You’ve probably noticed we’re living in a world full of uncertainty.
Our country is currently renegotiating the North American Free Trade Agreement (NAFTA) with Mexico and Canada, two of the biggest export destinations for U.S. dairy products. President Trump has been vocal about “unfair and unreciprocal trade.”
As part of that discussion, U.S. officials are asking Canada to let go of its supply management system for dairy. That’s like asking the U.S. to give up the standard system of measurement. It’s just not going to happen.
The tension started in May 2017 when dozens of producers in Wisconsin, Minnesota and New York lost their contracts with processors who were making ultra-filtered milk and shipping it to Canadian processors. U.S. dairy leaders blamed Canada’s new Class 7 pricing system for the incident. Class 7 makes it more profitable for Canadian processors to buy ultra-filtered milk domestically rather than from the U.S. Canadians consider Class 7 part of their supply management system. U.S. officials, on the other hand, say it’s global market manipulation.
Even Canada’s largest cheesemaker, Saputo, said in June Canada wants to “have their cake and eat it too” when it comes to Class 7.
Agriculture Secretary Sonny Perdue agrees. In fact, he’s not sure NAFTA renegotiations will reach the finish line if Canada is not willing to give up Class 7.
“They created this lower price, Class 7, in order to compete with our dairy producers and compete on the world export market,” he explained. “Frankly, I don’t know how we can go forward if Canada insists on a Class 7 part of their program.”
Aside from the copious amount of politics intertwined in Canada’s supply management system, the country’s dairy producers are not willing to let it go because of the price stability it has afforded them. It’s for that reason the Wisconsin Farmers Union has been hosting town hall meetings throughout the Upper Midwest to discuss the possibility of bringing supply management to the U.S. Something the group is quick to admit won’t happen soon.
Meanwhile, President Trump is using tariffs, to the tune of $200 billion, to encourage China to stop stealing U.S. intellectual property. As expected, those tariffs have been matched with Chinese tariffs on a variety of farm products, including dairy. Negotiators have until July 6 to work out this trade spat before those tariffs go into place.
In the end, all this trade drama will likely result in volatile milk prices, the potential for opportunities to lock in feed at a profitable level and an overwhelming feeling of being out of control.
What happens with trade is out of your hands, but there’s plenty you can influence on your farm. One critical component within your control is animal health. Healthy cows make more milk, are more profitable and stay in the herd longer. Those cows ensure your check comes every month.
You can’t control the markets, when the rain will fall or what our president posts on Twitter, but you can control where you devote your energy. Focus on your farm, your family and your profitability. We will get through this.