Canadian Pricing Policy Leads to Trade Tension

A fight over a little-known dairy product sits at the center of mounting trade tensions between Canada and the U.S. If the dispute goes unresolved, some observers say, it could have ripple effects in global dairy markets.

U.S. dairy farmers and processors in Minnesota, Wisconsin, and New York have been hurt by a newly adopted Canadian pricing policy that encourages Canadian dairies to buy certain types of milk products domestically. The specific product is a milk-protein concentrate: ultrafiltered milk, which is used primarily in cheese-making to increase yields.

In 2016, the U.S. exported $102 million in ultrafiltered milk to Canada, according to the USDA. But industry observers estimate that exports have dropped to nearly zero since February, when Canada created a dairy classification that lowered the price of Canadian milk used to make ultrafiltered milk.

Although the issue represents a relatively small drop in the larger schema of U.S. agriculture, it has come to signify more than just a cross-boundary dairy dispute. President Trump has criticized Canada’s dairy practices, describing them as “very unfair.” Along with timber, the dairy dispute has become a flashpoint in the Trump administration’s tussle with Canada over trade policies.

The National Milk Producers Federation estimates that U.S. farmers and processors stand to lose about $150 million a year as a result of Canada’s new pricing policy. Jaime Castaneda, senior vice president of the federation, says Canada has the potential to lower global prices for ultrafiltered milk and other milk-protein substances with its new price classification.

Source: Wall Street Journal