NMPF’s Trade team offers an issues update for the 2020 NMPF Virtual Town Hall.
Tag: China tariffs
NMPF’s Castaneda Says U.S. Needs to Be Careful in Mexican Trade Issues
NMPF Senior Vice President for Policy Strategy and International Trade Jaime Castaneda says the U.S. needs to be careful in how it handles concerns about trade with Mexico of seasonal agricultural products, given the ripple effect Mexican trade has across agriculture. Castaneda also discussed the USMCA trade agreement, dairy sales to China and other issues on the “Adams on Agriculture” podcast.
Dairy Defined Podcast: Mooney Speaks at Annual Meeting
(Note: NMPF’s Dairy Defined podcast explores today’s dairy farms and industry using high-quality data and podcast-style interviews to explain current dairy issues and dispel myths.)
ARLINGTON, Va. – U.S. dairy farmers have been through challenging times, but they’re ready to face the challenges of trade, the environment, climate and changing consumer tastes, said Randy Mooney, a Missouri dairy farmer and chairman of the National Milk Producers Federation. Mooney spoke this morning at the organization’s annual meeting, this in New Orleans.
“Dairy farmers play an important role in society. We help preserve communities,” he said. “Like all of you, I’m proud to be a dairy farmer, producing the most nutritious product in the world.”
To listen to the full podcast, click here. You can also find the Dairy Defined podcast on Spotify and SoundCloud. Broadcast outlets may use the MP3 file. Please attribute information to NMPF.
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The National Milk Producers Federation (NMPF), based in Arlington, VA, develops and carries out policies that advance dairy producers and the cooperatives they own. NMPF’s member cooperatives produce more than two-thirds of U.S. milk, making NMPF dairy’s voice on Capitol Hill and with government agencies. For more, visit www.nmpf.org.
Trade War with China Deepens, Worsening Economic Damage to Dairy
U.S. negotiations with China faced a serious setback in May, pushing off the prospect of a resolution in long-running U.S. efforts to reform a myriad of Chinese policies that harm U.S. interests.
The new tariffs that took effect June 1 included hikes by China of tariffs on lactose and infant formula. Still, greater damage to dairy is coming from prolonging the standoff that’s deeply damaged U.S. dairy exports to one of the world’s largest dairy markets, crimping U.S. sales while competitors take advantage of the impasse.
Tariffs erected in 2018 have proven to be a catastrophic blow for the U.S. dairy industry in its third-biggest overseas market. China’s dairy imports grew by 13 percent in the first quarter of 2019 compared to the same period last year; over the same period U.S. dairy exports fell by more than 40 percent, reversing the 10 percent annual growth the U.S. had seen in the Chinese over the past decade. Resulting losses in U.S. dairy farm revenues may reach $4.8 billion by 2020.
Dairy Takes Positive Steps Forward, But Trade Tremors Abound
It would be nice to have time to savor real progress, but that seems such a luxury when turbulence is the new normal.
The long overdue end to Mexico’s retaliatory tariffs against U.S. cheese exports last month was a positive development, one of several indicators suggesting that dairy’s fortunes may be improving. But as has often been the case, even that gain was soon thrown into doubt, suggesting that much work remains before we can feel confident we’ve turned the corner on reestablishing a dependable trading relationship with Mexico.
First, the good news: Removing the tariffs, a barrier that has harmed trade with our largest international partner, is important progress in improving dairy’s fortunes. The end of the Mexican retaliatory tariffs put the U.S. fully back as the preferred supplier to what last year was a $1.4 billion dairy market. The May 17 agreement ending U.S. tariffs against Canadian and Mexican metals that prompted the retaliation in the first place shows that, for all the frustrations farmers have felt in the ongoing trade wars, progress can occur.
The end of the tariffs also improves prospects for passing the USMCA trade treaty. Mexico has revised its labor laws, which should help gain support for the agreement in the U.S. Congress, and Canada is vowing “full steam ahead” for ratification. Meanwhile, producer margins are improving, and a better safety net is arriving with Dairy Margin Coverage Program signup on pace to begin June 17, giving producers several reasons for greater optimism about dairy’s economic fortunes.
