National Dairy Producers Organization

A new organization in the dairy industry is the National Dairy Producers Organization. Headquartered in Fresno, California, the NDPO was organized last September. The primary organizer is Tom Van Nortwick, editor of Agribusiness Dairyman magazine.

The NDPO seeks to represent dairy producers regardless of size or region. The mission of the NDPO is to influence dairy policy discussions—with the goal of improving profitability for producers. The organization has formed a board of directors, and is in the process of forming state delegations.

The board chair is Bill Rowell. Readers of this blog will recognize Mr. Rowell. Together with his brother Brian Rowell, Bill is involved in Green Mountain Dairy in Sheldon, VT, which was Vermont Farm of the Year in 2008. The Yankee board and staff toured Green Mountain Dairy last summer. Bill Rowell has been active in recent dairy policy discussions through Dairy Farmers Working Together.

Click here for more information (1 MB PDF file) about the National Dairy Producers Organization including a membership application.

News articles about the formation of the National Dairy Producers Organization:
The Evening Sun 10/11/10
The Country Today 11/10/10
Capital Press 11/19/10

UPDATE 1/04/11: Additional information about the National Dairy Producers Organization and more links can be found in the first comment.

UPDATE 1/13/11: The NDPO has approved a Contract with Producers which states its positions.

UPDATE 1/27/11: The NDPO will hold a conference call specifically for Vermont dairy producers on Thursday, Feb. 3 at 8:00 PM. The call in number is 424-203-8000, the participant code is 327974 #. For more information contact Bill Rowell.

UPDATE 1/27/11: The NDPO will hold its first annual meeting at the World Ag Expo in Tulare, California, on Feb. 8-10. All dairy producers are invited to attend. For more information contact Bill Rowell.

Two Senior Management Positions Open

We have openings for two senior management positions on our staff: a Senior Vice President/Regional Manager and a Chief Financial Officer. Details on our web site here:

Career Opportunities

The SVP/Regional Manager position is for our Northern Region. This position is to replace Ken Buzzell who is retiring next March after nearly 30 years of service.

The CFO position is a new position. We have not had a senior manager with that title since 2003.

If you know of anyone who might be a good fit for either position, please feel free to refer them to the link above. Anyone with questions may contact either Ruchel or me.

LGM-Dairy Update

Below is the second report from a dairy farmer using Livestock Gross Margin insurance (LGM-Dairy):

LGM-Dairy Blog Update

It has been awhile since I last wrote, but I thought I would write an update with our latest.

I think since I last wrote, LGM-Dairy has picked up a lot of interest and awareness. I know it was a topic of conversation with my husband’s family at Thanksgiving. His cousin was thinking of signing up for it and found out that there was only two contracts in the whole state that had been signed up till then – you guessed it, ours!

We shared our strategy with him – basically to maintain some sort of coverage at all times, or for however long we can. But really, we’re just testing it all out! We are using the default feed rations and trying out 100 cwts per month of coverage.

We should find out what happens for the December actual margin in the next few days. We first signed up in October, so December is our first month of coverage.

We also signed up in November for January margin coverage. We did the same thing that we did the previous month. However, we did change things up for the December sign-ups. A bunch of changes have been made and put into place for the program starting with applications completed in December.

• You no longer pay the premium up front, but rather at the end of the premium. Boy, does that take a hurdle out of signing up! For our low level of coverage- 100 cwts - the premium was not too bad for one month. But if we wanted to consider signing up more than one month, ten for example, that means we would have had to pay ten times what we were!
• There is a subsidy to go against the premium now, but you have to sign up for a minimum of two months. So, we signed up 100 cwts for two months – February and March. In the future I think we may look to sign up for more consecutive months.
• There are also deductibles that you can take off the top to help with your premium if you are signing up a lot of margin coverage. With our 25 cows, 100 cwts actually ends up being 22% of our total monthly milk production. We may look to increase that somehow – whether its overlap coverage so at any given time 44% of our margin and/or to simply increase the cwts of coverage.>

Another consideration we may make at some point is to figure out how our feed ration compares to the default and if it would advantageous to convert the energy in our ration and use our own.

I’m excited that the program is catching on. No doubt volatility is here to stay – even if we do reform milk pricing in the U.S. A paper that was put out by Mark Stephensen and Chuck Nicholson that analyzed the different policy proposals showed different levels of impact on a future projected price. One thing was true of all the proposals, however, while volatility may have been lessened, it was not eliminated.

There are tools out there already existing like LGM-Dairy and there are more to be created I’m sure to help alleviate this risk. I don’t want to wait for reform that may or may not happen. We’re taking whatever steps right now to try to manage the swings better. Someone once said, “If it is to be, it is up to me.”

************************************************************************
Many thanks to our anonymous farmer for sharing this experience with us!

See also:
Testing LGM-Dairy (the first report in this series)
LGM-Dairy Calculations (online LGM Analyzer)

Anyone with questions may post a comment on any of these blog posts. You may also directly e-mail our insurance agent Shantel Thomas or me.

UPDATE 1/03/11: Shantel had a baby boy this morning! Both mother and son are doing well. Until Shantel returns from maternity leave, Yankee's contact for crop insurance and LGM-Dairy insurance is Jeremy Forrett of Crop Growers. Anyone with questions can e-mail Jeremy or me.

AgEnhancement Grants

The Farm Credit Northeast AgEnhancement Program recently awarded grants totaling $32,360 to 16 organizations. The grants are intended to promote northeast agriculture. The recipients were:

New York Farm Bureau Young Farmers Program - $1,000 to support a leadership development conference to provide educational and motivational sessions for young farmers.

Down East Business Alliance - $1,000 to support workshops and speakers at the Maine Farmers’ Market Convention. The event provides direct marketing training for farmers and farmers’ market managers.

Vermont Holstein Association - $2,000 to support their Northeast Show Calf Summit in April. This event brings together over 150 youth from New England and New York to educate both farm and non-farm youth on animal agriculture and the selection and care of dairy heifers.

Harvest New England - $2,000 to support the 2011 Harvest New England Agricultural Marketing Conference & Trade Show. The funds will be used for speaker sponsorships. The focus and goal of the conference is to provide the participants with the tools and skills needed to increase markets for agricultural products and grow New England agriculture.

Northeast Organic Farming Association of Vermont (NOFA–VT) - $500 to support their Annual Winter Conference, which brings together nearly 1,500 organic farmers, to take part in a variety of workshops.

University of New Hampshire (UNH) Dairy Club - $3,500 to support the Northeast Student Affiliate Animal Agriculture Academic Triathlon. This event is expected to draw 160 animal science or agricultural college students from 13 colleges and universities in the Northeast.

New York Holstein Association - $1,000 to support their annual New York Spring Dairy Carousel which offers judging contests to develop leadership skills and increases knowledge of cattle.

