Idaho Dairy Focus 2015 September

Dairy
The Idaho Dairymen’s Association (IDA) was established to continue to
develop and sustain an economically viable Idaho Dairy Industry that works
together to achieve success in the domestic and global marketplace in
meeting the needs of the Idaho dairy farm families.
focus
September 2015
From the Boardroom
By Tony VanderHulst, IDA President
Looking to the future, the Board of Directors of the Idaho
Dairymen’s Association has formed a new, for-profit division within IDA (IDA Consulting Services, Inc.) to work
with dairy producers addressing their immediate needs,
ranging from water quality and soil health to animal husbandry and labor. Environmental and social sustainability
are becoming areas that purchasers of finished products
are focusing heavily on. This forces our Idaho processors
to seek more accountability in achieving their customers’
sustainability expectations. The IDA Board, in an effort to
keep economic sustainability as a reality for Idaho dairymen, authorized staff to move forward in establishing IDA
Consulting Services. The goal of this division of IDA is to
provide Idaho dairymen the tools and resources needed
to continue to meet the sustainability expectations placed
upon them.
Our first hire in our new endeavor is Dr. Stephanie Kulesza, a recent graduate of Virginia Tech with her doctorate in Philosophy in Crop and Soil Environmental Sciences. Stephanie will be relocating to Twin Falls, Idaho and
will be joining us on October 1st. At the November Annual
Meeting we will provide details of IDA Consulting Services
and you will have an opportunity to meet Stephanie.
We are first developing the environmental component of
sustainability. Once it is successfully established, we will
move forward in other areas that pertain to sustainability.
We will always be focused on the economic sustainable
component. If it is not economic feasible for producers, it
obviously is not sustainable.
(Continued on page 4)
An Update On Agricultural Security – Federal Court Strikes Blow To
Private Property Rights - By David Claiborne
On August 3rd, U.S. District Judge B. Lynn Winmill issued a
decision striking down Idaho’s agricultural security law as
unconstitutional on First Amendment and Equal Protection grounds. The Ag Security law, heavily supported by
the IDA, became law in Idaho on February 14, 2014. The
law made it a misdemeanor crime for a person to make
misrepresentations to producers in the hiring process, in
making entry on a farm or ranch, or in obtaining records
of a producer. It also made it a misdemeanor to take audio or visual recordings in non-public areas of an agricultural facility without the owner’s consent. The law was
immediately challenged by the ACLU and other affiliated
animal rights organizations. In a lengthy decision, Judge
(Continued on page 4)
Page 2 Report From D.C. by Charlie Garrison
Page 5 Income over Feed Comparisons by FC Stone
Page 3 EPA Blocked on WOTUS Implementation
Page 6 Congressman Simpson Fundraiser
Page 3 Treasure Valley Water Coalition
Page 7 Senator Crapo TPP Letter
Page 2
Idaho Dairy Focus - September 2015
Federal Dairy Issues Update
By Charlie Garrrison
The U.S. Congress is set to return to Washington, D.C. on
Tuesday September 8th with a long list of unfinished business to be completed in the fall. The current federal government fiscal year ends September 30th and none of the
13 appropriations bills to fund the agencies has been
completed. Talk of a government shutdown will be heard
frequently as both parties seek leverage on their priority
issues.
International Trade
The White House hopes to conclude negotiations for a 12
-nation Trans Pacific Partnership (TPP) free trade agreement before the end of the year. By all accounts the talks
are down to a focus on three or four issues of varying importance to different countries. Japan and Mexico are at
odds over truck exports. The U.S. and Australia disagree
over sugar policy. The U.S. is insisting on much stronger
patent protections for pharmaceuticals and intellectual
property. Lately, reporting on the talks has focused on
the disagreement over tobacco policy between the U.S.
and countries with much stricter anti-smoking regulations.
And then there is dairy. New Zealand is demanding increased market access for its milk product exports. The
U.S. position is that improved market access for commodities from New Zealand is acceptable only if restrictive
dairy import policies in Japan and Canada are opened up
significantly. In July, Idaho Senator Mike Crapo led a signon letter (found on page 7) reminding the U.S. Trade Representative (USTR) how important it is to get a “balanced”
deal on dairy in the TPP. That letter drew the support of
21 of his colleagues including fellow Idaho Senator Jim
Risch.
In the House, Idaho Congressman Mike Simpson is leading on this issue on behalf of Idaho dairy producers from
his position as co-chair of the House Dairy Farmer Caucus.
He was part of a small group of dairy state Representatives that met with the lead agriculture negotiator in the
USTR’s office to reinforce the message that U.S. dairy producers must be treated fairly in an eventual agreement.
