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Agriculture, dairy feel the pain of retaliatory tariffs

Progressive Dairyman Editor Dave Natzke Published on 11 December 2018
Trade

TRENDING: EXPORTS, TRADE

Having ended the previous year on a high note, many dairy analysts believed exports would be key to reversing slumping U.S. milk prices.

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On a total milk solids basis, U.S. exports were equivalent to 16.4 percent of U.S. milk production in December, the highest percentage of the year. It raised 2017 total exports to 14.7 percent of U.S. milk production. With Chinese demand for imported milk and other dairy products increasing, the potential for U.S. exports was at an all-time high.

By April, exports of dairy products were equivalent to 18.8 percent of U.S. milk production on a total milk solids basis, the highest percentage ever. In the background, however, President Trump announced tariffs on steel and aluminum imports into the U.S., resulting in retaliatory tariffs – including those on U.S. dairy products – by Mexico, Canada and China.

Recognizing the negative impact on agricultural and dairy trade, the USDA announced a three-pronged approach to help U.S. farmers suffering economic losses from the ongoing tariff wars. The approach included direct payments to producers to offset losses under the Market Facilitation Program (MFP), government purchases of agricultural commodities for feeding and nutrition programs, and money to assist in the development of new domestic and export markets.

For dairy producers, that meant a payment of about 6 cents per hundredweight (cwt) on half of their highest annual milk production history in 2011-2013. Dairy organizations were disappointed in the level of direct aid, estimated at $127.4 million.

The USDA said it would purchase about $84.9 million of dairy products for food assistance programs and earmark additional funds for international market development.

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At the end of October, (ag secretary) Perdue said a second round of MFP payments would be issued, likely beginning in December. Other details have not been announced at Progressive Dairyman’s deadline, but it’s widely assumed the payments will be the same as the first round.

Perdue also said there are no MFP payments planned for 2019, saying he believed markets lost to retaliatory tariffs will be restored, and trade agreements with other countries will enhance trade.

Dairy organization leaders were deeply disappointed in the level of dairy payments in the first round and have asked for much, much more. In a letter to the USDA, National Milk Producers Federation (NMPF) chairman and Missouri dairy farmer Randy Mooney cited four studies illustrating milk producers will have experienced lost income of between $1.15 billion and $1.5 billion in the second half of 2018.

Although there has been a new trade agreement with the leading U.S. dairy export market, Mexico, as part of the U.S./Mexico/Canada Agreement (USMCA), that agreement has not been ratified and likely won’t be until early 2019. A deadline to lift retaliatory tariffs has not been revealed. And there’s been no movement on an agreement with China.

U.S. dairy exports tracked higher than year-ago levels in the third quarter of 2018, despite continued setbacks in markets where tariffs have come into play. However, cheese exports drifted lower in the third quarter. September volume was a 20-month low, with cheese shipments to Mexico lower for the third straight month.  end mark

IMAGE: Getty Images.

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Dave Natzke
  • Dave Natzke

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