Cornell Dairy Fellows Program - $5,000 to provide an in-depth understanding of the dairy industry for its current class of Fellows. Cornell Dairy Fellows is a comprehensive undergraduate program that is nationally recognized as one of the best training opportunities for students considering careers in the dairy industry.

Granite State Association of FFA - $1,000 to support a leadership training conference for high school students of agriculture. The weekend-long program will include sessions on goal setting, character development, teamwork, agricultural issues and leadership skills.

Northeast Organic Farming Association of New York (NOFA-NY) - $500 to support the NOFA-NY Winter Conference held in January. The conference will provide workshops on farm profitability and business planning, organic farming methods, marketing, and other topics.

Connecticut Agricultural Education Foundation - $3,000 to purchase selected books for educating about agriculture. This Ag Literacy program is in support of its mission of fostering awareness, understanding and a positive public perception of agriculture, and an appreciation of Connecticut’s agriculture and the food, fiber, flower and fuel system.

New York State Maple Producers Association - $1,500 for the Maple Producer’s Association Urban Youth Education project. This ongoing project brings local maple agriculture to the urban elementary/middle school students of New York City.

Massachusetts Agriculture in the Classroom - $2,860 to initiate a new effort for educators who are new to classroom teaching or who work in low-income urban communities. The new Agriculture in the Classroom scholarship initiative for teachers will promote an understanding of agriculture and develop connections from the farm to the classroom. The teachers will then educate children about modern day agriculture.

New Jersey Agricultural Society - $5,000 to support the New Jersey Agricultural Leadership Development Program which provides young farmers and agri-business professionals with the training and support to become leaders in the agricultural industry.

Northeast Livestock Exposition - $2,000 to support this group’s Youth Events segment of the Exposition which will focus on the variety of agricultural careers available to youth in the Northeast. Skill development, knowledge of the many facets of agri-business, leadership and teamwork skills are the focus of this three day event.

Northeast Organic Farming Association of New Hampshire (NOFA-NH) - $500 to support their one-day Winter Conference to provide training, mentoring and resources to new and beginner farmers and the next generation of farmers; children and youth and those educators who have successfully integrated agriculture into academic curricula.

The Farm Credit Northeast AgEnhancement Program is a shared effort of Farm Credit East, Yankee Farm Credit, Farm Credit of Maine and CoBank. Grants are awarded in April, August and December each year. For 2010 the program awarded 41 grants totaling $92,160. Since its inception in 1996 the program has awarded 448 grants totaling $1.2 million.

Celebrating the Fruits of Local Agriculture

Each Christmas Yankee directors and employees celebrate the diversity of local agriculture with a selection of tasty food products from farmers in Yankee's territory. This year's selection included:

Sheep Sticks – from Tom Duclos & Lisa Thompson's operation on Sheep Farm Road in Weybridge, VT
Maple Cream – from James & Gayle Rowe, Mountainside Maple, Huntington, VT
Pickles/Beets – from Sandy Aylward, Fairfield ,VT
Gouda or Jack Cheese – from Taylor Brothers Creamery in Meriden, NH
Sparkling Cider – from Poverty Lane Orchards & Farnum Hill Ciders in Lebanon, NH
Maple Candy – from Couture’s Maple Shop in Westfield, VT
Horseradish – from Jed’s Maple in Westfield, VT
Pizzelles & Rolls - from "A Little Organic" by Susan Fournier of Swanton, VT

Once again we extend our sincere appreciation to all farmers in Yankee's territory for the wonderful bounty from their farms.

LGM-Dairy Calculations

We recently started following the experience of a dairy farmer using Livestock Gross Margin (LGM-Dairy) contracts. Click here for the first post in this series.

Let's see if we can duplicate these numbers from that post: "Our premium is $40 for the month and we are insuring $1,468 gross margin." Recall that the example in that post was to insure 100 cwt with no deductible. The contract was entered into in October 2010, and one month was insured - December 2010.

Prof. Brian W. Gould of the Department of Agricultural and Applied Economics at the University of Wisconsin-Madison has helpfully created an online LGM Analyzer:

http://future.aae.wisc.edu/lgm_analyzer_new/

Open the LGM Analyzer at the link above in a new window and follow these steps:

• Select "Premium Estimator" tab
• Change the insurance contract month to 2010 October
• Change the deductible to $0.0
• Select "Default" for feed values

In the table:

• Uncheck the box in the header that says "Coverage Month"
• Check the box in that column for "Dec 2010"
• On the row for "Dec 2010" enter 100 for Milk Qty.
• On the same row, the column for "% covered" should autofill to 100

The three columns to the right should now show the insured gross margin: $11.06/cwt or $1,106 total. So why does the post say $1,468? That is (approximately) the "Milk Revenue" in the third column. I get $1,463.

Now scroll down and click the "Calculate LGM Premium" button. You will see that the premium is $0.40/cwt or $40 total. Voila!

Director Nominations

It's that time of year again when Yankee's Nominating Committee begins selecting director candidates for the elections in April 2011. There will be three elections, one director in each of the three regions. Each position is for a three year term. If you would like to be considered for nomination, please contact a member of the Nominating Committee at the numbers below or call your local branch.

Region #1 (Chittenden, Franklin, Grand Isle counties, Vt.; Essex, Clinton counties, N.Y.)
Arnold Mercy 802-326-4200
Wynn Paradee 802-524-4202
Mark Wrisley 518-963-4039

Region #2 (Caledonia, Essex, Lamoille, Orange, Orleans, Washington counties in Vt.; Coos and Grafton counties, N.H.)
Richard Hall 802-229-6342
Richard Martin 802-328-4120
Patrick Waterbury 802-785-4753

Region #3 (Addison, Bennington, Rutland, Windham, Windsor counties, Vt.; Cheshire and Sullivan counties, N.H.)
David Ainsworth 802-763-8017
N. Kimber Harvey 802-483-6130
Bruce Bascom 603-835-6361

If you have any questions about the purpose or the procedures of the Nominating Committee, please contact John Peters, VP Operations at 800-639-3053.

You can find general information about the director nomination process and the role of directors on the Farm Credit Administration's web site.

Testing LGM-Dairy

Livestock Gross Margin insurance for dairy farmers (LGM-Dairy) has been available since 2008, but there has been little interest in it until recently. In October we worked with a dairy farmer who wanted to try a small contract—just to see how it worked, with real numbers. The farmer agreed to anonymously write about their experience and let us discuss it here on the blog.

We are pleased and excited to follow this farmer's experience. We hope this will be an educational experience for the dairy community. If you have questions as we go along, please feel free to post a comment. You may also directly e-mail our insurance agent Shantel Thomas or me.