But the threat of new tariffs President Trump raised in early June, meant to change Mexico’s behavior on immigration issues that are unrelated to trade or agriculture, raised the specter of renewed retaliation. With the resolution of that threat late last week, we are hoping that USMCA momentum, temporarily slowed, may revive and that we can again focus on repairing and expanding U.S. dairy’s relationship with its largest customer. To help build that groundswell of support in Congress, NMPF sent a joint dairy letter on USMCA, together with USDEC and IDFA, to two dozen of the top dairy state delegations in Congress. A day later NMPF joined with almost a thousand other food and agricultural organizations and companies, including many NMPF members, to send a unified message to the Hill urging movement on the trade agreement.
At the same time, turbulence continues with China. New U.S. tariffs on Chinese goods, the result of derailed negotiations between the world’s two largest economies (and the third-biggest importer of U.S. milk), are likely to invite further retaliation, compounding the sharp drop in dairy exports we’ve already seen to China.
To ease the blow for producers, the Trump Administration, through the U.S. Department of Agriculture, has promised to help producers across agricultural commodities to lessen the near-term economic damage from the trade war with up to $16 billion in a new round of aid.
We at NMPF have been in discussions with the department, suggesting how to target limited resources to best ameliorate the damage.
But we don’t yet know what will be in the assistance package, which means yet more question marks; we’ll keep pushing hard for assistance that mitigates the more than $2.3 billion in damages dairy farmers have faced because of the trade war. But no assistance package can completely capture the full effects of the market uncertainty, interrupted relationships and markets lost to unencumbered competitors who are seizing market share. That’s why we certainly hope the aid package isn’t just as fair as possible – we hope it’s the last one farmers need.
Significant work remains on numerous trade policy fronts to help dairy producers fully recover. In addition to working for USMCA passage, we will continue urging the White House to resolve the renewed tariff spat with China and conclude a bilateral agreement that lowers tensions and improves market access. We also need swift and robust progress in trade discussions with Japan, which the president has promised, so that U.S. dairy interests are not further punished by tariffs and TRQs that each year let our European and Oceania competitors gain ground due to the terms of their trade treaties with Japan.
These steps are necessary to provide certainty, opportunities and improved prices for U.S. dairy producers, something badly needed after the economic turmoil of recent years. If dairy truly is getting back on its feet – and positive signs are emerging – then the next step will be to start moving forward. The end of Mexico’s retaliatory tariffs put us on firmer ground. We can move ahead, despite the tremors that continue to shake things up.
NMPF Statement on Federal Trade-Mitigation Package for Farmers
ARLINGTON, Va. – From National Milk Producers Federation President and CEO Jim Mulhern:
“Dairy farmers have been harmed substantially by disrupted markets. We know that USDA is concerned about the damage being done to dairy farmers by ongoing tariff battles. We hope it will use the full range of tools available to provide a large segment of the payment in the first tranche to appropriately assist milk producers who have experienced a prolonged downturn in prices because of these conflicts,” he said. “We appreciate USDA’s concern for dairy’s needs, and we look forward to working with USDA, Congress and the White House as the department further develops its plans.”
NMPF estimates that producers have lost at least $2.3 billion in revenues through March due to higher tariffs against U.S. dairy, which has lowered milk prices for all producers.
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The National Milk Producers Federation (NMPF), based in Arlington, VA, develops and carries out policies that advance dairy producers and the cooperatives they own. NMPF’s member cooperatives produce the majority of U.S. milk, making NMPF the voice of dairy producers on Capitol Hill and with government agencies. For more, visit www.nmpf.org.
NMPF’s Morris on Dairy Trade Progress
Ensuring Milk’s Recent History Doesn’t Repeat Itself
“History doesn’t repeat itself, but it often rhymes.”
I’m reminded of this saying, usually attributed to Mark Twain, as we look at dairy’s price outlook over the next few months. For the first time since before the retaliatory trade tariffs hit last summer and ruined a promising market outlook, real signs of a milk-price recovery have once again been apparent, just as an improved USDA safety net takes effect to provide at least some relief to struggling producers.