Congressman Labrador supported a House Dairy Farmer
Caucus letter to the USTR about the TPP. IDA thanks Senators Crapo and Risch and Representatives Simpson and
Labrador for their work on getting a balanced dairy deal
in a TPP agreement.
Waters of the U.S. Rule
The Environmental Protection Agency (EPA) and the U.S.
Army Corps of Engineers planned to implement their new
“Waters of the U.S.” (WOTUS) rule August 28th. However,
a federal judge in North Dakota blocked that move in 13
states, including Idaho, which sued to block the rule. That
suit says the WOTUS rule is a regulatory overreach and
exceeds authority to regulate surface water under the
Clean Water Act. The judge ruled that the regulations
should not go into effect until the trial is held on the merits of the claims made by the 13 states in the lawsuit. The
EPA said it plans to proceed with implementation of
WOTUS in the remaining states.
In Congress, IDA continues to work on two tracks aimed
at getting the rule pulled back. One track is a bill to require that the agencies withdraw the rule and start over.
The second track is for Congress to deny funding for implementing any part of the WOTUS rule. Congressman
Simpson has led the charge on blocking the use of funds
for WOTUS from his position as a subcommittee chairman
on the House Appropriations Committee. Congressman
Labrador has been supportive of House attempts to roll
back the WOTUS rule as well. Both Senators Crapo and
Risch are cosponsors of the Senate bill that would force
the agencies to withdraw the rule and start over with significant input from stakeholder groups like farmers.
The White House and congressional Republicans are
equally dug in on the WOTUS rule. Getting the 60 votes
to break a likely Democratic filibuster of a bill to pull back
WOTUS in the Senate will be a difficult hurdle. This may
be one of the issues in play as a temporary funding extension is sought to keep the federal government open after
the end of the fiscal year on September 30th.
Immigration Reform
The political rhetoric on the subject of immigration reform has been anything but helpful to the cause of easing
the farm labor crisis. The tight farm labor situation continues, however, and IDA will keep working to try to get a
legislative solution passed by the Congress and signed
into law by the President.
The prospect of legislation to make the E-Verify program
mandatory is a potential threat to agriculture. The House
(Continued on page 6)
Idaho Dairy Focus - September 2015
Page 3
Federal Judge Orders EPA Cannot Implement Expanded “Waters of the United States” Rule
By Evan Roth, Sawtooth Law
On August 27th a U.S. District Judge in North Dakota issues an order prohibiting the EPA from enforcing or implementing its expanded Waters of the United States
(“WOTUS”) Rule. The EPA, using its authority under the
Clean Water Act, issued a new WOTUS rule that generally
sought to expand the EPA’s regulatory jurisdiction over
surface waters. Under pre-existing interpretations, the
EPA only exercised Clean Water Act authority over navigable waterways of the United States and their tributaries
which substantially affected the water quality of a navigable water way. The EPA’s new WOTUS rule, supposed to
go in to effect on August 28th, sought to regulate nearly
every waterway and waterbody in the United States, even
those that had no effect on the “chemical, physical and
biological integrity” of any navigable waterway.
The Court’s order issues a preliminary injunction temporarily stopping the EPA from enforcing the new WOTUS
rule in 13 states, including Idaho. Idaho and the other
states sought a preliminary injunction based upon the
harm that would be suffered within their states had the
new WTOUS went into effect. The states further argue
that the new rule goes far beyond the EPA’s authority
under the Clean Water Act. In granting the states’ request for a preliminary injunction, the Court reasoned
that the States are likely to succeed on their claim be-
cause (1) it appears likely that the EPA has violated its
Congressional grant of authority in its promulgation of
the new WOTUS rule, and (2) it appears likely the EPA
failed to comply with regulatory requirements when
promulgating the Rule. Essentially, the Court agrees with
the states that the EPA is attempting to expand their regulatory powers beyond what Congress has legislated in
the Clean Water Act.
In reaching its decision, the North Dakota judge focused
on the immediate harm that would be suffered by the
states, namely the invasion the new WOTUS rule would
have on matters of traditional state sovereignty. The
judge felt the EPA was instituting a land grab through the
use of their administrative powers. Specifically, the Court
stated “A far broader segment of the public would benefit
from the preliminary injunction because it would ensure
that federal agencies do not extend their power beyond
the express delegation from Congress”.
This litigation will remain at the forefront of many agriculture producers’ minds as this proposed rule could directly
affect how you farm your land and care for your livestock.
At present, be thankful that the State of Idaho had the
insight to join with other like-minded states and challenge
the EPA.
