Report criticizes marketing for some dairy foods

Food industry critic and reform advocate Michele Simon this week released a new report sharply critical of marketing practices for certain dairy foods including pizza and sugar sweetened dairy drinks. Most of this marketing effort originates with the federal government's fluid milk and dairy checkoff boards, which are semi-public government-endorsed programs that are funded through a tax or mandatory assessment on dairy producers.

My view of this issue is not anti-dairy, nor do I favor government restrictions on private-sector advertising for dairy products. Yet, surely reasonable people can agree on this: any federal government-sponsored producer boards, and any marketing funded using the federal government's power of taxation, ought to be consistent with the Dietary Guidelines for Americans. The checkoff marketing should not be for Pizza Hut or for sugar-sweetened drinks. In these times of major health crisis and rising public sector health costs, we should expect the foods and beverages marketed in the government's own voice to be healthy.

For readers following up on this story, here are some related links from a diversity of official and non-official sources.

• The U.S. Food Policy blog post on this topic in February.
• The annual report to Congress from USDA's Agricultural Marketing Service (AMS), describing the fluid milk and dairy checkoff programs. Although the report is annual, the most recent report online appears to be 2011.
• A report from USDA's Agricultural Research Service (ARS) earlier this year about pizza consumption in the United States.
• The dairy checkoff program's website describing its partnerships with Domino's, Pizza Hut, Taco Bell, and McDonald's, with an online video titled "McDonald's thanks America's dairy farmers."
• A 2010 article by Kim Severson in the New York Times about sugar-sweetened milk in school meal programs.

USDA reports on pizza consumption and on dairy checkoff program initiatives to increase pizza demand

USDA's Agricultural Research Service (ARS) today released a new report on the role of pizza in American diets. ARS researcher Donna Rhodes and colleagues found that an astonishing 13% of the U.S. population consumed pizza on any given day, based on the most recent years of the National Health and Nutrition Examination Survey (NHANES).

For this large population -- more than 1 out of 8 Americans -- who consumed pizza in a particular day:

• Pizza accounted for 25% (among kids) and 29% (among adults) of daily food energy intake. More than a quarter of all calorie intake was pizza.
• Pizza accounted for 33% (among kids) and 39% (among adults) of daily saturated fat intake. Compared with foods in general, pizza is much heavier in saturated fat.
• Pizza accounted for 33% (among kids) and 38% (among adults) of sodium intake. Compared with foods in general, pizza is much heavier in sodium.

In recent years, USDA's dairy checkoff program has spent many millions of dollars to increase pizza consumption among U.S. children and adults. Using the federal government's taxation powers, the checkoff program collects a mandatory assessment of 15 cents on every hundredweight of milk that is sold for use as fluid milk or dairy products. The total mandatory assessment in 2011 was $104 million for fluid milk and $98 million for other dairy products, according to the most recent annual USDA Report to Congress. These expenditures are many times greater than federal spending on promoting fruits and vegetables, whole grains, or any of the other foods for which the Dietary Guidelines recommend increased consumption. Each semi-governmental checkoff program is managed by a board of producers appointed by the Secretary of Agriculture, and all expenditures are approved by USDA's Agricultural Marketing Service (AMS). Much of the actual activity is carried out by Dairy Management Inc. (DMI), a dairy industry organization. The checkoff program goal is to provide increased economic demand for dairy producers.

The USDA Report to Congress found that the economic payoff to producers is greater for cheese marketing efforts than for fluid milk marketing efforts. The report concluded:

• For every $1 that the checkoff program spends on increasing demand for fluid milk, farmers get $3.95 in increased revenue.
• For every $1 that the checkoff program spends on increasing demand for cheese, farmers get $4.43 in increased revenue.

That differential payoff is unsurprising. During the recent years of checkoff program operation, the USDA report charted the following trend in fluid milk consumption:

Meanwhile, the USDA report charted the following trend in cheese consumption:

Pizza accounts for a large fraction of the increased cheese consumption, so the Report to Congress emphasized the value for producers of partnering with fast-food restaurant chains, especially Domino's Pizza:

On average, expenditures on marketing and cheese promotion were $12.0 million during the period. Owing to partnerships with the pizza industry, notably Domino’s Pizza, expenditures on cheese increased from the fourth quarter of 2008 to the end of 2011.

DMI spent over $35 million over three years in partnership activities with Domino’s. The Domino's relationship accounted for nearly three-quarters of DMI’s overall promotion expenditures in the cheese category over the 2009 to 2011 period.

According to the Report to Congress, Patrick Doyle, President and CEO of Domino's Pizza, explained why the support from the federal government's dairy checkoff program was so beneficial to the company, as follows:

“DMI support has allowed us to focus some advertising dollars on areas we would not have considered otherwise. The Wisconsin 6 Cheese pizza has twice the cheese of a regular pizza, but we had neither developed nor advertised such a product. DMI helped fund the research and media to launch this product”

The Report to Congress argued that the USDA-supported dairy checkoff program's pizza partnerships increased cheese consumption:

The promotional activities with Domino’s included new product lines, use of more cheese than had been provided on similar items in the Domino's chain before the partnership, and the introduction of specialty cheeses into the company’s recipes. In short, the assistance of dairy dollars was instrumental in positively affecting the pizza category, a category that is very important to the dairy industry.

