Written something you want to share on The Milk House? Email it to: RyanDennis@themilkhouse.org    The Milk House is also translated into French, appearing in the French-language version of Progressive Dairymen.    The readership grows: The Milk House now appears in Farm and Livestock Directory!

Archive for the ‘Feature’ Category

By Whitney Dennis

Animal welfare issues in agriculture are becoming more important in today’s society. “Statistically, farm animals comprise 98% of the animals in the country with whom we interact directly…” (Humane Society of the United States, 2010, September)  The large percentage of farm animals in our country is due to animal agriculture being a major industry in the United States. Livestock and poultry account for over half of U.S. agricultural cash receipts, often exceeding $100 billion per year (United States Department of Agriculture, 2009). Ten billion animals are used annually for food, 95% of which are poultry (HSUS, 2010, September). Also in 2009, the United States consumed 26.9 billion pounds of beef and the equivalent value of the beef industry alone was seventy nine billion dollars (USDA, 2010).

With the high consumption of beef, poultry and other animal products comes the need for mass production of large quantities of animal products in a safe and economical way. The trend for

It is important that students receive their education on animal welfare in schools instead of the media.

agriculture is moving towards a greater concentration in agricultural production. In 1997, forty six thousand of the two million farms in the U.S. accounted for 50% of sales of agricultural products (Environmental Protection Agency, 2009), and this trend continues today. Concentrated animal operations have been given the name “factory farms” by the media and public, but are specifically known as confined animal feeding operations (CAFO’s).[1] These CAFO’s as well as practices that are common on smaller farms have raised animal welfare issues in livestock production. American citizens are increasingly interested in the welfare of agriculture animals, are affecting government policies about animal agriculture, and are paying particular attention to portrayals of animal agriculture in the mass media (Peralta, 2010). Proper agriculture animal welfare education is needed to teach students about the growing societal concerns and the future of the food animal agriculture industry.

According to the goals and purposes of agriculture education as published in The Agriculture Education Magazine, the first goal of agriculture education is to update instruction in and expand programs about the food, fiber and natural resources systems (Case & Whitaker, 1998). This goal also indicates that a portion of the content should include animal welfare. Agriculture animal welfare is a field that is growing larger and gaining a greater interest by the public. Welfare is a topic toward which many people have strong opinions and feelings, yet have very little factual knowledge. The age appropriate time for supplying the public with this knowledge is in a middle or high school agricultural education setting. However, at this point in time there is not a fully developed unit available to middle or high school agriculture, science, or social studies educators that involve the current and relevant topics pertaining to animal welfare.  There is a need for an agriculture animal welfare unit to be developed that can be integrated within a middle or high school agriculture or animal science curriculum in order to fully reach the goals outlined for agriculture education. The need for an agricultural animal welfare curriculum is illustrated by the ability for societal views to impact legislation, the media’s impact on society’s views on animal welfare, and the willingness of teens to become involved in animal welfare issues.

Societal Views on Animal Welfare Impacting Legislation

Taxema Peralta, DVM, MSc, PhD, an animal welfare scientist at the Western University of Health Sciences in California, pointed out that much of the legislation that involves animal welfare of agricultural animals has been a result of societal pressures on the government (2010). This is very concerning, especially considering that only 2% of people in the United States live on farms and less than 1% claim farming as an occupation (EPA, 2009). This leaves a very small population of people with first hand knowledge of agricultural practices, and a large majority of voters with the potential to make uninformed or misinformed decisions on the legislation of agricultural practices.

One of the most recent events regarding legislature in the United States that resulted from societal pressure involves the banning of tail docking of dairy animals in California. California was the first state to ban tail-docking (Schecter, 2010) which took place in October of 2009 (American Veterinary Medical Association (AVMA), 2009). Although tail-docking was practiced by 83% of 113 farms surveyed in the North Central and North Eastern United States (AVMA, January 2010), tail docking is viewed by the public as being a barbaric, painful and unnecessary procedure. Also, the American Veterinary Medical Association opposes tail-docking as a routine practice (AVMA, January 2010). This procedure was again brought into the spotlight for the public by a January 2010 ABC news special that played hidden camera video footage of a large New York dairy farm in which tail-docking was being performed incorrectly. This video was not only portrayed on television but was posted on the “YouTube” website, as well (Esch, 2010). This video inspired a New York state legislator, Assemblywoman Linda Rosenthal, to propose a tail-docking ban similar to the one enacted in California (Esch, 2010). Although tail-docking is not always performed in the manner shown in the video, the video created a strong public opinion about tail-docking and is likely to lead to the public demanding that tail-docking be banned in more states across the country.

