Tag Archives: Dairy

Talks between Canada and the U.S. regarding the North American Free Trade Agreement are intensifying in Washington, D.C. Bloomberg says Canadian dairy farmers recently told Prime Minister Justin Trudeau not to use access to the protected Canadian dairy market as a bargaining chip.

The Dairy Farmers of Canada says it’s already lost $193 million because of past trade agreements and they won’t accept more losses. “The work of our lives seems to have been reduced to a bargaining chip,” says Dairy Farmers of Canada president Pierre Lampron. The group, along with the Dairy Producers of Manitoba, says farmers will hold Trudeau accountable for his promise to defend the supply-management system. The threat may have added strength because of Canadian national elections which come in about a year.

They say Canada’s market is too small to accommodate U.S. overproduction, saying the Class Seven milk targeted by President Donald Trump is worth protecting. Both groups issued a statement saying, “We will hold our prime minister accountable for saying he will defend supply management and dairy in the NAFTA negotiations. We have articulated clearly that the support means no access will be given to the Canadian dairy market.”

The United States still demands a dairy fix in the North American Free Trade Agreement, but Canada still wants to protect its dairy industry.

While Canada may be ready to give some concessions on dairy market access, Prime Minister Justin Trudeau and his allies have strong political motivations to stand firm. A trade lawyer told Politico this week that much of the focus is on Canada’s Class 7 milk, a class created last year that has disrupted trade between the U.S. and Canada.

The trade expert says those talks are “highly technical” and will take days to complete, but suggested an agreement is still possible, “even likely this week.” Talks between the U.S. and Canada are expected to continue with an overall goal to complete the agreement by the end of this month. Mexico officials are also back in Washington, DC to propel the handshake agreement between the U.S. and Mexico forward.

COLUMBIA, Mo. — Large supplies of meat and dairy, possibly record-setting tons, are coming to U.S. consumers.

For consumers, this can be good news with lower prices at grocery cases. For producers of beef, pork, chicken and milk it doesn’t bode so well.

In a mid-year baseline update for livestock and dairy, University of Missouri economist Scott Brown offers mixed outlooks.

U.S. consumers have shown strong demand. But farmers gearing up for rising exports grew their herds. With shifts in trade and tariff policies, uncertainties cloud markets. If exports falter, supplies will build in this country.

“It is difficult to pin down how much meat and dairy products will go to exports,” Brown says.

Combined per capita pounds of beef, pork, chicken and turkey will be almost 19 pounds more this year compared to 2014. That’s a 9.5 percent boost. Further, a 3.5-pound increase looms in 2019.

“Producers must hope for strong U.S. consumer demand,” Brown says. People eating more could keep products from piling up in freezers. If not, the growing supply moves through the market chain only with price cuts.

With that uncertainty, farm prices are projected to decline for fed cattle, hogs and chickens, Brown says.

“Beef export demand has grown thus far in 2018,” Brown says. For the first half of the year, those exports were up 196 million pounds above 2017. That helped offset a 480-million-pound growth.

For pork, exports grew 176 million pounds out of a 422-million-pound growth, January to June. “Weaker pork prices helped move exports,” Brown adds.

Beef cow herd expansion slowed in 2018. Drought stress on forage and water supplies helped slowing. Beef prices remain under pressure through 2020, Brown says. Demand for high-quality beef slows what could have been bigger price declines.

For hogs, increasing sow numbers with high production per sow pushed pork growth up for the last four years. Growth continues through at least 2020, Brown says.

Exports offset a large part of pork increases. That left per capita supplies at or below historical levels through last year.

Now trade doubts and production growth push domestic pork supplies next year to the highest levels since 1981.

Big supplies of beef and chicken compete with growing pork supplies. The result could be lowest the hog prices in a decade. That dollar drop can lead to financial losses for most hog producers.

Not helping pork is lack of return of the strong bacon demand in 2017.

On the poultry side, wholesale chicken prices hit records for three weeks this spring at $1.20 per pound. That had been seen only two other weeks in history. That was surprising, Brown says. Poultry production was high and chicken in storage was 10 percent above a year ago.

Chicken prices could retreat as production grows and demand returns to normal.

Turkey prices still struggle as they have for the past 18 months.

Egg demand regains footing following two years of low prices.

In the expansion mode, dairy cow numbers will likely grow in 2018 even as milk prices hit the lowest since 2009. Large herds in Texas, Kansas, Idaho and Arizona keep cow numbers largely unchanged.

