OMAHA (DTN) -- The next presidential administration needs to put more emphasis on competing with Europe for bilateral trade deals that will boost dairy sales as one way to bring back profitability for dairy farmers.
Competing with Europe, and selling more into Europe, were major themes for dairy and Wisconsin farm leaders Tuesday in a virtual event for the group Farmers for Free Trade.
Farmers for Free Trade is holding virtual town-hall meetings with leaders from different sectors and states voicing what they want to see for a trade agenda in the next administration, whether that's under President Donald Trump or Democratic nominee Joe Biden. Farmers for Free Trade will provide an analysis and recommendations after the election.
EXPORTS REMAIN GROWTH MARKET
In Tuesday's talk, dairy leaders stressed that exports now make up 15% to 17% of annual production, or roughly one day's national production out of every week. Exports remain the growth market for U.S. dairy producers.
"America's dairy future growth is really tied to the success of global markets," said Jim Mulhern, president and CEO of the National Milk Producers Federation.
Exports of all dairy products dipped more than 10% in value in 2016, the last year of the Obama administration. Since then, dairy exports rose by $1.23 billion, or nearly 21% in value from 2017-19, according to the USDA Foreign Agricultural Service. For the first six months of 2020, dairy exports were at $3.3 billion, or just over $400 million higher than the first half of 2019.
The Trump administration negotiated increased dairy access in the U.S.-Mexico-Canada Agreement that is expected to raise dairy sales to Canada as much as $227 million annually. Already at least 25 senators and 100 congressmen have sent separate bipartisan letters to U.S. Trade Representative Robert Lighthizer asking the Trump administration to start holding Canada and Mexico accountable for the trade commitments on dairy.
Despite the USMCA win, the U.S. is still lagging the European Union and New Zealand in cutting trade deals that expand dairy access, Mulhern said. "From a trade policy standpoint, we are actually falling behind our competitors, particularly the European Union, and the United States cannot let these opportunities with key ag-importing markets slip away," Mulhern said.
The dairy industry needs more progress to expand access and reduce barriers in Asia and the Middle East, Mulhern said.
Jeff Schwager, president of Sartori Cheese in Wisconsin since 2009, said one of the biggest challenges is selling into Europe itself. Some of the constraints on U.S. dairy products include geographical indicators for cheese that Europe uses to limit dairy imports and restrain competition in countries where the EU has a trade deal.
Schwager said, "The EU is way ahead of us in getting bilateral agreements in place" that include geographic indicators restricting sales of cheeses such as "asiago" or "feta" as descriptors.
"Not only are they keeping us locked out of their home market, they are attempting to lock us out of other markets around the world," Schwager said.
The EU accounted for just $143.8 million in U.S. export sales in 2018, or 2.6% of all exports. Sales to the EU dropped in 2019 to $116.2 million and are down for the first half of 2020 as well.
The EU also has high duties on U.S. cheese, while China has retaliatory tariffs on U.S. cheese products.
TARIFFS MAKE IT TOUGHER
The tariff situation with the Trump administration is making it harder to sell dairy products, Schwager said.
"New customers and existing customers are afraid to work on new business with us, as they don't know where the tariffs will be going forward," Schwager said.
The tariffs have slowed down exports to China -- even though dairy sales so far in 2020 are up 17% for the first half of 2020, driven by higher whey sales for feed supplements for China's rebuilding swine industry.
ISSUES WITH GEOGRAPHICAL INDICATORS
The issues with geographical indicators (GIs) came up repeatedly by speakers as a difficult problem for U.S. exporters trying to compete with Europe.
The EU is trying to "claw back" names of common cheeses, "which is really hampering our ability to compete and our ability to trade," said Chad Vincent, CEO of Dairy Farmers of Wisconsin, the checkoff for Wisconsin dairy.
IMPACT OF COVID-19
Randy Romanski, Wisconsin's secretary (designee) for the Department of Agriculture, said managing and eliminating COVID-19 are also becoming more important for export. Companies and agribusiness leaders can't travel to meet customers or build relationships overseas and are left with virtual discussions. At the moment, export trips with USDA remain suspended for the next 90 days.
"So, what we've found is that COVID-19 hampers new business development. Companies can maintain existing relationships over the phone, but it's extremely important for us to make new connections ... It's just not the same. We can't do this until we have the ability to travel safely to other countries," Romanski said. "So, managing COVID-19 is an important aspect to what we hope to do to get back out into the world."
WHERE'S THE MONEY?
Joe Bragger, president of the Wisconsin Farm Bureau, asked the dairy leaders when farmers would see the benefits of trade in their milk checks. Despite rising exports, that hasn't happened.
"We actually have the opposite -- record dairy farm bankruptcies and loss of dairy farms," Bragger said.
While he recognized the pain farmers have been facing over the past five years, Vincent highlighted again that one out of every seven days of milk volume goes abroad. Financially, dairy farmers would be in greater trouble without those exports.
"And I think it's not an either or. It's exports are an important piece of the puzzle, and I think that we have to continue to build demand," Vincent said. "The more access that we get, the better, stronger we get internationally, the more competitive we can be. And I think that, you know, our hope is that that is what would raise the price and raise the standard of living for us all."
TRUMP AND TRADE POLICY
Looking at what to expect from a second Trump term, in terms of trade policy, Mulhern said there is no reason to think Trump would change his current approach with tariffs.
"The president has been very clear, he sees the approach he's taking -- this hardline approach -- as one that in his mind works, and I think it's likely to continue. We have no reason to expect anything different. And I do think it's a mixed bag. Some of it has gotten the attention of countries around the world, but ultimately how effective is it going to be, and that's an open question."
BIDEN AND TRADE POLICY
On a Biden presidency, Mulhern said it's unknown exactly what trade policy would look like. "I don't think we really know, other than you served as vice president, the last administration and has a long history on Capitol Hill. You're probably more in the mainstream of a trade policy approach, but what that means in practical application is really hard to say," Mulhern said. "There are so many factors in the mix that I think none of us can give us a real strong view of what a trade policy would look like in a Biden administration, other than [there are] likely to be attempts to do trade agreements like was done in the past."
Chris Clayton can be reached at Chris.Clayton@dtn.com
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