The banning of sow gestation crates in Florida is another example of how legislation has been put in place based on societal pressures. On November 6, 2002, voters passed an amendment to the Florida State Constitution that banned the confinement or tethering of pregnant pigs in a manner that prevents the pig from turning around completely (AVMA, December, 2002). There were actually only two pig farmers using gestation crates in Florida, and pork production costs in Florida are high which is likely to prevent corporate swine production from developing in the state (AVMA, October, 2002). The amendment therefore had little effect on agriculture in Florida. The amendment gained support through the backing of Humane Society of the United Stated, Fund for Animals and Farm Sanctuary (AVMA, October, 2002). Kara Flynn of the National Pork Producer’s Council said that the animal rights groups targeted Florida because most people in the state knew very little about how food animals are raised and the science behind animal agriculture (AVMA, October, 2002). Animal rights[2] groups use the lack of knowledge of the general public gain success in states where the farming practices are not widely used with the intentions of moving on to other states with greater amounts of animal production. The banning of sow gestation crates in Florida as a prime example of how animal rights groups have a large amount of influence and can take advantage of those who know little about animal welfare in agricultural settings.

Another example of an unknowledgeable society influencing animal welfare legislation is the implementation of the ban on horse slaughter in Texas and Illinois in 2006. By putting an end to the three slaughter plants in these states, horse slaughter in the United States has been stopped (Becker, 2010). This piece of legislature was supported by famous individuals such as country singer Willy Nelson and actress Bo Derek (Cosgrove-Mathers, 2006). Through their efforts and groups such as the Humane Society of the United States, the ban gained public support. Animal rights groups once again influenced public opinion.  However, unlike the tail-docking ban in California or the ban on sow gestation crates in Florida, this ban created more harm than good. The ban has created new welfare issues with the care and maintenance of the unwanted horse. The AAEP (American Association of Equine Practitioners) defined unwanted horses as “horses which are no longer wanted by their current owner because they are old, injured, sick, unmanageable, fail to meet their owner’s expectations (e.g., performance, color or breeding), or their owner can no longer afford them.” (Animal Welfare Council, 2010) These horses are often neglected and treated poorly. Horses are also being sold for very little money as people cannot afford to take care of animals when suffering from difficult economic times. In a 2009 survey conducted by the Unwanted Horse Coalition found that more than 90% of respondents said the number of unwanted, neglected and abused horses is increasing and that 63% of equine rescue/retirement facilities that were polled are at or near full capacity and turn away 38% of the horses that come to them (AVMA, July 2009).

Overall, by creating this ban on horse slaughter, more animal welfare issues have cropped up in regards to horses than have been solved by the legislation. This legislation was supported and passed by poorly informed people who did not know the full range of consequences of their decision. Voters likely based their decision on the emotions that supporters of this ban created by portraying the cruelty of horse slaughter rather than on research and factual knowledge.

It is important for members of society to be well informed on the matters on which they vote. The media plays a large role in portraying animal welfare information to the public. Unfortunately we cannot depend on the media to create well informed, unbiased voters. One of the best means of creating informed voters is through public education, i.e. agriculture education on animal welfare. According to the goals and purposes published by The Agriculture Education Magazine, the purpose of agriculture programs in local public high schools is to produce capable, knowledgeable, contributing citizens (Case & Whitaker, 1998).  Agriculture educators must play an integral role in preparing and supporting students for agricultural careers, building awareness of the industry and developing leadership skills through education (Case & Whitaker, 1998).  By implementing an agriculture animal welfare unit, students will become better informed voters in regards to agriculture legislation.

