Milwaukee Journal Sentinel
Published 5:59 PM EDT Oct 1, 2018
Corrections & Clarifications: An earlier version of this story misspelled the last name of Andrew Novakovic.
Dairy farmers in states such as New York and Wisconsin will be able to sell more of their milk, butter and cheese to Canada under a new trade pact that replaces the North American Free Trade Agreement.
The two countries will now join Mexico in updating that 1994 accord, which will be renamed the United States Mexico Canada Agreement.
As part of the deal, the U.S. is getting expanded access to Canada’s protected dairy market.
Canada will ease restrictions on its dairy market and allow American farmers to export about $560 million worth of dairy products to its northern neighbor. That’s about 3.5 percent of Canada’s total $16 billion dairy industry.
"This is a very, very big deal for our farmers. Mexico and Canada will be opened up a lot more than they are now, and I think there will be a better spirit between our three countries, which is important for our farmers," President Donald Trump said Monday in a speech at the White House.
Canada will eliminate its so-called Class 7 milk pricing system, which makes it cheaper for the country's dairy processors to buy certain ingredients domestically. The system was a big obstacle in the trade talks.
And market access for the U.S. will exceed Canada’s concessions in the Trans-Pacific Partnership talks.
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Canada will also add an export charge on skim milk products and infant formula, allowing U.S. producers to expand their presence overseas.
In early 2017, dozens of dairy farms in Wisconsin, the nation's second-largest dairy producer, were nearly forced out of business when they lost their milk buyer following a trade dispute with Canada.
Grassland Dairy Products said it no longer would buy milk from those farms because it lost millions of dollars in business when the Canadian dairy industry made it harder for U.S. processors to sell ultrafiltered milk – used to make cheese – in Canada.
Trump promised to settle that fight, and other agricultural skirmishes, in the NAFTA negotiations.
"The deal includes a substantial increase in our farmers' opportunities to export American wheat, poultry, eggs and dairy, including milk, butter, cheese, yogurt and ice cream," the president said Monday.
"Those products were not really being treated fairly as far as those who worked so hard to produce them, and now they’re going to be treated fairly," he added.
Canadian officials said they weren’t to blame. Instead, they faulted the U.S. for producing too much milk in a global marketplace that was already flooded with the product.
The new deal also benefits New York, the nation’s third-largest milk producer and the No.1 producer of yogurt, cottage cheese and sour cream, according to the New York Farm Bureau.
"We have an overall positive look at both the Canadian and Mexico agreement," said Lauren Williams, senior associate director of national affairs for the state Farm Bureau. "It's going to be a positive for New York agricultural, and with the Canadian provisions, it's going to be a positive for the New York dairy industry."
There was no immediate comment from the state Department of Agriculture and Markets about the impact of the trade deal.
The agreement will help dairy farmers in New York who had been stung by restrictive trade policies with Mexico and Canada, said Bob Wellington, a dairy economist at Agri-Mark Cooperative, which is based in Andover, Massachusetts.
"The problem was our trade with Canada really put us in a hole about two years ago. And it looks like that is going to get straightened out," Wellington said. "I think very much so it’s going to be a positive."
David Fisher, owner of Mapleview Dairy, a 3,000-cow farm near the Canadian border in St. Lawrence County, said New York farms have suffered from an overcapacity and low prices in part because of the trade restrictions.
Previous trade limits "really put a hurt on plant capacity in the Northeast and the ability to move product," Fisher said.
Still, some problems remain.
The agreement will give Wisconsin and New York farmers greater access to new markets but may do little address the supply-and-demand issues driving down milk prices since 2014, according to Andrew Novakovic, director of land grant programs at Cornell University.
Overall, there has been a general consumer decline in milk sales as customers find substitutes.
"It's going to be a good thing for the U.S., but it isn't going to change the price forecast," Novakovic says.
Contributing: Chad Arnold and Joseph Spector of the (Rochester) Democrat and Chronicle.