US dairy exports struggle amid a tariff hit environment – eDairyNews
Countries United States |31 julio, 2018

Business | US dairy exports struggle amid a tariff hit environment

The US dairy industry is struggling under the weight of tariff measures in Mexico and China, with the full industry implications only just starting to come to light.

Since the end of May 2018, tariff measures of 20 to 25 percent have been imposed on US cheeses going to Mexico, while tariffs of 25 percent have been put in place on US dairy products going to China, in addition to the 8-12 percent tariffs that China already imposed on dairy products from most suppliers around the world.

Speaking to FoodIngredientsFirst, Jaime Castaneda, Senior Vice President, Strategic Initiatives and Trade Policy Executive Director at the National Milk Producers Federation and US Dairy Export Council, accepts that no figures are out yet but admits that dairy farmers are already feeling the pinch. “Anecdotally, I can only tell you that some shipments and orders have been canceled or that companies are starting to say that they will cover some of the costs of the new tariffs, or they will lose the customer,” he notes.

“We certainly have been severely impacted by these tariffs and we have our two larger markets that have been affected. China is obviously a growing market and I’m sure that many of the companies are having to make concessions but that can only be done temporarily; so there is a point at which all of our exports will get hit,” says Castaneda.

Last week, the US Department of Agriculture (USDA) announced that it is preparing a US$12 billion economic assistance program designed to help dairy farmers and other agricultural producers suffering from the effects of retaliatory tariffs imposed by Mexico, China and other key trading partners. Recent NMPF economic estimates indicate that the tariffs will cost US dairy farmers US$1.8 billion just through the remainder of this year, based on the decline in future milk prices since the retaliatory tariffs were implemented.

NMPF has been engaged in ongoing discussions with USDA about how to reduce the economic harm caused by the trade disagreements between the US and other nations. The new plan will use USDA’s authority to help farmers through a combination of direct payments to farmers, product purchases for distribution to feeding programs, and additional export development assistance. Further details about the exact nature of the relief measures will be unveiled later in the summer, USDA officials have said.

Castaneda welcomes the move but stresses that it is too early to comment in detail until specific numbers are disclosed. “We will wait and see what it means for dairy farmers and traders. We don’t know at this stage how much is going be divided out for dairy farmers,” he notes.

“Farmers need the assistance because [this occurred] just when they started to see that the market was improving, as was clear from the futures on the Chicago Commodities Exchange for cheese and powder,” he points out.

“Before the tariffs were announced (last fall), they were looking good and people were confident that they were going to recover and start making money after a couple of years of that not being the case. Now all of that has vanished. I know many farms who called it quits. They were hanging in there because of the futures’ higher prices, but for some that stopped when the prices decreased significantly,” he claims.

The Mexico situation accounts for most of the lobbying efforts of US dairy to date as the impact is so vast and was the first retaliation to strike the industry. Cheese accounts for approximately US$400 million of the US$1.2 billion in dairy sales to the country as a whole. Since a Free Trade agreement is in place with the country, no tariffs existed before the recent spat.

“We have focused a lot of our lobbying efforts on Mexico to finish the NAFTA negotiations. That is critical. If you are paying 25 percent on exporting to Mexico, it is hurting everybody in the US. Even for those who are not selling cheese, it is critical to the pricing for farmers. We are looking to conclude the negotiations and make sure that we open markets in Canada and save what we have with Mexico,” he says.

“China is probably going to take a little longer. So we will see what will happen, but we will continue to ask the administration to make a deal with the Chinese and ask the Chinese themselves to remove us from their retaliatory list. So we have two angles of asking for change,” Castaneda adds.

The dairy implications are huge for a relatively new large-scale exporter. “The US went from a country that exported very little 20 years ago to being one of the most significant sellers in the world. If you look at it by country, rather than by region, [i.e., the EU bloc], we are the largest exporter of several products including Skim milk powder and depending on the year cheese too. This is affecting not only producers who have seen their prices go down even further but also exporters, traders and manufacturers who have worked extremely hard to gain markets in China and Mexico,” he notes.

But can the US domestic market make up for the shortfall in exports by taking up some of the potential overcapacity? Castaneda admits that there will be a danger of cutting prices and flooding the US dairy market.

“Certainly if there is no other market we will have to go somewhere. There are a number of different avenues. I don’t know where they are going to go. Most people are trying to maintain the relationships that they have developed,” he says. “That may not happen all the time, but it is what people are trying. In some cases, there may be movement from some of the orders that have been canceled to try to find a home somewhere else. So normally when you do that in a short period of time you have to do it as a discount, which is not ideal,” Castaneda adds.

Either way, with tensions having eased between President Trump and the EU on potential tariffs of European products, it does not look like US imports of dairy products from the bloc will go down as a result.

Innovation with US dairy ingredients is not slowing down amid these unpredictable times. At the IFT Food Expo 2018, USDEC presented two prototypes that bring dairy protein benefits to life in on-the-go applications: Lemon Ginger Ice Pops with Whey Protein and a Savory Asian Granola with Whey Permeate/Protein Crisps.

In a video interview with FoodIngredientsFirst, Vikki Nicholson at USDEC explains: “We see opportunities in a multitude of applications. Beverages are still hot, snacking is a great opportunity. We also see unique opportunities in bakery and desserts for dairy proteins. For example, we are presenting an Asian inspired high protein granola, with whey protein crisps. Also, it has the flavor profiles of sriracha and soy in order to help give a nice snack, especially for adults, which allows you to engage in having a nice handheld snack that is not heavy. Granola gives a different spin to really show how you can expand on dairy ingredients within the snacking category.”

By:

Source: FoodIngredientsFirst

Link: http://www.foodingredientsfirst.com/news/us-dairy-exports-struggle-amid-a-tariff-hit-environment.html

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