Dairy Report: NAFTA Negotiations, Fewer Dairies and Tighter Margins

Dairy Report 09/11/18

As the U.S. and Canada continue to work through lingering differences that divide the two nations, dairy policy remains the main issue preventing completion of the North American Free Trade Agreement (NAFTA).

U.S. officials are pushing for greater access to the dairy market in Canada. Unless the U.S. garners more access to Canada’s dairy market, the issue could hurt votes for a final NAFTA agreement in Congress. The two countries have until the end of the month to settle these differences before the text on the U.S. agreement with Mexico is made public.

For the past 10 years, ultra-filtered milk has been a good product for U.S. processors to ship to Canada. However, this has changed as several milk processors in the U.S. have lost their contracts to sell the product to our neighbors in the north.

Companies like Grassland Dairy Products, located in Greenwood, Wisc., notified its producers that they would only have a few weeks to find a new processor. The quick announcement was due to a sudden and drastic change to Canada’s milk policy. While producers were able to find a new home for their milk, they may not be so lucky if this were to happen again.

Wisconsin has lost another 47 dairy farms in August, with the total number of licensed farms standing now at just 8,372. The loss of 47 farms is just slightly lower than the 54 farms lost in July. The state has lost 429 farms since the beginning of the year, a decrease of 4.9%, and 588 the past year, a decrease of 6.6%.

Tighter margins are causing small farms across the country to also tighten their budgets. This especially holds true for first generation dairy farmers such as Katie Dotterer-Pyle, owner of Cow Comfort Inn Dairy in Union Bridge, Maryland.

“We’ve got super tight margins,”, Dotterer-Pyle said. “We’re not a multi-generational family farm that has years of equity built up, so we really have to work with a sharpened pencil every month.”

A revised dairy program in the new Farm Bill may help slow the rate of farm departures. It roughly triples the benefits to smaller farms in the current Margin Protection Program.

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