action lawsuit that alleged raw milk price-fixing in a 14-state region stretching from southern Indiana through the southeastern United States.

“Resolution of both of these lawsuits allows us to remove a source of distraction for our leadership and to avoid additional legal fees,” DFA stated, adding, “Member milk checks and the member equity program will not be impacted.”

Alleged manipulation

The complaint alleges defendants manipulated and raised the prices for cheese on the Chicago Mercantile Exchange Cheese Spot Call Auction market.