Paulson, executive secretary of the Virginia State Dairymen’s Association, said his members have been suffering through the downturn in dairy that’s been troubling the industry nationwide for some time.
“It’s been a tough time these last two years, a pretty difficult time in the dairy industry,” Paulson said in a recent phone interview. “The issue is prices. That’s making it incredibly difficult for dairy farmers.”
The problem seems small, a modest oversupply of milk. But Paulson said that even a small amount of oversupply can depress prices greatly.
And there’s no way dairy farmers can dam that flow of milk.
“Corn, other things, you can store for a while. Milk is what we call a just-in-time product,” he said. “And you can’t turn the cows off. You don’t make the price, you take whatever price they give you.”
The bright spot, he said, is that cheese and butter consumption are at 40-year highs, so that’s siphoning off some of the raw milk oversupply. Researchers are also learning that milk fat has benefits and isn’t harmful, as research from the 1970s indicated.
But the fickle nature of export markets can create problems for the industry. When America’s dollar is strong, as it’s been for some time, buying from other countries often is cheaper.
“There’s things we can’t control, like exports, depending on how the markets are and what the markets are like in Europe and whether there’s enough rain in New Zealand. That affects us and changes the landscape,” he said. “The past year I think dairymen have tried to become more efficient with their herd. That’s not a Virginia thing; it seems to be nationwide.”
President Donald Trump has represented a mixed bag, he said. The president referenced the dairy industry a couple of months ago after Canada changed its rules related to ultrafiltered milk, adding tariffs that provided an incentive for Canadian dairy interests to produce milk. That cost New York and Wisconsin dairymen an outlet for their product and further squeezed the national market.
The affects of this change were recognized by Trump, and efforts are being made to negotiate changes that result in more U.S. milk crossing the Northern border.
Trump’s position on the North American Free Trade Agreement is one dairy industry leaders are watching closely.
Trump has said that he planned to pull out of the pact with Canada and Mexico, in effect since 1994, but was reportedly talked out of it by Sonny Perdue, the nationa’s secretary of agriculture. Instead, the administration’s plan is to renegotiate the deal.
NAFTA, Paulson said, is “incredibly important to the dairy industry. About one-sixth of the milk produced in the United States is exported, with Mexico (25 percent) and Canada (15 percent) major buyers.
“They’re good partners,” he said. “We’d like to see (trade with them) continue.
“Canada has a lot of quotas in place. That makes it tough for us to get in there. I think the administration realizes that and hopefully will promote and protect our interests.”
Trump did pull the U.S. out of the Trans-Pacific Partnership, a trade agreement among 12 Pacific Rim countries. Paulson said that deal wasn’t as crucial for American dairymen because less milk is exported to those nations and the deal included New Zealand, a major competitor.
“It would have been a net positive for us, but not nearly as much as other industries,” he said. “New Zealand would have been able to flood our market with their product. That would have offset some of the gains.”
It’s not just policy overseas that’s causing unease in the industry. Trump’s proposed budget also pulls spending from agriculture and conservation programs favored by dairy leaders.
Paulson said the dairy industry supports ongoing efforts to improve the quality of the Chesapeake Bay and opposes Trump’s plan to eliminate federal funding for that effort.
“I think the only saving grace is that it’s the president’s budget, and those never really are what things end up to be in the end,” Paulson said. “I think what we need to do is tell the story of what these programs do, how they help producers. Some of that gets lost in the overall scheme of things, but there are some positive programs that need to be protected.”
The feds aren’t alone in cutting conservation funding.
A budget shortfall led Virginia to hack money for best management practices cost-share programs to $7.6 million in fiscal year 2018, down from $13.6 million in fiscal year 2017, an outcome Paulson said was predictable given the state’s financial situation. Though many farmers install BMPs without governmental assistance, the cut is expected to slow their implementation.
“I think everybody realized that we need to live within our means, and if the money is not there, the money is not there,” he said. “Hopefully, (the funding rollback is) a temporary issue.”
On the plus side for dairy farmers, Trump has advocated eliminating the estate tax. Paulson said many dairymen have large amounts of money tied up in land, buildings, equipment and livestock, and some families have been forced to liquidate assets to pay inheritance taxes.
“I’ve heard of cases in Virginia where it’s caused some real heartache when (a farm) gets passed down from one generation to the next, and a lot of (dairy farmers’) wealth is in land, equipment and infrastructure,” he said. “There’s got to be some kind of exemptions, or the elimination of it.”
Sen. Tammy Baldwin, R-Wis., has sponsored the Dairy Pride Act, which Paulson said seeks to prevent nondairy products from being marketed as “milk,” such as almond milk or soy milk.
“They’re using the milk name and benefiting from the implied goodness that is milk,” he said. “The act would direct the USDA to enforce the rules.
“This is something the industry has been mindful of for a long time. We’re just starting to see some action. The European Union has said they can call it almond juice or almond beverage, but they can’t call it milk. We have no problem competing with them, but they can’t take our name when it isn’t milk,” he said.
Vic Bradshaw is a freelance writer in Virginia’s Shenandoah Valley. He can be reached at vic.writes@yahoo.com.
Source: Lancaster Farming
Link: http://www.lancasterfarming.com/farming/dairy/dairy-leader-reflects-on-challenges-opportunities/article_53b5ace9-938b-51d8-b6a9-e57ad3bee163.html