Water Users in Boise River Basin Form Coalition to Preserve and Protect Water Delivery
By David Claiborne, Sawtooth Law
Prompted by recent threats to storage capacity and water
delivery abilities in the Boise River Basin and its network
of reservoirs, rivers, diversions, canals, and ditches, water
users of the Boise River Basin have formed a coalition to
preserve and protect their existing water rights and water
services abilities. Threats to storage capacity have come
from the Idaho Department of Water Resources and its
proposal to allocate flood control reservoir withdrawals
made during the non-growing season against water users’
storage rights historically used during the growing season.
Increasing urbanization of the Treasure Valley places further pressures and demands on water users.
On June 15, 2015, water users throughout the basin officially formed the Treasure Valley Water Users Association
(“TVWUA”) as a non-profit entity. TVWUA has as its primary mission the development, control, conservation,
preservation, and use of the water resources that are part
of the Boise River system. It is anticipated that the
TVWUA will play an active role in the development of local and state water policy. Its founders include Nampa &
Meridian Irrigation District, Boise-Kuna Irrigation District,
New York Irrigation District, Pioneer Irrigation District and
Settlers Irrigation District, among other irrigations districts and canal companies. Lou Murgoitio was selected
to serve on TVWUA’s initial board of directors. Lou has
been instrumental in providing leadership toward the
organization of the association. With Tom Dorsey’s support and encouragement, the IDA has become an initial
associate member of the TVWUA. Roger Batt has been
selected to serve as TVWUA’s executive director. For further information, please feel free to contact David
Claiborne at [email protected], or by telephone at
(208) 629-7447.
Page 4
Idaho Dairy Focus - September 2015
(Boardroom - Continued from page 1)
(Ag Security- Continued from page 1)
The IDA Consulting Services will also be assisting producers who are being identified as a Public Water Systems
(PWS) by the Idaho Department of Environmental Quality
(DEQ). As part of IDA’s Memorandum of Understanding
with the DEQ, the DEQ has requested assistance to bring
dairies that fall under the jurisdiction of the Safe Drinking
Water Act (SDWA) into compliance with the that Act.
Winmill accepted the ACLU’s argument that the Ag Security law violated the U.S. Constitution, and in so doing
rendered a blow to private property rights.
In federal code, a PWS is defined as a water system that
provides water to the public for human consumption
through pipes or other constructed conveyances, if such
system has at least 15 service connections or regularly
serves an average of at least 25 individuals at least 60
days out of the year. We estimate that approximately 60
– 70 dairies qualify as a PWS as they will exceed the 25
employee threshold.
This past month my dairy was the first dairy in the state
to go through the required water assessment by Idaho
DEQ. I guess one of the perks of being the IDA President is
your operation becomes the guinee pig for new regulatory compliance issues we need to address. Overall, with
the tight water quality requirements we have in the Pasteurized Milk Ordinance, I believe we will have few if any
issues. As in many challenges to our industry today, record keeping and documentation, along with hiring the
correct consultants will be critical. Taking all the above
factors into consideration, the IDA Board felt the need
was apparent to create IDA Consulting Services, Inc.
IDA Elections
The IDA election season is upon us you will be receiving
your election ballots by September 20th. For District I
(Treasure Valley) there is not an IDA board seat up but
there is one Resolution position up for the election. In
District II (Magic Valley) two IDA board seats are up and
one Resolutions seat up for reelection. District III (Eastern
Idaho) like District I, has only a Resolution position up for
election. If you have any suggestions for nominees contact your area IDA Board member or call Bob at 208-3083382. Please take the time to vote.
Judge Winmill determined that it was a violation of free
speech to criminalize lies made by those seeking to deceive a farmer in order to obtain employment or access
to facilities and records. In doing so, he reasoned that
any privacy and property rights of farmers must give way
to the strong public interest in the food supply. Because
there is some greater good behind the lies made by these
“activists”, the Court feels private property rights must
give way. The same reasoning was applied to recordings,
where the Court felt it was necessary that these
“activists” be able to document what they hear or see.
On the separate “Equal Protection” issue, Judge Winmill
felt the Ag Security law was improper because it was motivated by “animus” – a lawmaker desire to cause harm to
a politically unpopular group – in this case animal rights
activists. This aspect of the decision is very concerning
inasmuch as the so-called “animus” is found from statements made by lawmakers in legislative debate, or statements made by those supporting the bill during legislative
committee hearings. By singling out statements of certain legislators and proponents and attacking their speech
made during the legislative process, the Court’s ruling is
certain to quell political speech made at the Statehouse,
and may even make some people afraid to offer their
opinions to legislators.
