Secretary Perdue Says Canada Must Give Up Class 7, But Will They?

September 10, 2018 11:55 AM
To finish the deal, Agriculture Secretary Sonny Perdue told CSPAN over the weekend that Canada’s Class 7 dairy policy must go.

The latest deadline the Trump Administration has given Canada to concede on tough issues and complete renegotiations of the North American Free Trade Agreement came and went again on Friday. To finish the deal, Agriculture Secretary Sonny Perdue told CSPAN over the weekend that Canada’s Class 7 dairy policy must go.

“Our farmers don’t have access to the Canadian markets the way that they have access to us. Class 7 has to go. It can’t be renamed something or called something else,” he said. 

According to Perdue, Class 7 gives Canada an unfair advantage in global sales of milk solids. He and many U.S. dairy groups say the pricing structure allows our neighbors to the north to “dump” their excess milk on the world market. In fact, Mike North of Commodity Risk Management said, that’s the reason we’re in this trade pickle with Canada anyway.

“You know, we talked about this trade war, and implied in that is everyone saying, ‘Oh, well, we shot the first round.’ With Canada, that's not true,” he told AgriTalk host Chip Flory last week. “You go back to last spring. They put together that Class 7 pricing mechanism and then for us in Wisconsin, or others in New York, that ultra-filtered milk that we were selling them as a stopgap to meet some of their needs got shut down immediately, and a lot of farmers lost their contracts with plants because there wasn't a home for it and it created all sorts of issues, but that particular pricing mechanism has allowed them to dump skim milk powder into the world market cheaper than anyone.”

Getting rid of Class 7 as part of NAFTA negotiations would be an easy give, according to North. 

“They should be able to give that up,” he said. “They've had some time to work through it. They've had some chances to dump their powder and they have. Their skimmed milk powder exports are up 200%. So, you know there is opportunities here for them to make some concessions for sure.” 

Last week Larry Kudlow, the U.S. National Economic Council Director, said on multiple occasions that the issue keeping NAFTA negotiations from reaching the finish line is dairy policy. While they might be willing to kill Class 7, dismantling the Canadian supply management system as some farm groups have implied is necessary will likely never happen. 

“Are they going to get rid of their supply management and more importantly their quota system? No, that will not happen,” North explained. “Quota right now is trading at about $30,000 per cow. The math on that across all their cow numbers… the government doesn't have the appetite to write that big of a check. They can’t get rid of it.”

Any NAFTA talks will be on hold until U.S. Trade Representative Robert Lighthizer returns from a trip to the E.U. later this week.

Back to news


Spell Check

Small town, KS
9/10/2018 07:36 PM

  To James Coots. You are correct in so many ways. I agree with you. Most of the time we are our own worse enemy.

prattsburgh, NY
9/11/2018 05:14 AM

  as a producer why is it so hard to admit that Canada just flat out beat us. unlike us they implemented a system to work and be profitable for their producers while we sit sucking our thumbs and crying about how unfair it is. come on guys get on down to the welfare office and get your checks the Donald will take care of us

James Coots
Allensville, KY
9/10/2018 06:11 PM

  I sold my dairy off at the end of 2014 when the price off milk was fixing to lose 2 dollars the start of the next year and has been going down since then a loss of 14$. When the price of milk goes down your inputs don't so what do most dairies do to make up the difference,milk more cows to up milk lbs per month to try to steady money going out. This only mask the problem! I am about to make a lot dairymen mad. When there was a quota system the supply was some what controlled and the price wasn't great but my father made money. When the quota system was ended milk cow numbers exploded and we could produce all the milk we wanted to at class 1 price but milk consumption was at a high level. This was great for dairy farmers and we saw great prices for our milk for a while then consumption started to drop and milk companies started to pool milk just to move milk from areas with over supply to areas that were below demand.This raised prices in some areas an lowered it in others and this problem still exist. Yes I am in the southeast region and the pooling of milk hurt our price we we're paid. So now we have fewer an fewer dairies in the southeast region an now the dairies in the dairy states are now feeling the results of mass cow numbers an over production of milk . Now deans is closing several milk bottling across the USA and dairies are losing a place to sell milk. So yes some of Canada's milk policies hurt American dairies with their duties but if we had kept our own quota system this mass over production would have not occurred as bad as it is. I know that not everyone agrees with my opinion but I also know that a quota system is not a cure all.