Canadian trade policies hurt WI processors, dairymen

Colleen Kottke
Grassland Dairy Products, Inc., announced April 1, that it notified several of its milk producers that they will no longer be accepting their milk effective May 1, due to the company's loss of a Canada customer that used nearly 1 million pounds of milk per day.

GREENWOOD - A ripple effect caused by newly implemented Canadian dairy trade policies is being felt by Wisconsin dairy processors and farmers alike.

Grassland Dairy Products Inc. sent out a letter on April 1, informing a group of its milk producers that it would no longer be accepting their milk effective May 1, 2017. While the company declined to confirm the number or scale of operations affected, citing that to do so could negatively impact their ability to find another market for their milk, local sources claim the number is around 75..

Maureen Lee, marketing and communication director for the firm said the company was notified by one of its Canadian buyers that due to the new dairy regulations, it would stop purchasing its products immediately.

Company officials said this results in a loss in sales of 1 million pounds of milk per day. The Greenwood-based company exports approximately $100 million of ultrafiltered milk to Canada each year.

After evaluating and adjusting as much milk as possible, Grassland was forced to decrease its milk intake volumes on such short notice due to to not being able to process milk on lines dedicated to Canadian customers.

Over the past decade, Grassland — the largest independent butter producer in the U.S. — has been investing in new equipment, new markets and new products to enable the long term growth of its business and patrons. Part of that business has been the long term sale of milk products into the Canadian market. Grassland annually exports $100 million of ultrafiltered milk to Canada each year. The company also produces powdered milk and dry ingredients.

Fighting the tide

Over the past year, dairy processors like Grassland have worked hand in hand with state and federal officials, Gov. Scott Walker and House Speaker Paul Ryan, national and state trade industry partners in an effort to keep the trade route to Canada open.

The U.S. dairy sector sent a letter to President Donald Trump, calling the new ingredients strategy that favors  using Canadian ingredients instead of those imported from the U.S. and other countries, an affront to Canada's trade obligations and a barrier to trade.

Gov. Walker was among those sending a missive to the President, saying Wisconsin's dairy producers have been disadvantaged by Canada’s recent change in their pricing policy.

"We believe the policy was designed to discourage U.S. exports of ultrafiltered milk and incentivizes Canadians to purchase Canadaian milk, which is a possible violation of World Trade obligations," said Gov. Walker, adding that Canada is the top international trade partner with the dairy state. Over the past five years, Wisconsin has exported over $358 million worth of dairy products to Canada..

U.S. Sen. Tammy Baldwin called upon top ag officials, urging them to investigate whether U.S. exports were being unfairly blocked and pressing them to ensure that trade agreements were being upheld.

Therese Beaulieu, assistant director of policy communications with Dairy Farmers of Canada, told media that the Canadian dairy industry maintains it is providing an alternative and competitive option for Canadian dairy processors to imported U.S. product.

Many farms are scrambling to find a new source for their milk following the news that their own milk plants are no longer able to accept their milk due to losses of trade partners.

National Milk Producers Federation President and CEO Jim Mulhern called Canada out on its dairy trade protectionism.

"While Mexico has been an incredibly valuable trading partner for dairy, Canada, by sharp contrast, has habitually worked to undermine dairy trade," he said in a news release.  "We continue to witness a backsliding by Canada in its already agreed-to market access for U.S. products. Canada’s new national ingredients strategy is expressly intended to both slash the importation of milk proteins from America, and create a new mechanism to dump milk proteins on the world market."

Mulhern also called on the Trump administration to address this type of protectionist, anti-competitive behavior.

"Our dairy exports are worth more than $5 billion annually, generating 120,000 jobs in dairy farming, manufacturing and related sectors," Mulhern said. "Any disruption in exports of dairy would have a devastating ripple effect on our farms and beyond, to workers in processing, transportation, and countless other sectors whose jobs are supported by these exports."

Trade must be free, fair

Rep. Mike Gallagher, R-Green Bay, issued a statement Tuesday night, saying Canada is breaking longstanding trade agreements and Wisconsin farmers are paying the price.

"The announcement that Grassland Dairy will be cutting its milk intake from our local farms because of new Canadian regulations preventing the sale of our dairy products in their country is not consistent with our values nor our agreements," Gallagher said. "Trade must be free but fair, and Canada must play by the rules and end their protectionist policies."

Gallagher said he has contacted the U.S. Trade Representative on this issue and will continue to push hard for fairness in the days ahead.

Goedhart Westers, vice president of business development at Grassland, told media that it could take 2-3 years to find sales with similar returns to replace the lost exports.

While the loss of business means Grassland will have to scale back its business, fallout from the Canadian government's decision has a far reaching impact on both the company's employees and the thousands of farms across the Midwest that depend on Grassland for a milk check each month.

"While this came on suddenly for both our company and farmers, we hope that farms will be able to transition during the next several weeks," company officials said. "This was a difficult decision and made with the utmost respect for the hard-working dairy farmers."