Every dairy checkoff partnership must be approved by USDA. Every marketing message has official legal standing as "government speech" (because, otherwise, courts would see the mandatory assessment as a misuse of the federal government's taxation powers). The checkoff partnerships undermine USDA's standing as a credible voice in promoting dietary guidance for Americans, and they must be a terrible embarrassment for the many people at USDA who seek to promote healthful eating.

Many Americans find pizza to be an enjoyable treat, but, from a nutritional perspective, it is a dreadful choice of major food staple. It is understandable that food companies may promote pizza with their own money, but it is a travesty that the federal government should contribute so heavily to this effort, while neglecting other important nutrition goals.

Washington Monthly covers "government speech" and Big Beef

At the Washington Monthly, Siddhartha Mahanta describes the unusual coalition of animal welfare and conservative groups opposed to the federal government's semi-public beef checkoff program:

With liberals and conservatives for once in agreement, it’s time to have a barbeque. Big Beef subsidies. It’s what’s for dinner. 

This blog's previous coverage of checkoff controversies includes the Humane Society's earlier work on the sale of the pork checkoff's "Other White Meat" brand, and the results of my 2006 Freedom of Information Act (FOIA) request that triggered the Humane Society's interest in this topic.

Long-hidden details revealed about the pork checkoff program's $60 million purchase of the "Other White Meat" brand

Six years after I requested these documents under Freedom of Information Act (FOIA) rules, USDA recently released unredacted copies of documents about a $60 million financial transaction between USDA's National Pork Board (a semi-public "checkoff" program) and the National Pork Producers Council (a pork industry association).

The documents reveal the shaky basis for the Pork Board's 2006 purchase of the "Other White Meat" brand from the National Pork Producers Council for $60 million.  It looks to me like the sale price was drastically inflated as a way of funneling money from the semi-public checkoff program to the private-sector trade association.

Here is how it works.  The checkoff program collects more than $40 million each year in mandatory assessments from pork producers -- whether they want to contribute or not -- using the federal government's powers of taxation.  Some dissident pork producers object to this tax, but the Department of Justice forces them to pay up.  The federal government says that the advertisements serve the public interest and officially are recognized as "government speech."  There are rules about how pork checkoff money must be spent.  For example, it is not supposed to be used for lobbying.

Some pork industry executives wished this restricted money could be transferred to the National Pork Producers Council, which faces fewer rules and is allowed to lobby as much as it likes.  In 2006, with USDA approval, the NPPC sold the property rights to the "Other White Meat" brand to the pork checkoff program for $60 million, payable at $3 million per year for 20 years.

That year, I asked USDA's Agricultural Marketing Service (AMS) to share the appraisal on which this sale was based.  Who said this brand was worth $60 million?  Was there any risk that some other entity was going to bid up the price and steal the brand out from under the pork checkoff program?  Can you imagine, "Avocados: the Other White Meat"?

AMS refused to share the documents.  When I filed an administrative appeal, AMS shared only a redacted version, with key passages blacked out.  The agency claimed the missing information was "pre-decisional" and "deliberative" and hence not subject to FOIA rules.  I always knew this reason was unconvincing, but I never had the money or the stomach to file a lawsuit to press the point.

Now, six years later, the documents were released from USDA to the Humane Society of the United States (HSUS), as part of a lawsuit which has also filed a lawsuit challenging the legality of the "Other White Meat" purchase [Note Feb. 26: edited slightly to clarify that the HSUS originally received the documents in a proceeding that was separate from the lawsuit].  The HSUS had become curious about the pork checkoff program, because checkoff funds were being used to criticize the animal welfare society.

In the unredacted documents, it seems clear that there is no justification for accepting the $60 million price as legitimate.  The pork checkoff program seems to have agreed to an inflated price.  The documents claim that it would cost $36 million to rebuild a brand to replace the "Other White Meat" brand over 7 years if the pork checkoff program did not purchase the property.  With payments spread over 20 years at a specified interest rate, the total payments would be $60 million.

One problem with this computation is that it calculates interest on the payments over 20 years but wrongly treats the $36 million cost as if it happened instantaneously.  If one amortized the $36 million cost over 7 years, it would have been much smaller, and hence the total payment over 20 years also would have been much smaller than $60 million.

A second problem with this computation is that much of the original equity in the "Other White Meat" brand was built with pork producer checkoff moneys.  Asking them to pay again to purchase the brand seems like double-billing.

A third problem is that this computation assumes the pork checkoff program was under some real threat of losing the brand.  Really, the National Pork Producers Council never had any other buyer.

In the following images, you can see the redacted and unredacted versions of one key document.  Three things to notice are:

(1) The author is Mark Williams, a long-time insider who had an early role in developing the "Other White Meat" brand.  He is not an independent appraiser.

(2) There was nothing "pre-decisional" or "deliberative" about the redacted passsage.  That was just an excuse to avoid sharing with me the passage that was most embarrassing for the checkoff program.

(3)  The unredacted passage admits plainly that there never was any other buyer for this brand.  In the formerly blacked out passage, Mark Williams says, "While 'The Other White Meat' is extremely well known, it is recognized (principally in the U.S.) as being synonymous with (fresh) 'pork,' which strongly suggests that no branded marketer would be able to gain enough benefit from its use to make them a likely buyer."  That's exactly what I thought in 2006!