Here is the farmer's first report:

Testing LGM-Dairy… Protecting Against the Squeeze

I’m a numbers person. My fiancé is not. However, we are both dairy farmers. As a numbers person who spends a lot of time analyzing businesses, I know that one of the biggest drivers of profitability is driving gross sales. What makes up gross sales? Volume of production and price. As dairy farmers, while we determine how much milk we sell simply by how many cows we milk and how productive we get them, we have little control over the price that we are paid. Unless you are retailing your own product, this is one of the most frustrating things about the dairy farming business.

Up until a year ago I just raised heifers so I have only been watching what has been happening with various price risk management tools, (wishing I could actually use them). There are several available now, compared to a few years back. These choices are important as it seemed like the first few options that were out there did not quite fit our farm – 25 cows milking. Many tools seem to fit various larger farms of different scale – 150, 500 and 1,000-cow plus.

I first learned about LGM-Dairy about two years ago and it was very confusing. Monitoring its progress though, I did hear of a few farms that used it and who had experienced good results – a sufficient payout. However, there were still many drawbacks. It seemed to me that this product needed more testing.

In a recent newsletter about LGM-Dairy that I received, the author threw out the idea to test the program yourself with 100 hundredweights. My immediate thought was: how much would that cost? I did a little digging and found that the premiums range of course, depending on what you choose for a deductible but generally from $0.65 per cwt. downward. Well, shoot, that makes it only about $65 to try it out.

I shared what I learned with my fiancé and we decided to dig a little deeper. Couldn’t hurt! LGM-Dairy uses corn and soybean meal prices along with Class III milk prices in its gross margin equation. Well, we don’t grow corn on our farm and feed grass-based silage. Nothing against corn, it just does not like to grow where we are, though we are hopeful to try again sometime in the future. I didn’t know how our grass-based ration would work with LGM-Dairy. That, combined with a few more questions including how to sign up, led me to find a crop insurance agent. We found Shantel Thomas who works for Crop Growers, LLP at the Yankee Farm Credit office.

Shantel was able to answer our questions and explain that we could either convert our own ration or use a default ration to determine the gross margin we would be insuring. We chose the default because quite frankly, it was the easiest. Essentially, we would be insuring a national gross margin, not necessarily what we have on our farm. I think the drawback to this is that if we achieve a better gross margin ourselves than the national average in a lower feed cost, then we are not insuring as much margin as we could. But, hey, it’s a place to start.

So, that’s what we are doing: testing out the program for one month – December 2010, insuring 100 hundredweights, no deductible, for $0.40 per cwt. and using the default feed ration. We faxed over our application and a copy of the check to Shantel and put originals in the mail during the short sign-up window which is the last business Friday and Saturday of October from 4:30 pm Friday to 9:00 pm Saturday. Our premium is $40 for the month and we are insuring $1,468 gross margin. Our expectations are not that we will get a higher price in the milk check, but rather that we are protecting ourselves against higher feed costs and a lower milk price that may actually occur in December.

We plan to do the same thing at the end of November to cover January margin. In the future, we would consider insuring more hundredweights and potentially for a longer period of time. That newsletter I mentioned earlier also explained some recent changes that are coming, namely subsidies and the timing of premium payment. Currently you have to pay the premium at the beginning of the policy and starting with contracts made in December, you’ll pay at the end. Seems to make more sense to me, matching closer to when you actually get paid for your milk.

We are happy to share our experience with other dairy farmers. It seems that as an industry, we may be on the cusp of some changes in the way we market and get paid for our milk in this country. However, if changes are made, it does not look like they will happen very quickly – the 2012 Farm Bill maybe, but there is no guarantee the bill would actually pass in 2012 or even 2013 and then any new program would need funding to be worked out anyway. We would rather try something that has the potential to help now than wait on anyone else any longer.

What We Offer

The following column appears in the Fall 2010 issue of Financial Partner magazine:

What We Offer

At our annual meetings last spring I talked about something that your board of directors and management added to our planning process this year. We tried to capture in three short phrases the most important things that Yankee offers to its customers. Here’s what we came up with:

1. Readily available capital
2. Competitive interest rates and services
3. Employees who represent our values

What do we mean?

Readily available capital

We are proud to be part of the Farm Credit System, which has been serving rural America since 1916. Within the Farm Credit System, Yankee’s relationship with CoBank helps us meet the credit needs of our customers. The Farm Credit System, CoBank and Yankee are all well-capitalized and profitable, which enabled us to operate throughout the financial crisis of 2008 without a hitch.

Competitive interest rates and services

Our interest rates are competitive, even after our October 1st increase of 0.25% in variable interest rates. Our rates look even better considering patronage refunds. We have paid patronage refunds every year since 1995.

Our financial services are also competitive, and include recordkeeping, income tax preparation, appraisal services, credit life insurance and crop insurance.

Employees who represent our values

It is our employees who make Yankee special. We have a talented group of employees, ranging from recent college graduates to veteran employees with more than 35 years of experience. One of the values we talk about is the importance of relationships and our pride that we are “Building Relationships That Last Generations.”

It’s about the customer

We exist to serve our customers, and to a considerable extent we are a reflection of our customers. Earlier this year I heard U.S. Secretary of Agriculture Tom Vilsack say that “the value system of this country is centered in Rural America.” Our customers represent those values. We at Yankee are fortunate indeed to work with such outstanding customers.

A final word

This is our final issue of Financial Partner magazine. Next year we will replace the magazine with quarterly newsletters. One reason for making this change is our desire to be more “local.” Keeping our business in our local economy is a win/win situation for everyone. For our 2009 annual report cover, which featured Monument Farms, we switched to a local designer and printer. We were very pleased with their work and we’ll be using the same designer for our newsletter. Look for our first newsletter in March.

We will also continue to communicate via our web site (http://www.yankeeaca.com/) and our blog (yankeeaca.blogspot.com). Please stop by either of those two Internet sites and let us know what’s on your mind. You can also send e-mail to me directly at george.putnam@yankeeaca.com.

Click here for the complete Fall 2010 issue of Financial Partner magazine (3 MB PDF file).

Ag Career Day

Rob Guay and Kyle Lussier attended the 2nd Ag Career Day at Miner Agricultural Institute. The idea is to get “youth interested in careers in Ag related careers in Clinton County.” The event brought over 250 area high-school students through a series of stations in which they were engaged in discussions with professionals in agricultural related fields or participated in presentations relating to agriculture. The interactive stations included presentations on careers in forestry, watersheds, soil sampling and pH, vegetable farming, alternative energy and the Ag economy. The event was a great success in which a large number of both students and chaperones/parents interested in agriculture were given the opportunity to explore the various possibilities which are present in the agricultural field. It's a great event which reinforces that you don’t need to shovel manure to work in agriculture… there are other Ag jobs which offer college bound students an opportunity to work in Ag.

