advertisement

Dairy fight with Canada escalates as U.S. farmers face loss of milk market access on May 1

Progressive Dairyman Editor Dave Natzke Published on 19 April 2017
Canada vs U.S. milk

Forty-four Wisconsin dairy farms producing about 500,000 pounds of milk per day are still hunting for a market home for their milk, with their current market access closing on May 1, according to Ben Brancel, secretary of the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP).

Brancel updated a gathering of Minnesota and Wisconsin cooperative representatives during the Cooperative Network 2017 Spring Dairy Issues Conference, April 19, in Eau Claire, Wisconsin. He said his agency has been working on several fronts while searching for immediately available milk processing capacity.

The meeting continued a tumultuous spring for about 90 dairy farmers in the two states who were notified they needed to find new markets for their milk.

In mid March, Nasonville Dairy told about 15 farmers the company no longer had room for their milk after the loss of a large cheese contract. On April 1, Grassland Dairy told about 75 dairy farmers in Wisconsin and Minnesota the company no longer had processing capacity for about 1 million pounds of milk per day due to changes in Canadian policies, effectively shutting off exports of Grassland’s ultrafiltered (UF) milk.

While Grassland had been given a two-day notice of the Canadian market closure, New York companies producing similar products for the export market were given an additional 30 days, Brancel said.

Read: Milk with no home: Producers, processor face challenging times and Search continues for available milk markets, solutions for orphaned milk.

Thus far, one company, Mullins Cheese in north-central Wisconsin, has picked up eight affected producers, Brancel said. Due to production contracts, Grassland has also re-absorbed some producers originally dismissed by the company.

There are also cases where individual companies have picked up individual producers. In total, about 50 percent of the displaced one million pounds of milk per day had found a home by April 18. Market confidentiality makes getting exact herd numbers and milk volumes difficult, Brancel said. A few smaller farm owners have indicated they will retire.

State agency focus to-date has primarily been on finding immediate milk market access, Brancel said.  However, DATCP was also dealing with other issues, including: 

  • securing potential sources of credit for affected producers who lost milk markets and processors who may have to deal with storing or moving burdensome product inventories; 
  • working with the Department of Natural Resources over the potential need to dump milk and the environmental impacts; and
  • meeting with workforce development organizations dealing with the potential loss of employment on farms. 

President Trump pledges dairy support

While on a visit to Wisconsin on April 18, President Donald Trump pledged to work with the state’s political leaders to confront Canadian leaders over the dairy policy issue. 

"We’re going to stand up for our dairy farmers in Wisconsin," Trump said. "I’ve been reading about it and I’ve been talking about it for a long time. And that demands, really, immediately fair trade with all of our trading partners and that includes Canada. Because in Canada some very unfair things have happened to our dairy farmers and others."

"We're going to get together and we're going to call Canada," Trump said. "And we're going to say, 'What happened?' And they might give us an answer but we're going to get the solution, not just the answer."

While in Wisconsin, Trump signed a "Buy America, Hire America" executive order designed to prevent immigration fraud and abuse in the H-1B visa program. In his remarks, Trump said the dairy trade issue was part of a larger problem related to the North American Free Trade Agreement (NAFTA), which he called a “complete and total disaster” for the U.S.

“We are going to make some very big changes or we are going to get rid of NAFTA once and for all,” he said.  

A war of words

Trump’s statements added to a rash of communications between political and dairy organization leaders on both sides of the border.

Canadian Ambassador David MacNaughton sent a letter to Wisconsin Gov. Scott Walker and New York Gov. Andrew Cuomo, saying overproduction of milk – not Canadian policies – was to blame for dairy farmer financial hardships in the U.S.

"Canada does not accept the contention that Canada's dairy policies are the cause of financial loss for dairy farmers in the United States," MacNaughton wrote.  "The facts do not bear this out."

MacNaughton said Canada was upholding its international trade obligations under the North American Free Trade Agreement (NAFTA), including allowing duty-free and quota-free access to milk proteins. Despite some published reports, Canada had not imposed high import tariffs on those products, he said.

Through a change in pricing policies under its supply management system, the Canadian dairy industry sought to protect its own farmers by lowering prices for domestically produced dairy ingredients used primarily in cheese production. Those changes made importing dairy ingredients from the U.S. less economical.

MacNaughton said the hardships facing some U.S. dairy producers was the result of a global glut of milk outside of Canada, which manages a quota system to control internal milk supplies.

