Canada not at fault for what ails U.S.
In recent weeks, on the U.S. side of the border with Canada, much noise has been made about a festering dispute with our Canadian neighbors over ultra-filtered milk in U.S.-Canadian dairy trade.
Ultra-filtered milk is condensed skim milk; a high protein, fat adjusted, reduced cost ingredient, used to fortify cheese and yogurt products. It did not exist at the time the North American Free Trade Agreement, (NAFTA) was signed. Ultra-filtered milk is an American contrivance deliberately designed to make a “trade loophole” to facilitate an end-run around Canadian negotiated NAFTA import tariff restrictions. It found a home in Canadian cheese and yogurt vats as a cost reducer.
As a result, an ever increasing amount of Canadian milk was being displaced in Canadian cheese and yogurt processing plants. From 2011 to 2016, U.S. exports of ultra-filtered milk to Canada increased from $33 million, (US) to $98 million; a threefold increase. Industry observers suggest that U.S. milk handlers have been using Canada as a “safety valve” for an ever increasing tidal wave of unrestrained, irresponsible U.S. surplus milk production. As matters were progressing, either Canada could rollover and watch its dairy farms be forced out of existence or they could stand-up to what was seen as a gross injustice and protect a vital national interest.
In 2016 the Canadians devised a solution: changing their pricing structure to allow Canadian produced ultra-filtered milk and other milk protein products to be sold at world market price to Canadian dairy processors. The Canadian government did not impose any tariff restriction on U.S. sourced ultra-filtered milk, as has been erroneously claimed in some U.S. media reports; it merely allowed Canadian milk protein products to compete with U.S. products, head to head, on a level playing field.
Upshot? These Canadian dairy ingredients were, at the least, cost neutral compared to U.S. exports. In fact, Canadian dairy farmers developed a loophole to make an end run around the original American designed loophole! This allowed Canadian dairy farmers to repossess what they see as their rightful place in Canadian dairy plants. Once again, Canadians were buying Canadian; perhaps a Canadian twist on Donald Trump’s “Buy American, Hire American!”?
Reaction to this development in the U.S. was shrill and fast in coming. With 75 Wisconsin dairy farms in danger of closure and serious mischief looming for New York dairy plants and farms servicing the ultra-filtered milk trade, a letter from U.S. senators representing Wisconsin and New York was quickly dispatched to the White House demanding action. President Trump, in predictable fashion, cluelessly declared the Canadians’ actions “disgraceful” and made bellicose growlings of retaliation, even to the point of threatening abandonment of NAFTA, thereby scaring the stuffing out of his Republican Party “free trading” colleagues. Their worst nightmares were eased when Trump momentarily regained his balance and declared his deep affection for Canada, but calling for talks aimed at revising NAFTA.
The Canadian response to this brouhaha was measured and fact based. Canadian Ambassador to the U.S., David MacNaughton, in a letter to the governors of Wisconsin, Scott Walker, and New York’s Andrew Cuomo, stated; “the facts do not bear out” Mr. Trump’s heavy-handed criticism of Canada’s actions. “Canada does not accept the contention that Canada’s dairy policies are the cause of financial loss for dairy farmers in the United States.” He instead cited the gross U.S. overproduction of milk as the true problem: “There are a lot of times when it is easier to blame somebody else than it is to deal with the market situation.” He noted that the U.S. enjoys a 5-1 advantage in dairy trade with Canada. MacNaughton’s views were supported by Canadian Prime Minister Justin Trudeau who defended Canada’s dairy policy on a national food security basis: “Lets not pretend we are in a global free market when it comes to agriculture. Every country protects, for good reason, its agricultural industries.”
Canada’s contention that U.S. over-production of milk is the real cause of U.S. dairy farmers’ difficulties has a solid basis in fact. For the last three spring seasons vast amounts of U.S. milk have had to be dumped because milk supplies out stripped U.S. processing capacity. More than 400 tractor trailer loads of milk per month were dumped on several occasions in Federal Milk Marketing Order No. 1 alone. According to data from the American Farm Bureau Federation, year over year U.S. milk production is up 1.8 percent nationwide, but production on the U.S. side of the Great Lakes Basin is running rampant: Wisconsin is up 3.8 percent, New York up 4.7 percent and Michigan an astounding 6.1 percent on what was an already glutted market. Based on recently analyzed data, Michigan is the major culprit, with a gob smacking 21 percent increase in milk production since 2013, with no corresponding increase of in-state milk processing facilities.
One U.S. dairy farm organization, the National Dairy Producers Organization, (NDPO) which seeks to become the legitimate voice of U.S. dairy farmers, lays significant blame for the situation on the leadership of the nation’s largest dairy co-operative, Dairy Farmers of America, (DFA): “The management of DFA is involved with around 30 percent of all the milk made in this country, but they disastrously effect 100 percent of the remaining dairy farmers in this country by encouraging more and more milk to increase sales no matter how great the loss the co-op dairy farmer members suffer.” NDPO is strongly encouraging DFA member farmers to sack current DFA directors and management.
Also, certain U.S. politicians deserve censure for their culpability in creating this mess. Back in 2011, those of long memory will recall New York Gov. Cuomo and senior U.S. Sen. Charles Schumer standing shoulder to shoulder enthusing that New York dairy farmers needed to ramp-up New York milk production by 25 percent to fill the anticipated Greek yogurt plants they fantasized were going to lift Upstate New York’s economy out of perpetual malaise. The yogurt boom went bust, but Cuomo and Schumer have never acknowledged responsibility for the overproduction they encouraged and fostered with their foolish, unfounded optimism.
An old axiom wisely states: “When one finds oneself in a hole, the best first option is to stop digging!” U.S. dairy farmers, dairy industry executives and feckless politicians would do well to reflect on this thought before sophomorically demanding a Canadian solution to what is clearly a homegrown American problem: gross overproduction of milk on U.S. farms.
This is not rocket science; currently U.S. dairy farmers have dug themselves into an enormous hole filled with surplus, homeless and ultimately worthless milk; it is long past time they quit digging, take honest stock of their situation, stop blaming Canada and heal this self-inflicted wound by bringing the U.S. milk supply into some semblance of balance with market demand.
Nate Wilson, 70, is retired from 40 years of dairy farming in the beautiful hills of Sinclairville.
Source: Observer Today
