NMPF Town Hall Meeting Tuesday, October 28, 2014Grapevine, Texas

NMPF Town Hall Meeting Christopher GalenSenior VP, Communications

NMPF Town Hall Meeting Sponsored By:

NMPF Town Hall Meeting Economic Outlook Environmental IssuesCooperatives Working Together FARM ProgramMargin Protection Program GMO LabelingTrade Policy Food DefenseImmigration Policy Drug ResiduesBREAK REAL Seal

Opening RemarksNMPF Chairman Randy MooneyRogersville, Missouri

Cooperative MilkProducers Association, Inc.

Mid-WestDairymen’s Company

Scioto Milk Producers Cooperative

United Dairymen of Arizona

NMPF Board of Directors

• Michael Anderson Farmers Cooperative Creamery• Jim Baird Lone Star Milk Producers, Inc.• William Beeman Dairy Farmers of America, Inc.• Adrian Boer Northwest Dairy Association• Brad Bouma Select Milk Producers, Inc.• Jay Bryant Maryland & Virginia Milk Producers Coop Assoc.• David Cooper FarmFirst Dairy Cooperative• Clint Fall First District Association• Dave Fuhrmann Foremost Farms USA• Brian Hardy Dairy Farmers of America, Inc.• Jerrel Heatwole Dairy Farmers of America, Inc.• Peter Janzen Land O'Lakes, Inc.• Pete Kappelman Land O'Lakes, Inc.• Cornell Kasbergen Land O'Lakes, Inc.

• Jimmy Kerr Cooperative Milk Producers Association, Inc.• Kelly King FarmFirst Dairy Cooperative• Peter Kleiman FarmFirst Dairy Cooperative• Jackie Klippenstein Dairy Farmers of America, Inc.• Albert Knegendorf Ellsworth Cooperative Creamery, Inc.• Mike McCloskey Select Milk Producers, Inc.• Ralph McNall St. Albans Cooperative Creamery, Inc.• George Mertens Dairy Farmers of America, Inc.• Paul Mills Prairie Farms Dairy• Randy Mooney Dairy Farmers of America, Inc.• Keith Murfield United Dairymen of Arizona• Ken Nobis Michigan Milk Producers Association• Doug Nuttelman Dairy Farmers of America, Inc.• Wayne Palla Dairy Farmers of America, Inc.• Thomas Pittman Premier Milk, Inc.

• Jeff Raney Dairy Farmers of America, Inc.• Neal Rea Agri-Mark, Inc.• George Rohrer Dairy Farmers of America, Inc.• David Scheevel Foremost Farms USA• Steve Schlangen Associated Milk Producers Inc.• Patrick Schroeder Swiss Valley Farms Company• Dan Senestraro Dairy Farmers of America, Inc.• Bill Siebenborn Dairy Farmers of America, Inc.• Rick Smith Dairy Farmers of America, Inc.• Dennis Tonak Mid-West Dairymen's Company• Tom Wakefield Land O'Lakes, Inc.• Lawrence Webster Upstate Niagara Cooperative, Inc.• Jim Wegner Northwest Dairy Association• Ed Welch Associated Milk Producers Inc.• Jim Werkhoven Northwest Dairy Association

NMPF Officers ChairmanRandy Mooney

Dairy Farmers of America, Inc.

First Vice ChairmanKen NobisMichigan Milk Producers Association

Second Vice ChairmanAdrian BoerNorthwest Dairy Association

Third Vice ChairmanMike McCloskeySelect Milk Producers, Inc.

SecretaryDave FuhrmannForemost Farms USA

Assistant SecretaryDoug NuttelmanDairy Farmers of America, Inc.

TreasurerPete KappelmanLand O’Lakes, Inc.

Assistant TreasurerNeal ReaAgri-Mark, Inc.

