2011 March/April Issue - Land O'Lakes Inc.

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SUCCESS IN THEMARKETPLACELEGISLATIVE NEWS by Steven KrikavaSetting the Policy Coursefor 2011Annual Meeting delegates approve Policies & Resolutionson behalf of membershipOne of the important pieces ofbusiness that Land O'Lakesmembers handle at the AnnualMeeting is review and approvalof the Policies & Resolutions. But the actualvoting belies the significant time andenergy that the members of the Policies &Resolutions Committee spend developingthe proposals for delegates.The committee consists of 24Land O'Lakes members who have beenelected to serve in the cooperative’s leadership.The committee members have accessto technical experts within Land O'Lakes tohelp provide analysis and insight on the impactof issues that affect farmers, the cooperativesystem, and Land O'Lakes business.Developing the Policies & Resolutionsis a year-round process. Committee membersmeet in August to receive an updateon the current issues and to begin work onnew and emerging issues. They have an opportunityto get input from other membersthrough late summer and fall. They attendfall membership meetings in November andearly December. Then in mid-December,the committee has a full-day meeting to developproposed positions for the next year.The committee’s proposals are made availableto all members and voting delegates inJanuary. Members who have questions, concerns,amendments, or new resolutions cangive that input up until the Annual Meeting.The committee meets the day before theAnnual Meeting to finalize their report. Theyalso give members a final opportunity for inputthe morning of the meeting. When thecommittee’s report is presented, delegatescan ask questions and debate the proposals.When the discussion is done, they vote, andHere are some highlightsfor 2011:Resolution 1 – New Farm Bill. ThoughCongress isn’t expected to write a new farmbill until 2012, discussion of what should bein that bill has already begun. Land O'Lakesmembers revised their farm bill resolutionto set some parameters on the debate.Resolution 4 – National Dairy Policy.As a member of the National Milk ProducersFederation (NMPF), Land O'Lakes has participatedin a comprehensive and extensiveprocess of coming up with a new approach todairy policy. This resolution puts Land O'Lakesofficially in support of the NMPF’s Foundationfor the Future plan. It shifts dairy policy fromthe current price support and direct paymentsto a margin insurance system.Resolution 10 – Environmental Regulationof Agriculture. With this resolution,Land O'Lakes members are joining many otherag groups in objecting to a series of proposalsfrom the Environmental Protection Agency.These proposals would have a significant impacton agriculture and would duplicate rulesthat already exist to protect the environment.the approved Policies & Resolutions becomeLand O'Lakes policy for the coming year. ■Steven is the director of GovernmentRelations for Land O’Lakes, Inc. He has beenwith the company since 1976, when he washired at Midland Cooperatives. Steve isbased in Arden Hills, Minn.Policy 1 – Cooperative Policy. This policywas amended by our members to include astatement reaffirming the important rolethat cooperatives play in the 21st centuryfood and agriculture system.Policy 2 – Sustainability. Land O'Lakesmembers ratified this policy statementthat commits the cooperative to serving apositive, constructive role in the nationaldiscussion on sustainability, especially as itpertains to agriculture and food production.The development of policies and resolutionsis an example of grassroots activismby the member-owners of the cooperative.They provide insights to how our membersfeel about the issues that affect farmers andthe cooperatives they own and use.For More InfoYou can read the approved Policies &Resolutions on the Land O'Lakes corporatewebsite: www.landolakesinc.com.Click Members in the main navigation,then under “Government Relations” inthe left-hand column, click Resolutionsand/or Policies.Get updates from Steve via Twitter at twitter.com/SPKrikava16 growingtogether www.landolakesinc.com
