Last month, Mexico announced new tariffs on U.S. exports in retaliation for U.S. tariffs on Mexican steel and aluminum.
These tariffs are affecting the U.S. dairy industry. More than 60 dairy associations have asked President Trump to suspend these tariffs, including the Virginia Dairymen’s Association.
Mexico is one of the largest export opportunities for U.S. dairy products; last year, they imported $400 million worth of U.S. dairy, which is 25% of the total milk that the U.S. exports.
“Before, we were enjoying tariff free, duty free trade with Mexico,” explained Eric Paulson. “Now, those are going up as high as 25% for some products.”
Paulson has already seen an impact on milk futures in the last couple of weeks.
“The future income for dairy farmers drop by 1.8 billion dollars in the last six months of this year,” said Paulson.
An extra two or three percent surplus can devastate milk prices.
“We can’t flip an on and off switch. Our dairy cows are producing,” said Paulson. “The market said, ‘Hey we have all this export, we need to create it,’ but all of a sudden that milk doesn’t have a home anymore.”
Although not all Virginia farmers are exporting their product, the surplus from other farms hurts prices across the country.
“We were exporting about 18% of our milk every year, so right now, about one out of every seven days, all of the milk produced in the U.S. was being exported overseas or to neighboring countries,” said Paulson.
The market does not allow for a consistent salary for farmers.
“They have no control over what their prices are,” said Paulson. “It makes it very challenging when we have this extreme volatility between great years like 2014 and very challenging years like 2017 was and 2018’s proving to be even more so.”
In the first six months of this year, 35 dairies have shut down.
Paulson says milk prices were starting to look positive for the fall, but the tariffs have destroyed that optimistic look ahead, because U.S. dairy products are now 25% more expensive in Mexico.