Here & Now

UW Agriculture Economist Explains Dairy Market Crisis

Donald Trump:

We're also going to stand up for our dairy farmers in Wisconsin.

[applause]

And I've been reading about it. I’ve been talking about it for a long time, and that demands really immediately fair trade with all of our trading partners and that includes Canada.

[applause]

Because in Canada, some very unfair things have happened to our dairy farmers and others. And we’re going to start working on that with Ron and with Scott and with Paul and with all of your representatives. What’s happened to you is very, very unfair. It’s another typical one-sided deal against the United States. And it’s not going to be happening for long. So Scott, you and Ron and myself and Paul and everybody else, we’re going to get together and we’re going to call Canada and we’re going to say, “What happened?” And they might give us an answer but we’re going to get the solution, not just the answer, okay? Cause we know what the solution is, all right?

[applause]

Frederica Freyberg:

President Donald Trump wades in trying to fix a problem that could put some Wisconsin dairy farmers out of business. The president made these comments during his trip to Kenosha this week after scores of farmers learned earlier this month that their processor would no longer buy their milk citing Canadian regulations preventing its export. The president brought welcome attention to the issue but how might he fair? We turn to Mark Stephenson with the UW-Madison Program on Dairy Marketing and Policy. Thanks for being here.

Mark Stephenson:

You’re very welcome.

Frederica Freyberg:

Let’s unpack some of what President Trump had to say about this situation. He made it sound like he would call Canada and get a quick solution. At least he would start working on this immediately. Is there an immediate or quick solution?

Mark Stephenson:

I presume there could be, but I doubt that that will be the case. Canada has a very highly protectionist dairy industry and they’ve never moved quickly on things in the past. And I think that foot dragging would be what is likely to be the case this time.

Frederica Freyberg:

Meanwhile for the farmers like those whom we visited last week out of Waterloo, they tell us this week that they think it’s great that the president has kind of gotten involved. But that they need this short-term solution because as of May 1, they lose their processor, their market for their milk. So then they say at least they’d be looking for a long-term solution. But for farmers like Jennifer and Shane Sauer that we visited with who have not yet found a processor to sell to, what can they do?

Mark Stephenson:

Well there’s a lot that’s being done on their behalf right now trying to find a processing home for the milk. One of the problems we have at this point in time is just that we have a tremendous amount of milk on the marketplace and there really doesn’t appear to be any dairy processor who is anxious to pick up more milk. So it would be almost altruistic for a dairy processor to pick up a few of these farms to help relieve some of that situation. It’s short-term, I think, an issue but farms cannot go without selling milk for a very long period of time before, you know, they’ve lost all the profit they would have for the year.

Frederica Freyberg:

For someone like yourself who knows so much about this, what is that like?

Mark Stephenson:

Oh, it’s a tremendous problem and an issue. As I said I think that farms are experiencing a great deal of stress right now because there is not an obvious answer to this. We have had a few of the farms picked up by a couple of plants and we hope that more will be. But the truth of the matter is we still have more than half of the milk that was originally lost their home that has not found a new home yet.

Frederica Freyberg:

What would be a long-term solution?

Mark Stephenson:

Long-term solution will find new markets for dairy products. It could be for exports overseas. Our domestic market has been robust and we can pick up a few of these items in the marketplace as well. But, you know, those are things that are going to take months and we’ve got maybe a few weeks that these farmers could go.

Frederica Freyberg:

Now President Trump described what Canada was doing as some very unfair things. Congressional leaders here in Wisconsin have also declared that Canada is practicing unfair trade practices. Is that true?

Mark Stephenson:

I think they can be viewed as being unfair. They’ve created a new class of milk or dairy product that is going to be priced at so-called competitive or world prices, which are much lower than their internal or domestic prices are. And this is clearly done as a strategy to help avoid, you know, the cross-border movement of these dairy products from the U.S. into Canada.

Frederica Freyberg:

And so as the U.S. has done in the past, could we sue Canada over this?

Mark Stephenson:

We can. In fact, our — the likelihood is that we will bring a lawsuit against the Canada through the World Trade Organization, the appellate court there but that’s years. That had happened back in 1990s and it took probably four years before that was settled.

Frederica Freyberg:

What role does the over-production of milk in the U.S. or globally play in all of this?

Mark Stephenson:

It certainly plays a role and locally right here at home, it plays a substantial role. We’ve had farms that have been dropped from a processing home in the past and usually that’s no headline at all because there’s some other processor waiting to pick that farm up. The difference right now is that in my 30 years of working in the dairy industry I've never seen this kind of thing happen when you can’t even cajole people into thinking about a little bit longer term use of this milk and dairy product for their plants.

Frederica Freyberg:

Canada says the U.S. itself is to blame because it doesn’t manage its dairy production. What about that?

Mark Stephenson:

There are very few countries that do manage their dairy production. Canada is certainly one of those. They have a quota-based system that allows each dairy farmer the privilege of selling a certain amount of kilograms of butterfat into the marketplace every day. We don’t have that. Most countries with substantial dairy industry doesn’t have anything like that.

Frederica Freyberg:

So this is kind of what happens when the market comes to bear?

Mark Stephenson:

The market comes to bear. We’ve had very good season for producing milk. The cows are doing very well. Farmers are responding to coming off of two years of low milk prices with now moderate milk prices and they are producing more milk.

Frederica Freyberg:

All right. Mark Stephenson, thanks very much.

Mark Stephenson:

You're welcome.