Low prices and trade the talk at World Dairy Expo
MADISON, Wis. — The big talk among dairy producers attending this year's World Dairy Expo included the continued low milk prices and trade, with the new North American trade deal.
Dairy farmers and industry representatives at the 52nd annual show held Oct. 2-6 in Madison were breaking down the new U.S.-Mexico-Canada Agreement, or USMCA, that replaces NAFTA, the North American Free Trade Agreement. The USMCA retains zero tariffs on most ag goods flowing between the three trading partners. The dairy industry was the big winner in the U.S., as Canada will gradually eliminate its Class 7 pricing scheme for dairy products and allow more access to U.S. dairy products.
"Canada was using the Class 7 pricing to avoid its obligations to limit the amount of exports it subsidizes, so it was a major achievement," says Chris Galen with the National Milk Producers Federation. "It will take time to phase that in and for Canada to limit its export subsidies, but this was one of our major goals in these NAFTA talks."
Canada will also allow improve market access for U.S. dairy imports. Galen says, "We're going to get 3.6-percent of their market when that is phased in over time, which is a little more than what Canada agreed to grant us in the Trans Pacific Partnership." He says this will take several years to phase in after the agreement is approved by Congress and the governments of Mexico and Canada. The caveat to trilateral agreement lies with Mexico, the top market for U.S. cheese exports. With the U.S. steel and aluminum imports still in place in Mexico, there are still reciprocal tariffs on U.S. agriculture and dairy products that are hurting the industry.
"We were hoping once this agreement was announced that would be accompanied by a lifting of the tariffs against Canada and Mexico and then Mexico would lift its tariffs against our agricultural exports," Galen says. "That has yet to happen and it needs to because that would be the other sort of stimulus in the short term to our dairy markets." The other focus at expo was the current low milk price cycle with 2018 continuing as another tough year for the nation's dairy producers. Mark Stephenson, University of Wisconsin-Madison director of dairy policy says, unfortunately, he only sees a modest improvement in the depressed milk price cycle in the near term.
"I mean, we're looking at, in my opinion, a little over a dollar a hundredweight improvement, which is good but it takes us back up to something more like 2017 prices were," he says. "We aren't talking about anything like the 2014 breakout year." Despite that, the mood was still positive among dairy producers at expo. They were at the show looking for new technologies and management tools to improve the efficiency of their operations.
"As a producer, you respond differently," Parker, S.D., dairy producer Allen Merrill says. "But I will say that all dairy farmers are looking at cash flows right now, large and small and trying to figure out what they can invest in that maybe will give them a chance at a return in their investment." Merrill also chairs the Midwest Dairy Association, which is working to increase domestic consumer demand for dairy products to improve prices. The World Dairy Expo also is the meeting place of the global dairy industry. It features world class dairy cattle shows and sales of all breeds, the world's largest dairy-focused trade show, and forage and dairy educational opportunities. Organizers were excited about this year's numbers.
"Cattle numbers are going to be almost exactly what they were last year," Al Deming, World Dairy Expo president says. "Our commercial exhibitors, we have 890 different companies represented this year from 30 different countries and we actually have 99 new companies that are exhibiting a World Dairy Expo for the first time this year, so, we're very very excited about that."
Deming says they also feature youth events like 4-H, FFA and collegiate judging, plus showmanship and fitting competitions. The World Dairy Expo annually attracts more than 70,000 people from 100 countries.