June 7, 2018

NAFTA renegotiation should not entail bad outcome for US dairy: Land O'Lakes COO

The US dairy industry welcomes the Trump administration's move to renegotiate the NAFTA agreement - but, this development should not lead to a trade war with Mexico, according to  Beth Ford, the chief operating officer of Land O'Lakes Businesses.

In her opinion piece for The Hill, Ford points out that 97% of US dairy farms are family-owned, and dairy farmers are "the backbone of a substantial contributor to the US economy."

"America's dairy products industry creates an economic ripple effect that is responsible for US$24.9 billion in state and local business tax revenues and US$39.5 billion in federal business tax revenues. It supports nearly three million workers, generates more than US$39 billion in direct wages, and has an overall economic impact of more than US$628 billion," she writes.

However, the drastic tendencies of US President Donald Trump's "America First" stance had led to some undesirable developments; for instance, Mexico, the US dairy sector's biggest foreign customer, could launch retaliatory tariffs on cheese.

 "If these are enacted, the impacts could be detrimental to the industry. Like much of American agriculture, it is highly dependent on exports, especially with our NAFTA partners," Ford warns.

She describes American dairy farmers as being impacted by feed costs and other farm inputs, as well as "stubbornly low global milk prices." Therefore, the US dairy trade with Mexico is crucial as the latter acquires 25% of US dairy exports.

"One-seventh of what dairy farmers produce - or as they like to put it, one day out of every week of work - is exported, an amount that was worth US$5.5 billion last year. Those exports in turn support many people in addition to farmers. They create an estimated 100,000 jobs in dairy farming and processing, retail, transportation, and more," Ford adds.

Nevertheless, she believes the recent NAFTA negotiations would "provide a tremendous opportunity for the US dairy industry to gain new market access for US dairy products into Canada while protecting and building on the market access we have into Mexico."

US dairy exports, Ford noted, is especially important to benefit the economic growth of rural communities in the US.

"For every dollar of sales associated with dairy exports to Mexico, an additional US$2.50 is supported elsewhere in the United States economy, adding up to US$23.3 billion over five years," she says.

"It is critical that our administration achieves the highest quality deal they can on NAFTA - even if it takes a little longer than originally hoped."

Ford, in conclusion, lauds the resilience of US dairy farmers for knowing "how to play the long game."

"Despite changes in consumer preferences, increasing pressure from Mother Nature, and less than ideal market circumstances, dairy farmers don't give up," she says.

"This National Dairy Month, please don't give up on them."