‘METAL’ TARIFFS, DAIRY EXPORTS AND USMC
What happened?
In May, the Trump administration announced a rollback on U.S. import tariffs on aluminum and steel from Mexico and Canada, originally imposed in March 2018. Canada and Mexico subsequently announced an end to retaliatory tariffs on products imported from the U.S., including those on cheese and other dairy products.
What’s next?
U.S. dairy organization leaders expressed hope the de-escalation of tariff wars will bring normalcy to the largest U.S. export market for cheese: Mexico. U.S. dairy products accounted for 80 percent of Mexican dairy imports by value in 2018, but that dominant market share was being jeopardized by the retaliatory tariffs. Between July and December 2018, volume sales of U.S. cheese to Mexico declined 4 percent, and the value of U.S. cheese exports declined 8 percent due to these tariffs.
Bottom line:
In addition to being blamed for a slowdown in U.S. cheese sales to Mexico, the steel and aluminum tariffs were seen as one barrier to ratification of the U.S.-Mexico-Canada trade agreement (USMCA) by governments of all three countries. The USMCA, approved by negotiators from all three countries late last September, replaces the North American Free Trade Agreement. It maintains U.S. dairy sales into Mexico, expands dairy market access in Canada and reforms many non-tariff barriers.
TRADE MITIGATION PAYMENTS ON TAP (AGAIN)
What happened?
The improvement in tariff relations with Canada and Mexico contrasted with a separate tariff war with China, ongoing since last July and with no apparent resolution near. As a result of higher tariffs on U.S. dairy products last year, first-quarter 2019 exports to China were down 40 percent. In May, President Trump imposed additional tariffs on products imported from China, and China responded with higher tariffs on U.S. products.
What’s next
As U.S.-China talks continue, the USDA rolled out another three-pronged aid package aimed at helping U.S. farmers suffering financial damages due to the trade dispute. The 2019 Trade Mitigation Program (TMP) is similar to one implemented last year, although funding for 2019 is boosted by 25 percent to $16 billion.
The 2019 version will include $14.5 billion in direct payments to crop, dairy and pork producers under the Market Facilitation Program. One change in this year’s program is that payments for crops will not be based on flat payments for each commodity. Instead, payments will be distributed based on a single-county rate multiplied by a farm’s total plantings to crops in aggregate in 2019.
The payments will be made in up to three “tranches.” The first tranche, the largest of the three, will begin in late July/early August, after the FSA crop reporting deadline of July 15.
The second and third tranches will be evaluated as market conditions and trade opportunities dictate. They’re tentatively scheduled for November 2019 and early 2020, respectively.
The bottom line
As of Progressive Dairyman’s deadline, we know dairy producers will again receive a per-hundredweight payment on production history established under the old Margin Protection Program for Dairy (MPP-Dairy). However, application requirements and payment rates for 2019 were not announced.
Last year, direct dairy farmer payments equaled 12 cents per hundredweight (cwt) on a producer’s annual milk production history in 2011-13. The payments were distributed in two equal rounds, one 6 cent per cwt in September and another in December. In total, dairy farmers received about $255 million last year.
We’ll keep you posted on details when they are released.
DAIRY REVENUE PROTECTION PROGRAM
What happened?
Some dairy producers who protected milk revenue under the Dairy Revenue Protection (Dairy-RP) program during the first quarter of 2019 are receiving indemnity payments. Through May 27, 142 claimants received indemnity payments totaling $4.765 million. Based on initial data, only producers protecting milk revenue at the maximum (95 percent) level qualified for indemnity payments in the first quarter of 2019.
What’s next?
Dairy-RP quarterly endorsements are available for sale until about the 15th of the month preceding the quarter to be covered. Producers can currently purchase quarterly endorsements for July-September 2019 (until June 15); October-December 2019 (until Sept. 15); January-March 2020 (until Dec. 15); April-June 2020; and July-September 2020.
There are small changes coming to Dairy-RP when the 2020 crop insurance year begins on July 1, 2019. Those changes include eliminating coverage options at the 70 and 75 percent level, and modifying minimum butterfat and protein coverage/indemnity ranges. Check with your local USDA FSA official.
Bottom line:
The USDA Risk Management Agency (RMA) does not report indemnity payment totals until payment documentation is reported, and final Dairy-RP claims and indemnity payments for the first quarter of 2019 may not be available until August. The RMA also does not provide quarterly data on the number of endorsements purchased or the pounds of milk or milk revenue covered in a single quarter, so the policies receiving indemnity payments as a percentage of endorsements purchased can’t be determined.
DAIRYAMERICA LAWSUIT
What happened?
On May 8, 2019, the U.S. District Court Eastern District of California approved a $40 million settlement agreement regarding the lawsuit, Carlin, et al., v. DairyAmerica Inc., et al., case number 1:09-cv-00430-AWI-EPG. The lawsuit stemmed from erroneous nonfat dry milk (NFDM) prices reported to the USDA’s National Ag Statistics Service (NASS) by DairyAmerica Inc., a federated marketing cooperative and the largest U.S. marketer of NFDM, from April 2006 to April 2007. Because the NASS prices were used to establish Federal Milk Marketing Order (FMMO) prices for milk in Class II, Class IV and, in some instances, Class I milk, the reporting of lower NFDM prices directly resulted in lower minimum milk prices paid to farmers.
In the settlement agreement, DairyAmerica and a shareholder, California Dairies Inc. (CDI), acknowledged the erroneous reporting but admitted no intentional wrongdoing. The USDA had immunity in the lawsuit.
What’s next?
Of the total $40 million settlement, the court awarded 33 percent ($13.33 million) in attorney fees and reimbursed law firms approximately $825,000 in litigation costs. The claims administrator, Rust Consulting, receives about $418,000.
That leaves an estimated $26 million to be split among about 26,000 U.S. dairy farmers who filed claim forms by the January 2019 deadline.
Bottom line:
While the claims on the remaining funds average about $1,000 per dairy, the actual payment to each individual dairy will be distributed on a pro rata basis. Payments are calculated based on the producers’ Grade A milk marketings pooled on FMMOs during the period Jan. 1, 2002 to April 30, 2007, divided by the total FMMO milk volume pooled during the same period.
The claims administrator could not provide a timeline for payments as Progressive Dairyman went to press. 
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Dave Natzke
- Editor
- Progressive Dairyman
- Email Dave Natzke
