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WashingtonUpdate
41st AnnualSouthern Dairy Conference
January 20, 2015Atlanta, GA
Jim MulhernPresident & CEO
National Milk Producers Federation
C o n n e c t i n g C o w s , C o o p e r a t i v e s , C a p i t o l H i l l , & C o n s u m e r s
National Milk Producers Federation
2Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
Importance of Margin Coverage
$2
$3
$4
$5
$6
$7
$8
$9
$10
$11
$12
$13
$14
$15
$16
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Do
llars
per
Hu
nd
red
weig
ht
MPP Margin and Coverage Levels, 2004-2014
MPP Margin
$8.00 / cwt.
$7.00 / cwt.
$6.00 / cwt.
$5.00 / cwt.
$4.00 / cwt.
Current 2015 Margin Forecast
$2
$3
$4
$5
$6
$7
$8
$9
$10
$11
$12
$13
$14
$15
$16
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Do
llars
per
Hu
nd
red
weig
ht
Source: USDA Farm Service Agency, 1/16/2015
MPP Margin and Coverage Levels, 2004-2015
MPP Margin
Forecast
$8.00 / cwt.
$7.00 / cwt.
$6.00 / cwt.
$5.00 / cwt.
$4.00 / cwt.
5Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
Gridlock on Immigration Reform
6Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
7
Dairy Trade Issues
Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
8
4.4%
3.7%
4.6%4.7%5.0%5.2%
5.7%5.3%
5.8%
8.2%8.6%
9.4%9.8%
11.0%
9.3%
12.7%13.3% 13.2%
15.5%15.6%
2.4%2.7% 2.9%
3.7%4.0% 4.0%
4.3% 4.3%4.6% 4.6% 4.9%
4.6% 4.5%4.1%
3.4%2.9% 3.0%
3.2% 3.0% 3.1%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Milk S
olid
s, %
of
U.S
. P
rod
ucti
on
2014: January-November
U.S. DAIRY TRADE BALANCE, 1995-2014 ytd
Exports: Percent of U.S.Total Milk Solids Production
Imports: Percent of U.S.Total Milk Solids Production
Trans-Pacific Partnership (TPP)
Key Focal Point: Japan
Japan vigorously fighting to
avoid tariff elimination on 5
“sacred” commodities
• Canada watching negotiations with
Japan -- likely to follow their lead if
market access outcomes are low
Weak market access offer by
Japan unacceptable
NMPF pressing for most
ambitious package possible
• TPP letter by dairy companies
Southern Dairy Conference |Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
9
Trans-Atlantic Trade & Investment
Partnership (TTIP)
US & EU Still “Sparring”
– Negotiations underway but little real
engagement yet to find solutions
• Particularly problematic on SPS/NTB issues
Past EU deals on ag typically poor
– Any agreement must expand US market
access, not one-sided in EU’s favor
• Must address current $1.3 Billion EU-US
dairy trade deficit
• Generated strong House letter on dairy
TTIP issues to USDA/USTR
• USDA Secretary Vilsack delivered strong
US ag message to EU ag ministers
Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
10
Geographical Indications
Recent Successes in Combatting
EU Attacks on Common Name
Usage
House Letter on GIs in TTIP &
export contexts: 177 signatures
55 Senators signed letter
opposing EU cheese GIs
Favorable initial responses to
U.S. legal & political challenges
in Latin America
U.S.-China agreed to protect
certain GI’s in EU-China FTA
negotiations
Continued Concerns
EU aggressive TTIP efforts
EU FTAs w/ Asian nations
including Japan, Singapore
Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
11
C o n n e c t i n g C o w s , C o o p e r a t i v e s , C a p i t o l H i l l , & C o n s u m e r s
National Milk Producers Federation
12Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
CWT PROGRAM – IMPACT
Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
13
Cooperatives Working Together (CWT) benefits all U.S.
dairy producers by:
Helping maintain U.S. exports when world prices are below
domestic prices
Making U.S. a more reliable export supplier
Helping maintain domestic milk prices when world prices
are lower
Focusing on milkfat-containing products: Butter, WMP and
American-type cheese
75%
100%
125%
150%
175%
200%
225%
Oct-14 Nov Dec Jan-15 Feb Mar Apr May
U.S
. P
rice
as %
of
Wo
rld
Pri
ce
, fo
b U
.S.
Source: CME, Rabobank, NMPF
U.S. and World Prices, 2014-2015Butter
Cheese
Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
2014 CWT Export Assistance
15
Another strong year: 1,285 requests from member coops 582 requests/offers accepted: 102.5 Mil. Lbs. Cheddar, Jack, Gouda cheese
About 2/3rd of American-type cheese exports
53.8 Mil. Lbs. Butter Nearly half of total US butter exports
34.7 Mil. Lbs. Whole Milk Powder Largest ever WMP exports
2.5 billion pounds milk equivalent, milkfat basis
2015 May Be CWT’s Most Important Year Yet Thanks to continuing investment of dairy farmer
members of 37 cooperatives and many individual farmers: CWT will provide needed assistance to maintain and
grow exports in 2015 Will be important to offset:
Weaker world prices Rising US milk production and falling domestic prices
Unlike 2009, CWT export assistance will be active, helping maintain US share of world markets
Animal Care
Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
20
C o n n e c t i n g C o w s , C o o p e r a t i v e s , C a p i t o l H i l l , & C o n s u m e r s
National Milk Producers Federation
Environmental Issues
| Connecting Cows, Cooperatives, Capitol Hill, & Consumers
21
Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
EPA “Waters of the U.S.” Proposal
22
Waters of the U.S. definitions Conform with U.S. Supreme court cases
Scientific basis for connectivity
Need certainty in regulation
Broad agricultural opposition
Interpretive Rule on 56 NRCS Conservation
Practices NMPF requests withdrawal
Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
Yakima Valley, WA Court Case
23
Federal court ruling last week would apply
federal RCRA law to manure Would treat manure as solid waste subject to RCRA
regulations on disposal
RCRA exempts manure when applied as fertilizer
Court said defendants applied beyond agronomic rates
and improperly stored manure – allowing it to leak into
ground water
Precedent setting decision with broad
agricultural implications if it stands
Case now moves to trial phase where Court will
order remedies
Environmental Issues
Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
24
With the growth and
consolidation of farms,
how can we turn “waste”
from a cost to a benefit?
Increasing State & Federal
Regulations
Customer Concerns
Anaerobic Digesters &
Nutrient Recovery Plans
NACWA MOU
C o n n e c t i n g C o w s , C o o p e r a t i v e s , C a p i t o l H i l l , & C o n s u m e r s
National Milk Producers Federation
Thank you
25Southern Dairy Conference | Connecting Cows, Cooperatives, Capitol Hill, & Consumers | January 20, 2015
$23.50
$24.90
$25.20 $25.30
$24.20
$23.20 $23.30
$24.10
$25.70$24.90
$23.00
$20.30
$18.00
$16.50
$15.50$15.20 $15.30 $15.50
$16.00
$16.70$17.20
$17.70 $17.80 $17.60
Based on CME Group futures settlement prices, January 16,
2015$14
$15
$16
$17
$18
$19
$20
$21
$22
$23
$24
$25
$26
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
Do
llars
per
cw
t. a
t avera
ge t
est
U.S. All-Milk Price: 2014-2015
2014 actual
2014 forecast
2015 forecast
Pre-2014 record = $22.10
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