Canadian dairy dispute could impact Wisconsin farmers
Farm Bureau official: Production controls needed

By Brian Huber - Freeman Staff and The Associated Press

April 26, 2017

U.S. Sen. Tammy Baldwin, D-Wis., looks at the young calves after talks with leaders from the Professional Dairy Producers of Wisconsin discussing Canadian trade barriers and their impact on the dairy industry on April 13 at Five Star Dairy Farm in Elk Mound.
Associated Press

WAUKESHA - The market change affecting dairy farmers whose products make their way to Canadian markets impacts far more farmers than the few dozen who are directly impacted, an official with the Waukesha County Farm Bureau said recently.

A recent change by the Canadian government in how farmers there are paid for their products has affected many farmers in America, with several dozen Wisconsin farmers getting letters from Grassland, the dairy processor they sell their ultra-filtered milk product to, telling them earlier this month that as of May 1 they no longer will have as extensive Canadian market. The move affects some 58 farms in Wisconsin, plus others in New York state.

But it also has repercussions for nearly every dairy farmer, and there are 19 operating dairy farms in Waukesha County, according to the University of Wisconsin-Extension.

Tom Oberhaus, vice president of the Waukesha County Farm Bureau, said dozens of families across the state, including at least one in Waukesha County, will be directly impacted, as they will have no place to sell their milk unless they can find new buyers in a very short time. Oberhaus is a dairy farmer in the Town of Delafield who does not sell to Grassland, but produces about 5,500 pounds of milk per day.

“It’s worse than losing your job. We all have a lot of debt we need to make payments on, and cows, you can’t just shut ‘em off. So it’s a tough, tough situation,” he said.

But the ripple effects could affect every dairy farmer, because as more milk hits an already flush market, prices drop.

“Because of the turmoil it caused within the industry, all milk prices dropped about 50 cents. Base price is about $15.50 and we lost about 50 cents (about 3 percent) per hundred pounds,” Oberhaus said. “Hopefully people understand, expenses don’t change, only the sale price changes. So when you talk about 50 cents on that, it’s a good chunk of our profit margin, let’s put it that way.”

Repeated calls to Grassland were not returned.

Multiple fronts

State Department of Agriculture Secretary Ben Brancel said the state has the ability to process all the milk produced here but other states do not, so they send it here. The oversupply leads to discounted prices that in turn have processors thinking about the markets of tomorrow and their ability to survive.

He said it’s a multi-pronged problem - trade issues, addressing the immediate needs of the farmers affected, and the state’s long-term market strategy.

“Our focus has been on the farms being impacted,” he said. “We’ve raised issues of trade issues, which is federal, and we are letting them take the lead on that topic. Our long-term strategies are left for decisions down the road. Our focus today is helping these farmers find a home for their milk.”

The issue has gained attention at both the state and federal levels, with President Donald Trump pledging some help to state dairy farmers during last week’s visit to Kenosha. On Tuesday, the federal government levied a tariff on Canadian lumber, The Associated Press reported, adding that about half of the farms dropped by Grassland Dairy have found new buyers.

‘‘We’re continuing to find homes for farmers’ milk,’’ said Daniel Smith, a state Department of Agriculture, Trade and Consumer Protection administrator. ‘‘Our figures change almost by the hour.’’

 But the milk market, Smith noted, is “tighter than we expected.

 “It doesn’t mean the game’s over, but it does mean the clock is ticking,” he added.

 Smith said he hadn’t heard any updates from Gov. Scott Walker or Trump. But Walker said in a news release Tuesday that he spoke with Trump Monday and Tuesday about the Wisconsin farmers seeking help after being dropped following the change in Canada’s pricing policy for domestic milk that evaporated the demand for U.S. milk. Walker said Trump talked about his decision to impose new tariffs on Canadian softwood lumber in response.   ‘‘It was great to talk to you this morning,’’ Walker told Trump on Twitter after the conversation. ‘‘Thanks for supporting WI dairy farmers!!!’’

 Trump referenced the crisis on Twitter a day after announcing the tariffs: ‘‘Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!’’

 When visiting Wisconsin last week, Trump vowed to help and called Canada’s policy changes ‘‘very unfair.’’ 

Trade winds howling

Jaime Castaneda, senior vice president of the National Milk Producers Federation, said this matter is “absolutely” a trade dispute. His group has asked Walker and New York Gov. Andrew Cuomo, other governors and the federal government to draw a line and come up with consequences, saying the Canadian policy change not only undercuts U.S. imports, but also dumps more milk on the world market, costing the U.S. access as a result. The NMPF also asked for the Canadian government to halt the move and agree to set up a task force with U.S. counterparts and industry leaders on both sides to come up with ways to make sure the rules are clear.

“When Grassland began selling this product in Canada, it was legitimate, there was an absolute need for it, dairy farmers in the U.S. have been told there is a need for milk, produce more,” Castaneda said. “This is not the first time it has done this. Every year somebody tries to export something into Canada, Canada tries to find a way to undermine those exports from the U.S. This cannot continue. When we negotiated (The North America Free Trade Act) in the 1980s, dairy was left out of this agreement, and we need to revise that. We need to make a serious analysis of the rules of the game on dairy when it comes to Canada.”

In a letter to Cuomo and Walker last week, Canadian Ambassador David MacNaughton said part of the issue was U.S. and global overproduction, which led to Canadian imports of U.S. milk protein substances going from $33 million U.S. dollars in 2011 to $98 million last year, and total Canadian imports of U.S. dairy jumping 17 percent last year alone over the previous one.

He said in the letter Canada upholds its international trade obligations, and has not imposed any duties or taxes for milk protein substances, nor has it taken any broader action to limit imports from the U.S.

“(B)oth Canadian and American farms have been dealing with international pressures of low world prices, and a surplus of skim milk solids. Like their U.S. counterparts, Canadian farmers are trying to adapt. This is why the Canadian industry has taken steps to reform - including the negotiation of the National Ingredient Strategy. The national ingredient strategy is industry-driven and was developed between dairy producers and processors,” he wrote. “... (I)t is important that we work together to grow middle class jobs, and not lay blame where it does not belong, for economic changes that are the result of global market trends.”

Oberhaus said he understands that when Trump says he wants to put Americans first and make America great again, it’s not unreasonable for other countries to feel the same way about themselves. So internationally, such trade issues lead to “deep philosophical questions.”

“What many of us in the state would say is that we need to - it’s been highly controversial, but many of us would say it’s probably time the U.S. put in some kind of production control in the U.S. so we don’t have people just wildly expanding. Because when you expand that much more somebody else gets pushed out of business,” he said.

“They say that’s what America is, a free enterprise world. I say to myself is that any different than a couple of the corner drugstores we all grew up with that are being pushed out by the big boys in the industry? Some big questions for us to work out.”