608-286-1001     Email Us            

WCMA Notes: Canadian Policy Hits Wisconsin Dairy Farms

A Column Offered by John Umhoefer, WCMA Executive Director

A battle of diplomatic letters and press releases has turned into real human concern as Canada’s move to wall off ultrafiltered milk from the U.S. has caused Grassland Dairy to cease buying milk from dozens of Wisconsin dairy farms.

Grassland Dairy, one of the nation’s largest makers of butter and milk ingredients, told these dairy farmers in a letter this week that its “long term sale of milk products into the Canadian market” has been “eliminated” due to Canadian dairy regulations.  The loss to Grassland Dairy is dairy ingredient business that has used nearly one million pounds of fresh milk each day from Wisconsin farms.

The Greenwood, Wisconsin-based processor told these farms that Grassland will no longer be able to accept their milk, effective May 1.

This loss of market and a milk buyer for these Wisconsin farms is the result of a year-long battle which has seen U.S. dairy interests crying foul against protectionist policies in Canada.

In February 2017, coordinated by the Canadian Dairy Commission, Canadian provincial milk marketing boards began to roll-out a special “Class 7” milk price category for Canadian milk – a new low-price milk class for production of skim milk powder, milk protein concentrate and ultrafiltered milk.  This new class has the impact of halting imports of U.S. milk ingredients, such as the ultrafiltered milk from Grassland Dairy, by establishing a milk price so low that Canadian dairy ingredient companies can beat world market prices.

This new milk class is part of a “National Ingredient Strategy” Canadian dairy leaders from across the nation’s provinces have been debating for years.  Last spring, the Dairy Farmers of Ontario spurred the debate, initiating a milk ingredient class price that has become the template for the new national Class 7 milk price in Canada.

Dairy manufacturers in the U.S. built long-term sales of ultrafiltered milk into Canada as this liquid milk protein ingredient, often used in cheesemaking, can, under NAFTA regulations, enter Canada duty-free. In May 2016, the Canadian Milk Supply Management Committee followed Ontario’s lead, instituting a temporary modification to Canada’s low 4(m) milk price to include liquid skim milk – a stop-gap measure held in place until the national Class 7 milk price category was approved in February.

U.S. dairy leaders at National Milk Producers Federation, International Dairy Foods Association and more sent concerns to incoming President Donald Trump in January.  Referring to the change to 4(m) milk pricing last spring, they wrote, “Provincial policies for ingredient class milk pricing, adopted last April, are displacing U.S. exports into Canada and costing the U.S. thousands of jobs on farms, in processing plants and throughout the supply chain.”

The U.S. dairy leaders noted that a nationalized, world-market price for dairy ingredients from Canada not only shuts out dairy ingredients from Grassland Dairy and others, but “additional large volumes of skim milk powder will be forced onto the thinly traded global market resulting in a further depression of prices that will negatively impact the revenues of dairy farmers around the world.”

A diplomatic war of words has become a harsh reality for Grassland and some of its patron dairy farms.  As a consequence of this severe loss of business, the Wisconsin manufacturer wrote to farmers this week: “Grassland is now forced to cut back on our milk intake volumes on a very short notice… We appreciate your business over the last several years and regret that the Canadian government’s decision has made such a severe impact on Grassland’s and your business.”

Add to this protectionist policy a host of high tariffs on other U.S. dairy products entering Canada and you have “a one-way street with Canada expecting to enjoy the benefits of exporting its products of interest to our market while denying a sector accounting for hundreds of thousands of jobs in rural America reliable access to the Canadian market,” 17 major U.S. dairy processors wrote in a January 30 letter to U.S. Governors.

Canada’s protectionist move to block U.S. dairy ingredients with a special, low milk price that incents domestic production must be at the top of negotiations as the Trump Administration ponders a new North American Free Trade Agreement with our Neighbor to the North.