Judge Winmill’s decision is disappointing not only to
members of the IDA, but to all those that value the legislative process, private property rights and personal privacy protections. The decision appears to favor certain constitutional rights (speech, press) over other constitutional
rights (property, privacy). IDA leadership, together with
many other agricultural organizations and political leaders, is closely working with the Idaho Attorney General’s
Office in determining a strategy to protect the dairy industry, and agriculture in general, from future harm, and
to preserve private property and privacy rights. The
Attorney General must decide whether to appeal the ruling to the U.S. Ninth Circuit Court of Appeals before the
end of September. For further information, please feel
free to contact David Claiborne at [email protected], or by telephone at (208) 6297447.
Idaho Dairy Focus - September 2015
Page 5
Income Over Feed Comparisons
By James Carr
West Coast Dairy Operations Manager
Dairy producers dominated 2014. The all milk price averaged $23.97/cwt while seeing dairy feed costs average
$9.52/cwt for the year for an Income over Feed Cost
(IOFC) average $14.45/cwt. The number is tremendous
but looking prices averaged (on a per ton basis) $162 for
corn, $458 for soybeans and $200 for Hay.
2015 is a different story. Let’s coin it the year of the dairy
survivor. All milk prices through July have averaged
$16.81/cwt ($7.40/cwt less than the same time period
last year) but dairy feed costs have dropped over a dollar
to $8.35/cwt for an IOFC average of $8.46/cwt. On average feed prices have dropped (on a per ton basis) $14 for
corn, $96 for soybeans and $23 for hay.
My expectations are for feed prices to continue to fall.
Feed prices could continue to soften into harvest with
some discussing $3/bushel corn, sub $8/bushel soybeans.
Hay costs should come down significantly as dairies finally
work through the last of their “expensive” hay and move
into this year’s lower priced bales.
Looking at the chart above we see that 2015 income over
feed costs have been hovering around the 5 year average
(purple line). Given the expected decline in Corn, Soybeans and Hay I believe on a national basis the IOFC level
will hold steady or climb slightly for through the remainder of the year.
Unfortunately not all IOFC are equal. The national num-
ber doesn’t wholly explain Idaho. We live in a feed deficit
location that increases costs significantly. Idaho’s IOFC
tend to be lower historically.
Cooper Norman one of the leading accounting firms in
the state, whose client base milks well in excess of 50% of
the cows in Idaho, provided us with their DAC (Dairy average comparison) reports for 2014 and 1st quarter 2015 for
comparison.
In 2014 the All Milk Idaho IOFC, with its many feed challenges including high Hay costs and transportation issues
causing increased grain expense in comparison to the national USDA numbers, averaged $8.45 per cow per day
whereas Cooper Norman clients had an IOFC of $9.14 per
cow per day for their blended milk price. Cooper Norman
clients for 1st quarter 2015 averaged $4.28 per cow per
day.
Bill Brooks, award winning dairy economist for the FCM
Division of INTL FCStone Financial Inc. has projected lower Class III prices for the remainder of the year per the
above chart from his end of August, 2015 report. The blue
line represents Bill’s price projections for the last 4
months. The brown line is current futures prices as of the
close 9/1/2015. As we can see, Bill has projected Class III
to move lower alongside our expectations for decreasing
feed costs.
(Continued on page 8)
Page 6
Idaho Dairy Focus - September 2015
IDA Board Members Sponsor Golf Outing for Congressman Simpson
Federal Law prohibits corporations and organizations like
IDA from directly contributing to federal campaigns, but
allows funding from Political Action Committees (PAC).
The Idaho Dairymen’s Association does not have a federal
PAC so when we want to express our support for our national delegation members, by organizing and participating in a campaign fundraising activity, the funds come
from directly from individuals.
In his bid for reelection in 2014, Congressman Mike Simpson was targeted by national far right organizations in an
effort to silence his voice of reason in DC. The effort to
beat Congressman Simpson was very expensive to combat. Congressman Simpson is and has been a longtime
supporter of Idaho agriculture and a strong voice for the
Idaho dairy industry.
On August 24th the IDA Board, staff and Idaho dairy producers hosted the 2nd Annual Magic Valley Scramble with
Congressman Mike Simpson at the challenging Blue Lakes
Country Club. The very successful event was followed by
a private dinner with Congressman Simpson at Elevation
486.
The IDA Board Members, dairy producers and other dairy
industry representatives that participated were, Tony
VanderHulst, Arie Roeloffs, Adrian Kroes, Tony DeWit,
Don Heida, Lou and Vicky Murgoitio, Bernie Teunissan,
Dave Veenhouwer, Adrian Boer, John Reitsma, Mike Roth,
Rick Onaindia, Jerry Visser and Bob and Doris Naerebout.