Outgoing Board Secretary

Dave FuhrmannPresidentForemost Farms USABaraboo, Wisconsin

NMPF Staff• Jim Mulhern – President & CEO• Dustin Baker – Economic Analyst• Tom Balmer – Executive Vice Presidentmer• Ryan Bennett – Director, Government Relations• Beth Briczinski – Vice President, Dairy Foods & Nutrition• Jaime Castaneda – Senior VP, Strategic Initiatives & Trade Policy• Anne Chamblee – General Office Assistant• Clay Detlefsen – Senior VP, Regulatory & Environmental Affairs• Chris Galen – Senior VP, Communications• Khadija Gibson-White – Program Assistant, CWT• John Hollay – Vice President, Government Relations

NMPF Staff• Jamie Jonker – Vice President, Sustainability & Scientific Affairs• Louise Kamali – Senior Director, Meetings & Office Services• Emma Kenton – Receptionist• Anuja Miner – Vice President, Membership Services• Gail Mobley – Senior Director, Finance & Administration• Shawna Morris – Vice President, Trade Policy• Sarah Olson – Manager, Communications/YC Coordinator• Brenda Rowe – Executive Assistant to the President & CEO• Peter Vitaliano – Vice President, Economic Policy & Market Research• Bobby Yi – Director, Information Technology• Maria Caridad Zieba – Manager, Trade Policy

NMPF CEO Transition

Jim MulhernPresident & CEO

Margin Protection Program is Progress

NMPF Chairman Randy MooneyRogersville, Missouri

Economic Outlook Peter VitalianoVP, Economic Policy & Market Research

$23.50

$24.90$25.20 $25.30

$24.20

$23.20 $23.30

$24.10

$25.00

$16

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Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

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U.S. All-Milk Price: 2014

$23.50

$24.90$25.20 $25.30

$24.20

$23.20 $23.30

$24.10

$25.00

$16

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U.S. All-Milk Price: 2014

2014 actual Pre-2014 record = $22.10

$23.50

$24.90$25.20 $25.30

$24.20

$23.20 $23.30

$24.10

$25.00 $25.30

$23.10

$20.90

Based on CME Group futures settlement prices, October 24,

2014$16

$17

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Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

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U.S. All-Milk Price: 2014

2014 actual 2014 forecast Pre-2014 record = $22.10

$23.50

$24.90$25.20 $25.30

$24.20

$23.20 $23.30

$24.10

$25.00 $25.30

$23.10

$20.90$19.60

$18.90$18.50 $18.30 $18.10 $17.90 $17.90 $18.10

$18.50$18.90 $19.00

$18.70

Based on CME Group futures settlement prices, October 24,

2014$16

$17

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Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

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U.S. All-Milk Price: 2014-2015

2014 actual 2014 forecast 2015 forecast Pre-2014 record = $22.10

U.S. Dairy Situation in BriefChange from a year ago:

Jan-Jun Jul-AugMilk Production ↑ 1 % ↑ 3 %Total Commercial Use ↑ 2 % ↑ 1 %- Domestic Commercial Use ↑ 0 % ↑ 3 %- Commercial Exports ↑ 13 % ↓ 10 %

Imports ↓ 7 % ↑ 26 %Stocks ↓ 11 % ↓ 5 %

CWT Program ImpactCooperatives Working Together benefits producers by:• Helping to maintain U.S. exports when world prices are below

domestic prices• Making the U.S. a more reliable export supplier of dairy

products• Helping maintain domestic milk prices when world prices are

lower• Focusing on milkfat-containing products: Butter and American-

type cheese

CWT Program ImpactJan – Aug 2014 Butter Cheese NFDM Dry WheyU.S. Exports as %of U.S. Production 9% 5%* 56% 61%

U.S. Share of WorldMarket – 2013 10% 16% 31% 26%

CWT Share ofU.S. Exports 36 % 58%* N/A N/A

*American-type cheese

75%

100%

125%

150%

175%

200%

225%

250%

April May June July August Sept

U.S

. Pri

ce a

s %

of W

orld

Pri

ce, f

ob U

.S.

U.S. and World Prices, 2014ButterCheeseNFDMDry Whey

CWT Program ImpactEstimate: During April – Sept 2014, CWT responsible for:

→ 15% of butter price gap

→ 25% of cheese price gap

↑ $390 million U.S. dairy farm income

200

250

300

350

400

450

Jan-12 May Sep Jan-13 May Sep Jan-14 May

Mill

ion

Poun

ds, T

otal

Milk

Sol

ids

U.S. DAIRY EXPORTS, 2012-2014

75%

100%

125%

150%

175%

200%

225%

Oct-14 Nov Dec Jan-15 Feb Mar Apr May

U.S

. Pri

ce a

s %

of W

orld

Pri

ce, f

ob U

.S.