You can see why the pork checkoff program fought so hard to keep this information secret.  The whole purchase seems very wrong to me.  I think the hard-working pork producers themselves are being victimized as they are forced to pay up for such nonsense.  And I don't think the federal government's semi-public checkoff program should be set loose from the rules that normally circumscribe how checkoff money is used.

This sale should be reversed and the ongoing annual payments should be stopped. 

Redacted version (2006)

Unredacted version (newly released)

Wayne Pacelle and Chuck Jolley discuss pork checkoff

Veteran food industry journalist Chuck Jolley recently discussed the pork checkoff program with Wayne Pacelle, president of the Humane Society of the United States (HSUS).  Jolley asked Pacelle if the recent HSUS lawsuit against the pork checkoff program was "legal shenanigans" or a substantial case.  Pacelle's response noted some recent reporting on the U.S. Food Policy blog.

Warner left no doubts about the NPPC position. Let me ask the question posed in my column directly to you: “Does HSUS have a case against the National Pork Board or are they just engaging in some legal shenanigans in order to force NPB to the bargaining table?”

A: You can read our complaints. We have (hard evidence) that the Pork Board used check-off funds to participate in NPPC lobbying events. NPPC says the charges are baseless, yet it quickly acted to remove evidence of the Board’s high-donor “Partner” status in its Alliance lobbying program. Within days of the HSUS complaint, the U.S. Food Policy blog reported that the Pork Board had been (removed) from the Alliance website.

HSUS and pork farmers also filed a (complaint) over the $60 million pay-out from the Pork Board to the NPPC for the use of the ‘Pork: The Other White Meat’ slogan. NPPC used $500 million from the checkoff to make the slogan successful, so producers should not have to pay again for it, especially in light of the slogan being put to bed.

Pork alliance removes National Pork Board from Alliance Partners list

U.S. Food Policy reported on Wednesday that the National Pork Board (a federal checkoff program) was listed as an Alliance Partner on the website of the Pork Alliance, a lobbying entity sponsored by the National Pork Producers Council (a private-sector trade association).

It is against the law for federal checkoff funds to be used for lobbying.

I see today that the Pork Alliance website no longer lists the National Pork Board.  The alliance must have removed the board from the list in the past 3 days, after a complaint was filed by the Humane Society of the United States.

Here, for the historical record, is my screen capture from last Wednesday (click the image for a higher-resolution view).  The National Pork Board appears right below Merck Animal Health.

Pork checkoff funds lobbying alliance

The federal government's semi-public checkoff programs collect mandatory assessments from producers.  Of course, it is illegal to use these funds for lobbying.

Yet, the National Pork Board (the pork checkoff program), overseen by USDA's Agricultural Marketing Service, is listed as an "Alliance Partner" for a National Pork Producer Council lobbying organization.  The NPPC is a private-sector pork industry trade association.  The NPPC's alliance web page explains the lobbying goal:

Pork Alliance dues are used to fund outreach for critical legislative and regulatory industry priorities, including foreign trade access, environment, food safety and animal welfare issues.

The dues mentioned in the web page are large.  The application form (.pdf) on the NPPC website says that the dues for becoming an "Alliance Partner" are $20,000.

I am not surprised that the Humane Society of the United States (HSUS) has filed a legal complaint with the USDA Inspector General.  The mandatory assessments are being funneled to a lobbying organization.  No matter what you think of the HSUS, it seems wrong for the federal government to use its power of taxation to place a finger on the scale of the public debate.

Lawsuit challenges pork board purchase of "Other White Meat" slogan

A lawsuit filed today in the U.S. District Court for the District of Columbia charges that the $60 million sale of the pork industry's "Other White Meat" slogan illegally diverts money to the lobbying efforts of the National Pork Producers Council (NPPC).

One of the plaintiffs is Harvey Dillenburg, a pork producer in Adair County, Iowa.  Mr. Dillenburg is not a member of the NPPC.  He is required by law to pay a portion of every sale to the National Pork Board, which is supposed to use the money for promotions and advertising.  The National Pork Board is not allowed to lobby.  In 2006, the National Pork Board agreed to pay the NPPC $60 million in return for the property rights to the "Other White Meat" brand.  The resulting payments of $3 million per year for 20 years help fund the NPPC's powerful lobbying machine.

Think about how this arrangement looks from the point of view of Mr. Dillenburg.  Although he does not choose to support the NPPC, the federal government forces him along with all other pork producers to pay the National Pork Board, which in turn pays the NPPC.

The other plaintiff is the Humane Society of the United States, a leading animal welfare organization.  As the Congressional Research Service (.pdf) explains, the HSUS recently brokered a successful agreement with egg producers, reaching a judicious compromise about what type of cages seem ethically acceptable for hens.  Although the leading trade association for egg producers is now working with HSUS to get this balanced policy approved by Congress, the agreement faces implacable opposition from the NPPC.  The egg agreement causes no harm to pork producers, but the NPPC is worried that the precedent of a successful egg agreement will generate unrealistic hopes for similar good-faith negotiations about gestation crates for pork.  It is not surprising that HSUS has been looking into how the federal government's pork board -- which is not supposed to support lobbying -- helps fund the NPPC's efforts to spoil the egg agreement.

