What am I most proud about in 2020?
That was the question posed by Lucas Lentsch to dairy farm leaders of the National Milk Producers Federation (NMPF), Dairy Management Inc. (DMI), and the U.S. Dairy Export Council (USDEC) during the first-ever virtual annual meeting of the organization. The online experience replaced this year’s previously scheduled in-person event.
“The pivot, the relationship, and the ability to move dairy products during the pandemic,” responded Marilyn Hershey, the chair of the DMI board of directors. Hershey is a dairy farmer from Pennsylvania.
Indeed, the dairy sector was able to rebound rather quickly after the pandemic struck. Signs came down nearly as fast as they went up regarding in-store limits for fluid milk. Foods that carry significant amounts of dairy ingredients also have played a pivotal role.
Pizza carries sales
“Pizza had been a superstar during the pandemic,” Barbara O’Brien, president of DMI, said later in the meeting. “The average pizza sale growth for checkoff partners was over 10%,” she continued. Those strategic partners include some of the industry’s largest players — Domino’s, Pizza Hut, and Papa John’s, three of the four largest U.S. pizza chains.
As for the long-term trajectory, four factors have driven dairy demand since 2010. “First is cheese at food service, and second is cheese on pizza,” said Tom Gallagher, CEO of DMI. Third is dairy product exports. Fourth would be fat research and fat resurgence. “That would be shown in stepped-up butter sales,” he shared.
“The key to this year has been keeping dairy farmer balance sheets strong,” stated Randy Mooney, NMPF board chairman. There have been a number of reasons for the resilient balance sheets in the face of the pandemic. Chief among them have been Coronavirus Food Assistance Program (CFAP) payments and the Farmers to Families Food Box Program. The mechanics of those USDA programs made all the difference. However, ensuring those strong balance sheets took a lot of phone calls and emails.
“We advocated for our industry before Congress, USDA, and the White House,” said NMPF president and CEO Jim Mulhern. “We engaged in marathon discussions and strategized across the industry and throughout the government.”
“We had to ensure that Dairy Margin Coverage (DMC) payments and other risk management payments would not be deducted from CFAP payments,” added Mooney. The Missouri dairyman added that farmers who took risk mitigation strategies should not be punished for their foresight. “We literally beat back that provision three times,” he continued.
“We built bipartisan and a cross-industry coalition to oppose payment limits,” said Mooney. “While the caps were not completely eliminated, the original $125,000 payment limit was raised.”
As for future government intervention, “I’ll be advocating for ‘stimulating the economy’ projects like the Farmers to Families Food Box program versus direct payments (such as CFAP),” said Mooney. “Farmers would rather receive a fair price for their milk.”
An eye toward the future
“If we want to grow the U.S. dairy industry, we have to grow exports because that’s where the people are at, and that’s where protein demand will be,” stated Larry Hancock, board chairman for the U.S. Dairy Export Council (USDEC). In making that statement, the Texas dairyman further explained that while the U.S. is not a growing population, Asia and Africa continue to grow and have many more potential dairy customers.
“This year, Southeast Asia became our No. 1 market based on volume,” Tom Vilsack, president and CEO of USDEC later added. “That’s even better than the market from our good friends in Mexico,” Vilsack added of Mexico’s long-term standing as America’s top dairy producer buyer.
This growth was planned as the U.S. dairy sector developed its “Next 5 Percent” strategy to grow U.S. dairy exports from 15% to 20% of U.S. milk production. “We are selling $1.4 billion more in dairy products since the beginning of this plan,” Vilsack said of the progress in growing U.S. dairy product exports.
The former USDA Secretary and Iowa governor touted the grand opening of the U.S. Center for Dairy Excellence in Singapore. The venue will serve as a platform to showcase U.S. dairy throughout the greater Asian region. “The key to growing dairy exports is presence (people), partnerships, and promotions,” stated Vilsack to the 500-plus individuals attending the virtual meeting. “We have been working on adding more of these.
“The long-term future of exports is nothing but positive,” Vilsack went on to say.
“U.S. dairy farmers can compete on dairy exports,” stated Hancock in comments made earlier in the virtual meeting. “I am concerned about tariffs . . . lots of times the playing field is not very level,” he said of his ongoing concerns.
The price of entry
“Sustainability is just the price of entry,” said Gallagher. “If you are not competitive in taste, price, sustainability, and accessibility, then you won’t be relevant to the next generation,” he went on to say, explaining recent work on the U.S. Dairy Stewardship Commitment focused on sustainability.
“According to a Nielsen survey, 81% of global consumers said it is very or extremely important that companies implement programs to help the environment,” confirmed O’Brien.
“Have farmers voted on sustainability?” Mooney asked himself rhetorically to answer a question from skeptical farmers on the topic. “The truth is consumers are voting every day!
“The dairy farmer board of directors of NMPF and DMI also voted on the matter,” he added of the endorsement of U.S. sustainability efforts centered on dairy.
“As important as sustainability is in the U.S., it’s equally or even more important in the export markets,” later advised Vilsack.
“We have to look for every way to forward contract in our business,” said Mooney being ever mindful of conditions on dairy farms.
“We just started the sign-up for the 2021 Dairy Margin Coverage program,” said NMPF economist Peter Vitaliano. “As we saw this year . . . when we did not expect that the program was going to make payments . . . it made major payments. It’s an insurance program,” he reminded the audience. “You can’t really trust the forecasts (in a pandemic). We urge all dairy producers to sign up for Dairy Margin Coverage, if you have not already done so, at the $9.50 level for your first 5 million pounds of milk.”