Source: CME, Rabobank, NMPF

U.S. and World Prices, 2014-2015ButterCheese

CWT Program ImpactFor the foreseeable future:• World prices for butter and cheese will remain below

U.S. prices• CWT assistance will be needed to maintain U.S. exports

and prices

History lesson #1: CWT export assistance was suspended during the previous major world price correction – in 2009

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MPP Margin and Coverage Levels, 2004-2014 MPP Margin $8.00 / cwt. $7.00 / cwt. $6.00 / cwt. $5.00 / cwt. $4.00 / cwt.

$2

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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Source: USDA Farm Service Agency, 10/24/2014

MPP Margin and Coverage Levels, 2004-2015 MPP Margin Forecast $8.00 / cwt. $7.00 / cwt. $6.00 / cwt. $5.00 / cwt. $4.00 / cwt.

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MPP Margin and Coverage Levels, 2004-2009 MPP Margin $8.00 / cwt. $7.00 / cwt. $6.00 / cwt. $5.00 / cwt. $4.00 / cwt.

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2004 2005 2006 2007 2008 2009

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MPP Margin and Coverage Levels, 2004-2009 MPP Margin9/30/08 forecast $8.00 / cwt. $7.00 / cwt. $6.00 / cwt. $5.00 / cwt. $4.00 / cwt.

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MPP Margin and Coverage Levels, 2004-2009 MPP Margin9/30/08 forecast11/28/08 forecast $8.00 / cwt. $7.00 / cwt. $6.00 / cwt. $5.00 / cwt. $4.00 / cwt.

$2

$3

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$5

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2004 2005 2006 2007 2008 2009

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MPP Margin and Coverage Levels, 2004-2009 MPP Margin9/30/08 forecast11/28/08 forecast $8.00 / cwt. $7.00 / cwt. $6.00 / cwt. $5.00 / cwt. $4.00 / cwt.

NMPF Town Hall Meeting Questions?

Cooperatives Working Together

Tom BalmerExecutive VP

2014 Export Assistance through Sept. 30• Requests for assistance

– 1,161 bids– 10 cooperatives currently participating– Providing assistance on 541 requests

• Total cheese– 843 bids, 355 accepted– 85.6 million lbs.

• Butter and WMP– 318 bids, 186 accepted– 48.2 million lbs. Butter (82%), 33.2 million lbs. WMP

• Milk equivalent 2.117 billion pounds

2014 CWT Exports By Region

Region Cheese Butter WMPAsia 52% 8% 16%Cent. & S. America

7% 0% 65%

Europe 1% 7% 0%Middle East 20% 58% 8%North Africa 12% 27% 11%Oceania 7% 0% 0%

• Cheese, 84.3 million pounds• 58% of U.S. American-type cheese exports• 15% of total U.S. cheese exports

• Butter, 40.7 million pounds• 36% of U.S. butter exports

• WMP, 10.6 million pounds• 12% of U.S. whole milk powder exports

2014 CWT Shipments through Aug. 31

Product 2004-2014

Cheese 507.6 million pounds

Butter (82%) 303.2 million pounds

Whole Milk Powder (WMP) 18.3 million pounds

Milk Equiv. Milkfat Basis 11.641 billion pounds*

Total CWT Assisted Exports

NMPF Town Hall Meeting Questions?

Margin Protection ProgramJaime CastanedaSenior VP, Strategic Initiatives & Trade Policy

Margin Protection Program

Margin Protection Program Deciding on MPP coverage for 2015History lesson #2: Futures market indications of the MPP margin at the time of sign up would have led to the wrong MPP participation decision during the previous major price correction –in 2009• Registering to participate in MPP this year will provide a larger

production history compared to waiting, and be worth more than $100

Protecting Farmers’ Equity

Think “Insurance”• Do you think twice buying health

insurance or insuring your barn?• Some may want to make this decision

more complicated than it is

Risk Management = Saving the Farm

What Are the Key Questions?• Is my farm eligible? What are the deadlines?• What margin is used in the program? • What is my production history?• Levels of protection (coverage)? What about fees &

premiums? When do I have to pay?• What if I move or sell my farm, or buy a new farm?

Who Should I Ask about These Issues?

• www.futurefordairy.com– Jcastaneda@nmpf.org– Jhollay@nmpf.org

• Your cooperative• Your local FSA office• DMAP – University economists

NMPF Town Hall Meeting Questions?