ECONOMIC OUTLOOK by Tom WegnerA Look at Dairy PricesFundamental market factors drive prices in 2011Economists often look to fundamentalmarket factors when explainingor projecting prices. Fundamentalfactors impacting farm milkprices include weather, number of milkcows, cow productivity and stocks of dairyproducts. Occasionally, these fundamentalfactors line up in a nice way, allowingeconomists and market participants toclearly explain and even project futureprice movements.For example, most analysts attributethe record milk prices experienced in2007-08 to the poor weather conditions inNew Zealand, which reduced the supply ofmilk for exports. Thus, the available milksupply residing on the U.S. market got bidup and effectively allocated dairy productsamong global customers.In the corn market, fundamental factorshave strengthened prices to unprecedentedlevels; a smaller than predictedU.S. crop and low carryover stocks, coupledwith strong demand from both exportcustomers and ethanol plants, has liftedprices to levels well in excess of $7 perbushel. Economists with the Universityof Illinois have developed price scenariosfor next year that rely heavily on assumptionsabout U.S. weather. Their analysisconcludes that under a poor weather scenario,corn prices could average as high as$7 per bushel, while under a good weatherscenario, prices would still average $4.75per bushel. These estimates do not takeinto account the most current reports ofhistorically low levels of corn carryover. Bycomparison, USDA has conservatively estimatedthe corn price will average $5.40per bushel, and the Food and AgriculturalPolicy Research Institute (FAPRI) at theUniversity of Missouri, a major sourceof market analysis for the U.S. Congress,projects a corn price of $5.03 per bushel.Clearly, weather, and its accompanyingimpacts on acreage planted and yield, representsthe major fundamental factor influencingU.S. corn prices in 2011-12.Turning to the dairy markets, the key fundamentalin 2010 was increased internationaldemand, which pulled U.S. dairyproduct prices above 2009 levels andraised farm milk prices above $16. In 2011,USDA projects farm milk prices to top $18as international demand continues to drivedairy prices; the FAPRI projects milk pricesslightly lower at $17.79.Most analysts agree that the large volumeof U.S. cheese stocks do not line upneatly with the current price levels. Cheesestocks have exceeded 1 billion pounds everymonth since March 2010, leading to concernsabout cheese prices weakening in thecoming months as the U.S. approaches theseasonal production flush. Recent futuresseem to reflect this concern.Perhaps the factors underlying the impactof cheese stocks on prices are changing.One of the more difficult aspects of projectingprices is identifying such changesin fundamental factors. For example, thepopularity of pizza in U.S. diets significantlyaltered (for the better) the demandfor cheese. Similarly, the entrance of mega-sizedcheese plants (think Southwestand Hilmar cheese plants processing morethan 5 million pounds of cheese each day),combined with an ever-increasing level ofprice volatility, may have resulted in a desireby customers, suppliers and processorsto hold a larger level of inventory. Inshort, supply chain participants may havebeen consciously choosing to hold more inventory,and that 1 billion pounds of cheesein stocks may not be excessive consideringtoday’s price and processing environment.In summary, fundamental factors supportstrong milk prices and even stronger cornprices for 2011. Livestock producers – especiallydairy producers – need to proactivelytake steps to minimize their exposure to therisk that these two ever-heating markets puton their milk margins over feed costs. ■Tom is the director of Economics and DairyPolicy for Land O’Lakes, Inc. He has beenwith the cooperative since 2005 and holdsa master’s degree in applied economics.Tom is based in Arden Hills, Minn.www.landolakesinc.com MARCH/APRIL 2011 17
Page 1 and 2: TMMARCH/APRIL 2011THE FUTURE OFTHE
Page 3 and 4: Table of ContentsMARCH/APRIL 2011TM
Page 5 and 6: One of those messages is that in th
Page 7 and 8: of a legislator in Washington or th
Page 9 and 10: FeedThe company’s Feed business r
Page 11 and 12: LAND O’LAKES EXECUTIVE AGRIBUSINE
Page 13 and 14: PROFILESSARA MORTIMORE, Vice Presid
Page 15: It’s easy to find critics of biot
Page 19 and 20: Josh (left) and John Zonneveld Jr.
Page 21 and 22: A truck picks up milk at Hilltop Da
Page 23 and 24: organized through MBGs in early 200
Page 25 and 26: outbreak near our plant was so broa
Page 27 and 28: 25 Years of CooperativeServiceEach
Page 29 and 30: In addition to sponsoring the event
Page 31 and 32: BUNNY CREAM PUFFSThese delightful c

2011 March/April Issue - Land O'Lakes Inc.

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