Jim Mulhern, National Milk Producers Federation (NMPF) president and CEO, sharply rebuked MacNaughton’s comments. He said Canada’s pricing policy changes were designed to undermine competition from the U.S., block U.S. imports and undercut global powder markets by dumping their own surplus on the market.

“It’s absurd for the Canadian government to assert there is no relationship between its new Class 7 policy and the lost U.S. milk sales there,” Mulhern said. “When customers in Canada, who have been purchasing milk products from American suppliers for years, suddenly decide to switch to domestic suppliers after Canada implements a major change in milk pricing, it is abundantly clear that the lost business incurred by U.S. farmers is directly tied to Canada’s milk pricing system.”

 “The problems this pricing policy are creating for dairy farmers in Wisconsin, New York and Minnesota are real, and they have nothing to do with U.S. ‘overproduction,’ ” Mulhern said. “Canada didn’t like U.S. farmers supplying their processors’ demand for milk proteins, so they changed the rules of the game.”

“Canada’s effort to shift the focus away from the internal problems their milk pricing system is disingenuous at best,” Mulhern said. “Canada can support its industry without intentionally using policy tools to harm U.S. dairy farmers and world dairy markets.”

U.S. political, dairy organization leaders urge action

Other U.S. political and dairy organizations also see Canada's policy change as a trade agreement violation requiring action.

U.S. Senators Charles Schumer and Kirsten Gillibrand (both D-New York) and Tammy Baldwin (D-Wisconsin) sent a letter to acting U.S. Trade Representative Stephen Vaughn, Commerce Secretary Wilbur Ross and acting Secretary of Agriculture Michael Young, urging the officials to immediately address the issue with the Canadian government and launch an investigation into the trade actions.

“We urge you to exhaust all potential avenues to bring Canada into compliance with its trade commitments and establish dependable trading conditions for U.S. companies exporting to Canada,” the Senators wrote. “Dairy farmers should not have their businesses ruined and lives upended as a result of this unfair trade practice. Canada must be clearly and swiftly reminded in a concrete way that dependable trading conditions between our two countries is critically important to their country as well.”

Schumer and Gillibrand, representing a state with several companies exporting affecting dairy to Canada, said the negative impact would impact processors and producers in New York and neighboring states. Companies like O-AT-KA and Cayuga Milk Ingredients, along with Ideal Dairy Farm, rely on trade with Canada for a significant percentage of their revenue.

“This action has left many farmers facing terribly difficult decisions about the future of their farms,” the senators wrote. ”We urge you to immediately address this with your Canadian counterparts and to launch an investigation into whether Canada’s Class 7 National Ingredients Strategy and Ontario’s Class 6 pricing programs are in compliance with Canada’s longstanding trade commitments to the United States.”

In a separate letter, Mulhern and heads of the International Dairy Foods Association (IDFA), U.S. Dairy Export Council (USDEC) and National Association of State Departments of Agriculture (NASDA) urged President Trump to take immediate action against Canada’s “repeated and escalating disregard for its trade obligations” under NAFTA.

They urged the Trump administration to tell Canadian Prime Minister Justin Trudeau to halt the new pricing policy and restore imports of U.S. products, specifically UF milk. They also asked President Trump to direct U.S. agencies to “examine a full range of tools that could be used immediately to impress upon Canada in a concrete way the importance of dependable two-way trade.

“U.S. dairy exports support approximately 110,000 jobs across America, many of which are in farming and food manufacturing, as well as in supporting rural manufacturing and skilled farm service workers,” the organization leaders said in the letter. “However, for trade to yield its full potential and provide the maximum impact possible in supporting American jobs, our trading partners must hold up their end of the bargain as well.”

The governors and heads of agricultural agencies in each state also issued their own joint letters to the Trump administration.

“Wisconsin and New York dairy farmers are only the first victims of Canada’s illicit dairy trade restrictions,” Wisconsin Gov. Walker and New York Gov. Cuomo wrote. “Nearly one year ago, we, along with other state and U.S. dairy officials, warned our federal partners - and Canadian industry and government representatives at all levels - that protectionist regulations would harm U.S. dairy producers.”

Dairy product purchases urged

Wisconsin’s Brancel along with New York Department of Agriculture and Markets Commissioner Richard Ball joined in another letter urging USDA to assist farmers negatively impacted by the trade policies to purchase cheese and butter and distribute it through the USDA’s nutritional aid programs.

PHOTO: Illustration by Corey Lewis.

Dave Natzke
  • Dave Natzke

  • Editor
  • Progressive Dairyman
  • Email Dave Natzke

Before commenting on our articles, please note our Terms for Commenting.

LATEST BLOG

LATEST NEWS