This blog, U.S. Food Policy, began covering the tale of the "Other White Meat" sale in a June 2006 blog post, which called for greater transparency about the terms of the sale.  When nobody would give me the documents voluntarily, I filed a Freedom of Information Act (FOIA) request.  USDA initially turned down my request, arguing that the information was "pre-decisional and deliberative".  When I appealed, USDA's Agricultural Marketing Service in December 2006 released partly-blacked out versions of the key documents.

Although AMS hid critical details, enough information was revealed in 2006 to suggest that this was a poor use of pork producers' money.  For example, I pointed out accounting flaws in the supposedly independent appraisal upon which the $60 million sale price was based.  In the HSUS and Dillenburg lawsuit today, I learned for the first time that Mark Williams, who is largely responsible for pulling together the supposedly independent price appraisals, actually has been responsible for developing the "Other White Meat" branding since its inception. 

The HSUS explains further:

Through months of research, The HSUS uncovered glaring legal violations, conflicts of interest, and an exorbitantly over-inflated $60 million price tag associated with the deal. Much of the extraordinarily inflated value of the slogan resulted from 20 years of promotional campaigns funded entirely with pork producers’ own checkoff funds: roughly half a billion dollars. In essence, NPPC charged pork producers twice: once to make The Other White Meat successful, and again to pay for the value of that success.

Now, the case against this sale has only gotten stronger.  The National Pork Board has largely retired the "Other White Meat" slogan, in favor of the new "Be Inspired" slogan, and yet the pork board continues to pay the NPPC $3 million each year for the nearly worthless old slogan.  The NPB has an escape clause allowing it to cancel the payments, but it chooses not to exercise this clause.

The HSUS and Dillenburg lawsuit (.pdf) is well written, with astonishing details beyond what can be described in this space.  It was covered today in Feedstuffs and other trade publications.  I encourage everybody interested in U.S. Food Policy to read it in full.

Federal government says all sorts of things about soy milk

Mark Bittman this week describes how he overcame years of heartburn by giving up milk.  Though the NYT columnist agrees this experience hardly counts as a controlled experiment, it does point his critical attention toward USDA's dietary guidance message about dairy.

Today the Department of Agriculture’s recommendation for dairy is a mere three cups daily — still 1½ pounds by weight — for every man, woman and child over age 9. This in a country where as many as 50 million people are lactose intolerant, including 90 percent of all Asian-Americans and 75 percent of all African-Americans, Mexican-Americans and Jews. The myplate.gov site helpfully suggests that those people drink lactose-free beverages. (To its credit, it now counts soy milk as “dairy.”)

There’s no mention of water, which is truly nature’s perfect beverage; the site simply encourages us to switch to low-fat milk. 

Regarding MyPlate's inclusion of soy milk in the dairy group, however, not all federal government messaging seems to agree.

Soybean checkoff message

Like Bittman and MyPlate, the United Soybean Board also has high praise for soy milk. The board is a government-sponsored checkoff program, which has authority from Congress to issue federal government messages in favor of soybeans using money from a mandatory assessment on soybean producers. From the soybean checkoff website link we learn:

Soymilk is a great source of high-quality soy protein, frequently fortified with calcium and vitamin D for bone health, and an option for the lactose-intolerant.

Dairy checkoff message 

But the federal government's dairy checkoff program disagrees.  The program has authority from Congress to issue federal government messages in favor of dairy products using money from a mandatory assessment on dairy producers.  The dairy checkoff program has a bitterly sarcastic satirical flash-based interactive website, mocking soy milk for its sugar content, long ingredient list, and food science chemistry manipulations.

Mixed messages

By using checkoff programs to sponsor contradictory messages for different commodities -- while approving each message as "government speech" -- the federal government serves consumers poorly.  When will these programs be reformed?

Farm Bill update

The Senate is debating the 2012 Farm Bill, which reauthorizes agriculture, conservation, and nutrition assistance programs for another five years. You can read coverage at Politico, the Washington Post, the Food Politics blog, and Roll Call.

Overall, the Farm Bill is likely to save some taxpayer money by replacing some agricultural subsidies with new crop insurance programs.  These government subsidized crop insurance programs are likely to cover "shallow losses" -- comparatively modest losses that don't meet the threshold for serious losses already covered.  These new crop insurance subsidies may be a little less expensive than the crop subsidies they replace, but they still reflect the agriculture industry's capture of legislators, who can be persuaded to do the industry's bidding, rather than representing sound policy.

Senate leaders agreed to consider a list of 73 amendments. You can follow the specific votes on the Senate website. If I understand correctly, an amendment to approve a compromise between the egg industry and animal welfare organizations regarding treatment of chickens was not on the list of amendments for consideration, perhaps because it was blocked by hardliners in other meat industries who oppose such compromises. An amendment to protect the Supplemental Nutrition Assistance Program from medium-sized cuts failed (it would have saved the money by reining in the new crop insurance subsidies). An amendment to limit the size of payments in a marketing loan subsidy program passed.

The DeMint amendment that I discussed recently failed. DeMint (R-SC) noted that checkoff programs claim to have enthusiastic support from producers. If this were true, surely a voluntary contribution would be sufficient, right? Yet, only 20 Senators, all Republicans, backed DeMint's effort to make the contributions voluntary. My skeptical view of checkoff programs seems to have more friends at the Heritage Foundation than among the progressive Senators who ought to speak up for good governance and a coherent federal government message on this public health issue.

