Trade Wars Trigger Crisis for Dairy Farmers
The author is CEO of the American Dairy Coalition
Times are tough for farmers across the nation, milk prices are low and dairy producers have been hit hard by tariffs on the products they export to some of our major dairy trading partners.
This year, President Trump imposed tariffs on steel and aluminum on Mexico and China to push back on trade agreements deemed unfair by the U.S. As a result, Mexico retaliated with its own tariffs of up to 25% and third quarter cheese exports to Mexico are down 11% from 2017. China also imposed its own tariffs of 25% on a large amount of U.S. dairy products, resulting in whey sales to China decreasing 8.2% so far this year.
Overall, the impact of the trade war on exports has taken more than 10%— or $1.78 per hundredweight — from already depressed US milk prices. For reference, Class III milk prices in 2014 averaged $22.34 per hundredweight. Today, the next twelve-months of the futures curve shows an average of $14.60 (a 35% decrease).
Dairy farms from coast to coast face financial collapse with prices at current levels: Without an equitable resolution to the trade wars, Texas A&M AgriLife Extension Service projects U.S. dairy producers will lose $3.4 billion annually and nearly 16,000 jobs over the next five years.
These tariffs are hurting the U.S. economy as a whole. The U.S. dairy industry exported $5.4 billion in 2017, with Mexico alone accounting for $1.3 billion of that business. In addition, China imported $577 million in U.S. dairy.
The stakes could not be higher. The U.S. dairy products industry supports nearly 3 million workers, generates more than $39 billion in direct wages and has an overall economic impact of more than $628 billion, according to the International Dairy Foods Association. The dairy industry provides jobs at feed mills, dairy manufacturing plants, construction companies, genetic companies, milk haulers, dairy plants plus much, much more.
However, the future of the dairy industry is at stake if the President does not address these damaging retaliatory tariffs soon. The president’s government subsidy program has proven ineffective, incapable of keeping pace with the devastating impacts of what has been, essentially, a trade war on multiple fronts.
The American Dairy Coalition, which represents dairy producers throughout the United States, calls on President Trump to take action immediately by removing the steel and aluminum tariffs from Mexico in exchange for lifting tariffs on our dairy products. Furthermore, urgency is required to immediately come to an agreement with China that will remove tariffs against U.S. dairy products.