Closing US-Mexico border would send shockwave through dairy economy

Last year, the U.S. dairy industry exported over $1.4 billion in goods across the Mexican border to its best export customer. The potential disruption of that supply line could deliver a devastating blow to not only the dairy industry, but U.S. agriculture as a whole.

President Donald Trump threatened to "seal" the U.S.-Mexico border to combat illegal immigration, a move that would disrupt the flow of $26 billion of food imports in the U.S. from Mexico, threatening U.S. consumers with potential shortages and higher prices for goods, and cutting off the lifeblood of the dairy industry's largest single customer for exports.

Farmers are already struggling against mounting financial losses from a downturn in the dairy industry driven by overproduction and failing export markets over the past four years.

"The dairy industry is suffering through one of its worst economic periods ever," said Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF). "Low milk prices are already creating hardships for farmers, and further supply disruptions would only prolong producer difficulties."

This is especially bad news for an industry that is losing more than seven farms a day across the U.S. As of Feb. 1, Wisconsin had 8,046 dairy herds, down 40 percent from 10 years earlier, according to the USDA records. 

Undo progress

Closing the southern border between the two countries could undo gains in the export market that took years to forge, said Tom Vilsack, president and CEO of the U.S. Dairy Export Council.

"...it would be a gut punch that could set the industry back by a decade or two," Vilsack said. "There is not a ready alternative market for the millions of gallons of milk that are converted into the thousands of tons of dairy ingredients and cheese that we ship to Mexico." 

Vilsack, former U.S. Secretary of Agriculture, said it would be "difficult to fathom the impact closing the border would have on U.S. agriculture, and both the American and Mexican food industries". An average of 15,000 trucks and $1.7 billion in goods cross the border each day.

Dairy Farmers of America President and Chief Executive Officer Rick Smith sent a letter to members of the House and Senate, urging them to take "immediate action to ensure the border remains open for U.S. dairy exports."

"The dairy industry has worked together closely for more than two decades to grow and strengthen the market for U.S. dairy products in Mexico," Smith said. "In the volatile dairy industry, strong dairy export markets are crucial for our farmers who have suffered years of financial stress on the farm."

U.S. pork producers have struggled along with their counterparts in the dairy industry and also rely on the flow of exports to Mexico. David Herring, president of the National Pork Producers Council (NPPC) pleaded with the Trump administration to carefully consider the fallout from cutting off trade between the U.S. and Mexico.

"A cloud of uncertainty and restricted access to our most important export markets have strained U.S. pork producers and their families for more than a year," said Herring, pointing out that the value of pork exports to Mexico and China are down 28 percent and 32 percent, respectively, this year. "We are at a breaking point and can't afford a total loss of the Mexican market, one that accounted for more than 20 percent of total U.S. pork exports last year."

Economic debacle

Trump last week said he'd seal the border in the coming days if Mexico did not immediately halt all illegal immigration into the United States. On Tuesday, the president walked back his threat to close the border during a joint appearance with NATO Secretary-General Jens Stoltenberg.

Trump told reporters that he was pleased with steps that Mexico has taken in recent days to stem the flow of illegal immigrants from Central America traveling through Mexico seeking asylum in the U.S. and said "We're going to see what happens."

Senate Majority Leader Mitch McConnell told reporters that "closing down the border would have a potentially catastrophic economic impact on our country," he said, adding, "I would hope we would not be doing that."

The U.S. Chamber of Commerce said such a step would inflect "severe economic harm."

More than 60 percent of all Mexican winter produce consumed in the U.S. crosses into the country at Nogales, Arizona. The winter produce season is especially heavy right now, with the import of Mexican-grown watermelons, grapes and squash, said Lance Jungmeyer, president of the Fresh Produce Association of the Americas.

He said 11,000 to 12,000 commercial trucks cross the border at Nogales daily, laden with about 50 million pounds of produce such as eggplants, tomatoes, bell peppers, lettuce, cucumbers and berries.

Jungmeyer said a closing of the border would lead to immediate layoffs and result in shortages and price increases at grocery stores and restaurants.

Future trade

While Trump acknowledged that trade with Mexico was important, he has held fast to the significance of border security.

"While we recognize the importance of border security, we respectfully ask the Trump administration to proceed cautiously and consider the implications of cutting off trade with a market that is so vital for rural America," said Herring, adding that the administration should turn its attention to ending trade disputes, and focus on upcoming trade negotiations and expansion of export markets for U.S agriculture.

Brad Pfaff, Secretary-designee of the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) says state officials and agriculture advocates have worked hard to strengthen the export market of Wisconsin goods into Mexico over the years, noting that Mexico is one of the largest consumer market of the state's agriculture products, including dairy.

"DATCP's International Agribusiness Center maintains productive working relationships with our trade partners in Mexico and many other countries, and we hope to continue developing those partnerships," Pfaff said. "We will continue to communicate with our federal partners about the importance of keeping markets open and accessible to Wisconsin dairy farmers."

While supporters of the USMCA are eager for lawmakers to ratify the new trade deal, some wonder if tensions between the U.S. and Mexico over the border wall along with demands by Speaker Nancy Pelosi to reopen the pact will jeopardize action.

Pelosi told POLITICO Playbook this week, that the House would not consider ratifying the new deal until Mexico passes labor law reforms.

Anthony Pahnke, vice president of Family Farm Defenders and an assistant professor of international relations at San Francisco State University said Mexico may choose to instead focus on domestic policy, or look to other markets like Europe instead of dealing with the U.S.

"The current government in Mexico is making plans to provide some domestic support programs for its small farmers, a step that would make the country's rural economy more independent of free trade and more stable," Pahnke said.

National Farmers Union President Roger Johnson said Trump is yet again risking essential trade markets and the country’s reputation as a reliable trade partner.

“Many American farm families are already in dire financial strain because of a drastic decline in farm prices over the past five years. Unfortunately, the President’s tactless, flailing approach to trade has exacerbated the situation," Johnson said. "In order to begin to fill the hole he has singlehandedly dug, he must work to repair relationships, not make them worse."

With more U.S. inspectors deployed to the border to screen cargo and vehicles at ports of entry along the Mexican border, the flow of goods back and forth across the border has slowed considerably. And if Mexico's progress fails to meet Trump's expectations, traffic could grind to a halt.

"We cannot condone limiting access to food as a bargaining chip in solving immigration issues," Vilsack said.

The Associated Press and USA TODAY contributed to this report