Trade PolicyJaime CastanedaSenior VP, Strategic Initiatives & Trade PolicyShawna MorrisVP, Trade Policy

Source: U.S. Chamber of Commerce

U.S. FTA Partners: Expanding Sales

U.S. Balance of Dairy Trade: FTA Partners & Select WTO Accession Agreement Countries

FTA/WTO Accession Countryd

Exps Imps Net Trade

Million Dollars (2013 Trade Data)

Mexico – NAFTA 1,430 168 +1,262

Canada – NAFTA 569 424 +145

China WTO Accession 706 33 +673

Vietnam WTO Accession 241 5 +236

CAFTA-DR FTA 168 37 +131

Australia FTA 136 83 +53

FTA/WTO Accession Country

Exps Imps Net Trade

Million Dollars (2013 Trade Data)

Singapore FTA 91 6 +85

Taiwan WTO Accession 68 13 +55

Peru FTA 61 10 +51

Chile FTA 53 15 +38

Other FTAs (Morocco, Jordan, Bahrain, Oman) 89 3 +86

• Political outreach–Trade Champions–Trade Promotion

Authority• Multilateral work

–WTO, WIPO

Opening Doors & Maintaining Access• Trade agreements

–TPP, US-EU FTA• Trade barriers:

–Canada, China, India, Latin America, Mexico, SE Asia, Russia

Geographical IndicationsBattling EU Efforts to Restrict U.S. Competition Globally

Geographical Indications

• U.S. cheese sales = $55.6B– U.S. cheese exports = $1.4B– Past 5 years: export growth of 215%

• U.S. Greek Yogurt sales = $4.7B• European Union getting nervous

– Inventing ways to hamper U.S. sales

Geographical Indications

• This is both a processor problem, AND a farmer one–Just as exports/sales growth boost milk

prices; declines do too• Consortium for Common Food Names

–Encourage your co-op to join!

NMPF Town Hall Meeting Questions?

Immigration PolicyJaime CastanedaSenior VP, Strategic Initiatives & Trade PolicyJohn HollayVP, Government Relations

Potential White House Action on Reform

• Timing– Who knows?

• Scope of action– Deferred action– Change in how visas are counted

Potential White House Action on Reform

• Dairy industry impacts– More documented workers– Changes to current programs– Change in enforcement priorities– Other possibilities?

New Congress in 2015

• Presidential action– Congressional calculations

• New legislation– House: No change in approach– Senate: Depends on who’s in charge

New Congress in 2015

• Political calculations for 2016– Impact of presidential campaigns– Different Senate map

• NMPF actions in 2015– Keeping the pressure on– Working with Ag Workforce Coalition– DHS monitoring

Economic Study of Dairy Sector

• Texas A&M to conduct new analysis– Building on previous study of dairy practices– Study objective– Survey of farmers

NMPF Town Hall Meeting Questions?

NMPF Town Hall Meeting DAIRY BREAK SPONSORED BY:Vela Environmental &Western Dairy Association

Environmental IssuesClay DetlefsenSenior VP, Regulatory & Environmental AffairsJamie JonkerVP, Sustainability & Scientific AffairsRyan BennettDirector, Government Relations

Moving Beyond Regulation –Environmental Opportunities

National Issues and Opportunities• Regulatory/societal pressure about

manure management• Timing and nutrient content of manure

not ideal for crop uptake• Turn potential runoff issues into

enhanced opportunities

Issues and Challenges Everywhere• Chesapeake• Great Lakes• Mississippi• Yakima• Florida• Central Valley• more

Nutrient Recovery & Energy• Strategic and proactive steps

– Avoid costly regulations – Generate new revenue though voluntary

actions • Moving forward

– NMPF Environmental Issues Committee examination

– NMPF Board to establish a path forward

Environmental Services Cooperative• Facilitate nutrient trading, enhance nutrient

recovery and digester technology and provide environmental services to co-ops

• Repository for knowledge and expertise for all co-ops that want pursue to pursue new and unique opportunities

• Change is coming – Be Leaders not Laggards

Environmental Services Opportunities• Funding for digesters and back end technology• Resource/nutrient recovery options to extract revenue

from digestate• Nutrient trading and other credits for other voluntary

activities• Low cost energy via hands-off or hands-on solar

systems• Other promising emerging technologies such as

geothermal, wind, etc

Proof of Concept Pilot Projects• Nutrient Trading in Ohio River Basin and

Chesapeake Bay• Digester with Nutrient Recovery in Chicago

area• Digester with high PPA in CA• Solar pilots in NY

Water Quality Trading

Water Quality Trading• Voluntary programs set up at the state level• NMPF working with the National Network for

Water Quality Trading to give recommendations to EPA and USDA for guidelines

• NMPF-NACWA MOU will allow members to explore bi-lateral trades

Waters of the United States

Interpretive Rule –NRCS Conservation Practices• 56 considered “normal” farming practice• Exempt from 404 permitting requirements• USDA, EPA, Army Corps MOU• U.S. Supreme court cases

NMPF Town Hall Meeting Questions?