The event has grown considerably from the initial session. Plans are to hold it every two years for high-school kids in order to give them two chances to go in their high-school career. Organized by Cornell University Cooperative Extension, 4-H and Miner Institute. Sponsored by a long list of area businesses including YFC.

4-H Foundation of New Hampshire

Ken Nelson, Senior Loan Officer from the White River Junction office, recently represented Yankee at the 52nd Annual Meeting of the 4-H Foundation of New Hampshire. This year the meeting was held October 19, 2010 at Alan’s Restaurant in Boscawen, NH.

The 4-H Foundation helps support the many 4-H programs in New Hampshire which involve over 20,000 youth and 2,500 adult volunteers in all aspects of 4-H. Over the past year, the Foundation has provided financial support of more than $100,000 to help fund these programs.

During the meeting thanks and recognition was given to the people who have volunteered their time and talents working with 4-Hers over the years. Special recognition was given to four women who have each worked with the 4-H youth for more than 40 years. Quite an honor for these exceptionally dedicated people.

Several 4-Hers made presentations highlighting projects they have worked on or educational trips they have taken over the past year. Two teens spoke enthusiastically about their participation in a program designed to provide various activities, entertainment, life skills training and many other types of support to New Hampshire children who have a parent or parents in the military. 4-H partners with several other organizations in this program titled Operation: Military Kids (OMK). There are more than 4,000 children in New Hampshire’s military families at the present time. This is one of the many projects that the 4-H Foundation supports.

Yankee Farm Credit supports the 4-H Foundation of New Hampshire as an “Achiever” donor.

CoBank's Outlook Newsletter

CoBank publishes a monthly newsletter called Outlook. Each issue features an interview with an expert on a topic of interest. Following is a list of this year's issues:

Jan - Assessing Inflation Risk, Todd Buchholz
Feb - The Case for Free Markets*, George Melloan
Mar - Double-Digit Growth — No Matter What, Michael Treacy
Apr - Economics and Population Growth, Robert Fogel (Nobel prize 1993)
May - Outlook for the Eurozone, Judy Shelton
June - Tax Policy and the U.S. Economy, Leonard Burman
July - Protectionism vs. Free Trade, Douglas Irwin
Aug - Keynes, Hayek and the Great Stimulus Debate*, Russ Roberts
Sept - Russia's Future in the World Economy, Bruce Parrott

*mentioned in previous blog posts

The September issue includes a special report on the outlook for the U.S. livestock sector including dairy. The livestock sector is being heavily influenced by current events in the crop sector, including Russia's recent embargo on wheat exports.

Interest Rate Changes 10/1

The following letter is being mailed to members with the next monthly billing statement:

September 16, 2010

Dear Member,

I am writing to let you know that all variable interest rates to members will increase by 0.25% effective October 1, 2010.

There are two primary reasons for this increase. First, market interest rates for short-term debt have increased slightly in recent months. This has increased our cost of funds. Second, the risk profile in our loan portfolio has increased in the past two years as a result of the general economic downturn which has affected nearly every industry we serve. More risk calls for higher interest rates to compensate for the increased possibility of default and loss.

We understand that many of our borrowers are facing difficult times. We lowered our variable interest rates considerably during the financial crisis of 2008, to the lowest rates in our history. We waited as long as possible before increasing rates, but we now find it necessary to increase rates to maintain the Association’s strong financial position. We believe that this modest increase of 0.25% for all borrowers, our first general interest rate increase since July 1, 2006, is appropriate given the increased level of risk in our loan portfolio.

Please feel free to ask your loan officer any questions you may have about your interest rate.

Thank you for your continued patronage and best wishes for your financial success.

Sincerely,

George S. Putnam
President and CEO

Health Benefits of Maple Syrup

You always knew that maple syrup was good for you, right? Recent research indicates that this might indeed be true. A researcher at the University of Rhode Island's College of Pharmacy has found numerous anti-oxidant compounds in maple syrup:

URI pharmacy researcher finds beneficial compounds in pure maple syrup

Click here for the scientific abstract. The research used Canadian maple syrup, but I'm sure that maple syrup from Vermont, New Hampshire and New York has the same benefits!

Liberty Hyde Bailey

Liberty Hyde Bailey was an influential leader of the Country Life Movement in the late 1800s and early 1900s. He founded Cornell University's College of Agriculture and was its first dean. In 1908 President Teddy Roosevelt selected Prof. Bailey to chair a National Commission on Country Life.

The 1909 Report of the Commission on Country Life was influential in the development of many institutions that we know today. It led to the Smith-Lever Act of 1914 which created the Cooperative Extension Service. It profoundly affected the evolution of 4-H. And it led to the creation of the Farm Credit System in 1916.

Much of Prof. Bailey's work built on the foundation of the land grant university system—see the earlier post about Justin Smith Morrill. Cornell University is New York's land grant university. It has both a Morrill Hall and a Bailey Hall.

Cornell further honors Prof. Bailey with the Liberty Hyde Bailey Leadership Society. Several northeast Farm Credit employees are members of this society, including Geoff Yates of Yankee Farm Credit. Many employees of northeast Farm Credit are graduates of Cornell University, including Yankee's Geoff Yates, Loren Petzoldt, Kelly Langmaid and Clara Hall.

The influence of Cornell University on Farm Credit is strong and it began with Liberty Hyde Bailey.

Justin Smith Morrill

Justin Smith Morrill was born 200 years ago in Strafford, Vermont. He represented Vermont in the U.S. Congress for 44 years, first as a representative (1855-1867) and then as a senator (1867-1898).

Senator Morrill is known as the father of the land grant university system. He authored the Morrill Land-Grant Colleges Act which provided federal funding for land grant colleges and universities. But he never attended college himself. Many land grant universities today have a Morrill Hall in honor of Senator Morrill, such as this one at UVM.

Senator Morrill is in the Vermont Agricultural Hall of Fame.

In 1848-1851, before he became a Member of Congress, Mr. Morrill constructed the Morrill Homestead in Strafford. This has been a National Historic Landmark since 1960, and is well worth a visit. There is a modest fee for the house tour, but the self-guided grounds tour is free and there is an interesting interpretive display about Senator Morrill's life and accomplishments in the carriage barn. The site is open only part of the time, so be sure to check the official web site for hours of operation.

The grounds of the Morrill Homestead are beautiful, and one of the many interesting things they contain is this:

The map of the grounds identifies it only as a "kettle." The photo above is from the Friends of the Morrill Homestead web site and the caption there says only: "This cistern is a favorite hangout for frogs in the summer." I think it is a potash kettle.

Back on the subject of land grant universities, many employees of northeast Farm Credit are graduates of one of the land grant universities in New England, New York and New Jersey. It is no surprise that Yankee Farm Credit has many UVM graduates, as well as graduates from the University of New Hampshire, the University of Maine and Cornell University. Elsewhere in northeast Farm Credit, there are also graduates of Rutgers University.

