2008 Farm Bill: Livestock and M-COOL Geoff Benson Geoff Benson Dept. of Agricultural & Resource Dept. of Agricultural & Resource Economics Economics NC State University NC State University
Dec 23, 2015
2008 Farm Bill: Livestock and M-COOL
Geoff BensonGeoff BensonDept. of Agricultural & Resource Dept. of Agricultural & Resource
EconomicsEconomicsNC State UniversityNC State University
2008 Farm Bill
22GEOFF BENSON, ARE, NCSU
2008 Farm Bill Dairy Provisions Program areas
Price support programMilk Income Loss Contracts (MILC)Federal milk marketing ordersMandatory price reportingForward pricing contractsDairy Export Incentive ProgramDairy promotion and researchDairy Indemnity Program
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Price Support Proposals Program was changed to directly set dairy
product prices at existing levels -- No “farm milk” support price. Cheese: $1.13 per pound for block cheese, $1.10 for
barrel cheese Butter: $1.05 per pound Nonfat Dry Milk Powder: $0.80 per pound Price s may be reduced if CCC purchases become
excessive Effectively leaves the level of support
unchanged but dramatically reduces the estimated WTO producer subsidy equivalents calculated for the program
This is a very low producer safety net relative to current cost of production
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MILC Proposals Continues the program through 9/30/2012 Payments = (Actual Milk Price – Trigger) X
Payment Rate% Trigger price: Modified by adding a feed cost adjuster.
Base is a Class I price of $16.94/cwt in the Boston market. The base price is increases by the same percentage as the increase in estimated feed cost above $7.35/cwt through 8/31/12 and $9.50 thereafter
Payment rate: Remained at 34% initially but increases to 45% from 10/1/08 thru 8/31/12, then it reverts to 34%
Payment cap: Maintained at 2.4 million pounds initially but increases it to 2.985 mil. lb from 10/1/08 through 8/31/12, after which it reverts to 2.4 million
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Federal Milk Market Orders
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Federal Orders Orders
Classify milk according to use (I = fluid, II = soft product, III = cheese, IV = butter & powder)
Establish monthly minimum producer prices for each class that are derived form wholesale product prices
Pay producers under pooling arrangements
Audit processors Widespread dissatisfaction with how
FOs are “working” and the time it takes to get changes made
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Federal Milk Marketing Orders Secretary to issue rules to speed up
the amendment process within 60 days of farm bill passage
Federal Order Review Commission To conduct a comprehensive review of
milk marketing options -- both Federal Orders and non-Federal order systems
14 appointed members Report back within 2 years
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Forward Pricing Contracts A substitute for federal order
pricing Establishes a permanent program
until 9/30/2012 Participation is voluntary – if you
opt out, federal order pricing applies
Applies to producers, Coops and Associations of Coops
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2008 Farm Bill
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Livestock Provisions Program areas
Country of origin labeling (COOL)Mandatory price reporting, evaluation
and education programs Forward pricing contracts for hogs &
poultryState-inspected meat & poultry
processing plant rulesLivestock health and disease
initiativesFood SafetyStudy bio-energy from livestock
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Country of Origin Labeling 2002 Farm Bill created a COOL program Implementation was delayed until
September 30th, 2008 except for fish 2008 version applies to the following :
Muscle cuts of beef, pork, goat, and lambGround beef, pork, goat, and lambPoultry, whole and partsPeanuts, pecans and macadamia nuts“Perishable agricultural commodities” – fresh
fruits, vegetables, herbsFish and shellfish (implemented 4/4/2005)
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COOL Retailers must clearly label or
provide signage for covered products
For covered meats there are four labels:U.S. Origin (Born, raised and
slaughtered in the US) Multiple Countries of Origin that
include the United States (list all) Imported Direct for Slaughter (Both
countries)Imported meat (Country of origin)
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COOL
Exemptions:Foodservice salesSmall retailers’ sales. Defined as less
than $230,000 of perishable product sales per year
Processed meats. Defined as “substantially changed in character or combined with other products”. The rules of the Tariff Act of 1930 may apply, however.
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COOL
16GEOFF BENSON, ARE, NCSUPhoto courtesy of Nate Jaeger, NCBA
Scope of M-COOL
Item Beef1 Pork1 Poultry2
US Production, MMT 60.9 97.1 80.0
US Consumption, MMT 60.5 96.9 75.4
Exports, MMT 7.7 5.5 8.3
Imports, MMT 7.2 5.2 7.6
Imports, % of consumption 11.8% 5.3% 9.5%
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1 Carcass weight. 2 Ready to cook weight
Scope of M-COOL Pork:
~60% processed & 40% fresh~80% consumed at home, 40% is fresh
= 33% falls under M-COOL
Beef:~75% fresh & 25% processed~65% consumed at home, 75% is fresh
= 50% falls under M-COOL
Source: ERS, USDA reports GEOFF BENSON, ARE, NCSU 18
M-COOL For covered livestock products, the
packer, processor or importer provides labeling information to the retailer
Producers in the supply chain with “first hand knowledge” can provide an affidavit to the buyer to certify the country of origin of an animal
US producers are not required to undertake additional record keeping other than “records maintained in the course of the normal conduct of the business”
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Summary Dairy
Continues to be subject to heavy government intervention through farm bill and other legislation but the impact on prices, price volatility and industry trends likely is limited
Other livestockLittle intervention in prices and incomes
through farm bill provisions Mostly concerned with market power and
price transparency issuesM-COOL is a major new initiative
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Geoff Benson
Phone: 919.515.5184 Fax: 919.515.6268 E-mail: [email protected] Web page: http://www.ag-econ.ncsu.edu/
faculty/benson/benson.html
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