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Global trade hits home in Canadian pricing changes

Tuesday, April 25, 2017   (0 Comments)
Posted by: John Holevoet, director of government affairs
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Talk of global trade is often hard to wrap our heads around.

But Canada’s recent changes to its milk pricing system — leaving Minnesota and Wisconsin dairy processors and farmers scrambling — bring the issue home in a very personal way.

Canada’s new Class 7 program has disrupted an important U.S. export stream and, unfortunately, will likely have farther-reaching effects in global markets.

The export of UF 85 (ultra-filtered milk with a protein content of 85 percent or more) to Canadian cheese makers had been a growing market for several U.S. dairy processors, including Wisconsin-based Grassland Dairy Products. The new price structure revisions make it impossible for U.S.-produced UF 85 to remain price competitive.

This abrupt change left Grassland and some other processors without important Canadian buyers and with far too much milk at their plants considering the elimination of this major product line. As a result, Grassland faced the difficult task of telling some of its supplying farms that they would no longer be purchasing their milk as of May 1.

The farmers affected by this are in a very difficult position. There is an oversupply of milk on the market right now in the Upper Midwest. It will be challenging for those farmers to find new processors. DBMMC has been working directly with our affected farmers, attempting to connect them with new processors.

The pursuit of freer and fairer trade and better market access matters. It is something for which we must continue to strive.

DBMMC has joined other dairy organizations, such as the International Dairy Foods Association, National Milk Producers Federation and the U.S. Dairy Export Council, in criticizing the Canadian policy changes. It is likely that the U.S. and other key players in the global dairy market, including the European Union and New Zealand, will formally challenge aspects of the Canadian pricing structure before the World Trade Organization.

This issue of Canada’s use of non-tariff trade barriers impacting U.S. dairy exports is not new. This specific threat to UF 85 exports had been on DBMMC’s radar since last spring. We had worked with the U.S. Department of Agriculture and members of Congress to try to avoid the current problem.

We remain dedicated to seeking a fix. Together with the co-op's federal lobbyists and allies within the dairy community, we are stepping up our efforts to develop a solution to this problem, but it will not be a quick fix.

Even if your farm wasn’t directly affected by this situation, you will likely see other effects. Another aspect of the Canadian plan would promote the export of skim milk powder, the production of which is domestically subsidized. This will affect global milk prices. Adding additional oversupply pressures to the Midwest will also likely harm prices.  

It is important that you contact your federal lawmakers and remind them of the importance of global trade for dairy farmers. The dairy community must work together to improve market access and be innovative in creating new products and markets to help meet the demands for protein around the world.

You can find your congressional representatives on this website:
www.govtrack.us/congress/members. If you would like help, please contact us.

Rest assured that we will continue to work for solutions to global trade issues and keep you informed.

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