Most land grant colleges and universities are public institutions, but there two exceptions. Cornell University is part public and part private. The other exception may surprise you—the Massachusetts Institute of Technology. Yankee Farm Credit is pleased to also have a graduate of MIT on its staff, Farm Tax Assistant Randy Smith in our Newport office.

Progressive Dairyman Poll on Dairy Policy

Vermont's three Members of Congress have sponsored two bills on dairy policy (see Dairy Policy Bills). There are also other dairy policy proposals under active consideration. Some have been introduced as bills in Congress and some have not.

Progressive Dairyman magazine recently provided a roundup of the various proposals and conducted a poll. The following link is a good place to start, then follow the links from there for more detail:

PD POLL: Dairy Reform [Updated July 2]

The proposals included in the Progressive Dairyman poll were:

• Federal Milk Marketing Improvement Act of 2009 (S.1645) aka the Specter-Casey Bill
• Farmers Union proposal
• Holstein USA Plan (Dairy Price Stabilization Plan)
• NMPF Plan (Foundation for the Future)
• Dairy Growth Management Initiative
• Dairy Price Stabilization Act of 2010 (H.R.5288) aka the Costa Bill
• Ration-all
• Strategic Dairy Reserve

(Progressive Dairyman did not include the DPI Plan or S.3531.)

The "Holstein USA Plan" aka the Dairy Price Stabilization Plan is the plan favored by Dairy Farmers Working Together (see Growth Management Plan).

Progressive Dairyman has a concise side-by-side summary of three of the above plans (Specter-Casey, the Dairy Price Stabilization Plan and the NMPF Plan): Part 1 from the 7/21/10 issue and Part 2 from the 8/11/10 issue.

The results of the PD poll were: Specter-Casey 67%, NMPF 15%, Dairy Price Stabilization Plan 12%, all others 6%. However, the magazine editors felt that the results were skewed by a Pennsylvania consumer write-in campaign as they explain here.

This raises an interesting question. How should we decide dairy policy? Should we be influenced by a consumer write-in campaign? Or...Should we trust the experts?

Should we trust the experts?

No one can know everything, and when we are confronted with a problem outside of our comfort zone we often defer to the judgment of experts in that area. Are the experts necessarily better?

The latest CoBank Outlook newsletter features an interview with Prof. Russell Roberts of George Mason University about the economist Friedrich Hayek. (Related posts: Keynes vs. Hayek - The Non-Rap Version and Keynes vs. Hayek - The Rap Version.)

The Outlook newsletter quotes Prof. Roberts as follows:

"The underlying insight of Hayek is to be skeptical of the ability of experts and individuals to steer complex systems."

Long-time readers of this blog may recall a post two years ago that discussed similar thoughts by the physicist Richard Feynman: What is science?

"Learn from science that you must doubt the experts."
"Science is the belief in the ignorance of experts."
"The experts who are leading you may be wrong."

Hayek and Feynman were both PhD's. Hayek won the Nobel prize for economics in 1974. Feynman won the Nobel prize for physics in 1965. So, there you have it. Two experts advising us to be skeptical of experts. Surely there's a little humor in that.

There was not much humor, however, in the financial crisis of 2008. That crisis provided a clear example of the dangers that Hayek and Feynman were talking about. A year ago I wrote about the dangers of relying too much on experts, in this case "experts" armed with mathematical models: What went wrong?

Keynes vs. Hayek - The Non-Rap Version

CoBank's latest Outlook newsletter features an interview with Prof. Russell Roberts of George Mason University and the Hoover Institution at Stanford University:

Keynes, Hayek and the Great Stimulus Debate

The "Great Stimulus Debate" is about whether or not the recent $862 billion federal stimulus package was a good thing. The discussion draws on the views of two famous economists from the last century—John Maynard Keynes and Friedrich Hayek. The Outlook interview with Prof. Roberts is a good discussion and I recommend it.

Earlier this year Prof. Roberts co-produced a rap video on this subject:

Keynes vs. Hayek - The Rap Version

The video is both entertaining and educational and I recommend it, too!

The Importance of Financial Records

The current issue of Progressive Dairyman has an article by Scott Plew, CPA about the importance of good financial records for dairy farmers:

Are you being progressive enough with your finances to survive a tough market?

Mr. Plew works with Idaho dairy farmers, but his comments apply to Northeast dairy farmers, too. He writes that "critical changes in business practices" are needed, and he draws on lessons from other industries. He recommends preparing a monthly budget, comparing actual results to budgeted results, analyzing variances, and making changes "mid-stream if appropriate for the business to meet its desired result – profitability."

Mr. Plew's comments are consistent with, and build on, the letter that I sent to Yankee members about financial records last December.

Vermont Ag Hall of Fame

Four individuals were inducted into the Vermont Agricultural Hall of Fame on September 1st at the Champlain Valley Exposition:

Senator George Aiken (deceased)
Catherine Beattie of Danville
Wilson "Bill" Clark of Pawlet (see J.R.H. 33)
Ryle Dow of Georgia (deceased)

Congratulations to the 2010 inductees to the Vermont Agricultural Hall of Fame!

This was the 8th induction ceremony. Here is the program from the ceremony, which lists all of the past winners:

Merrimack Farmers' Exchange

The Merrimack Farmers' Exchange was a fixture in the agricultural economy of New Hampshire from 1920 to 1982. The Exchange sold feed and other supplies to farmers, and it also provided advisory and consulting services. It was more than a business, it was part of the rural culture, almost like family. The Exchange operated as a cooperative. Click here for a brief history.

A Window in Time: Merrimack Farmers' Exchange in Crisis and Transition is a recently published book about the last years of this unique organization. The cover of the book shows a newspaper column about the dramatic events in the final years of the Exchange. That column was written by Yankee Director Steve Taylor, then a newspaper reporter for the New Hampshire Times. A Window in Time was written by Charles F. Sheridan, the outside counsel for the Exchange. Click here to order the book from the New Hampshire Historical Society.

In 1982 the assets of the Merrimack Farmers' Exchange were sold to Blue Seal. You may have noticed the Blue Seal feed mill at the intersection of I-89 and I-93 in Concord. That used to belong to the Exchange.

The story of the Merrimack Farmers' Exchange reminds me of the 1991 movie Other People's Money, starring Danny DeVito, Gregory Peck and Penelope Ann Miller. Both stories involve a corporate raid. The movie explores the issues on all sides with humor and insight.

Dairy on the Moove

Last week at the Orleans County Fair the public got a new look and taste of dairy. Dairy on the Moove is a trailer equipped with a pasteurizing and cheese making vat. Fair goers were able to watch the milk from the dairy cows exhibited at the fair be made into cheddar cheese curds while munching away at the “fruits” of the cheese maker’s labor.