Dairy exports have remained impressive, Brown says, although low prices triggered federal milk price margin protection for some dairy farms.

High production in livestock and dairy kept the consumer price index for food below 2 percent for the fourth year in 2018. The CPI runs less than the rate of inflation.

This baseline update came in conjunction with the MU Food and Agricultural Policy Research Institute baseline. That covers crops and biofuels. Reports are available at fapri.missouri.edu(opens in new window).

Livestock and dairy are covered by Brown and Daniel Madison in the MU Division of Applied Social Sciences. All are in the College of Agriculture, Food and Natural Resources.

MONTREAL – Nearly 1,000 kilometres from Washington, where a team of top Canadian negotiators sit in 11th-hour NAFTA discussions, Peter Strebel works under a cloud of concern at the rural Quebec dairy farm his father founded in 1976.

The Quebec milk producer is worried that rumblings that Canada may sacrifice part of the sacred cow of supply management as a concession in trade negotiations with the United States would “punish” the dairy industry, open the floodgates to American milk products and prompt thousands of farm closures north of the border.

“There would be lots of bankruptcies … It would be devastating,” he said from his farm south of Montreal.

“We’ll probably have to cut back on investment, maybe lay off a couple workers. I don’t know how it would be done.”

Canadian dairy operates under a supply management system, in which farmers are protected from competition because the government blocks out foreign production with high tariffs and sets quotas to limit production and prevent market saturation. With traditional market forces removed, the government decides how much farmers are paid for their production, helping to keep farmers’ incomes stable.

The protectionist policy, a staple of Canadian agriculture for more than 40 years, has come under periodic attack from U.S. President Donald Trump.

And as trade talks hit a fever pitch ahead of a pending Friday deadline, Strebel and others fear that the Canadian government is ready to make concessions on dairy.

More than 15 per cent of the Canadian dairy market is already opening up to imports under terms of the Trans-Pacific Partnership signed in March. Any further dents to supply-side protection would imperil the business, said Strebel, who represents his region on the board of the Milk Producers of Quebec.

Strebel’s 150 cows churn out 5,000 litres of milk per day, which is trucked off to 115 processing facilities — waypoints on the path to products ranging from Yoplait yogurt to local cheese.

Several potential concessions are of particular concern to him and Canada’s 11,000 dairy producers, the vast majority of whom are located in Quebec and Ontario.

One is Canada’s domestic milk ingredient pricing system. The Class 7 pricing agreement struck in 2016 has effectively restricted U.S. exports of ultra-filtered milk used to make dairy products, industry experts say.

The policy allows Canadian dairy processors to buy domestic milk at world market prices instead of higher prices controlled by the national supply management system. U.S. dairy groups argue the policy provides processors with an incentive to cut milk imports and intentionally blocks American products.

But the head of the Dairy Farmers of Ontario believes scrapping Class 7 would be detrimental to the Canadian industry.

“Either we’d try to get less capital cost per unit of milk shipped and try and live that way, or go broke — or just try to ride it out for a few more years and then quit,” said Ralph Dietrich, who chairs the advocacy group and co-owns a dairy farm in southwestern Ontario.

Should supply management suffer a blow at the trade table, Strebel wondered if Canada would compensate with hundreds of millions of dollars in subsidies, or rethink its ban on bovine growth hormone for dairy cows, which the U.S. allows as a means to boost milk production.

Robert Wolfe, a professor emeritus at Queen’s University who specializes in agriculture trade policy, pointed to the possibility of devalued quotas. Much like the medallion system that regulates the number of taxi drivers, quotas mean a farmer has the right to produce a certain amount of the product.

Any new farmer has to buy in, and the rights don’t come cheap — anywhere from $20,000 to $43,000.

“That quota is the right to sell a certain amount of milk. But if anybody can sell milk, then that quota that you’ve spent a lot of money on is worthless,” he said. “For the typical dairy farmer, we’re talking millions.”

Slashing supply management or lowering tariff rates would have a ripple effect, particularly for farmers with recent capital investments and bigger debt loads, said Al Mussell, research lead for Agri-Food Economic Systems in Guelph, Ont.

“There are some farmers that have reinvested in facilities and expanded in more efficient facilities, but are relatively new and financially leveraged who could have a great deal of difficulty in that environment because they’ve lost some of their ability to generate revenue,” Mussell said.

