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Got milk? Wisconsin has too much, but that’s not Canada’s problem

May 17, 2017

Americans are milking a Canadian import-policy change to heap blame on their northern neighbours.


Wednesday, May 17, 2017

The Hill Times

U.S. President Donald Trump recently denounced Canada’s dairy system. His animus resulted from a long-advertised change to Canadian dairy import regulations that affected ultra-filtered milk. The public face of the dispute is the about 75 dairy farmers in and around Wisconsin who were told that their milk was no longer needed by their processor, Grassland Dairy, because of its market loss following the tariff change.

Trump blamed Canada for messing up U.S. dairy, suggesting that this country get rid of its system of supply management, which is quota-based, matches domestic demand with domestic supply, and does not engage, by and large, in the international market. Indeed, he seemed to link his distaste for NAFTA more generally with Canada’s tried and true dairy system, which suits Canadians’ need and which provides a high-quality product at a very reasonable price to consumers.

What do we make of this? Most importantly, that this is not Canada’s problem. Indeed, Wisconsin dairy farmers have been working to seal their own fate for the past several years, as they increased production to meet, or so they were told, limitless export potential. As it turned out, that was a false promise, even as production right across the U.S. in 2016 soared by 2.5 per cent and farmers continued to struggle with oversupply.

Moreover, in 2016, long before Canada legitimately altered its dairy import regime to respond to Canadian issues, 400 Wisconsin dairy farmers had shuttered their farms, unable to make a living wage. Danielle Endvick, the communications director at the Wisconsin Farmers Union, has observed that “It is insanity to continue with unthrottled production.” She is so correct.

The Milwaukee Journal-Sentinel picked up on this idea in late April: “It’s not just a Wisconsin problem. Dairy producers in other states and countries are also in trouble because there’s a global surplus of their products.” This raises the obvious question: why have U.S. producers not cut back on milk production, given this continuing situation? Is that not how their market-based system is supposed to work?

In Wisconsin, farmers are to some extent the authors of their own misfortune. Endvick, who grew up on a dairy farm, likened the industry to “a runaway train that was only headed for heartache.”

If the president is so concerned with dairy in Wisconsin, or Scott Walker, the state’s governor, wants to help out its dairy sector, why not start by preventing cut-rate milk imports into Wisconsin from neighbouring states. Processors buy this out-of-state milk for US$5 per hundredweight (cwt, or 100 pounds) less than they pay their own farmers and truck in massive volumes of the stuff.

Some reports are more pointed. Michigan dairy farmers have taken Wisconsin markets in their own desperate search for any place to offload their product. They are willing to part with a hundredweight of milk for US$6, well below the cost of production, which generally runs at about US$21 per cwt. Wisconsin milk generally costs processors about US$14 per cwt.  

Given Michigan’s massive dairy surplus, farmers are desperately seeking any advantage. It is either that or dump it in lagoons, spread it on fields or drain it away using some other method. Last year, U.S. farmers denatured 43 million gallons of milk because no market could be found, not even at a cut-rate price. What a waste!

Given all this, how is it possible that Trump can tweet completely unsubstantiated alternative facts about Canada’s system of supply management/fair farm pricing? Canadians have nothing at all to do with the downturn in the U.S. dairy industry; it is all of American making.

Indeed, Canada has been sideswiped by that runaway train that Endvick has mentioned, despite the fact that we have been minding our own business. Supply management has provided our rural economy with a certain resilience that does not exist south of the border. Indeed, without our Canadian dairy system, the very dire American environment would be visited upon Canada, with incalculable effects on our countryside.

Moreover, despite the Trump tweets, Canada has been a willing partner to the United States in terms of importing dairy products, buying about $550-million every year from American dairy farmers, while exporting only about $110-million to our southern neighbour. Overall, we are the top global importer of U.S. agricultural products, taking US$24-billion each year, far more than we sell in that market.

U.S. hypocrisy knows no bounds. To follow this story suggests that the future of NAFTA and the free world depends on what happens to those Wisconsin dairy farmers, although all have now found an alternative processor. The Americans remain fixated on a Canadian dairy system that is sensible, reasonable, is a bastion of Canadian food security and sovereignty, and which is fair for both producers and consumers alike.

Bruce Muirhead is associate vice president, external research, and a professor in the department of history at the University of Waterloo. He has written extensively on Canadian trade negotiations since the Second World War. His more recent work, which was funded by the Norwegian Research Council, has focused on the evolution of Canadian agricultural policy, and especially dairy and egg supply management. He is the Egg Farmers of Canada Chair in Public Policy, where his research focuses on issues surrounding the relevance and usefulness of supply management.

The Hill Times

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