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Idaho dairy, wheat score wins in revamped NAFTA

October 9, 2018

If implementation of the revamped North American Free Trade Agreement goes as intended, local dairymen and wheat growers benefit, said Bracken Henderson, extension educator for Franklin County.

“Milk prices have been down for some time and it appears that this could strengthen the U.S. dairy industry’s position and hopefully increase prices,” he said.

But Henderson also sees that demand for products needs to be increased.

“This gives hope for light, if not the light itself, at the end of the tunnel,” he said. “It is encouraging that U.S. wheat should now have ‘equal’ access to the Canadian market but that will also depend on how Canada implements the new agreement. U.S. agricultural products are among the most highly regulated in the world. There are costs associated with that regulation but the resulting products are of the best quality.”

This nation’s dairy and wheat industry fared well in the United States-Mexico-Canada Agreement (USMCA), which was announced Sept. 30 and, if ratified, will replace the 24-year-old NAFTA.

U.S. potato and beef cattle industry leaders said their industries didn’t gain anything from the new agreement, but they also didn’t lose any of the favorable trade terms they enjoyed under NAFTA. But the dairy industry was a clear winner in the USMCA.

Under the new agreement, Canada will provide new access for U.S. dairy products, including for fluid milk, cheese, cream, butter, skim milk and powder, and that nation will also eliminate its tariffs on whey and margarine.

The agreement provides U.S. dairy products access to an additional 3.6 percent of Canada’s dairy market. The U.S. exported $619 million worth of dairy products to Canada in 2017.

Canada will also eliminate its Class 7 milk pricing system, which the U.S. dairy industry has charged allows that nation to undercut U.S. sales of certain milk products in Canada and dump surplus concentrated milk proteins onto global markets in direct competition with U.S. exports.

According to U.S. dairy industry leaders, Canada’s class 7 milk is a subsidized class of Canadian milk (including butter and milk power) that is used to stop the import of concentrated milk proteins from the United States. Concentrated milk proteins are used in a variety of products, including protein-fortified beverages and foods, weight management products and sports nutrition products.

Idaho Dairymen’s Association Executive Director Rick Naerebout said addressing Canada’s Class 7 pricing system was the top goal of the U.S. dairy industry in the NAFTA renegotiation.

“It was a good announcement for U.S. dairy,” he said. “It appears we got what we wanted with the agreement.”

The U.S. dairy industry didn’t gain a tremendous amount of new access to Canada, Naerebout said, “but we do get some incremental gains and that is a positive thing.”

Getting Canada to eliminate its Class 7 milk pricing system and allow some additional market access to U.S. dairy products were two important objectives of the U.S. dairy sector, according to a joint news release by national dairy industry organizations.

“Maintaining dairy market access in Mexico and improving market access into Canada were (International Dairy Foods Association’s) top priorities during the talks to modernize the North American Free Trade Agreement,” IDFA President Michael Dykes said in the news release. “This new agreement will preserve our vital partnership with both countries and allow the U.S. dairy industry to seek more export opportunities.”

Canada also agreed to grade U.S. wheat imports in the same manner it grades Canadian wheat. According to U.S. wheat industry leaders, U.S. wheat currently shipped to Canada is automatically downgraded to feed wheat, the lowest classification, which also brings the lowest price.

Idaho Grain Producers Association Executive Director Stacey Katseanes Satterlee said the U.S. wheat industry has been working to resolve that issue for a long time.

“We’re pleased to see that as part of the announced changes,” she said. “It’s a huge thing for U.S. wheat growers.”

The current NAFTA agreement is critically important for U.S. wheat farmers who depend on the enormous Mexican market that NAFTA built, “But it did have room for improvements, particularly on grain trade with Canada,” the National Association of Wheat Growers and U.S. Wheat Associates said in a joint news release.

Canada’s grain grading system automatically designates U.S. wheat as the lowest grade simply because it is foreign, the release stated, which “means U.S. farmers producing the highest quality wheat arbitrarily get less value for their crop.”

“We will follow the implementation of this commitment closely to ensure U.S. farmers can finally have reciprocal access to the Canadian market,” the wheat organizations stated.

For the U.S. potato and beef industries, nothing has changed under the new agreement but under USMCA, the U.S. will allow 9,600 metric tons of refined sugar from Canadian sugar beets into this country annually, according to Luther Markwart, executive vice president of the American Sugarbeet Growers Association.

The current agreement on sugar between Mexico and the U.S. will remain the same under USMCA, he said.

Idaho sugar beet farmers brought in $305 million in farm cash receipts last year, ranking that crop as the No. 6 Idaho farm commodity.

The U.S. imports about 3 million metric tons of sugar a year so the 9,600 metric ton amount won’t have an impact on U.S. sugar farmers, Markwart said, especially since that could easily be offset by reducing the amount of sugar allowed into the U.S. from Mexico by that same amount.

“Yes, we took a little hit, but it doesn’t amount to much and it’s nothing to worry about,” he said.

Canada is the top destination for U.S. agricultural products, with $22 billion worth of U.S. ag products shipped there last year, and Mexico is third at $18 billion, behind China ($21 billion).

Mexico and Canada combined purchase 28 percent of all U.S. food and agricultural export in 2017, according to the U.S. Trade Representative’s office.

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