x
Breaking News
More () »

Trade deal: What could it mean for milk prices and farmers?

U.S. dairy farmers remain hopeful that a new trade deal with Canada could help lift them out of a deep slump, but some are casting doubt that it will make much of a difference in an American market flooded with milk.
Credit: WGRZ
Dairy cows

U.S. dairy farmers remain hopeful that a new trade deal with Canada could help lift them out of a deep slump, but some are casting doubt that it will make much of a difference in an American market flooded with milk.

The deal, announced Monday by President Donald Trump, is “more of the same,” except it hurts Canadian farmers, said Jim Goodman, a Wisconsin dairy farmer and president of the National Family Farm Coalition.

“Canadian family farms will go out of business, and Canadian dairy farmers will see their incomes fall due to increased U.S. imports. And while the slightly expanded market will offer small benefits to some U.S. farmers, it does nothing to reduce the overproduction at the heart of our dairy crisis,” Goodman said.

For consumers, milk prices remain at historic lows as farmers grapple with a large supply and dwindling demand because people are drinking less milk and finding other alternatives, experts said.

That will be hard to reverse no matter what trade deals are reached, some farmers said.

“The biggest is the decrease in consumption,” said Jerry Simonetty, chairman of Hudson Valley Fresh, a dairy partnership in Poughkeepsie that sells milk directly to customers and stores.

“Trade is critical, trade is important, and I think there will be modest help with this trade deal once it gets implemented, but I don’t think it’s a game changer.”

What's changing?

The new deal is called the United States-Mexico-Canada Agreement.

In it, Canada would open more of its dairy market to trade and drop its quota and pricing system for “Class 7” milk powders and proteins — a move that could benefit the struggling American dairy industry as it seeks export markets.

But it only opens up about 3.6 percent of Canada’s market for dairy, poultry and eggs to the U.S., and that’s not much for American farmers.

The federal trade deal will help farmers, “but I don’t see a big resurgence in prices because of it,” said Bob Wellington, an economist for Agri-Mark, a Northeast cooperative based in Andover, Mass., which represents 900 farms, including more than 500 in New York.

“I think it just corrects the problems that occurred because of other activities of the government,” he said.

Tensions over the North American Free Trade Agreement were heightened last year when Canada raised tariffs on ultrafiltered milk used to make cheese and other dairy products.

Exports that had grown to $102 million skidded to a halt at a time when America’s dairy industry, then in its third consecutive year of low prices, was losing money and farms.

A sign of hope?

The new pact could restore some lost sales, and it also could provide a framework for making trade deals with other countries, particularly in the Asia Pacific region.

“The export story is probably the silver lining in the dark cloud that hangs over the dairy industry today,” said Tom Vilsack, U.S. Agriculture Secretary from 2009 until 2017, and a former Iowa governor.

Details are still being ironed out, but the trade deal is a positive development, said Vilsack, now president of the U.S. Dairy Export Council, an industry trade group.

“I think it’s fair to say that it should provide stability in the dairy markets because now we know for certain that the United States is not going to get out of the trilateral relationship with Mexico and Canada,” Vilsack said.

On Wednesday, Trump tweeted out an endorsement of Rep. Tom Reed, R-Corning, for his support of the trade deal. Reed is seeking re-election in November.

Prices remain low

Still, in the short run anyway, the deal isn’t likely to raise the price U.S. farmers receive for their milk — which in some cases has been below their cost of production.

“The likelihood that a revised NAFTA will resolve the low prices that U.S. dairy farmers have been experiencing the last several years is fairly limited,” said Veronica Nigh, an American Farm Bureau Federation economist.

Details of the agreement are important, and a lot is still unknown.

“We’re not completely ready to say it has resolved the issues with Canada,” Nigh said.

Retaliatory tariffs are still in place from Canada and Mexico, and that's especially affected trade with Mexico, Vilsack said.

In a global market awash in dairy products, prices have skidded, and many U.S. farmers have burned through their savings and farm equity to remain in business.

Thousands of farms have closed because their monthly milk check did not cover their bills and debt payments.

In central New York, the Cortland Bulk Milk Producers Cooperative that dates back decades is ending its marketing of milk this month in large part because of slumping sales.

It had 200 farms as members in the 1980s; now it has about 50.

“Everybody’s prices are down. Some are down more than others, and it’s an individual situation on each farm based on their profitability and their levels of equity and debt,” said Martin Young, president of the cooperative’s board and a Cortland County farmer.

So will the new trade deal help him?

“I don’t think we’ll see any impact for a couple of years,” Young responded.

High supply

While consumers have been eating more cheese and yogurt in recent years, keeping many farms afloat, sales of milk as a beverage have been declining for decades.

In 2017, total U.S. beverage milk sales were 48.6 billion pounds — about 5.5 billion gallons — the lowest level in at least 43 years, according to U.S. Agriculture Department data.

Whole-milk sales were down more than 50 percent from the 1970s.

Americans consume about the same number of gallons of beverages as they did years ago, but they're drinking a lot less milk.

A flood of new beverages, including bottled water, sports drinks, bottled teas, soy and almond drinks, have taken a toll on milk sales.

The gallon milk jug was invented to feed a nation that, decades ago, was largely eating most meals at home as a family.

But now, morning meals like breakfast cereal swimming in milk have been replaced by fast-food egg sandwiches or a bagel at work.

Changing markets

Dairy markets typically move in a three-year cycle, but this downturn has been more sustained.

“To put it in context, dairy farmers … nationally, have been living in a pretty unpleasant environment for three or more years now,” said Andrew Novakovic, director of land grant programs at Cornell University in Ithaca, New York.

The prices that farmers receive for their milk should improve some in coming months, industry experts say, but that’s from market forces, rather than the trade deal, which hasn’t been approved by the three countries yet and could take years to be fully implemented.

U.S. dairy experts say questions remain about whether Canada will find another way to dump milk on the international market, lowering prices for American farmers.

“That’s one of the reasons why we aren’t doing backwards somersaults over this deal,” said Jim Mulhern, president of the National Milk Producers Federation, a U.S. industry trade group.

“I think the most important thing in this agreement is the cap on (Canadian) exports. If the caps are effective, this problem should be stemmed,” Mulhern said.

Canadian dairy farmers will be hurt because the trade deal reduces their milk supply protections, such as import quotas.

It will help U.S. farmers, 'but I don’t see a big resurgence in prices because of it,” said Bob Wellington, an economist for Agri-Mark, a Northeast cooperative based in Andover, Mass., which represents 900 farms including 500 in New York.

Rick Barrett is a business reporter with the Milwaukee Journal Sentinel; Joseph Spector and Chad Arnold are with the USA Today Network's Albany Bureau.

Includes reporting by Breana Noble of the Detroit News.

Before You Leave, Check This Out