Media Influence on Views of Animal Welfare

As was mentioned earlier, the media has a large influence on the public and in turn has the potential to dictate legislation. Media attention on animal welfare also has the power to influence consumer choices. A study performed at Kansas State University indicated that while the price of meat products is still the largest factor in consumers choosing meat products, media attention to animal welfare has had notable impacts on the livestock industry (Tonsor & Olynk, 2010). This study analyzed the top U.S. newspapers from 1982 to 2008 to develop indices reflecting public information on animal welfare and combined them with the meat demand system in order to determine the effects of animal welfare media on consumer meat choices (Tonsor & Olynk, 2010). Researchers were able to determine that consumer choices were affected by animal welfare media. It was found that the media attention to animal welfare had a negative effect on the U.S. meat demand, primarily in the swine and poultry markets (Tonsor & Olynk, 2010). Also increasing media attention has led to consumers purchasing less meat rather than reallocating their spending dollars to other competing forms of meat (Tonsor & Olynk, 2010). This indicates that animal welfare media influences the views of consumers of the livestock industry and directly impacts their daily decisions such as what groceries to purchase.

However adults are not the only people to be influenced by the media. More than ever teens are engrossed in media coverage. Science Daily reported in 2008 that 60% of teenagers spent at least 20 hours per week in front of television and computer screens. Close to one third of teenagers spent an average of 40 hours a week in front of a television or computer screen and 7% are exposed to 50 or more hours of “screen-time” a week (O’Loughlin et al, March 2008). What does this translate into? This massive amount of time spent in front of a television or computer translates to tremendous amounts of media exposure for teens. This media coverage can play a large role in forming opinions about subjects including animal welfare in agriculture. With less than 2% of Americans living on farms (EPA, 2009), it is reasonable to say that the media is the primary means of teens learning about animal welfare in agriculture rather than personal experience or through formal educational means.

Concern for animal welfare and the portrayal of animal abuse has been gaining momentum in the media. Recently there have been television advertisements paid for by the HSUS (Humane Society of the United States) depicting the sad and tragic stories of animals that have been poorly treated. Also, PETA (People for the Ethical Treatment of Animals) has a very detailed website filled with campaigns against animal cruelty and even has a specific link for multimedia geared towards “kids” projecting videos and games (http://www.petatv.com/kids.html) concerning animal welfare. These are only two of the examples of ways animal welfare is being portrayed in the media. With a simple Google search for “animal welfare organizations” and a click of the mouse one is exposed to links to hundreds of animal organizations across the country and world. Not to say that all of this exposure is a bad for agriculture or food animals. If the information that is gained through the media is used properly, then all of this exposure can be a powerful tool. The problem with the large amount of exposure to animal welfare that teens are getting from the media is that it tends to be a biased resource. For example, PETA is a radical animal rights group that has a tendency to focus on individual cases of animal mistreatment or abuse and apply it to the treatment of all animals in order to gain support for their cause. They immortalize abuse cases in the media in order to gain support for their true agenda, which is to end all use and consumption of animals and promote animal rights (PETA, n.d.).

It is important for students to be able to navigate through these massive amounts of media and to determine which statements are facts and which are an exaggeration of the truth about animal welfare. These skills can be taught in the classroom with the aid of an agriculture animal welfare unit. By teaching students about animal welfare in an unbiased manner, the students will be able to become informed consumers of animal products as well as understand the animal welfare needs of agriculture (production) animals.


[1] Confined Animal Feeding Operations are defined by the United States Environmental Protection Agency as “agricultural operations where animals are kept and raised in confined situations. [Animal Feeding Operations] AFOs congregate animals, feed, manure and urine, dead animals, and production operations on a small land area. Feed is brought to the animals rather than the animals grazing or otherwise seeking feed in pastures, fields, or on rangeland.) (EPA, 2010)

[2] Animal rights is the view that animals should not be used for human purposes such as for food and fiber production or entertainment. Animal welfare is the perspective that animals should be treated humanely and that it is acceptable to use animals for human purposes as long as there are no alternatives.


