U.S. Dairy Farmers Say Billions of Sales at Risk After Trump Quit TPP

January 30, 2019 08:00 AM
 
The U.S. dairy industry stands to lose billions of dollars over the next two decades if trade agreements with Japan, one of the biggest buyers, don’t materialize.

(Bloomberg) -- The U.S. dairy industry stands to lose billions of dollars over the next two decades if trade agreements with Japan, one of the biggest buyers, don’t materialize, according to a U.S. Dairy Export Council report released Wednesday.

The Japanese are gobbling up more cheesy pizzas and proteins like whey, at the same time that its own dairy industry is seeing a decline. Exporters are aggressively competing to supply that growing demand, and the European Union has a leg up on the U.S. due to a trade agreement that went into affect at the end of last year. Other major exporting countries are set to benefit from the Trans-Pacific Partnership, a pact from which the U.S. withdrew.

The U.S. saw record dairy exports in 2018, said former Agriculture Secretary Tom Vilsack, who now heads the Dairy Export Council. But if nothing else changes, in a decade, half of the U.S.’ Japanese business will be wrested away by competitors. Two decades from now in 2038, American dairies will have lost $5.4 billion.

It’s not just Japan that U.S. dairy farmers are worried about. Trade spats with their No. 1 cheese customer, Mexico, and with China have led to lost sales. The pile of tariffs may begin to erode farmers’ support for the administration.

‘Very Patient’

“We have momentum that can be either significantly supercharged or we can have further depression on prices by limiting our capacity to export,” Vilsack said by telephone. “Dairy farmers have been very patient, but at some time they need to see some positive light at the end of the tunnel. They need to see some success.”

There are several reasons why Japanese people are eating more dairy. The economy is growing, so people are buying higher-end products. There’s an interest in easy-to-prepare foods, like pizza, and wellness is big, so sports associations are touting whey protein, Vilsack said. Meanwhile, Japanese dairy farmers are aging and younger farmers aren’t replacing them, so production is in decline.

Japan is the second biggest cheese importer, and if the U.S. could negotiate market access equal to its rivals, it could supply 24 percent of the the country’s cheese by 2027, up from 13 percent in 2017, according to the report.

American dairy farmers have been struggling with a years-long slide in milk prices. Many aren’t making it. In Wisconsin alone, more than 600 dairies left the industry last year.

“If competitors have a 10 to 20 percent advantage, it doesn’t make a difference how good your product is,” Vilsack said.

 

©2019 Bloomberg L.P.

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