ST. ALBANS — While Canadian dairy farmer organizations expressed dismay at the U.S.-Mexico-Canada Agreement (USMCA) negotiated between Canada and the U.S. and announced Sunday night, in Vermont dairy cooperative leaders were pleased.
“Overall, we feel that the USMCA trade agreement is very positive,” said Kiersten Bourgeois of the St. Albans Cooperative Creamery. “Maintaining strong trade relationships with Canada and Mexico is important for our industry, cooperative and membership. We are hopeful that this will provide new opportunities for our dairy farmers — although we realize that it will take some time before the agreement is fully implemented.”
“I would give it a very positive rating,” said Bob Wellington, vice president of the Agri-Mark/Cabot co-operative, which runs a big cheese plant in Middlebury.
Canada, like the U.S., has been experiencing a high demand for butterfat, the cream used in products like Ben & Jerry’s ice cream.
When butterfat is separated from whole milk, skim is left behind. Just as in the U.S., Canadians have been turning that skim milk into milk powder.
Because the Canadian government subsidized the powder market, Canadian processors were able to undercut the U.S. price on the world market, Wellington explained, driving down the price of powder.
“They were selling subsidized, cheap powder on the world market,” said Wellington.
Because of the way the U.S. dairy market is structured, a low price for powder brings down the price for fluid milk (Class I) and milk used to make products such as ice cream (Class II).
USMCA establishes a new formula determining Canada’s price of skim milk powder, effectively ending Canadian powder subsidies.
The agreement may also open up some of the butterfat market in Canada to butterfat from the U.S.
While Mexico is already moving to implement the agreement, Wellington wasn’t certain the USMCA will ultimately meet with Parliamentary approval in Canada.
“I’m not sure Canada will acquiesce so easily,” he said. “They’re going to need some arm twisting, I think.”
While Canada has been very protective of its dairy market, Mexico is one of the largest markets for U.S. dairy. Its purchase of powder produced in the western U.S. has been critical for northeastern farmers and cooperatives, according to Wellington, because it kept western producers from shipping powder east and competing with powder from St. Albans and Agri-Mark.
USMCA still needs Congressional approval.