By Ryan Dennis

Milk Pricing: A Survey of 5 Economic Communities

The price the farmer receives for his milk is his most immediate concern, yet little seems to be known about the calculations and factors that go into determining farmgate prices.  Many of the present systems are being called into question, or are soon expected to be.  As new ideas are sought, one country has the potential to learn from the approaches and programmes of another.  The following is a brief survey of the milk pricing systems in the United States, Canada, the European Union, New Zealand and Australia.  Similarities seem to be a function of geography, as the US and Canada, and New Zealand and Australia most closely resemble each other, while the EU is in a process of transition.

United States

The federal pricing system in the United States is based on milk marketing orders that organise the states into eleven areas.  Milk is pooled in each section and values are calculated with a classified pricing system based on the end use of milk in wholesale products.  Class I represents fluid milk, Class II soft dairy products (butter, cottage cheese), Class III hard dairy products (most cheeses) and Class IV is  nonfat dry milk.  The final price a farmer receives inside a marketing order is a blend of the class prices, with Class III or Class IV generally having the most influence (see Appendix A below for formulas).  Milk marketing orders set a minimum Class I price, but because it is up to processors how they use the milk they collect, it has only marginal effect on the blend price received by farmers and cannot guarantee them a fixed price.  Marketing orders have the legal authority to audit handlers and ensure that they pay the appropriate minimum Class I price.  The actual wholesale dairy prices are determined weekly from trading on the Chicago Mercantile Exchange.  California is the only state that prices its own milk and is not under a marketing order.  Instead, it bases five class prices on butterfat and solids nonfat (SNF).  It also operates on a quota system, in which quotas can be bought, sold, or readjusted by the state.

The established milk support price was terminated in 1999.  The Commodity Credit Corporation (CCC) took over as the main form of market assistance.  The purpose of CCC is to buy and remove surplus dairy products from the market in an attempt to bolster poor prices.  Storage has been the chief obstacle, shifting a majority of the CCC’s purchases to nonfat dry milk.  When possible, the US tries to place a specific quantity of surplus to targeted overseas market, via the Dairy Export Incentive Program (DEIP).  The Milk Income Loss Contract Program (MILC) has also been implemented intermittently the last several years to provide farmers with direct payments when the price falls below a specific level.

In 1996 congress granted consent for the formation of the Northeast Dairy Compact, giving a handful of small states (several more joined later) more regulative authority in the pricing of their milk.  The Northeast Dairy Compact sets the minimum Class I price at $16.94 per hundred weight of pounds and requires handlers to pay the difference if not met.  The said monies is pooled by the compact and first reimburses the CCC for any purchases resulting from surpluses in area milk, and then to the farmers.  The result is that producers in the compact area may receive a slightly higher price for their milk than they would if only regulated by the milk marketing order.  Many other states have tried to create or join similar compacts, but have not found the legislative support.

Canada

The Canadian Dairy Commission (CDC) operates a supply management system that works to plan production in a year starting on August 1st and ending July31st.  Under the National Milk Marketing Plan, the Canadian Milk Supply Management Committee (CMSMC) establishes the market-sharing quotas (MSQ) for the country, which the CDC monitors and adjusts when necessary.  Target production is measured in terms of butterfat.  The CMSMC gives each province its share of the MSQ, and then the province allocates them to its individual producers as it sees fit.

Like the US, the milk produced in Canada is priced with a Harmonized Milk Classification System, breaking down the end use of wholesale products into five classes.  Class I consists of fluid milk, Class II of most soft products (except butter), Class III for cheeses, Class IV is butter, milk powder, and certain components like casein, and Class V includes ingredients used elsewhere in manufacturing.  Each class has multiple subsets that further organise the products.  The provincial boards set the butterfat price, while protein and other solids are determined by the CMSMC every August 1st and February 1st.  Revenues from milk components used in rennet casein are pooled among all the provinces, and CDC receives milk utilisation declarations from all provinces on a monthly basis for pooling purposes.