Liberate the soybean farmers!

The American Soybean Association (ASA) this week slammed Senator Jim DeMint (R-SC) for proposing that checkoff contributions should be voluntary.

At present, the checkoff programs use the federal government's power of taxation to collect hundreds of millions of dollars each year in mandatory assessments from producers -- whether the producers want to contribute or not -- to be spent on advertising, marketing, research, and plenty of overhead.

The checkoff programs were the focus of scrutiny by USDA's Inspector General, who determined in a March report (.pdf) that the Agricultural Marketing Service (AMS) "needs to improve its governance over the boards."  AMS took some steps in 2010 to increase oversight and plans to release more detail about procedures the boards should follow in the near future.  A key example in the report came from the soybean checkoff.  According to the Inspector General:

A recent OIG investigative review reported that a subcontractor of the USB [the soybean checkoff board], the United States Soybean Export Council, used subcontracts as a mechanism for paying employees unauthorized bonuses totaling approximately $302,000. The Council’s executives did not obtain authorization from the USB to pay the bonuses. 

The American Soybean Association's vociferous email this week is misleading on several points.

In the email, ASA President Steve Wellman said, “The checkoff is not a tax. It is not something that is imposed upon us as farmers. Rather, it allows farmers to invest our own dollars to conduct research, build markets and create new uses for soy.” I cannot figure out who Wellman thinks he is fooling, checkoff farmers or the general public? For farmers who choose not to contribute voluntarily, the checkoff payment is imposed. The U.S. Department of Justice enforces the mandatory assessments. Although the checkoff collections do not appear in the federal government's official tax accounts, that omission is itself a scandal. In plain English, the checkoff is a tax.

The ASA email continues, “With oversight provided by USDA, producers have taken it upon themselves to fund over $905 million of research, promotion and consumer education programs annually through checkoff activities at no cost to the federal government.” Is that really the number? $905 million?! The USDA Inspector General's report said the soybean oversight problems mentioned above contributed to the IG's concern that "oversight controls were not adequate to prevent or detect the potential misuse of funds."  I would not say that USDA oversight strengthens the case for a mandatory assessment.

Describing the IG report and the soybean checkoff problems in particular, syndicated agricultural policy columnist Alan Guebert wrote in April, "When federal auditors examine almost any aspect of the 18 checkoffs created by Congress, they usually find the worst of times: funds misspent on illegal travel, subcontracts used to funnel money for unauthorized bonuses, no procedures to track money and audit rules so porous that a checkoff-bought Sherman tank could clank through most checkoffs without a question or an eyebrow getting raised."

In DeMint's proposed amendment to the Farm Bill, checkoff contributions would be voluntary and would no longer be enforced by the federal government's power of taxation.  Imagine that! Like every other industry, farmers would be free to contribute or not contribute, as they prefer, to private-sector marketing efforts.

Spinning dairy weight loss claims

The USDA's Center for Nutrition Policy and Promotion (CNPP) provides the Nutrition Evidence Library, a clear and transparent source of systematic evidence reviews about all sorts of nutrition and health issues.

For example, here is the evidence review summary for claims about dairy consumption and weight loss:

Conclusion

Strong evidence demonstrates that intake of milk and milk products provide no unique role in weight control.

That seems clear enough: no unique role in weight control.

Meanwhile, the federal government's semi-public dairy checkoff program offers its own distinct review of the evidence.  Although many people do not realize it, the National Dairy Council is an arm of this checkoff program.  Its review says:

A growing body of research illustrates that enjoying three servings of milk, cheese or yogurt each day as part of a nutrient-rich, balanced diet may help maintain a healthy weight.

The first study mentioned is by Michael Zemel, the researcher who won a patent on dairy weight loss claims, which allows dairy industry organizations to collect royalties from food companies that use such claims. 

Buried deep in the subsequent studies, one finds contradictory evidence.  For example, a study by Wagner and colleagues in the Journal of the American College of Nutrition finds, "there were no significant differences in weight loss between groups.  The milk group showed significantly less reduction of body fat than the placebo group."  But you would not know that from the Dairy Council's summary statement.

The National Dairy Council -- whose messages have official status as "government speech" -- seems to be contradicting the more impartial review of USDA's scientists.  Why should the federal government be willing to play the role of "enforcer" for the National Dairy Council, collecting the millions of dollars in mandatory assessments that support the Council's industry-friendly spin on the evidence?

USDA posts the 2010 dairy checkoff report

The federal government's dairy checkoff program just today released the July 2010 Report to Congress, which was the subject of my earlier Freedom of Information Act (FOIA) request.

The report, 16 months overdue, says that $108 million were collected in 2009 for fluid milk promotions, and another $283 million were collected for other dairy products (principally cheese).  The checkoff programs use the federal government's power of taxation to collect mandatory assessments, essentially taxes, from producers.  All the advertising and promotion messages count as "government speech."  The expenditures vastly outweigh anything the federal government does to promote healthy eating.

The introduction emphasizes the controversial Domino's campaign:

The Dairy Board continued to develop and implement programs to expand the human consumption of dairy products by focusing on partnerships and innovation, product positioning with consumers, and new places for dairy product consumption. One such endeavor was accomplished through a partnership with Domino’s Pizza and the creation of the American Legends pizza line.

