Rolling Back Tariffs Could Help Idaho Dairy Farmers Survive Record Cheese Surplus, Low Milk Prices 

click to enlarge 123RF
  • 123RF
The United States is buckling under the weight of its cheese surplus. NPR reports that according to U.S. Department of Agriculture statistics, the extra 900,000 cubic yards of cheese currently sitting in cold storage make up the largest glut in American history—and could wrap a cheese wall around the U.S. Capitol. That's not good news for Idaho's dairy farmers, whose troubles with low milk prices (which are based on national cheese values) have been compounded by U.S. trade conflicts with Mexico and China.

Idaho Dairymen's Association CEO Rick Naerebout said that although the surplus is in large part due to a surging milk supply that has outpaced national demand, a drop in exports caused by tariffs has fed the cheese glut.

"Cheese is one of those big export items," he said, "...Mexico is our biggest trade partner and there's a 25 percent tariff on cheese going to Mexico, so it's effectively taking opportunity out of the marketplace as long as that [retaliatory] tariff remains in place."

While Naerebout said the country has seen "positive demand in cheese consumption"—the USDA reports Americans ate 39.1 pounds of cheese per person in 2017, up about 1.5 percent from 2016—it's not enough to offset a dairy industry booming thanks to more efficient cows and, in Idaho's case, more cows in the industry.

click to enlarge LEX NELSON
  • Lex Nelson
The price of milk per 100 pounds (known in the industry as the price per "hundredweight") was last reported by the USDA in October 2018 at $17.40, 20 cents below the 2017 average but more than $2 higher than the lowest reported average of the year, which was $15.30 in February. The Farm Journal's MILK magazine reports that the price of milk has been below the cost of production since 2010, but international retaliation to the Trump administration's tariffs on steel and aluminum have made the curve steeper, and the slow-moving dairy industry has struggled to react. Reducing herd size is an unappealing prospect for many farmers, who have invested heavily in their cows. And as Naerebout pointed out, there aren't really any other quick, viable options.

"It's a two-year decision to get a calf to the point that she's producing, so there's not a lot of tools in the toolbox for dairymen when it comes to slowing down production," he said. "And it's not like you can just tell her, 'Hey, milk prices are low, quit producing milk.' It just doesn't work that way."

Because changing supply is a slow and daunting prospect, Naerebout said Idaho dairy farmers are hoping for a change in demand instead.

click to enlarge Mike Reid of Paradise Springs Farm, a family dairy in Victor, with his cows. - LEX NELSON
  • Lex Nelson
  • Mike Reid of Paradise Springs Farm, a family dairy in Victor, with his cows.
"If we could see movement on repealing our steal and aluminum tariffs, that would then trigger the opportunity for Mexico to pull back on their agricultural tariffs that they have in place, and the same thing for China," he said. "If we could see tariff relief in both those trade disputes, that would make a big difference in us being able to increase demand going forward."

Two recent offsetting payments from the USDA through the Market Facilitation Program, while undoubtedly welcome, haven't done much to move the needle on losses for farmers.

"The combination of the two have amounted to 12 cents per hundredweight on a year's production ... The problem is, the estimates of impacts on milk prices have the negative impacts on milk price anywhere from $1 to $1.50 per hundredweight," said Naerebout. "So the USDA kicking in 12 cents per hundredweight to try to offset the negative impacts—it's really only amounting to about a 10 percent coverage of the problem that the administration has created."

Due to the ongoing partial government shutdown, the USDA hasn't updated its reports on the national dairy situation since Dec. 12. 
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