The Canadian Dairy Commission annually determines support prices for butter and skim milk powder.  They work much like the United States CCC in purchasing butter and skim milk powder at this established price, creating a support floor on the market.   Once a year the CDC collaborates with the provinces in a national study on the farmer’s cost of production.  In addition to this, the CDC holds a forum with producers, processors, restaurant owners and consumers.  The results of the study, forum, and considerations of other economic indicators lead to a price support that becomes effective February 1st of each year.

Provinces in Canada function in similar ways as marketing orders in the US.  While the government has federal authority over the marketing of industrial milk and products (solid goods), provinces regulate the marketing and export trade of fluid milk.  Provinces generally license producers, distribute milk quotas to producers, determine the prices charged to processors, and some assume other specific responsibilities, such as negotiating shipping costs with transportation agencies.  There are two pooling agreements among provinces.  All Milk Pooling or P5 (because of the five signatory provinces) pools both industrial and fluid milk, transportation costs, and provides for multiple component pricing, a daily quota system and quota trade, and the pricing of components based on their end use in products.  The four western provinces created the Western Milk Pooling Agreement (WMP).  The WMP has been engaged in discussion on a pricing system that would provide WMP provincial boards to adopt fluid milk pricing that would allow for the consumer price index, cost of producing milk, and the farmer’s disposable income.

New Zealand

The pricing of New Zealand milk differs from that of Canada and the US in that is not market-variable and sees very little influence from the government.  Fonterra, a coop that distributes 95% of the nation’s milk, sets an annual price based on mechanisms such as negotiated sales and export revenue.  Although there is no competition, Fonterra operates like a traditional business in that producers are shareholders in the cooperative, receiving one share for each kilogram of milk solids they are contracted to provide.  This is allows farmers to receive returns from the cooperative’s value added activities, in addition to the milk check.  An independent party appointed by the Shareholders’ Council determines the value of the shares.  All of the Fonterra’s income is distributed to shareholders as a payout, both from milk payments and return from value added activities.

Without competition, there is no market to determine the milk price.  It is difficult to use milk prices in other countries due to variances in cost structures.   Instead, Duff and Phelps, the same independent group that determines the share value, also calculates the Commodity Milk Price (CMP). The CMP is a theoretical price that a competitor could pay for the milk of equal quality and quantity to that supplied to Fonterra after subtracting costs from commodity revenue.   From this a Historical Commodity Milk Price (HCMP) is assessed using actual milk volumes, base commodity prices, and exchange rates used by Fonterra during the season.  Finally, the cooperative uses its own product portfolio and operating costs to determine the Fonterra Commodity Milk Price (FCMP), which is the price paid to farmers.  The FCMP is compared to the HCMP to determine the Milk Gap, a performance indicator used to asses Fonterra’s efficiency.  The FCMP is determined annually and doesn’t change per month, regardless of the season.  In its simplest form, the price is based on the following formula: fat kilograms + protein kilograms – a small volume charge.  The New Zealand milk price is based nearly entirely on milk solids (only 4% was sold as fluid milk last year), with milk fat retaining 33% the value of protein.  Currently New Zealand dairy farmers receive $5.10 NZD per kilogram of milk solids.

EU

The 27 countries that make up the European Union are joined by a Common Agricultural Policy (CAP) that is based on a single market and common financing.  The policy is presently in transition.  The dairy industry was previously seen as part of a larger European position of agricultural being multifunctional, fulfilling a broad range of roles, from maintaining rural communities to protecting environmental welfare.  Farmers were paid both for their milk, and on the basis of commodity-focused supports in the form of subsidies that rewarded producers for these other inherent services they provided.  Supply was controlled and dictated by a quota system similar to Canada’s.  Nonetheless, these quotas are in the process of being phased out, with a complete termination targeted for 2015.  The present agricultural commission supported a paradigm shift that believed the market would be more efficient for price determination.  The previous subsidies schemes are being replaced by a decoupled payments that are not based on the amount of milk produced.

