Tariffs will cost U.S. dairy farmers $1.5B this year

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CAPITAL PRESS – CAROL RYAN DUMAS – A study by Informa Economics found retaliatory tariffs by China and Mexico will reduce U.S. dairy farmer revenue by $1.5 billion in 2018 and $3 billion in 2019 if they remain in place.

The Trump administration’s mitigation plan will cover only a fraction of the losses U.S. dairy farmers would encounter because of the trade war, a study shows.

While U.S. dairy producers appreciate USDA’s plan to purchase dairy products and increase funding to develop foreign markets in its tariff-mitigation strategy, they say the agency’s plan to distribute $127 million in direct payments to dairy producers falls far short of what’s needed.

Responding to USDA’s announcement on Monday of $6.1 billion in assistance across farm country, the National Milk Producers Federation said the direct payments to dairy farmers represent less than 10 percent of U.S. dairy losses due to retaliatory tariffs by China and Mexico.

In recent months China imposed an additional 25 percent tariff on U.S. dairy products and Mexico imposed new tariffs ranging from 20 to 25 percent on U.S. cheese in retaliation for the Trump administration’s imposition of tariffs on steel and aluminum from those countries.

Dairy farmer income will take a $1.5 billion hit this year if the tariffs remain in place through 2018, according to a new study by Informa Economics.

“The price drop resulting from these tariffs has not been gradual — it’s hurting U.S. dairy producers right now and will continue to do so,” Jim Mulhern, NMPF president and CEO, stated in response to USDA’s mitigation plan for dairy producers.

Since the retaliatory tariffs were announced in late May, milk futures prices have lost $1.2 billion through December, and the milk price forecast for the remainder of the year dropped $1.10 per hundredweight of milk, he said.

China and Mexico account for about 35 percent of total U.S. dairy exports, worth about $1.9 annually, and the retaliatory tariffs significantly impact the U.S. dairy sector.

Dairy exports could fall by $115 million in 2018 and $415 million in 2019. From 2018 through 2023, they could fall by about $2.7 billion, or 7 percent, the Informa Economics study found.

“The decreased exports to China and Mexico lead to an excess domestic supply, which puts downward pressure on prices. This decline in prices paired with slow adjustments to production lead to significant loss in farm-gate revenue,” the analysts said.

Lower prices are forecast to reduce dairy farmer revenue by about $1.5 billion in 2018 and $3 billion in 2019. If the tariffs are in place from 2018 through 2023, dairy farmers will take a $16.6 billion hit.

“That sizable decline in farmer incomes will compound the low prices and financial losses that dairies have already felt. If farmer income continues to suffer as projected, we will lose more farms,” Mulhern said.

NMPF is repeating its request that the administration provide relief to farmers by restoring normal trade conditions. It also wants the administration to pursue new market access opportunities through trade agreements that expand dairy exports.

“Those steps on trade would pay meaningful dividends to our farmers,” Mulhern said.

Posted by: Carol Ryan Dumas, Capital Press, Published on August 29, 2018 7:47AM

Picture: USDA/ARS