Moses Lake, WA 98837, USA

Northwest dairy farmers, hurt by end of NAFTA, see benefit in new North America trade deal

For the Business Journal

MOSES LAKE — As North America has struggled to reach an international trade agreement to replace the North America Free Trade Agreement (NAFTA), finally settling on the U.S.-Mexico-Canada (USMCA) deal recently, few industries in the U.S. had more to lose from a bad deal and more to gain from a good deal than the dairy industry.

U.S. dairy farmers heavily rely on trade with its neighboring countries, said Sarah Taydas, director of corporate communications for Darigold.

“Mexico is Darigold’s largest export destination,” Taydas said. “And Darigold currently sells a very small amount of cream and butter to Canada. Access to international trade is important to our co-op members.”

Even before the Trump Administration chose to renegotiate NAFTA, U.S. dairy farmers were hurt by unfair trade practices with Canada, said Denny Mickelsen, a dairy farmer in Moses Lake and member of the Darigold board of directors. A Canadian strategy of increasing dairy quotas under NAFTA was undercutting prices for the American market, Mickelsen said, and a shift in trade practices was necessary to even the playing field. In a statement, Darigold CEO Stan Ryan noted that these trade practices from Canada had long disadvantaged American farmers.

“Canada’s closed and supply-controlled system had embarked on a program that essentially dumped milk proteins on world markets and moved American dairy farming and processing, along with thousands of additional high-quality jobs, from the U.S. to Canada,” Ryan said. “The U.S. Administration successfully halted this program at current levels, just as it was about to take off and expand. The (U.S. Trade Representatives) also gained some limited access to Canadian dairy markets that heretofore the U.S. dairy industry had not yet been able to take advantage of.”

In past years, that dumping of dairy products by Canada’s industry has directly impacted the pocket books of U.S. farmers, Mickelsen said. This is because the dairy industry is very susceptible to price shocks, Mickelsen continued, and unlike other types of agriculture dairy farmers can’t store their product for extended periods of time waiting for better prices.

The dairy industry has also regularly come in conflict with international trade regulations that require products with certain regional heritages to be sold under their historically recognizable name only if they are actually made in that region. In many countries, cheeses made in the U.S. can’t be sold as Swiss cheese, Parmesan or Gouda because they weren’t made in Switzerland, Parma, Italy or Gouda, The Netherlands respectively, even if the products are substantially similar.

Despite the need dairy farmers had for a fair deal, Mickelsen said he wished that it could have been reached without political posturing and a protracted period without any agreement, impacting the pocket books of farmers.

“I wish politics would stay out of economics,” Mickelsen said before laughing. “But I know that’s not how it works.”

If trade negotiations became political, Ryan said the industry is still better off for the agreement that was eventually reached and for an administration that negotiated for the best deal.

“The dairy aspects of USMCA were some of the most fiercely contested and divisive issues,” Ryan said. “We are grateful for the Administration’s and the USTR’s stern and ardent support of the U.S. dairy industry.”

While dairy farmers are happy to see a North American trade agreement finalized, recovery from years of a bottomed-out market will take time, Mickelsen said. Canadians will be granted a grace period before they will need to pull back the amount of dairy products they dump into the market, a “hangover” from the trade negotiations, Mickelsen said.

Despite the difficulties that dairy farmers have faced, Mickelsen doesn’t plan on retiring the farm anytime soon.

“Things will get better,” Mickelsen said. “There’s a reason I’m still working in this industry.”