A Mesa representative for Arizona dairy farmers believes a recent U.S. trade agreement benefits producers exporting to Canada, but they worry retaliatory tariffs from Mexico will continue to hamper the industry.
In a deal reached Sept. 30, Canada agreed to eliminate a controversial pricing system and open up more of its market to the U.S. Canada’s strict dairy quota limited dairy imports from the U.S. in favor of Canadian farmers.
Jim Boyle, a Mesa dairy farmer and member of the United Dairymen of Arizona, said the deal with Canada was a welcome surprise that gives farmers “a little more access” to that market.
“I remember I was in D.C. last year and everybody was just amazed that the administration was actively talking about dairy trade. No administration for decades had ever really talked about dairy trade as a major component of any deal,” Boyle said.
The United States-Mexico-Canada Agreement, or USMCA, is a replacement for NAFTA, which President Donald Trump has long opposed.
Keith Murfield, chief executive of United Dairymen of Arizona, said Canada’s pricing system had “lowered the whole world market.”
“A lot of this will help the producers more in the Northeast” who are closer to the Canadian border, he said. “Indirectly, it will help producers in Arizona.”
Murfield says that it has been tough for producers to make money, but he doesn’t think consumers will see any difference in the price that they pay at the store.
“The American consumer has some of the cheapest dairy products in the world; you know that when you go to the store.”
Boyle said that the new deal is a step in the right direction for the U.S. dairy industry, but he says that the impacts on Arizona are minimal because only a small portion of Arizona’s dairy products go to Canada.
But he is worried about tariffs Mexico placed on agricultural exports on May 31 to retaliate for the U.S. administration’s restrictions on steel and aluminum imports.
“The issue that happened was that during the new NAFTA negotiations, we placed tariffs on imported steel and aluminum and other products from Mexico and Canada, which then forced Mexico to place a number of tariffs on American agricultural products going South,” said Boyle, who also is a member of the Arizona Farm Bureau and runs a farm where they milk 1,800 cows. “That was a big hit to us.”
He said those restrictions remaining in place was “kind of a let down in the industry to a certain extent – that this isn’t going to cure any of our problems real quickly.”
Arizona has an estimated 110 dairy farms and eight dairy plants that, in 2016, produced $111 million in dairy exports, according to U.S. Dairy Export Council data for 2015 and 2016.
Murfield says Mexico is by far the Number 1 destination for dairy from the U.S. and said Mexico, as an Arizona neighbor, is one of the state’s leading export destinations.
“We have a shredding and cutting operation in Mexico City, but we’re not able to bring U.S. cheese in yet and this negotiation does not change anything,” Murfield said. “It is still hooked to the steel and aluminum.”
Boyle said the U.S. dairy industry has been struggling for a long time because of the excess production of dairy around the globe. He says that in terms of affecting their milk profits, it is going to be a while.
He also is concerned about roadblocks to the deal with Canada, which could prolong restrictive Mexico tariffs.
The U.S. trade agreement is expected to be signed in November, but he said the midterm elections could block the deal if Democrats take control of the House.
Sen. Ron Wyden, D-Oregon, ranking member on the Senate Finance Committee, appeared to reserve judgment.
He said he wanted to learn whether the revamped NAFTA – now known as USMCA – “lives up to the President’s promise to strike a new deal that truly benefits U.S. workers, innovators and farmers.