Dairy outlook hinges on USMCA, farm bill aid

House agriculture subcommittee evaluates state of dairy economy, including labor shortages, USMCA and margin support.

Jacqui Fatka, Policy editor

May 1, 2019

6 Min Read
Capitol Building Washington D C

Dairy producers across the country have faced a multiyear period of low milk prices and trade uncertainty, along with labor challenges that have remained unsolved for decades.

These problems are plaguing dairy producers of all sizes and in all regions of the country, and during a House agriculture livestock and foreign agriculture subcommittee hearing on Tuesday, legislators and industry representatives testified on the ongoing challenges facing the dairy industry, including its overall economic health, farm bill implementation, passage of the U.S.-Mexico-Canada Agreement (USMCA) and labor shortages.

The U.S. has lost nearly 20,000 licensed dairies over the last 10 years. Andrei Mikhalevsky, president and chief executive officer of California Dairies Inc., testified that the dairy industry continues to see consolidation, similar to other sectors of the economy. Between 2012 and 2017, the number of U.S. dairy farms contracted by 15%. Smaller farms with herds fewer than 100 cows declined by 29%, while farms with more than 2,500 cows grew by 24%. Over this period, the total U.S. dairy herd increased by 3%, or more than 280,000 head.

However, Scott Brown, agricultural extension economist at the University of Missouri, noted in his testimony that the current long-term outlooks provided by the university's Food & Agricultural Policy Research Institute and the U.S. Department of Agriculture estimate that the U.S. all-milk price will not exceed $18/cwt. on an annual basis until after 2022.

Related:Farm bill decision-making tool launched for dairy

“These forecasts suggest no quick relief from the current financial downturn but, rather, a slow recovery that occurs over the next three to four years, barring some external unanticipated shock that cuts milk supplies or creates new demand,” he said.

Nationwide, 16% of the U.S. milk supply goes to products for export, and those exports support hundreds of thousands of American jobs. In fact, California Dairies Inc. now produces 700 million lb. of milk powder per year, and exports of milk powder reach 60% of the co-op’s total production.

Mikhalevsky explained, “A key to improving both the short- and long-term outlook for U.S. dairy farmers is expanding the number of trade agreements that include increased dairy market access. This includes congressional approval of the USMCA, concluding Administrative negotiations with China and Japan and expanding further opportunities in the [European Union] and other South Pacific countries. The U.S. must pursue a robust trade agenda that expands opportunities as well as preserves market access.”

Related:U.S. loses over 2,700 licensed dairy farms in 2018

After the hearing, subcommittee ranking member David Rouzer (R., N.C.) and House Agriculture Committee ranking member Michael Conaway (R., Texas) said the dairy industry sent a clear message in the hearing about the need for approval of USMCA.

“No legislation, no program will benefit producers like improvements to market access, and we must do all we can to approve this trade agreement in short order,” Rouzer said.

“The dairy industry couldn’t be more clear: Pass USMCA. We know producers are struggling and the main hope for recovery lies with trade,” Conaway said. "While members continue repeating the economic significance of USMCA, what remains to be seen is whether my colleagues on the other side of the aisle will heed the ag industry’s calls. After the recent release of the long-awaited International Trade Commission report, speaker [of the House Nancy] Pelosi [D., Cal.] should make preparations to bring USMCA to a vote in the House as soon as possible. Our farmers can’t afford to wait."

Farm bill implementation

Brown testified that the Dairy Margin Coverage (DMC) program appears like it will provide a needed boost to the dairy safety net and builds on the new policy direction laid out in the 2014 farm bill’s Margin Protection Program. “The combination of lower premiums, added flexibility in production history covered and higher margin protection levels results in a much more effective safety program than the dairy industry has had for some time,” he said.

