The dairy outlook is more rosy and positive than New Zealand producers may have been feeling about it, says US Rabobank global dairy strategist Mary Ledman.
The importance of international trade to the US dairy economy is almost impossible to overstate.
So is the current uncertainty surrounding trade relationships.
Chinese and US negotiators are grappling with how to reset the world’s biggest bilateral trading relationship, with hopes of an agreement later this month.
The US-Mexico-Canada Agreement, the signature US trade achievement of 2018, has yet to be ratified by Congress. And the Section 232 tariffs on aluminum and steel that have invited retaliation against dairy from crucial trade partners China, Mexico and Canada remain in place.
Each discussion is crucial for dairy, which is ever-more-dependent on global markets to support prices as US production rises to meet global demand growth: for the past 15 years 50% of US production growth has gone to exports, and the percentage of the US milk supply sent abroad has steadily increased.
The outcome of each debate, in turn, will shape the direction of other negotiations important to the sector, including potential bilateral talks with Japan, the European Union and post-Brexit UK, and potential negotiations with the Philippines and Vietnam.
But as discussions grow more complex and headlines swing wildly from hopeful to gloomy and back again, it becomes only more important to be mindful of two things: first, that in our own advocacy as NMPF and the work we support with the US Dairy Export Council, we advance dairy’s interests at all times; second, regarding improving market access, dairy is in it for the long haul and we will settle for nothing less than the best possible trade terms for our producers.
To ensure prosperous dairy trade over the long term, an overarching need is that agriculture, in the current environment, be excluded from trade disputes that may or may not be justified. Because agriculture is a rare part of the US economy with a trade surplus, it’s a tempting target for trade partners looking to retaliate against actions against them – and that’s a recipe to make US farmers collateral damage in any trade war.
While trade agreements that may be past their prime can be legitimately ripe for renegotiation, we then need to strengthen and renew those ties, not limit them in ways that harm US dairy producers.
Meanwhile, competitors continue to conclude new agreements.
The Trans-Pacific Partnership sailed without the US last year, as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership completed its journey. And the EU jumps from accord to accord, most recently with Japan.
Finally, we need to ensure that negotiators focus on key sectors important to agriculture and not accept any drive for freer trade that puts farmers in the back seat.
For example, NMPF supports breaking down trade barriers as a matter of principle, but we can’t simply allow the EU to get away with preserving a status quo that unfairly protects its farmers and hampers US agricultural competitiveness. Especially that applies to irritants such as the EU’s use of geographical indications to pursue protectionist policies, when it insists on excluding agriculture from any US trade talks. We want trade deals – but not simply for the sake of having them. We will always represent our cooperatives’ interests — and be patient.
Our patient, consistent and effective work in these areas persists. Such patience is vital as trade developments twist, turn and frustrate. The fact is, dairy needs greater market access. Increased dairy shipments abroad are the central reason behind the USDA’s forecast of a mild milk-price recovery as published in its Agriculture Outlook in February. Greater access would provide an even greater recovery, one that’s been hampered so long as tariffs continue to bite.
When dairy’s prosperity returns, exports will be a big reason behind it. But easing the path for exports must be done right. That’s what we will stand for, and always will, no matter how much the momentary shifts in trade winds may try to blow us off that path.
• Jim Mulhern is chief executive of National Milk Producers Federation in the US.