Additional sponsors included Dan Steenson of Sawtooth
Law, Darigold PAC, Grain Producers Association, Con Paulos Chevrolet, Idaho Auto Dealers Association PAC, Idaho
Relators PAC and Mitch Watkins of Watkins Distributing.
We want to thank all of this year’s sponsors. We will be
holding the 3rd Annual Magic Valley Scramble for Mike
Simpson in 2016 and would like to expand the event, if
you’re interested in participating in 2016 please contact
Bob at [email protected]. Congressman Mike Simpson deservers our industry’s support.
(Federal Dairy Issues - Continued from page 2)
Judiciary Committee passed a mandatory E-Verify bill earlier this year. Thus far, no plan has emerged to bring that
bill to the floor of the House for a vote. However, the
heated rhetoric on the campaign trail may have emboldened some of the most hard line opponents to finding a
reasonable solution to our broken legal immigration system. They may try to pass mandatory E-Verify as part of
a package of “interior enforcement” measures. IDA maintains ongoing contact with our congressional delegation
to deliver the message that mandatory E-Verify without
effective legislation to solve the farm labor crisis would be
devastating to agriculture and something your association
would ask them to vigorously oppose.
Tax Reform
Major reform of the tax code seems likely to wait until
2017, following the next presidential election. However,
current tools important to farmers must be extended for
calendar year 2015. Those include Section 179 expensing
and bonus depreciation. IDA has worked with staff for
the two Senators and the two Representatives so that
they understand the significance of those provisions of
the tax code for farmers. Included in that message is that
we would hope this Congress could do better than the
extension of those provisions for calendar 2014 done in
mid-December, just two weeks before the end of the tax
year.
###
Idaho Dairy Focus - September 2015
Page 7
195 River Vista Place
Suite 308
Twin Falls, Idaho 83301
(FC Stone - Continued from page 5)
We have projected the remainder of 2015 to be softer
than current futures represent. Looking at class III, corn
and soybean futures and then using a late August Idaho
Hay report we can see in the table below that Class III
IOFC comes in as follows:
IOFC is an important metric that every dairy should calculate periodically to help make informed decisions regarding capital allocation and risk management. In today’s
volatile market environment, having an understanding of
your profit margin – and your profit margin potential –
are critically important. No one can tell you what the future will bring, but one thing seems clear: the outlook for
Idaho dairy demand – both domestically and abroad – is
bright.
Class III IOFC
Class III
Feed
Corn
Beans
Hay
Inc over
Futures Cost/cwt. per bushel per bushel per ton
Feed
AUG
$ 16.32 $ 7.93 $ 4.560 $ 9.140 $ 125.00 $ 8.39
SEP
$ 16.33 $ 7.93 $ 4.560 $ 9.140 $ 125.00 $ 8.40
OCT
$ 16.75 $ 7.92 $ 4.560 $ 9.040 $ 125.00 $ 8.83
NOV
$ 16.50 $ 7.92 $ 4.560 $ 9.040 $ 125.00 $ 8.58
DEC
$ 16.15 $ 7.92 $ 4.560 $ 9.040 $ 125.00 $ 8.23
** Corn and Soybean price includes approximate basis and delivery costs
Utilizing the projections in the table above we calculate
that the class III IOFC for the last 4 months of 2015 is averaging $8.48 per cow per day. Significantly better than
expected given the decline in milk price. I would caution
that the above table is Class III and does not take into account other class pricing or alternative indices.
This material should be construed as the solicitation of trading
strategies and/or services provided by the FCM Division of
INTL FCStone Financial Inc. noted. The trading of derivatives
such as futures and options on futures may not be suitable for
all investors. Derivatives trading involves substantial risk of loss,
and you should fully understand those risks prior to trading.
Board of Directors - United Dairymen of Idaho
Tony VanderHulst—President, IDA; Co-Chair, UDI Adrian Kroes—Vice President, IDA Pete Wiersma—Treasurer, IDA
Tom Dorsey—Chairman, IDPC; Co-Chair, UDI Bob Naerebout—Executive Director, IDA Karianne Fallow—CEO, IDPC
John Brubaker
Arie Roeloffs
Tony DeWit
Mike Siegersma
Dave Veenhouwer
Kim Korn
Brian Esplin
Steve Ballard
Allan Swainston
Bernie Teunissen
Dan Gilbert
Greg Andersen
Don Heida
Willie Bokma