This unique solution came about from a common problem. Last year just prior to the fair season fairs and dairy producers were notified by the milk co-op that they would not be picking up milk at the fairs any longer. The directors at the Orleans County Fair and others scrambled to find a solution, but were only able to sell the milk at a reduced price for pigs and calves or dumped it.

This winter a few of the Orleans County directors, including Kelly Langmaid from the Newport Farm Credit office, got together and started brainstorming ideas, thus the birth of Dairy on the Moove. This committee was able to raise $75,000 from industry support, including a donation from Yankee Farm Credit, to put this mobile unit together. The idea is the unit will go from fair to fair equipped with a cheese maker and helper(s). Other county fairs in Vermont, New Hampshire, New York, and even Eastern States Exposition in Springfield, MA have expressed interest as a way to utilize at least a portion of the milk produced to educate the public about the dairy industry. Future plans may utilize further milk with additional products such as ice cream.

The cheese curds were a big hit and sold out every day of the fair. Included are a few pictures of the unit as well as the process and the final product. The unit was run by the committee after a crash course in cheese making, as well as Marisa Mauro, owner of Ploughgate Creamery in South Albany, VT and Tucker Purchase of Fairmont Dairy in Craftsbury, VT. A special thanks to the sponsors for believing in the idea when there were many that did not. Also, to Marisa and Tucker for being crazy enough to love the idea and willing to fight to make it happen! The unit will make an appearance this week at the Caledonia County Fair in Lyndonville, VT. Come on out and try some squeaky cheese!

The vat:


The system:


Cutting the cheese:


Curds and whey:


Kelly and Tucker flipping slabs:


The final product!


Click here for the WCAX article on 8/19/10.

Click here for the article on the front page of the Burlington Free Press on 8/21/10.

Pictures and write-up submitted by Kelly Langmaid. Thanks, Kelly!

Farm Tour

Yankee Farm Credit directors and employees, as well as guests from CoBank, Financial Partners Inc. and the Farm Credit Administration, toured several farms and agricultural businesses in northwestern Vermont on Wednesday, July 21st.

A big thank you to our hosts for taking time out of their busy day to show us around! Also, a big thanks to the staff in our St. Albans office for arranging an interesting tour.


Our first stop was Lamell Lumber in Essex, VT. The company was formed in 1965 by Richard Lamell, and is now operated by son Ronald and his sons Ron Jr. and Keith. It is a pine and hemlock mill with dry kilns. They also sell bagged shavings, processed bark mulch and storage sheds. They were selected as Outstanding Sawmill Operator of the year in 2008 by the Northeast Lumberman's Association.


Next we travelled to Sam Mazza's Farmstand and Greenhouse in Colchester, VT. Sam operates the wholesale business and several members of the next generation operate the retail business. We toured some of the 155,000 sq. ft. of greenhouses and 400+ acres of vegetables. It is the largest vegetable business in Vermont. There is also a retail stand open year around which includes a bakery and gift shop. They host several festivals each year and have a corn maze. Our group enjoyed eating lunch beside the petting zoo under cover of the pavilion building.


Our third stop on the tour was Green Mountain Dairy in Sheldon. This 1,000 cow dairy farm is operated by Brian and Tammy Rowell with assistance from their children Matthew and Megan and Brian's brother Bill Rowell. They were the 2008 Vermont Dairy Farm of the Year - Green Pastures Award. The farm includes a methane digester which powers a 300 kW electric generator. They are a CVPS Cow Power producer of renewable energy.


Our last stop was the Bourbeau and Sons farm in Swanton, VT. Alan and Kim Bourbeau own and operate the 225 cow dairy and 12,000 tap maple operation with the help of their two sons Justin and Eric. The maple operation has grown from selling sap to a modern sugarhouse built in 2006. Our group had the luxury of sampling some of the syrup — delicious!

The farm tour was a great opportunity to see some of the variety of farms and businesses that keeps agriculture in Yankee's territory thriving.

Dairy Policy Bills

I mentioned last month that Rep. Peter Welch is a co-sponsor of a House bill on dairy policy and that Sen. Sanders was circulating a draft Senate bill. Sen. Sanders has since introduced his bill with Sen. Leahy as a co-sponsor.

The House bill is H.R.5288 and is titled the "Dairy Price Stabilization Program Act of 2010." Info on Thomas and GovTrack. (Thomas is the official web site, but GovTrack is easier to use. It should be the same information, as GovTrack gets its information from Thomas.)

The Senate bill is S.3531 and is titled the "Dairy Market Stabilization Act of 2010." Info on Thomas and GovTrack.

Senators Sanders and Leahy will hold a press conference about S.3531 at the Lucky J. Holsteins Farm in South Burlington (John, Joyce and Todd Belter) at 10 AM on Monday, July 12.

More Thoughts on Interest Rates

The Wall Street Journal article referenced in the preceding post (Thoughts on Interest Rates) was published on April 10, 2010: Two Treasury Forecasts: a Grand Canyon-Size Gap (subscription may be required to access). The WSJ asked 18 forecasting teams on Wall Street for their predictions of the 10-year U.S. Treasury rate at year-end. At the time of the article the rate was 3.93%.

The article was primarily about the widely differing forecasts of two of the most respected names on Wall Street: Morgan Stanley predicted an increase to 5.5% while Goldman Sachs predicted a decrease to 3.25%. Goldman Sachs was one of only four teams to predict a decrease. The median prediction was an increase to 4.2%. So far Goldman Sachs is looking pretty good. Today's rate for the 10-year Treasury is 2.98%.

A good source of historical interest rate data is FRED (Federal Reserve Economic Data) at the St. Louis Fed. FRED has lots of other economic data, too—over 20,000 time series, all of which can be graphed and downloaded for further analysis. Here's a graph from FRED of the 10-year Treasury rate since 1962:

Thoughts on Interest Rates

The following column appears in the Summer 2010 issue of Financial Partner magazine:

Thoughts on Interest Rates

The feature article in this issue of Financial Partner magazine is about interest rates. Will interest rates go up? Should borrowers consider switching from variable to fixed interest rates? Members asked similar questions at our recent annual meetings.

Yankee’s variable interest rate depends on what happens in the short-term interest rate markets. Short-term interest rates are at historical lows. They have no place to go but up—the question is when and how much.

Yankee’s fixed interest rates depend on what happens in the long-term interest rate markets. Long-term interest rates are also low, but they are not at historical lows. Recently they have been declining. (But this could change by the time you read this.)

As I write this, our Tier 1 variable interest rate is 4.00%. The 10-year fixed rate for a Tier 1 borrower is 6.20% today (this rate can change daily). Should this borrower choose the variable or the fixed rate?

Let’s first consider short-term rates. As noted in the feature article, the consensus opinion is that short-term rates will likely increase, perhaps significantly, sometime in the near future. This is what I think, too, but it is worth noting that this is not certain. Short-term rates in Japan have remained low for the past 15 years! Here in the U.S. we are less than two years into our present period of low short-term interest rates.

