U.S. farm groups are cheering the last-minute deal struck Sunday night to keep Canada in a newly renamed North American trade pact with the U.S. and Mexico.
The U.S. agriculture sector is primarily relieved now that it looks like the virtually tariff-free trade pact between the three countries will remain whole, but there are plenty of provisions in the new deal for U.S. farmers and ranchers to celebrate.
U.S. dairy, wheat and poultry farmers are expected to reap the most added benefits in the United States-Mexico-Canada Agreement (USMCA), formerly known as NAFTA.
American Farm Bureau Federation President Zippy Duvall, said the new agreement, formally announced by President Trump on Monday, is "welcome news."
“This was a hard-fought win and we commend the administration for all the efforts to solidify the trading relationships we have with our North American neighbors," Duvall said. "Trade is critical to agriculture, especially trade with our two closest neighbors. The USMCA builds on the success our farmers and ranchers have seen from NAFTA.”
Here's a look at some key aspects of the deal affecting U.S. farmers and poultry producers:
DAIRY
“Keeping Canada in the trade deal is a critical win for our dairy farmers,” said Brody Stapel, president of the Edge dairy cooperative and a Wisconsin farmer. “The partnerships built over the years with Canada and Mexico through NAFTA have been a major part of growth for our businesses.”
Canada relented Sunday night after more than a year of the U.S. demanding that it eliminate its Class 7 dairy pricing system – a policy that resulted in Canada flooding the international market with subsidized skim milk powder and hundreds of millions of dollars in lost U.S. exports.
It was a deal-breaking issue, Trump said Monday in a press conference after announcing the agreement in the White House Rose Garden.
Now, under the agriculture provisions of the USMCA, Canada has agreed to hit its own exports of milk protein concentrates, skim milk powder and infant formula with export taxes if they exceed set limits.
“The elimination of Canada's Class 7 pricing system will level the playing field and give U.S. farmers the opportunity to compete in a free and fair environment,” Stapel said.
Beyond the pledge to eliminate Class 7 within six months of implementation of the USMCA, Canada also agreed to phased-in increases for U.S. access to its tightly controlled domestic market by setting up new tariff rate quotas for milk, cheese, cream, skim milk powder, butter, ice cream, whey and other dairy products.
“Farm Bureau will review the details of the new treaty as they become available, but the elimination of Canada’s Class 7 dairy pricing program is a clear victory for our farmers,” said Duvall. “We also now have access to an additional 3.6 percent of Canada’s dairy market, which is even better than what we would have achieved under (the Trans-Pacific Partnership).”
WHEAT
U.S. wheat farmers – especially those near the Canadian border – are also set to reap a major reward from the new trade pact. That’s because Canada has agreed to U.S. demands to change its ways when it comes to grading U.S. wheat. Under current policy, U.S. wheat is automatically given the lowest feed grade possible, regardless of its quality, and that’s angered farmers and lawmakers for years.
Steve Mercer, a spokesman for the U.S. Wheat Associates, cautioned that there’s still a long way to go until the U.S., Canadian and Mexican governments all ratify the revamped NAFTA, but if that happens then U.S. farmers are going to have a new option for selling their crops.
USDA Secretary Sonny Perdue, who joined Trump for the Rose Garden announcement, lauded the provision that will open up a new market for many U.S. wheat farmers that don’t want to sell high-quality wheat for feed grade prices, but he also lavished praise on the overall accord.
“I have long said that I believe our country is located in the best neighborhood on Earth – North America – with valuable allies to our north and south,” Perdue said. “We have secured greater access to these vital markets and will maintain and improve the highly productive integrated agricultural relationship we have as nations.”
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POULTRY
While Canada is most known for its protective dairy supply management system, the country also keeps a tight hold on the amount of chicken, turkey and eggs that can enter its market. The U.S. sells about $600 million worth of poultry and eggs to Canada a year, but the U.S. industry has long complained it could be selling a lot more.
Canada did not do away with its market protections, but did agree to allow more market access over time through new TRQs. There’s a new 57,000-ton quota for chicken that kicks in six years after implementation as well another allowance for an increase of an extra 10 million dozen eggs that starts in the first year.
“Canada has always been one of our key export markets for chicken, turkey and eggs,” said Jim Sumner, president of the USA Poultry and Egg Export Council. “We’re most pleased that the new agreement not only assures our continued access, but provides for growth in our exports as we move forward. It certainly appears to be a win-win for both the U.S. industry and Canadians.”
But it’s not a win yet, and even if it is ratified by all three countries and then implemented, it’s still just one step in mending the relations with U.S. trading partners after contentious negotiations and other trade disputes, said National Farmers Union President Roger Johnson.
“After more than a year of escalating trade tensions, the prospects of progress on trade with our two closest trading partners is encouraging,” said Johnson. “Farmers have seen their income plummet over the past five years, only to have farm prices further depressed by trade disruptions. While this agreement is certainly no cure-all, it is hopefully a start to repairing our trade relationships around the world, to restoring our reputation as a reliable trading partner, and to resolving longstanding issues with discrimination against U.S. wheat.”
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