‘Un’conventional dairy wisdom
By Dave Natzke
Conventional wisdom holds that improved U.S. and global economies will increase dairy consumption. Every once in a while, I trip over reports – usually unrelated to dairy – that could have a direct or indirect impact on the economic health of the dairy industry. This week, we have two views of the U.S. economy, sending mixed messages.
Credit Managers’ Index
The March Credit Managers’ Index (CMI) trended in a positive direction, reinforcing the notion the general economy is doing better. The combined index is at the highest level in well over a year, but still lackluster compared to the boom years of the last decade.
The index, compiled by the National Association of Credit Management, measures "favorable” (sales, new credit applications, dollar collections and amount of credit extended) and "unfavorable” (accounts placed for collection, rejection of credit applications, credit beyond terms, credit disputes and bankruptcies) credit conditions in manufacturing and service business sectors. In March, favorable conditions held steady, while unfavorable conditions improved.
There's one approaching concern, according to the report. Weaker companies – which may have resorted to cost-cutting to reduce cash flow at the expense of long-term profit – are exiting business, reducing price competition for consumers. The next phase in the progression involves a boost in the inflation threat, as the remaining companies can now start to hike prices. The rise in inflation is a sign that the economy as a whole is on a real rebound. Now the emphasis will be on figuring out how to restrain that inflation surge without sending the economy back into recession.
After six months of gains, the Small-Business Optimism Index fell in March, with nine of 10 index components dropping from February. Most notably, hiring plans and expected sales growth took downturns. Fears of inflation and the need to increase sales prices were cited as a primary concern.
Based on March surveys of 757 small businesses, the latest National Federation of Independent Business (NFIB) monthly Small Business Economic Trends indicates 77% of small business owners reported no net hiring in the first quarter of 2012. The remaining 23% were almost equally split in either adding or cutting employee numbers. Thirty-two percent of small business owners attempting to hire employees reported few or no qualified applicants for positions.
While 23% of small business owners reported higher nominal sales over the past three months, 22% reported “weak sales” as their top business problem.
Small business capital expenditures on land, facilities, equipment and vehicles fell, a reversal of gains made during the previous two months. The percentage of businesses expecting to make additional capital expenditures during the next 3-6 months declined.
High oil and fuel prices are spurring companies to reevaluate their supply chains and distribution networks in a quest to find offsetting costs savings, according to a new report, How Fuel Costs Affect Logistics Strategies, released by the NAIOP Research Foundation.
However, the report says high energy costs will not materially increase the demand for distribution centers (DCs) to reduce distances to customers, because higher operating costs will offset transportation savings. Instead, companies are evaluating ways to optimize distribution networks, including maximizing use of full containers and truckloads, adding freight-pooling hubs or mixing centers to their supply chains.
The NAIOP Research Foundation, a 501(c)(3) organization, supports individuals and organizations engaged in real estate development, investment and operations. It is affiliated with the Commercial Real Estate Development Association. Visit www.naioprf.org.
OSHA must be timely
The U.S. Court of Appeals for the D.C. Circuit ruled unanimously the Occupational Safety and Health Administration (OSHA) must issue a citation within six months of a violation's occurrence, according to the International Dairy Foods Association. The ruling put an end to the agency's practice of extending the statute of limitations for violations as long as five years and reversed an earlier decision by the Occupational Safety and Health Review Commission.
The case, AKM LLC d/b/a Volks Constructors v. Secretary of Labor, challenged more than 60 citations OSHA gave Volks for record-keeping violations that occurred between 2002 and 2006.
Put some citric acid on it
IDFA also said USDA’s Animal and Plant Health Inspection Service will ask the U.S. Environmental Protection Agency to allow citric acid to be used as a disinfectant in the event of a food-and-mouth disease outbreak. Citric acid is a food-grade product that is readily available and has been used effectively against FMD in other countries. Recent research from the Plum Island Animal Disease Center in New York, which works to protect animals and the nation's food supply, has reaffirmed citric acid's effectiveness.
The dairy industry is concerned that the number of disinfectants available and approved by EPA for FMD is limited, and rapid and ready access would be critical during an outbreak. IDFA collaborated with the National Milk Producers Federation about the need for additional disinfectants and sent separate letters to USDA asking for the exemption.
Feds give preferential treatments
If you want a government contract, make sure your products are bio-based. The federal government is making preferential purchasing decisions under USDA’s BioPreferred program. Latest additions to the 10,000-item list of designated products include such things as air fresheners and deodorizers, asphalt and tar removers, asphalt restorers, electronic component cleaners, floor coverings, inks, packaging and insulating materials, pneumatic equipment lubricants and wood and concrete stains.
Bio-based products are composed wholly or significantly of biological ingredients. A complete list and detailed description of each BioPreferred designated item, and items for future designation, can be found at www.biopreferred.gov.
Biofuel associations support EPA
Six biofuel trade associations filed a motion in the U.S. District Court of Appeals for the District of Columbia Circuit, April 6, to intervene in support of the Environmental Protection Agency’s (EPA) Renewable Fuel Standard (RFS2) 2012 final rule. The rule is being challenged by the American Petroleum Institute (API). The case is D.C. Circuit case no. 12-1139, American Petroleum Institute v. United States Environmental Protection Agency.
Dave Natzke, Editor
Editorial Director – DairyBusiness Communications