Now let’s consider long-term rates. There is no consensus opinion on whether long-term rates will increase or decrease over the next few months. The Wall Street Journal recently published the results of a survey on this question. Of the 18 forecasting teams surveyed, 14 predicted an increase and four predicted a decrease. As noted above, the minority has been right so far—the long term rate in question has been declining.

If you think short-term rates will increase significantly in the near future, and you think that long-term rates are also going to increase, you might be inclined to switch to a fixed rate now. But if you think long-term rates are going to decrease, you would probably stay with a variable rate for now. Why fix now if you think you can fix later for less? And, of course, if you think that short-term rates won’t increase all that much, at least for a while (e.g., the Japan scenario), then you would probably stay with the variable rate.

Well, this is all getting complicated! It reminds me of a quote attributed to the famous Danish physicist Niels Bohr: “Prediction is very difficult, especially about the future.”

My advice is to make your own prediction. Your prediction is likely to be as good as mine or anyone else’s, even the experts. Keep in mind that even the experts don’t agree on predictions for long-term interest rates. And when the experts do all agree, as in their prediction that short-term interest rates will increase in the near future, they could still be wrong.

The important thing is to make decisions that you can live with, even if your prediction is wrong. As noted in the feature article, this depends on your personal tolerance for volatility and your financial condition.

And keep in mind that the most important decision a borrower makes about credit is not whether to choose a fixed or variable interest rate. It is deciding how much to borrow.

Click here for the complete Summer 2010 issue of Financial Partner magazine (3 MB PDF file).

See also the next post (More Thoughts on Interest Rates) for additional information and links.

Congressional Visits

On June 17th Yankee visited Congressional offices in Washington, DC. Participating were: Chairperson Paul Gingue, Vice Chairperson Rocky Giroux, Bob Smith and me. Bob Smith is a senior vice president of Farm Credit East who assists several associations with government relations.

We visited people in eight Congressional offices:

• Sen. Patrick Leahy and Adrienne Wojciechowski
• Rep. Bill Owens and Nell Maceda
• Kathryn Tanner in Sen. Kirsten Gillibrand's office
• Thomas Maloney in Sen. Jeanne Shaheen's office
• Lauren Tribble in Sen. Bernie Sanders' office
• Andrew Lattanner in Rep. Scott Murphy's office
• Sarah Levin in Rep. Paul Hodes' office
• Jake Oster in Rep. Peter Welch's office

Our main message again this year was that we are meeting the needs of our customers and doing business as usual, notwithstanding the continuing downturn affecting many of our customers, especially in the dairy and timber industries. We are lending money; our financial results are good; we continue to pay patronage refunds; and the Farm Credit System has not needed any government assistance. This message was well received.

Both the House and Senate have passed legislation for financial services regulatory reform, and a conference committee is currently negotiating the differences between the two bills. For the most part the Farm Credit System is not affected by this reform. However, we voiced our concern that one provision in the Senate version, the so-called Volcker Rule, could potentially have an adverse effect on the cost of Farm Credit System debt as compared to other GSEs.

Other issues that we mentioned were estate taxes, farm labor and issues relating to how we can work better with the Farm Service Agency. We provided each office with a copy of the Northeast Dairy Farm Summary published last month.

We happened to be in Washington for the 28th Annual Capitol Hill Ice Cream Party, sponsored by the International Dairy Foods Association. It was very popular!

UPDATE 6/25/10: Added the photo with Senator Leahy. Senator Leahy was one of the 12 senators on the conference committee mentioned above regarding financial services regulatory reform. That conference committee has been meeting over the past several days, and it concluded its work with a marathon 20-hour session ending around 5:30 AM today. New York Times article here. We are pleased that the bill approved by the conference committee satisfactorily addressed our concerns with the Volcker Rule. This morning's agreement by the conference committee means that the final bill will go back to the House and Senate next week for an up-or-down vote. President Obama is expected to sign the bill if it passes the House and Senate.

National Tree Farmer Convention

The 2010 National Tree Farmer Convention will be held in Vermont on July 13-15, 2010. The conference will be held at the Hilton Hotel in Burlington. Shelburne Farms will host field day events including interactive displays, demonstrations, exhibits, activities, workshops, tours and more. There will also be tours to other places in northern Vermont. Youth events will be held at the ECHO Center.

Vermont speakers at this national convention will include Thetford's John Morton of Morton Trails and biathlon fame and Prof. Thomas McEvoy of the Rubenstein School of Environment and Natural Resources at the University of Vermont.

The local host organization for the 17th National Tree Farmer Convention is the Vermont Woodlands Association. Yankee Farm Credit is a sponsor.

Slow Money National Gathering

The second annual Slow Money National Gathering was held in Vermont on June 9-11, 2010. Most events were held at Shelburne Farms. Over 600 people attended from all over the country, and a few from other countries:

Slow Money is a concept inspired by Slow Food, an international movement started in 1986 in reaction to fast food. Slow Food encourages people to enjoy local and traditional foods, and has much in common with what I call SLO agriculture (sustainable, local or organic agriculture). The purpose of Slow Money is to finance Slow Food.

Woody Tasch launched the idea of Slow Money in 2008 with the publication of his book Inquiries Into the Nature of Slow Money: Investing as if Food, Farms and Fertility Mattered.

The first annual Slow Money National Gathering was held last year in Santa Fe, NM, near where Woody Tasch lives. The second annual Slow Money National Gathering was held in Vermont in recognition of the significant amount of "SLO agriculture" in Vermont, such as the Hardwick Agricultural Revolution. The entrance to the Coach Barn at Shelburne Farms was flanked by large posters of Jack Lazor of Butterworks Farm in Westfield, VT and Tom Stearns of High Mowing Organic Seeds in Wolcott, VT:

From the web site: "[Slow Money] is a new way of connecting investors to local food systems, catalyzing new forms of social investing and philanthropy for the 21st century." The conference was attended by a "network of investors, donors, entrepreneurs, farmers, and activists who are giving birth to the nurture capital industry." (Nurture capital is intended to be contrasted with venture capital.)

Conference speakers included: Woody Tasch; Bill McKibben of Middlebury College; and Robert Zevin, one of the founders of socially responsible investing.

Northeastern Forest Products Equipment Expo

On May 7-8, 2010 the Champlain Valley Exposition Center in Essex Junction, VT hosted 5,500 attendees for the 2010 Northeastern Forest Products Equipment Expo.

• Highlights of the Expo included:
  Seminars on BCAP





• Banquet sponsored by Farm Credit for 6th consecutive year, held at Doubletree Hotel South Burlington, VT.





