USMCA Deal Faces First Challenge
Published: Friday, July 16, 2021
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
U.S. dairy exports have been strong, which is good news considering how U.S. milk production keeps rising. The U.S.-Mexico-Canada Free Trade Agreement, however, has resulted in some friction between the U.S. and Canada.
Hoards Dairyman managing editor Corey Geiger, speaking in the July 12 Dairy Radio Now broadcast, said it's no surprise that dairy was the first dispute in the USMCA. At issue is what are called Trade Rate Quotas, or TRQs. The TRQs are import permits, he said, given to importers of record, typically dairy processors, trading companies, brokers and other similar organizations.
What the U.S. is trying to say, said Geiger, is you can't allocate TRQs to an entity who knowingly won't use it, according to Gregg Doud, former chief agricultural negotiator for the U.S. trade representative under the Trump administration. The dispute comes with high stakes, according to Doud, because "ultimately it will become a benchmark for the effectiveness of the entire USMCA agreement."
Doud says the objection has validity and the U.S. trade representative would not have brought the case if it didn't really believe it would win it.
You'll recall May milk production totaled 19.85 billion pounds, up a hefty 4.6 percent from May 2020, according to USDA's preliminary data. The latest Dairy Products report shows where that milk ended up, though StoneX Dairy reminds us that milk production last May was down from the previous year, as co-ops and milk buyers put incentives in place to limit output, which led to big drops in butter and nonfat dry milk production. That was not the case this year.
May cheese production totaled 1.156 billion pounds, up 1.8 percent from April and a bearish 5 percent above May 2020. Year to date (YTD) cheese output hit 5.6 billion pounds, up 4 percent from the same period in 2020.
Checking the top five cheese manufacturers, Wisconsin produced 295.6 million pounds, up 4.6 percent from April and 5.1 percent above a year ago. California delivered 207.3 million pounds, same as April, but 1.9 percent below a year ago. Idaho contributed 79.5 million pounds, down 8.6 percent from April and 1.4 percent below a year ago.
Italian-style cheese totaled 481.3 million pounds, down .1 percent from April and .2 percent below a year ago. YTD Italian was at 2.4 billion pounds, up 1.7 percent.
American-type cheese, at 473.1 million pounds, was up .1 percent from April and 7.2 percent above a year ago. YTD American was at 2.3 billion pounds, up 6 percent.
Mozzarella output totaled 376.7 million pounds, down .7 percent from a year ago, with YTD mozzarella at 1.9 billion pounds, up .5 percent from 2020.
Cheddar, the cheese traded daily at the CME, totaled 343 million pounds, up 8.9 million pounds, or 2.7 percent, from April, and a whopping 27.3 million, or 8.7 percent, above a year ago. YTD Cheddar hit 1.66 billion pounds, up 5 percent from 2020.
Butter churns produced 185.4 million pounds of butter, up 1.5 million pounds, or .9 percent, from the April volume which was revised down 1.3 million pounds, but was up 13.1 million pounds, or 7.6 percent, above a year ago. YTD butter climbed to 964.2 million pounds, still down 3.5 percent from 2020.
Yogurt output totaled 388.7 million pounds, up 4.2 percent from a year ago, with YTD at 2 billion, up 5.4 percent.
Dry whey totaled 77.7 million pounds, up 3 million pounds, or 4.1 percent, from April, but 6.4 million pounds, or 7.6 percent, below a year ago. YTD dry whey was at 391.4 million pounds, down 3.6 percent.
Dry whey stocks crept up to 66.5 million pounds, 6.3 million, or 10.4 percent, more than April but 19.7 million, or 22.9 percent, below those a year ago.
Nonfat dry milk output climbed to 205.3 million pounds, up 11 million pounds, or 5.7 percent, from April, and 48.1 million, or 30.6 percent, above a year ago. YTD production was at 980.5 million pounds, up 9.9 percent from 2020.
Stocks jumped to 347.8 million pounds, up 30 million pounds, or 9.5 percent, from April and 9 million pounds, or 2.7 percent, above a year ago.
Skim milk powder production fell to 35.7 million pounds, down 11.3 million pounds, or 24 percent, from April and 21 million pounds, or 37 percent, below a year ago. YTD skim milk powder, at 189.9 million pounds, was down 22.2 percent from 2020.
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