However, supply management is also one of the few cards the Trudeau government has left to play at the bargaining table after the U.S. and Mexico reached their own side deal on Monday.

Defending dairy farmers, who enjoy artificially high prices and exorbitant incomes, threatens to hurt the steel, aluminum and automotive industries during trade negotiations unless concessions are made, said Martha Hall Findlay, president and chief executive of the Canada West Foundation.

“Why are we sacrificing those sectors, those jobs, those Canadians, for a small number of now wealthy producers?” she wrote in a paper released Wednesday.

Findlay called on Ottawa to dismantle supply management, “not because Trump says so, but because it’s in Canada’s best interests.”

MILWAUKEE  — Wisconsin dairy farmers and cheesemakers remain hopeful that a new trade deal between the U.S. and Mexico will augment business in a key state export market.

The preliminary U.S.-Mexico deal announced Monday by President Donald Trump calls for zero tariffs on dairy and agricultural products, the Milwaukee Journal Sentinel reported. Mexico also has agreed to not restrict market access for commonly named U.S. cheeses.

“We are very happy that this deal has been reached,” said Jeff Schwager, president of Sartori Cheese in Plymouth.

No other country imports more dairy products than Mexico, said Edge Dairy Farmer Cooperative president Brody Stapel. He added that the potential loss of that market has caused anxiety for farmers over the past several months.

“Let’s face it. These are tough times for dairy farmers — tough enough even without all the uncertainty created by trade wars,” said Stapel. “So we should celebrate this for the major step forward that it is.”

Mexico and Canada are the state’s biggest trading partners.

Trump said the tentative trade agreement would replace the North American Free Trade Agreement , which he said had “bad connotations” for the U.S. Full details of the agreement haven’t yet been released.

“It’s a big day for trade,” the president said. “It’s a big day for our country.”

Trump said he intends to terminate NAFTA, and that the U.S. would immediately begin negotiations with Canada, the third party in the trilateral trade pact.

MADISON, Wis. (AP) — A new federal crop insurance program may help Wisconsin dairy farmers protect against low milk prices.

The American Farm Bureau Federation and its insurance company recently announced the Dairy Revenue Protection program, Wisconsin Public Radio reported.

The program, which will be available starting in October, allows farmers to set a guaranteed revenue they want to make on a certain amount of milk. Farmers can receive an indemnity payment if their actual revenue doesn’t meet the set level. Insurance costs are determined by expected milk prices and market risk.

“It allows the individual farmer to pick both the amounts of milk he wants to protect price on and the months in which that milk is produced,” said Jim Holte, president of the Wisconsin Farm Bureau.

The program is modeled after existing federal crop insurance programs for corn, soybeans and other commodities each growing season, Holte said. But the program for milk is different because dairy is produced year-round. Farmers will be able to make changes daily, he said.

The cost of coverage may not be affordable to farmers after nearly four years of low milk prices, Holte said.

“As we return to a more normal pattern of milk prices, the futures prices will offer more opportunities to farmers to lock in a profitable level,” he said.

The federal government will subsidize costs for farmers. But Holte still expects farmers to be hesitant to buy coverage.

Farmers will face a learning curve in figuring out how to take advantage of the insurance with the changing markets, said Brian Gould, professor of agribusiness at the University of Wisconsin-Madison.

But he said the new program is a welcome change from existing safety net options for dairy, which calculate indemnity payments based on a profit margin between milk prices and input costs.

“(Farmers) like a contract that you can count on, that is actually reflecting the type of market that you’re selling your milk into,” Gould said.

Availability of a new insurance plan for dairy producers developed by American Farm Bureau Insurance Services (AFBIS) that insures against unexpected declines in quarterly milk sales – called Dairy Revenue Protection (DRP) – was announced by USDA’s Risk Management Agency.

DRP “provides insurance for the difference between the final revenue guarantee and actual milk revenue if prices fall,” USDA said in a release. It increases flexibility for producers seeking coverage by providing “a greater choice of prices, from those that focus on cheese to fresh milk, protein or butterfat.”

Coverage levels available under the program range from 70% to 95% of revenue (in 5% increments), and coverage is available in all counties in all 50 states.

Further, producers who elect for coverage under the new program are not precluded from participation in the existing Margin Protection Plan – Dairy (MPP-Dairy) from USDA’s Farm Service Agency (FSA).

Sign-up for DRP opens October 9, 2018, with the first available coverage taking effect for the first quarter of 2019.