PARTNERS

By Craig W. Anderson 

What a difference a year makes: in 2018 dairy prices appeared ready to match the industry’s optimistic forecast and then the trade battles began. U.S. dairy producers have suffered losses and the future seems to hold more of the same for the dairy industry, especially with an increase in tariffs on Chinese commodities that went into effect recently.

“China is a major market for our dairy products and while prices may be on the upswing, tariffs are certainly affecting the dairy industry,” said Jack Hamm, SJFB past president and Lodi dairyman.

Despite all the agonizing over tariffs, Lodi dairy farmer Hank Van Exel said, “We’re still exporting a huge amount of product as we’re a big powder producing industry.” 

According to Annie AcMoody, Western United Dairymen economist, San Joaquin County dairy producers – and California’s dairy industry – are being affected by the U.S. increased tariffs on Chinese steel. “The side effect of this particular tariff is another tariff. If China retaliates with further dairy tariffs, it’s a direct hit on U.S. dairy producers.”

Concerned about continued losses if a trade agreement isn’t reached soon with China, AFBF President Zippy Duval wrote President Trump, pointing out that U.S. farm exports to China last year “declined $10 billion, about a 50 percent loss. This is a drastic reversal for what had been a growing market.”

New trade agreement, USMCA

In addition to China, Mexico became testy about U.S. tariffs and retaliated with one of its own that raised the price of U.S. cheese in Mexico. But, Van Exel pointed out Mexico and Canada’s tariffs “weren’t as high as you would think and Mexico’s been buying dairy all along.”

It seems the U.S. Mexico Canada Agreement (USMCA) is nearing implementation, with an expectation of increasing agricultural trade among the trio of $2.2 billion, according to the International Trade Commission.

However, with congressional approval needed, bargaining has begun over the USMCA with the Trump administration wanting to push the trade deal through Congress. But Congressional Democrats want changes and time to work on the agreement while senior administration officials want to send the accord to Congress, a push that would force a decision from the Democrat-controlled House.

“While politics and pricing aren’t a good mix, I support the president because you have to carry a big stick to succeed in today’s political and export marketplaces,” Van Exel said.

Tariffs could be lifted

The U.S. has increased tariffs on steel and aluminum imports from Mexico and Canada; both have said when those tariffs eliminated they would remove their retaliatory tariffs on dairy products and other commodities. “All the more reason to get busy on affirming this agreement,” Hamm said.

CFBF President Jamie Johansson echoed Hamm, noting, “With both… agreeing to drop their tariffs it could provide a boost in exports [and] be a big victory for the family farm.”

U.S. losing customers

Passing the USMCA as soon as possible is vital because without this preferential tariff treatment “we’ll have other countries looking to get into those markets,” said Dave Salmonsen, senior director of congressional relations for AFBF. “Other countries have better tariff treatment and they’re starting to take away some of markets that have been very good for us.”

Milk tariff stays the same

In what could be a measure of good luck, China has maintained its tariff of only 5% on milk products but in tariff wars, that could change.

Second trade aid package

The U.S. Department of Agriculture is working on a second trade-aid package of $15 billion to $20 billion to help farmers nationwide hurt by the tariffs. Agriculture Secretary Sonny Perdue said the plan could provide aid which is in line with the estimated impacts of retaliatory tariffs, according to a Western United Dairymen report.

With bad weather affecting feed plantings, with terrible weather throughout the Midwest threatening to curtail shipments of feed and supplements to San Joaquin County dairies and with the Federal Milk Marketing Order barely underway, it looks like another challenging year ahead for the county’s dairy farmers.

CFBF contributed to this story