Economic Development, Food Service & Agriculture, and Government

Farmers express hope over milk pact

The agreement, which has yet to be signed, would open export avenues to Canada.

October 12, 2018
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Dairy Cows
The proposed agreement would allow local farmers to export more dairy products to Canada, including fluid milk, cream, butter, skim milk powder and cheese. Courtesy Michigan Milk Producers Association

A new trade agreement between the U.S. and Canada might benefit dairy farmers in Michigan.

Ken Nobis, president of the Michigan Milk Producers Association and a dairy farmer in St. Johns, said on the surface the deal looks positive for Michigan’s dairy farmers.

The agreement, which has yet to be approved by Congress and signed by President Donald Trump, seeks to amend the trade regulations between the two countries after months of ongoing tariff retaliation.

The trade deal also includes Mexico and is expected to be signed by the president in November. The agreement has two advantages for Michigan: an expanded Canadian market and the elimination of Canada’s Milk Classes 6 and 7 products.

The agreement will allow U.S. dairy farmers the opportunity to export more dairy products to Canada, including fluid milk, cream, butter, skim milk powder, cheese and other dairy products. In addition to opening its export market, Canada also will eliminate tariffs on whey and margarine, according to terms of the agreement.

Jamie Zmitko-Somers, international marketing program manager for the Michigan Department of Agriculture and Rural Development, said 60 percent of the state’s agriculture exports go to Canada, including poultry and grains.

Fluid milk currently is not exported to Canada, according to Nobis, despite the overproduction of milk in the state. Construction of two large dairy processing plants is underway in mid-Michigan.

“We currently export zero (milk) to Canada because … there is a 200 to 300 percent tariff on any milk that we ship to Canada,” he said. “You will see a number saying ‘we export milk to Canada,’ but it is milk that is exported to Canada for processing and then it is re-exported from Canada to some other destination. It is not sold in Canada, so it is misleading. Now, what we will have in this deal, which is going to take a while to come into fruition, is a limited amount of milk that we will export into Canada … I think tariff-free, but it will equal 3.5 percent of Canadian milk production. It is a very minor amount, but it is a foot in the door.”

In 2017, Michigan exported more than $7 million in dairy products to Canada, according to MDARD statistics, and between January and July of this year, the state exported more than $5 million worth of dairy products, including cheese and butter, to Canada.

The deal also eliminates Canada’s Class 6 and 7 products, such as skim milk powder, milk protein concentrate and infant formula, which Nobis said Canada had used as lower-priced dairy ingredients to undercut U.S. dairy sales in Canada and other countries.

“It resulted in them being able to dump skim milk powder on the global market and drive everybody’s prices down,” he said. “It was a market disruptor to the U.S., EU and New Zeeland, but because we sit next door, we (felt) a greater impact.”

So, instead of underselling U.S. dairy prices, the deal would allow Canada to apply export charges to its skim milk powder, milk protein concentrates and infant formula at volumes over an agreed-upon threshold, which would allow U.S. producers to expand sales overseas.

While Nobis acknowledged he doesn’t yet know all the details in the agreement, he said the pact could be a turning point for Michigan’s dairy farmers and, potentially, a new and competitive market where farmers can export their milk.

Zmitko-Somers agreed.

“From a Michigan perspective, we are certainly glad to have a new and upgraded agreement, and we are looking forward to continuing to work with Canada and expand Michigan exports into the Canadian market,” she said. “It is a very important market for our Michigan growers and producers.”

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