In his opening remarks, subcommittee chairman Jim Costa (D., Cal.) said he met Monday with USDA undersecretary Bill Northey, who said the agency is making progress on getting the new DMC implemented. USDA announced Tuesday an online decision-making tool that will let farmers estimate how DMC would work for them. Also, as soon as later this week, USDA will send out letters to dairy farmers who participated in the Margin Protection Program to let them know what premium refund or credit they will be able to receive.

“These updates are good news, but unfortunately, the expected start of Dairy Margin Coverage signup is still June 17. I appreciate the priority that USDA has put on implementing the dairy program, but I know time is of the essence for many dairy farmers who have endured years of low margins and can’t hold on much longer,” Costa said.

Labor shortages

New York dairy farmer Michael McMahon voiced the dairy industry’s unique workforce challenges. In order to maintain just 10 full-time workers, he found that filling nearly half of the crew with Latino workers resulted in less employee turnover.

“Not only did turnover nearly stop, but we found in the migrant workers a work ethic, animal handling skills and a level of respect for coworkers and owners alike that seem to be lost in the local workforce,” he said.

McMahon cited a 2017 Texas A&M University study that found that 79% of the U.S. milk supply is affected in some way by Hispanic workers. “Agriculture needs a way to secure an immigrant workforce that is steady, willing, able and legal,” he said. “We need to bring the multitude of indispensable agricultural workers who are already here out of the shadows without major disruption to the workforce. Let’s find out who they are, and if there are felons among them, then they cannot stay.”

In his opening remarks, Rouzer also highlighted how the dairy industry continues to struggle with the shortage of adequate labor and the broken immigration system.

“Dairy producers essentially have no reliable supply of workers, and the current agricultural guestworker program is only designed for seasonal labor needs rather than the year-round work required on dairies,” Rouzer said.

Last Congress, Rouzer was an original co-sponsor of H.R. 4092, the AG Act, which attempted to address the needs of farmers, ranchers and other agricultural businesses struggling to find adequate labor.

“While immigration can be a complicated issue, we should all be able to recognize the disservice congressional disfunction has done for all sectors of the agricultural industry in failing to pass meaningful reform of the guestworker program. As we speak, cows go un-milked, fruit gets left on trees and crops rot in the field because farmers cannot find a legal source of labor,” he said. “Meanwhile, we in Washington [D.C.] always wait for the results of the next election, and the problems continue to grow. We cannot continue to ignore this problem, and I urge all of us in Congress put aside all the politics related to it and for once on this issue start beginning to craft a commonsense solution that the President can sign. American agriculture needs it desperately and I think we all can agree on that.”

Costa also voiced support for a legislative solution for the agricultural labor force, saying, “A workable immigration solution for agriculture is long overdue, and I have been calling for one for years. We, in Congress, need to find ways to address challenges with both current and future work force needs, including access to a year-round visa program. A legislative fix is being worked on, and I took heart in [Agriculture] Secretary Sonny Perdue’s call for legislative reform to ensure access to a steady workforce. When a plan is finalized, I am hopeful the secretary will continue to be a champion for this cause.”

About the Author(s)

Jacqui Fatka

Policy editor, Farm Futures

Jacqui Fatka grew up on a diversified livestock and grain farm in southwest Iowa and graduated from Iowa State University with a bachelor’s degree in journalism and mass communications, with a minor in agriculture education, in 2003. She’s been writing for agricultural audiences ever since. In college, she interned with Wallaces Farmer and cultivated her love of ag policy during an internship with the Iowa Pork Producers Association, working in Sen. Chuck Grassley’s Capitol Hill press office. In 2003, she started full time for Farm Progress companies’ state and regional publications as the e-content editor, and became Farm Futures’ policy editor in 2004. A few years later, she began covering grain and biofuels markets for the weekly newspaper Feedstuffs. As the current policy editor for Farm Progress, she covers the ongoing developments in ag policy, trade, regulations and court rulings. Fatka also serves as the interim executive secretary-treasurer for the North American Agricultural Journalists. She lives on a small acreage in central Ohio with her husband and three children.

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