The Republican President took a shot at Canada’s Dairy industry last week as being unfair to US dairy producers and that he’s going to renegotiate treaties like NAFTA so US dairy producers can move into Canada. Of course, shit for brains was speaking in Wisconsin and beating his chest with his tiny hands about America First. Funny how facts never actually entered into his bloviating.
The particular issue is what is called Class 7 diafiltered milk. Essentially take the leftovers from making butter (the non-fat solids), then concentrate it by membrane filtering to a 42%, or more, protein content. This stuff is sold to Canadian producers at a certain price to make cheese. Not necessarily good cheese, think commercial cheese, or those single slices wrapped in plastic that can also patch your fibreglass canoe. You can also make yoghurt, ice cream or that green can “Parmesan” cheese out of Class 7.
Since it’s not considered “milk”, but a protein ingredient, it’s not subject to a tariff rate quota. Diafiltered milk was invented in the US, post-NAFTA, so it’s not covered by NAFTA. American producers have sprung up along the border states to sell it to Canadian cheese producers. Diafiltered milk is not used by American dairies. As an aside, 42% protein means there is very little waste from the cheese-making process, essentially skim milk, that is dumped, used as animal feed, or dried to make skim-milk powder.
Last year, Canada’s dairy producers lowered their prices for dairy ingredients to match what American producers were selling their diafiltered Class 7 products, to encourage Canadian dairies to buy Canadian. This is called “the market at work” and the tariff loophole went away. To quote this article
Al Mussell, a researcher with Agri-Food Economic Systems in Guelph, Ont., has argued against American farmers being portrayed as victims of North American trade. In fact, under NAFTA it’s been the opposite, he’s written.
“We’ve got competitive pricing here. Since when is the U.S. a victim of competition?” he said. “I think it’s a revisionist dialogue,” he said.
Grassland Dairy Products in Wisconsin announced that since the market for Class 7 protein concentrate in Canada has gone competitive, their market has dried up. Grassland notified 75 dairy farmers that supply them, that they no longer have a place to sell, as of May 1st. Coincidentally, Grassland is building up a 5,000 head herd of their own cows to provide their own milk, at their own price. Conveniently, they won’t need the milk production from other farmers.
For our American readers, Canada is a separate country from the US which means we have our own rules regarding many things and dairy products are one of them. We have what is known as supply management. The production of milk is controlled by the government to keep dairy farmers in business.
Our dairy industry is not set up for export, but for internal consumption, which means we produce what we need at a reasonable price for the farmers and producers. New Zealand and Australia are net-exporters of dairy, as evidenced by the preponderance of NZ butter and cheese in Barbados during our vacation earlier this year. Australia recently approved a $450 million dollar bailout for their dairy industry. The EU offered their dairy producers a 500 million Euro support program last July. American dairy producers in the US received $3.84 BILLION in direct payments to producers in 2012 and several dairy price support programs in the millions of dollars range. A truly free market. That is the problem.
There is a global oversupply of milk. Everybody makes too much of it. In the US, where the market rules, dairy farmers are gong broke; the cost of production is higher than what the market pays. Supply management means Canada has enough milk being produced to meet our needs and let the farmer make a buck at it. Our milk price is about the same as Australia and New Zealand, who are also on the market price, but a bit more than the US, who seem content to crush their own dairy industry and then blame someone else when we compete with them on price. Quality? We’re so far ahead on quality, US producers are but a speck in our rear-view mirror.
Being our own sovereign country means we also have rules regarding milk quality and purity. Canadian milk is not allowed to have any traces of antibiotics, steroids or growth hormones. None, as in zero. If a cow needs to be treated for milk fever or bovine ketosis (two common dairy cow health problems) the milk from that cow cannot be sold or processed until there is no trace of antibiotics or steroids in the milk. There are heavy fines for any farmer who tries to wangle it through and any dairy that tries to get away with it is also fined. Heavily. Not only does the farmer test for purity, but so does the dairy before the milk gets in the building. The reason? We insist on only the purest, cleanest, safest milk. It’s the law and part of the responsibility of supply management is a ferociously high quality standard.
America? If you can get it out of the cow, you can sell it, at whatever price you can get, preferably with a government subsidy tacked on the end, even if the product is from sick and medicated animals. Yep, that’s what you call the free market with “yuge” subsidies.
At the end of it, Grassland Dairy used a loophole to create a market on a price they determined, while trying to cut back on the price they paid to Wisconsin dairy farmers, by building up their own herd and shafting 75 local dairy farmers. They got caught when we matched them on price and encourage Canadian manufacturers to buy and use Canadian dairy products. So, being caught red-handed, the usual step is to blame someone else.
As the added twist, someone handed The Republican President a Post-it note in Wisconsin that said NAFTA bad, American Jobs, Dairy, so that moron you elected mouthed off without a smattering of knowledge. He’s an idiot-savant without the savant.
What it really means is we’re kicking your ass in a competitive market and you’re crying over spilled, subsidized, sub-standard, over-produced milk.