The report later explains in greater detail:

The pizza industry plays an important role in the dairy industry. Twenty–five percent of all cheese manufactured in the U.S. is used on pizza, and Mozzarella comprises 49 percent of all cheese volume in the foodservice industry. Research showed that negative pizza cheese volume trends were having an impact on the dairy industry. As a result, dairy producers partnered with Domino’s to reinvigorate the pizza category and launch American Legends, a line of six specialty pizzas that use up to 40 percent more cheese than a regular Domino’s pizza.

The report shows that a large fraction of affiliated advertising expenditure goes toward cheese.

Professor Harry Kaiser at Cornell University wrote the accompanying economic analysis, showing the great effectiveness of the checkoff program in expanding dairy consumption on both a nonfat and fat basis (increasing intake of milkfat).  Professor Kaiser (a good colleague for whom I was a teaching assistant at Cornell) has previously written U.S. food policy to explain his view of the nutritional impact of the checkoff programs:

[W]e continue to believe that the nutritional state of consumers in the United States would be worse without generic food advertising programs. 

I am not convinced.  The checkoff programs should rein in the fast food collaborations and bring the promotions in line with the dietary guidelines, or they should let free markets work on their own and let producers contribute voluntarily to the checkoff programs.  The status quo, with the federal government promoting Domino's Pizza, is terrible.

The July 2011 report has not yet been released.  It is not clear whether USDA simply didn't submit the report to Congress as required, or instead whether USDA submitted that report but is not yet willing to share it with the public.

Federal policy and the McRib

The McDonald's McRib is back in the news again. A mocking Twitter feed is under way.  Now is a good time to revisit the federal government's role in this industrial concoction, a perfect symbol of a food system gone mad.

The McRib was originally developed with support from the federal government's pork checkoff program.  Of all the things this federal program has accomplished over the decades, the McRib deserves mention right up front.  The National Pork Board's 2006 annual report (.pdf) boasted in its first paragraph:

The Pork Checkoff celebrated 20 years of progress in 2006. Taking a look back and reflecting on where we are today, I am reminded of the impact that the Pork Checkoff has had on the industry, such as moving from being a net importer of pork to one of the largest exporters of pork in the world; creating new products like the very successful McRib; developing education programs such as Pork Quality Assurance™ to help producers ensure consumers of a safe, wholesome product; and repositioning pork from a second thought to top-of-mind awareness.

The pork checkoff program sometimes is mistaken for a private sector trade association.  It is not.  Like all the federal checkoffs, it uses the federal government's power of taxation to collect a mandatory assessment or tax from all pork producers, whether they voluntarily want to pay or not.  The checkoff is managed by the National Pork Board, whose members are appointed by the Secretary of Agriculture.  Program oversight is provided by USDA's Agricultural Marketing Service.  Every marketing message is approved by the federal government, with official status as "government speech."

The McRib stands for the proposition that the federal government should help the pork industry promote any product, no matter how contrary to the government's own dietary guidance efforts in the midst of an epidemic of overweight and chronic disease.

Here is the nutrition facts panel, with 450 Calories, 40% of a day's saturated fat, 37% of a day's sodium, and an overall grade of "D" from Caloriecount.

I can understand why McDonald's wants to market this kind of stuff.  I am sure it is profitable.  But, why can't the federal government exercise more discretion in its own choice of products for the federal checkoff programs?  Isn't there anybody in the whole chain of oversight for the pork checkoff who is embarrassed to be associated with the McRib?

Where is the dairy checkoff report to Congress? (Update)

Despite a requirement in federal law to submit an annual report to Congress, the dairy checkoff program has not yet produced the report for July 2010 or July 2011, both of which are now long overdue.

Because earlier requests for a copy of the July 2010 report had been turned down by USDA's Agricultural Marketing Service (AMS), I filed a Freedom of Information Act (FOIA) request in September for the two most recent missing reports.  However, AMS turned down the request today, saying that the material was classified as "pre-decisional" and "deliberative."  The AMS response said that the reports were still in USDA clearance, and that the 2010 report will be released shortly.

The Dairy Production and Stabilization Act of 1983 (.pdf) says:

Not later than July 1, 1985, and July 1 of each year after the date of enactment of this title, an annual report describing activities conducted under the dairy products promotion and research order issued under this subchapter, and accounting for the receipt and disbursement of all funds received by the National Dairy Promotion and Research Board under such order including an independent analysis of the effectiveness of the program.

Likewise, USDA's Dairy Promotion and Research Order (.pdf) requires the agency:

To prepare and make public, at least annually, a report of its activities carried out and an accounting for funds received and expended.

The dairy checkoff program uses the federal government's power of taxation to collect a mandatory assessment of more than $390 million per year from farmers, in order to support research, promotion, and advertising activities, such as the "Got Milk" campaign.  The checkoff program promotes increased high-fat cheese consumption through support for fast food pizza marketing campaigns.  The program's management corporation, Dairy Management Inc., boasts of the fast food collaborations.  Notwithstanding the tension between these advertisements and healthy dietary guidance, every checkoff program message is endorsed by the federal government (in legal terminology, the advertisements must be approved as "government speech").

I think dairy farmers and the public deserve more timely transparency in this federal program, which is vastly better funded than anything the federal government does to promote healthy eating.