F.A.R.M. ProgramJamie JonkerVP, Sustainability & Scientific Affairs

2014 F.A.R.M. Program Highlights

• 75%+ of U.S. milk supply• 12,000+ farms evaluated• Retailer engagement• International engagement

www.nationaldairyfarm.com

F.A.R.M. Administrative Changes• Consistent implementation of

Second Party Evaluations• Protocol for Investigation,

Probation and Reinstatement in Allegations of Willful Animal Abuse

• Voluntary Guidance to Create and Implement an Action Plan

See It? Stop It! • Employer Checklist• Employee Agreement• Posters• English and Spanish

www.seeitstopit.org

NMPF Town Hall Meeting Questions?

GMO RegulationClay DetlefsenSenior VP, Regulatory & Environmental Affairs

States with GMO Labeling Laws

• Vermont labeling law is in litigation• Connecticut law goes into effect when other

Northeast states with a total of 20 million residents enact similar laws

• Maine’s law goes into effect with a similar trigger

States with GMO Ballot Initiatives

• Colorado voters will decide on Prop 105 on November 4 – GE feed alone does not trigger labeling

• Oregon voters will decide on Measure 92 on November 4 – GE feed alone does not trigger labeling

GMO Issue is Broader than Labeling

• Chobani claims they use only GMO free ingredients and has pledged a commitment to sourcing milk from farms that do not use GE feed

• Starbucks is being pressured not use to any dairy products other than organic

Food DefenseFSMA Section 106 “shall not apply to farms, except for those that produce milk”

Regulatory Content

• The regulation:– shall specify how to assess whether a

person is required to implement mitigation strategies

– describe appropriate science-based mitigation strategies to protect the food

Regulatory Timeline

• Proposed rule issued 12/24/13• NMPF filed comments 6/30/14• We anticipate a re-proposal in the spring of 2015• Final rule must issue by 5/31/16

NMPF Town Hall Meeting Questions?

FDA Drug Residue SurveyBeth BriczinskiVP, Dairy Foods & Nutrition

FDA/CVM Milk Sampling Assignment

• Report is being finalized, expected “soon”

What is Coming Next?

Drug Residues in Cull Dairy Cows

Ceftiofur 43%

Penicillin 24%

Flunixin 9%

Sulfadimethoxine6%

Sulfamethazine, 4% Other, 14%

2015 Drug Residue Prevention ManualThank you to our 2015 Sponsors!

NMPF Town Hall Meeting Questions?

REAL® Seal PromotionChristopher GalenSenior VP, Communications

Program Has Continued to Grow Online

Developed a community of 111k+ consumer advocates,

84% of which are women – the key grocery store decision

maker

Optimized our brand on social by recalibrating educational and

entertaining imagery in support of the REAL® Seal

Expanded our community of influencer advocates who

spotlight the Seal, increase reach of message and drive

traffic to owned channels

Facebook Community as Consumer Resource›Average engagement per post is 3.25%

›Total interactions with fans in 2014: 41,793

›Since its rebranding, the REAL® Seal Facebook page has earned more than 105,000 “Likes” and more than 50,000 “Likes” since January.

›Most popular age group: 25-44

Facebook Offers Sharable Content to Inform

MostInteractions

8,122User

Spotlights

Highest Engagement

Rate6.22%

Competitive Comparison

s

Pinterest Site Launched in May

Compelling & Sharable

Content

Influential Followers

Dairy Divas Blogger Network Uses REAL Products2.2+ MM UNIQUE MONTHLY VISITORS

20 MM POTENTIAL IMPRESSIONS100 PLACEMENTS

67 PARTNERS

DairyUS Featured in 7 Videos

DairyUS Featured in 7 Videos

NMPF Town Hall Meeting Questions?

NMPF Town Hall Meeting Tuesday, October 28, 2014Grapevine, Texas