• After dinner entertainment: Slide show from wildlife photographer Gary Lee





• NELA Award Winners from Vermont:
  “Outstanding Service to the Forest Industry” George Buzzell
  “Outstanding Contributions to Forest Industry Education” Norman Hudson

This event is a joint collaboration between Farm Credit of Maine, Farm Credit East, and Yankee.

The winner of the Stihl MS 362 chainsaw door prize this year was Jerzey Heald of Lewis, NY (shown here with her parents Tom and Opal Heald, and Heather Curler from the Middlebury office).

Introducing Clara Hall

I am pleased to announce that Clara Hall joined the Yankee team on June 14th following her graduation from Cornell University with a degree in animal science, and a concentration in agricultural farm management and finance. She is a credit analyst in the White River Jct. office. Clara grew up on Fairmont Farm in East Montpelier.

Introducing Kyle Lussier

Kyle began working for Yankee on June 7th as a Credit Analyst in the Middlebury office. Kyle is a recent graduate of Southern NH University with a BS in Accounting and has spent the past year gaining experience working for Chittenden Bank. Kyle spent many years on Blue Spruce Farm in Bridport performing many farm related responsibilities.

Please join us in welcoming Kyle!

Dairy Policy Issues

Many proposals are presently circulating to fix the problems in the dairy industry. Representative Peter Welch is a co-sponsor of the Dairy Price Stabilization Program Act of 2010 (HR 5288). Senator Bernie Sanders is circulating a draft bill on this issue to introduce in the Senate. The USDA Dairy Industry Advisory Committee recently started holding meetings and is expected to issue a report by the end of the year. The National Milk Producers Federation has a proposal (click here). Dairy Farmers Working Together has a proposal (click here). I recently linked to a proposal by Steve Mandl, a former investment banker turned dairy farmer (click here).

Representative Collin Peterson of Minnesota, chairman of the House Agriculture Committee, has started holding hearings on the 2012 Farm Bill. In a recent interview with the Watertown Daily Times, published on 5/22/10, he said that the 2012 Farm Bill will likely include significant changes in federal dairy policy: Changes in dairy safety net expected. Some aspects of the various proposals listed in the paragraph above are likely to be included in the 2012 Farm Bill.

The problems in the dairy industry are not new, as I have noted before. Many solutions have been tried in the past. What have we learned from those experiences?

The Dairy Policy Analysis Alliance has recently published an excellent discussion of that question. The Alliance is a collaboration between the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri and the Department of Agricultural and Applied Economics at the University of Wisconsin-Madison.

The full document is Dairy Policy Issues for the 2012 Farm Bill (1 MB PDF file, 54 pages). An executive summary is available as a set of shorter briefing papers: Dairy Policy Briefs (1 MB PDF file, 16 pages). If you want an even briefer discussion, see this news release.

For a good understanding of the issues, it is well worth while to read the full document. But the first sentence of the news release summarizes the gist of the report: "Like a lot of strong medicine, past federal dairy programs have cured some industry ills but caused some unpleasant side effects."

Solutions to the problems of the dairy industry that have been tried in the past include: price supports, the MILC program, voluntary supply management, mandatory supply control, revenue insurance, milk marketing orders, and trade policy. Each approach has had unpleasant side effects, which are discussed in the report. And clearly none of those approaches was a successful long term solution, or there wouldn't be the current plethora of proposals to fix "the problem."

Most of the current proposals involve supply management. Voluntary supply management programs that have been tried include the 1984-85 Milk Diversion Program, the 1986-87 Dairy Termination Program (Whole Herd Buyout), and the current CWT program. These haven't proved sufficient, and so most current proposals involve mandatory supply control.

What does the Dairy Policy Issues report say about mandatory supply control? It has never been implemented in the U.S.: "In the past, dairy farmer interest in supply management has dwindled if milk prices improve..." Based on experiences in other countries, the report notes that "the tendency of mandatory supply management programs is to freeze the structure of dairy farms and regional milk production." Also "the first dairy producers to receive quota 'rights to produce' stand to receive a significant windfall gain" and "it may be difficult for new producers to enter dairying." These are all side effects that policy makers and the industry will need to consider.

As anyone involved in the dairy industry knows, the marketing of milk is complicated because of the many policy issues. The Dairy Policy Briefs and Dairy Policy Issues reports described in this post are an excellent resource to help understand these policy issues.

UPDATE: The NMPF board of directors approved their "Foundations for the Future" plan (news release). The IDFA likes the plan except for the supply management part (news release).

International Dairy Prices

In recent years dairy markets have become increasingly globalized. It is no longer sufficient to consider only domestic markets when thinking about factors that affect prices paid to U.S. dairy farmers. One must also consider international markets.

With that in mind, one resource for tracking international dairy prices is globalDairyTrade. This Internet-based electronic trading system for commodity dairy products was launched by Fonterra, the New Zealand dairy cooperative, in July 2008. I mentioned globalDairyTrade last year, but it's worth mentioning again. And it is encouraging to note that global dairy prices have improved in the past year:

The big increase in prices in 2007 and early 2008 is obvious, as is the collapse in prices in late 2008 and 2009. But prices have recovered significantly since last summer.

The quantity that is graphed above is an index calculated by Fonterra that they call gDT-TWI (globalDairyTrade-Trade Weighted Index). This index was 641 a year ago (6/02/09). The latest value (6/01/10) is 1179, an increase of 84%. However, this index has declined slightly in the last two months. The current value of 1179 is down 4% from 1232 on 4/06/10.

The original of the above graph (which may be easier to read) can be found on the Latest Results page of the globalDairyTrade web site. The Latest Results page contains links to more information on specific products, including anhydrous milk fat (AMF), skim milk powder (SMP) and whole milk powder (WMP). For even more detailed information, see the Historical Data section of the Latest Results page. This contains a link to an Excel spreadsheet with detailed data that you can view or download.

Farm Credit Fellow - Henry Pearl

Henry Pearl of Danville, VT was in the Middlebury office the week of May 24-27 for his one week internship for the Farm Credit Fellows program. Henry is a FARMS 2+2 student and will graduate from UVM next year with a bachelors degree in Animal Science. After graduation Henry would like to return home to start up an organic dairy to add to the maple sugaring and sawmill businesses.

Farm Credit Fellow - Jinny Purrier

Virginia (Jinny) Purrier visited the Newport office the week of May 24-27 as part of the Farm Credit Fellows program. Jinny has an associates degree in Dairy Farm Management from Vermont Tech and is currently a student at UVM in the FARMS 2+2 Program. She just finished her semester at the Miner Institute in Chazy, NY. She will be returning to UVM this fall as a senior. After graduation Jinny plans to pursue an internship/employment for a year before she returns home to Montgomery, VT where she hopes to restart the family dairy farm and incorporate some aspects of Ag tourism, such as a maple sugaring operation, farmstand, and a Bed & Breakfast.