Reactions to beef checkoff upheaval

The U.S. agricultural industry continues to react to the recent upheaval in the Cattlemen's Beef Board (CBB), the federal government's checkoff program for research and advertising to promote beef.

Larry Dreiling writes in the High Plains / Midwest Ag Journal:

Even though Cattlemen's Beef Board Chairman Tom Jones and CEO Tom Ramey have resigned in the aftermath of an eavesdropping scandal, there's still plenty of concern from several state livestock groups that the scandal has eroded the very purpose of the CBB.

The National Farmers Union suggested a complete separation of the National Cattlemen’s Beef Association (NCBA) and the Beef Checkoff Program:

It is impossible to build a firewall strong enough when you have one organization that picks the members of the committees that make all of the funding decisions for the checkoff and are also involved in program evaluations. The ongoing firewall breaches are no longer allegations, but have been proven in a compliance audit review that has uncovered multiple financial irregularities and misappropriations of checkoff funds.

The U.S. Cattlemen's Association -- a competing trade association without the NCBA's heavy reliance on federal checkoff money -- published an editorial on Friday:

On July 1 the United States Cattlemen's Association (USCA) formally requested that the Secretary of Agriculture initiate a full investigation into circumstances surrounding the expanding contractor financial irregularities within the national mandatory beef checkoff as well as those circumstances surrounding the resignation of the Cattlemen's Beef Board (CBB) CEO. Since then, unfortunately, circumstances have grown even more serious with the resignation of the CBB Chairman, Tom Jones. It is unprecedented in beef checkoff history for the CBB chairman and chief executive officer to have been driven out of office. As USCA president, I want cattle producers to understand what USCA has discovered and what is behind USCA's decision to ask for the Secretary's intervention. Please become engaged in this very important process because what happens in the next few weeks will directly impact the future of the beef checkoff.

I spoke today (.mp3) with Don Atkinson, the farm news editor for the Voice of Southwest Agriculture (VSA), which is part of the Clear Channel radio networks, providing farm news coverage through affiliates in Oklahoma, Texas, and several other states. I have no idea what beef producers will want do next, but it does seem like the program needs to be changed. Cattlemen might want to convert the program to a private-sector program with voluntary contributions, or they might want to accept greater oversight and greater separation between the federal program and the NCBA.  Either option seems more reasonable than the status quo.

Coup d'etat in the beef industry: Tom Jones resigns as chairman of Cattlemen's Beef Board

Tom Jones resigned this week as chairman of the Cattlemen's Beef Board (CBB). This follows the resignation of Tom Ramey as CEO two weeks ago.

The CBB oversees the beef checkoff program, which uses the federal government's power of taxation to collect $70 to $80 million in mandatory assessments or taxes each year from beef producers, for use in research and promotion activities such as the advertisements with the slogan, "Beef. It's What's for Dinner."

The real power behind the throne has long been the industry's private-sector trade association, the National Cattlemen's Beef Association (NCBA), which serves as the principal contractor to the CBB, receiving most of the checkoff money, and which simultaneously controls most decision-making for the program.  The CBB had tried to re-organize the checkoff program to provide more accountability, but the NCBA opposed these changes.

The industry trade press has mostly been absent from duty.  The Rod Smith article for Feedstuffs about the Ramey resignation ignores the multi-million dollar questions about financial management, but spends whole paragraphs on an accusation that Ramey listened in on a conference call to which he was not invited.  That seems to me like a trivial matter.  Smith's brief today editorializes that Jones "was also caught up in the apparently now-failed maneuvers by the board's executive committee to restructure how beef checkoff programs are approved and funded by trying to pull the Federation of State Beef Councils out of the National Cattlemen's Beef Assn. (NCBA)."  I imagine most beef producers must be appalled at the anti-reform spin and will seek their information elsewhere.  Won't somebody in the trade press give this story the real investigation it deserves?  Or will it all be swept under the rug?

In his resignation letter today, Jones cites family concerns and also writes:

I am so sorry to the members of this Board who truly want what’s best for every producer.  Keep doing the right thing.  Doing what’s right is all that matters.  Some board members put their allegiance to their chosen association before their oath of obligation to serve all producers who pay the checkoff.  This is a dangerous position to take.  The checkoff program could benefit from positive change and it is difficult to work for that when your allegiance causes you to wear blinders to the change that is needed.  It will also be impossible to defend those attitudes if or when this program is challenged.

I have never in my life seen as much public defamation and misrepresentation as I’ve seen lately.  I know many of you as friends.  This kind of behavior is beneath us as people of agriculture.  When I see that kind of action, I look for the real purpose behind it.  More often than not, that purpose is fear – fear of change, fear of the future.  Fear may cause someone to want to hide the true issues, which are often based on the desire for money and power.  My resignation from this Board certainly won’t solve all of the issues before the Board.  You still have a lot of work to do and empty calls for “getting along” won’t get you anywhere.

The Agwired coverage mentions Jones' family reasons for resigning, but did not include these two sharp paragraphs. There is extensive coverage of recent events on the independent beefcheckoff blog.

Where is the dairy checkoff report to Congress?

This is not the first time we have run this headline.

Every July, USDA's Agricultural Marketing Service is supposed to submit a report to Congress detailing the activities of the fluid milk and dairy checkoff programs.  These programs are responsible for the cheese promotions described in the Michael Moss NYT article last year.  The most recent report on the AMS website is the July 2009 report, which described the programs' 2008 activities.  The July 2010 report has not yet been posted as of July 2011.  My gentle email requests to AMS go unanswered.  Even though the good folks are busy, perhaps they will forgive a more public nudge.

