Wisconsin’s Got Milk, But Canada Doesn’t Want It

A trade dispute with Canada is causing anxiety among Wisconsin dairy farmers who are losing a market for what amounts to about 1 million pounds of milk per day. Grassland Dairy Products of Greenwood has notified about 75 dairy farmers that after May 1, it won’t buy their ultrafiltered milk, leaving them scrambling to find new buyers in a sour market where product already exceeds demand.

Until recently, ultrafiltered milk — a high-protein concentrated product typically used in cheese production — was exported tariff-free to Canada, unlike U.S.-produced whole milk. But under Canada’s new National Ingredients Strategy and what’s known as its “Class 7” milk pricing program, the cost of U.S.-produced ultrafiltered milk will dramatically increase. Dairy farmers in Canada have long complained about the policy, saying it puts the country’s dairy farmers at a competitive disadvantage.

Grassland alone exports about $100 million worth of ultrafiltered milk annually. The company said the new policy left them with no choice but to cancel contracts with some of its suppliers.

“When Canada implemented this new policy, it left us little to no response time,” Goedhart Westers, Grassland’s vice president of business development, told the Wisconsin State Journal. “Our next move is to find a new home for this milk, and that will be tough.”

Some Wisconsin dairy farmers say they could be forced out of business. Milk isn’t subsidized like some other agricultural commodities.

“One day you are looking for the future for your kids,” Waterloo dairy farmer Jennifer Sauer told the Milwaukee Journal Sentinel. “And the next day it’s all taken away from you, in a matter of minutes, when you open an envelope.”

Randolph dairy farmer Frank Behling, who has herd of 60 milking cows, had been shipping about 4,000 pounds of milk a day to Grassland, the nation’s largest independent producer of butter.

“I’ve never encountered anything like this before,” he told the Wisconsin State Journal. “Finding a new processor fast is my priority.”

With so much milk on the market, that will be an arduous task. Wisconsin’s approximately 400 other processors are at capacity with contractual obligations with dairy farmers not only in Wisconsin, but also from neighboring states.

“The problem right now is that we've seen milk production go up in other states, including South Dakota and Michigan, and (Wisconsin processors have) bought up some of that milk, so the system is full right now and has left us less flexibility than we had hoped for,” Wisconsin Secretary of Agriculture Ben Brancel told the Wisconsin State Journal.

Dairy Farmers of Canada, a trade group, said in a statement in 2016 that protections for the country’s dairy farmers were in place before the Class 7 pricing rule, but weren’t being enforced, resulting in approximately $231 million in annual revenue losses for Canadian dairy farmers.

National Milk Producers Federation President and CEO Jim Mulhern said the new Canada policy is protectionist and possibly a violation of trade agreements.

“While Mexico has been an incredibly valuable trading partner for dairy, Canada, by sharp contrast, has habitually worked to undermine dairy trade,” Mulhern said in a news release. “We continue to witness a backsliding by Canada in its already agreed-to market access for U.S. products. Canada’s new national ingredients strategy is expressly intended to both slash the importation of milk proteins from America, and create a new mechanism to dump milk proteins on the world market.

“Our dairy exports are worth more than $5 billion annually, generating 120,000 jobs in dairy farming, manufacturing and related sectors,” Mulhern said. “Any disruption in exports of dairy would have a devastating ripple effect on our farms and beyond, to workers in processing, transportation, and countless other sectors whose jobs are supported by these exports.”

U.S. dairy industry and political leaders have called on President Trump to intervene. Wisconsin has exported more than $385 million worth of dairy products to Canada in the past five years, the Wisconsin State Farmer reported.

“We believe the policy was designed to discourage U.S. exports of ultrafiltered milk and incentivize Canadians to purchase Canadian milk, which is a possible violation of World Trade obligations,” Wisconsin Gov. Scott Walker said.

In a statement Tuesday, Congressman Mike Gallagher, a Green Bay Republican, said Canada’s new policy “preventing the sale of our dairy products in their country is not consistent with our values nor our agreements.”

“Trade must be free but fair, and Canada must play by the rules and end their protectionist policies,” Gallagher said.

U.S. Sen. Tammy Baldwin, a Democrat from Madison, asked the U.S. Department of Agriculture to investigate whether Canada is unfairly blocking U.S. exports and if trade agreements have been violated.

“These reductions in export sales impact dairy manufacturers, and their supplying farms, in areas of our states that are unfortunately already struggling with depressed milk prices,” Baldwin wrote in a letter to the USDA.

(AP Photo/Dinesh Ramde)