But just like a year ago, trade turmoil – in this case, new and higher tariffs against China – now clouds the market outlook. At NMPF we are doing what we can to ensure that history doesn’t repeat itself, and that even if it rhymes, this time the song needs a better melody.
Now in our fifth year of low prices and our third year of trade wounds, we’re hopeful that the market signals — that the worst may be over and that better days may lie ahead – are not derailed by a trade war train wreck.
For some of the positive, hopeful signs:
- After years of rising cow numbers dating to 2011, herd sizes have dropped every month since last July, with March’s decline the biggest of the entire period. The steady decline in cow numbers in March finally pushed milk production to levels lower than a year earlier, reducing the supply overhang that has depressed prices.
- Futures markets have noticed the tightening. Forecasts for milk prices this year as reflected in futures show a rise of $1.80 per hundredweight over last year, stabilizing around $18, and have been rising by the week.
- The higher milk prices, combined with steady feed costs, have improved producer margins.
- And finally, sustained improvement in world prices for butter, skim-milk powder and cheese are in turn helping lift domestic prices, showing how global demand can benefit U.S. dairy, despite the trade-policy and export challenges we currently face.
These developments show a sector experiencing an improving outlook, perhaps putting us back on the path we appeared to be on in 2018, when retaliatory tariffs against dairy from Mexico and China disrupted exports to two of our largest markets. The question before us is whether the economic fundamentals today are strong enough to maintain the nascent recovery.
Until trade turmoil is resolved, the battle to open and expand new markets — our best hope for real, sustainable recovery — will be fought with one hand tied behind our back. And the previous half-decade has taken such a toll on farmer finances that, over the next few months, many dairies will likely continue to struggle. Help from the market is critically important – but it’s inevitable that the economic pain on the farm won’t end overnight.
That’s why there is significant work to do to help producers weather the dairy crisis over the next few weeks and months.
The immediate task is to encourage and guide producers through signup for new dairy programs, most importantly the new Dairy Margin Coverage program. At a congressional hearing on dairy’s struggles convened April 30, Minnesota farmer Sadie Frericks told lawmakers she’d be signing up for five years of coverage at the maximum, $9.50 per hundredweight level. “Dairy farming requires smart business decisions. This was an easy one,” she said after the hearing.
Many other farmers, especially small and medium-sized producers, need to make the same choice as Sadie’s family. We will be ready to help producers understand their full options, which includes not only DMC but other risk-management tools, as well as ways to gain premium discounts and allocate refunds for previous Margin Protection Program premiums provided for under the farm bill passed last year. Please watch our website, nmpf.org, in coming weeks for more information and resources as we head toward the DMC signup date in mid-June.
At the same time, we can’t accept gridlock in Washington’s ability to improve trade policy. A renewed tariff spat with China cannot be an end in itself – it must lead quickly to a bilateral agreement that lowers tensions and establishes more and better market access. The Administration must lift the steel and aluminum tariffs on Mexico and Canada, and the Congress must ratify the U.S.-Mexico-Canada Agreement this year. We also need quick resolution to trade discussions with Japan so that U.S. dairy interests are not further punished by tariffs much higher than those negotiated by our European and Oceania competitors. These steps are necessary to provide some measure of certainty and new opportunities for dairy producers, something badly needed after the economic turmoil of recent years.
These are building blocks for longer-term recovery that need to be laid down now, when the urgency of dairy’s hard times is still fresh in the public’s mind and concern about them isn’t limited to the dairy sector itself.
If dairy truly is getting back on its feet – and we hope this spring’s positive signs show it’s about to happen, despite deeply worrisome trade tensions – then the next step will be to gain traction and move forward, because we don’t want history to repeat itself.
A little rhythm would be nice, but we’re ready to be done with the blues.
Cooperative Members, Dairy Experts Testify in Agriculture Subcommittee’s First Hearing
In its first hearing of the 116th Congress the House Agriculture Committee’s subcommittee on livestock and foreign agriculture focused on dairy’s improved safety net and the need for expanded exports, with farmers from NMPF cooperatives and industry leaders bringing national attention to industry concerns.