Beef checkoff CEO Tom Ramey resigns

The Cattlemen's Beef Board (CBB) chief executive officer (CEO) Tom Ramey resigned this week, throwing the checkoff program into turmoil.

The independent beefcheckoff blog pointed out that, during Ramey's time as CEO, the beef board investigated billing errors and financial misappropriation by the industry's powerful trade association, the National Cattlemen's Beef Association (NCBA):

On March 24 of this year, NCBA leadership filed charges of misconduct with the CBB Executive Committee against CBB leadership. The sequence of events speaks for itself. Who wins with this resignation? NOT checkoff-paying cattle producers.

Congress should hold hearings to investigate the beef checkoff program, DTN ag policy editor Chris Clayton suggested this week.  The beef checkoff is the semi-governmental program that collects a mandatory assessment or tax from beef producers and sponsors advertisements such as "Beef.  It's What's for Dinner."

Clayton describes the intensifying arguments between the CBB (which is appointed by the Secretary of Agriculture to oversee the checkoff funds) and the NCBA (which eventually receives about 90% of the checkoff program's $70-$80 million annual funding stream by serving as a contractor to carry out the program's operations).

Recent documents from the Cattlemen's Beef Board and the National Cattlemen's Beef Association reveal a wide-ranging rift over possible reforms and changes to the checkoff. Columnist Alan Guebert highlighted those problems last month, and posted related documents on his website.

Over the years, U.S. Food Policy has given extensive coverage to the strange world of federal government checkoff programs. For more information, see the long archives under the checkoff tag and, for a discussion of the tensions with federal dietary guidance, a 2006 article in the journal Obesity.

New "Be Inspired" brand for pork is unlikely to completely replace "the Other White Meat"

The federal government's promotion program for pork this month launched a new slogan for pork advertisements, "Be Inspired."  The new slogan largely -- but not entirely -- replaces the previous slogan, "Pork. The Other White Meat."

The Associated Press coverage on March 4 emphasized the bad news for the former slogan:

The Other White Meat" has another slogan.

The National Pork Board on Friday replaced the decades-old ad campaign with a new message: "Pork: Be Inspired."

Board officials said after nearly 25 years, it was time to move on from the old message that compared pork to chicken and instead try to increase sales by focusing on the estimated 82 million Americans who already eat pork.

Both the old and new advertisements are funded by the National Pork Board, which is a "checkoff" program established by Congress in 1985 to support pork research and promotion.  The board's $60 million annual budget is collected using federal taxation authority through a mandatory assessment on pork producers.  [Update: Following two sentences have been revised in response to the first comment.]  The board provides millions of dollars each year under subcontracts to the National Pork Producers Council, the industry's largest private-sector trade association.  The USDA Office of the Inspector General (.pdf) wrote in 1999 that the National Pork Board "needs to improve accountability for the funds and regain control over the National Pork Producers Association's (NPPC) influence on the Board's business," which led to increased efforts in the 2000s to maintain an arm's length relationship between the two entities.

It is easy to see why the National Pork Board might have been dissatisfied with the 20-year-old Other White Meat slogan.  During the years the slogan was used, chicken (broiler) consumption soared while pork consumption stagnated, even though there is no federal checkoff program for chicken as there is for pork and beef.  These trends were highlighted in an analysis prepared by the National Pork Board to justify the new campaign, which was approved by USDA's Agricultural Marketing Service in December, 2010.

The analysis pointed out that the old Other White Meat brand was targeted at light users of pork.  This audience was not enough to achieve the remarkably ambitious objective in the National Pork Board's new strategic plan: "a 10 percent increase in real per capita domestic consumer expenditures for pork."

For such a sharp increase in pork demand, the new campaign will have to promote major increases in consumption by a target audience that is more heavily into pork.  The new target audience is described in the National Pork Board analysis as "the flavor-seeking creative," people who enjoy cooking and "love a good meal -- with various proteins at the center, plus delicious sides."  The target group is "aware of fat and sodium, but doesn’t let that stop them from enjoying pork."

Despite what news reports implied, the documents from the National Pork Board say that the program is not abandoning the Other White Meat brand. You can still see the old brand way down in the bottom right corner of the pork board's website, described as a "Our Heritage Brand."

It would have been awkward for the checkoff program to abandon the old brand entirely, given that the National Pork Board committed to using $60 million in farmers' checkoff payments to buy the rights to use the Other White Meat slogan from the National Pork Producers Council less than five years ago.

At the time of this sale, I asked questions about the appraisal that was used to determine this sum, but neither USDA nor the National Pork Board would release the information.  The documents I received under a Freedom of Information Act request were blacked out to remove the most important information. The information about the appraisal that was visible in the documents justified the $60 million estimate on the grounds that, without this purchase, the National Pork Board would have to invest in developing a new slogan from scratch.  The reason now seems especially dubious, as the board invests in the launch of the new "Be Inspired" slogan.

In 2006, USDA said the $60 million payment to the National Pork Producers Council would be made in intallments of $3 million per year for 20 years. It might be politic for the pork checkoff program to retain that "heritage brand" in the lower right-hand corner for many years to come.