The Canadian - American dairy wall

Last week was a shocker for the Wisconsin dairy industry: Two well-known, highly regarded milk processors and much-revered family dairies, Grassland Dairy at Greenwood and Nasonville Dairy, Marshfield, notified some of their farmer patrons that their milk would no longer be processed after May 1 - something that just doesn’t happen in America’s Dairyland.

Historically, dairy farmers have always had a choice of dairy processors wanting their milk, in fact, often competing for their milk as dairy plants were being built or expanded. Very seldom did a dairy producer have to look very long or hard to find a milk plant to process and market their milk.

One must look back to the late 1980’s to the Kasson Cheese, at Brillion, bankruptcy when over 200 farmers lost their processor home and considerable money but that was a time when Wisconsin dairying was growing and processors were expanding, enabling the farmers to find a new home for their milk literally overnight.

Hard to do

“It was a tough decision on our part, one of the most difficult we’ve ever had to make,” Dallas Wuethrich of Grassland Dairy Products explained. “But we had to protect our other farmers and the company.”

That was Wuethrich’s response to my question about Grassland Dairy’s recent release of some 75 dairy farmer patron’s as the result of the company’s loss of a liquid protein contract in Canada (the equivalent of about 1 million pounds of milk per day).  With no home for the product, the farmers were notified that their milk would not be taken effective May 1.

At about the same time Nasonville Dairy gave notice to a reported 14 dairy producers that their milk would not be processed after April 15 because of the loss of a cheese sales contract.

Little choice 

These notifications left the affected dairy producers with little choice: Find a new processor or quit milking cows, neither of which is easy to do for an active and ambitious family dairy farmer who has never before faced such a traumatic decision.

There are a total of 203 Wisconsin plants manufacturing one or more dairy products according to the Wisconsin Dairy Plant Directory, many of these producing a specialized dairy product and/or may be a small family operation with already enough milk for their needs. Most cannot absorb more milk.

It’s also true that the nation has a surplus of milk and cheese as producers have greatly expanded their dairy herds in recent years. Modern technology, dairy genetics, management and equipment have encouraged more efficient milk production.

With greater milk production comes the need to sell more milk and dairy products in this country and in the export market. The flighty export market has two sides: US farmers who prosper with dairy sales to other countries, meanwhile the foreign dairy producers may feel the milk from the US is hurting their price, thus their income. That seems to be the basis for the lost Canadian sales at Grassland Dairy.

“We’ve been aware of the issue for over a year,” Wuethrich says.  “And have been working with dairy groups and government to solve it - it hasn’t happened.”

Little known issue

I’ll admit I and many dairy people I know had not heard about this issue until last week. I then did some research and found a year old news story centering on New York Senator Charles Schumer’s visit with a major New York Dairy Co-op. His letter of March 25, 2016 to the U.S. Trade Representative (USTR) and the U.S. Department of Agriculture(USDA) partially explains the issue:

Dear Ambassador Froman and Secretary Vilsack:

I write to you with strong concerns about reports that Canada is weighing policy and regulatory shifts that would undermine one of New York’s most important export markets. Just a few years ago, two dairy companies made investments worth tens of millions of dollars in Upstate New York to produce ultra-filtered milk specifically for export to the Canadian cheese market. These sales are possible as a result of the duty-free access for this specific product that Canada agreed to under the North American Free Trade Agreement.

Recent reports indicate that Canada is considering administrative actions to limit Canadian companies’ capacity to use this product in further processing and that Ontario is advancing a new, targeted pricing policy designed to crowd out New York’s dairy sales. Further restraints on dairy trade are unacceptable, particularly coming on the heels of Canada’s recent pledge to expand access to its tightly restricted dairy market under TPP. 

New York has made sizable investments in exporting into Canada under specific rules laid out by the Canadian government. Those sales now help support dairy farmers and rural communities across the state. New Canadian barriers to market access would have an outsized impact on New York’s dairy sector.  As the country’s third largest milk producing state, a significant impact on New York’s ability to tap into key foreign markets also will impact farmers in surrounding states in the northeast and Mid-Atlantic region. Moreover, this latest example of dairy market-access restrictions appears to represent a continuation of persistent Canadian regulatory and policy shifts aimed directly at impeding dairy trade. 

We must hold Canada to its commitments and ensure that our exporters do not encounter barriers to the products they are already shipping to Canada. I urge you to strongly reject this and similar efforts to impair the value of concessions the U.S. previously secured under NAFTA. Thank you for your attention to this important priority with one of this country’s largest trading partners. 

Sincerely,
Charles E. Schumer
United States Senator 

It happened 

It’s a year later and all the bad things Senator Schumer projected as possible have happened. Our national dairy groups, if they made any attempts at solving this issue, have obviously failed and 100 Wisconsin dairy farmers must seek new homes for their milk.

Grassland Dairy, owned by the Wuethrich family as it has been for over 100 years, is the largest independent butter producer in the US. I have known the family for many years, ever since my first real job as U-W county ag extension agent in Clark County when John D. and Lee Allen Wuethrich were building the John Wuethrich Creamery into a national company.  

John D’s son and now Grassland Dairy’s Chairman Dallas Wuethrich was a Junior Leader in 4H and showing Distinction Farm Holsteins at the county and state fair as were his sisters Diane and Dawn. His older brother DeVere was raising pigs and working at the butter plant. Today, Dallas and his sons, Trevor and Tayt, own and manage Grassland Dairy Products.

I’ve heard reports that some of the affected dairies have already found processors willing to take their production - great. Hopefully all will do the same and be able to continue milking.

Longer term, I suspect that the dairy industry will do some serious thinking about the issue of producing more milk than can be consumed in the US or exported, and yes, a closer look at trade rules. True, China is just beginning to consume dairy products but at the same time are developing huge dairy farms to provide the milk in the future.  

Will US dairy farmers be able to continue to produce unlimited amounts of milk endlessly? Can Canadian export issues be solved? Tough questions. Any answers?

John Oncken is owner of Oncken Communications. He can be reached at 608-222-0624, or email him at jfodairy2@gmail.com.