Like New Zealand, farmgate prices are determined by the cooperatives.  Unlike New Zealand, however, there is competition between the coops and the price the producer receives is specific to each organisation.  The determining formulas and factors involved in these calculations are private and seldom released.  The government has little involvement in the market, except for price support arrangements in association with the Intervention Milk Price Equivalent (IMPE).  The EU buys an allotted amount of units of unsalted butter and skim milk powder when the prices for these products fall to a determined level, functioning much like the CCC in the United States.  Another benchmark indicator used in Europe is the Milk for Cheese Value Equivalent (MCVE).  This figure determines a factorygate price by calculating the returns on mild cheddar, whey butter, and whey protein.  The MCVE has no direct bearing on the price received by farmers and is not used in any other calculations.  Instead, the level of its changes is used to indicate the adjustment in the value of the milk farmers supply to their cooperatives, and in turn can hope to receive back.

Australia

In 1999 Australia began the transition of moving into a completely deregulated dairy industry.  The Dairy Structural Adjustment Program (DSAP) eased the shift with an 11 cent per litre levy paid by consumers and allocated to farmers.  The DSAP has concluded, and the country has no legislative controls over the price of milk.  Instead, the farmgate price is largely dependent on international markets, as Australia historically exports 50% of its milk production, mostly to Asia.  Australia tends to receive slightly less for its milk than most countries, but the cost of production is also generally lower.

The lack of government involvement makes the Australian dairy industry similar to New Zealand, but instead of a cooperative organising payments, farmers receive their price from the processors directly.  Although each manufacturer will have its own way of determining farmgate prices, it is generally based on butterfat and protein content.  Payments to farmers will vary marginally, being affected by such factors as product mix, marketing strategies, and plant efficiency.  Each firm will also have its own forms of incentives and penalties to encourage milk quality and volume.

Due to the reliance on international markets, Australian farmers created Dairy Australia, an industry service company that works to maximize the conditions for export.  Dairy Australia is funded by levies paid by farmers on the fat and protein content of their milk.  The company researches new markets while monitoring established ones, and works on maximising effectiveness of overseas marketing.  Dairy Australia is also politically involved in assessing trade agreements in other countries and promoting the removal of trade barriers.  They have been very active in the World Trade Organisation discussions, as their industry may have the most at stake.

The Milk House sincerely thanks Teagasc, DairyNZ, Fonterra.

Appendix A: Federal Milk Marketing Order Price Formulas

Note: Milk prices are per 100 pounds or cwt, rounded to the nearest cent. Component prices are per pound, rounded to the nearest one-hundredth cent. Cheese, dry whey, butter, and nonfat dry milk prices are weighted averages of weekly NASS survey prices.

Class I

Class I price = (Class I skim milk price x 0.965) + (Class I butterfat price x 3.5).

Class I skim milk price = Higher of advanced Class III or IV skim milk pricing factors + applicable Class I differential.

Class I butterfat price = Advanced butterfat price + (applicable Class I differential divided by 100).

Note: Advanced pricing factors are computed using applicable price formulas listed below, except that product price averages are for 2 weeks.

Class II

Class II price = (Class II skim milk price x 0.965) + (Class II butterfat price x 3.5).

Class II skim milk price = Advanced Class IV skim milk pricing factor + $0.70.

Class II butterfat price = Butterfat price + $0.007.

Class II nonfat solids price = Class II skim milk price divided by 9.

Class III

Class III price = (Class III skim milk price x 0.965) + (butterfat price x 3.5).

Class III skim milk price = (protein price x 3.1) + (other solids price x 5.9).

Protein price (true protein) = ((cheese price – 0.165) x1.405) + ((((cheese price-0.165) x 1.582) – butterfat price) x 1.28).

Other solids price = (dry whey price – 0.140) divided by 0.968, snubbed at zero.

Butterfat price = (butter price – 0.115) divided by 0.82.

Class IV

Class IV price = (Class IV skim milk price x 0.965) + (butterfat price x 3.5).

Class IV skim milk price = nonfat solids price x 9.

Nonfat solids price = (nonfat dry milk price – 0.140).

Butterfat price = See Class III.

Producer Prices:

Butterfat price = See Class III.

Protein price = See Class III.

Other solids price = See Class III.

Somatic cell adjustment rate = cheese price x 0.0005, rounded to fifth decimal place. Rate is per 1,000 somatic cell count difference from 350,000.

This formula is provided by the This formula is provided by the USDA.