The hearing, called by Subcommittee Chairman Jim Costa (D-CA), spotlighted the low prices and trade concerns the sector faces while discussing the opportunities offered for producers through the new Dairy Margin Coverage program, calling solutions to dairy’s struggles one of the subcommittee’s highest priorities.
Testimony included:
- Minnesota dairy farmer Sadie Frericks, a member of Land O’Lakes, spoke of the importance of the new Dairy Margin Coverage program as a risk management tool as her family weathers economic challenges;
- California Dairies, Inc. President and CEO Andrei Mikhalevsky provided an overview of dairy’s trade issues, a rising concern as exports are crucial to increasing dairy demand;
- Pennsylvania dairy farmer Dave Smith, Executive Director of the Pennsylvania Dairymen’s Association, discussed additional challenges including the importance of milk consumption in schools and the need to combat mislabeled fake milks in the marketplace;
- New York dairy farmer Michael McMahon gave voice to the dairy industry’s unique workforce challenges, including the lack of a viable guest worker program that covers year-round workers;
- and Dr. Scott Brown, Director of Strategic Partnerships for the University of Missouri’s College of Agriculture, Food and Natural Resources, provided economic insight.
NMPF President and CEO Jim Mulhern thanked the participating farmers and industry leaders for bringing their crucial dairy perspectives to a national level and applauded the subcommittee for putting dairy first on its 2019 agenda, noting that the sector’s “challenges reverberate through the U.S. economy.” Mulhern also thanked lawmakers including Costa, subcommittee ranking member Rep. David Rouzer (R-NC), Agriculture Committee Chairman Rep. Collin Peterson (D-MN), and Congressman GT Thompson (R-PA) for their helpful opening and closing statements at the hearing.
NMPF Urges Washington to Prioritize Dairy in China Negotiations
With the outcome of trade negotiations with China still uncertain, NMPF is taking proactive steps to engage with President Trump, his administration and policymakers to ensure that dairy-industry priorities receive top consideration in negotiations with China.
Negotiations with China, once aimed toward a March conclusion, are certain to continue well into spring. Treasury Secretary Steven Mnuchin and U.S. Trade Representative (USTR) Robert Lighthizer traveled to Beijing last month to resume trade talks, while Chinese officials returned to Washington at the beginning of April. NMPF remains hopeful that a constructive outcome is near, with an agreement between Presidents Trump and Xi that could be signed within the next few months.
NMPF, the U.S. Dairy Export Council and allied groups are working to help shape an agreement that further opens China’s market to U.S. dairy products and rolls back trade barriers, including securing the removal of all retaliatory tariffs against dairy.
Toward this end, NMPF recently worked with the US Dairy Export Council to spearhead two letters to President Trump. One letter, signed by 49 food and agriculture groups, explained that a deal that maintains retaliatory tariffs could negate any trade gains. “As part of your negotiations, we are asking that your Administration prioritize the removal of all retaliatory tariffs and make their immediate elimination a mandatory condition of any successful trade agreement,” we wrote. “Quickly restoring access to the Chinese market for agriculture products is a top priority for America’s farmers, agribusinesses and food manufacturer as negative impacts will continue to compound the longer that our trade relationship with China remains in question.”
The other letter, sent by NMPF, USDEC and the International Dairy Foods Association, delivered a dairy-specific message on the importance of securing strong results for the sector in the trade negotiations and providing for more market access to China for dairy products.
China’s retaliatory tariffs, levied in response to U.S. Section 301 tariffs on Chinese goods, have resulted in strongly negative repercussions for dairy in particular. U.S. cheese exports to China, which had been on pace to exceed records during the first half of 2018, dropped by 45 percent after retaliatory tariffs were imposed.
An agreement with China that prioritizes the removal of retaliatory tariffs, increased purchase of U.S. dairy products and removal of trade barriers will allow our industry to reclaim and increase our market share. NMPF’s focus is to encourage actions that will add momentum for immediate action to resolve this trade dispute.
