The 25-year-old trade deal known as NAFTA is no more. As of Sunday night, the United States-Mexico-Canada Agreement know as USMCA was born.
So what does this mean for producers? Let us break it down for you…
Increased market access for American dairy farmers
So far, market access into the Canadian dairy sector has been pegged at around 3.59 per cent to even 3.9 per cent, according to Graham Lloyd with the Dairy Farmers of Ontario (DFO).
To some, that might seem like a small number but in reality it’s a big chunk of change, as the annual Canadian dairy market is around US$16 Billion.
So how much will the red and white have to accept from the U.S.? 50,000 metric tonnes of fluid milk, 12,500 metric tonnes of cheese, 10,500 metric tonnes of cream, and 4,000 metric tonnes of butter, according to a statement by the USTR.
Now you have to remember, this is going to roll out very slowly over years-upon-years. For the consumer side of it, analysts say you won’t see a huge drop in price nor will you start seeing American made milk by Christmas. Except…
Goodbye, Class 6 and 7 milk
This is one item that will roll out quicker than other provisions. It’s expected to go into effect six months after the USMCA deal is in place.
What is it? Class 6 is milk used to process skim milk components or condensed skim milk components, wet or dry, into an ingredient to be used in processed milk products. For example, skim milk powder, milk protein concentrate, or ultra-filtered milk.
Class 7 is comprised of skim milk components, including milk protein concentrates, skim milk and whole milk powders, edible casein, rennet casein, and various powders derived from milk products.
The new provision will eliminate the pricing structure set by the Canadian Dairy Industry. It was originally put in place by Ontario, but then it was seen as a move the entire dairy industry should take, so it was put in place on a national level around March of last year.
In a statement by the USTR, it says, “Canada will ensure that the price for skim milk solids used to produce nonfat dry milk, milk protein concentrates, and infant formula will be set no lower than a level based on the United States price for nonfat dry milk. Canada has also committed to adopt measures designed to limit the impact of any surplus skim milk production on external markets.”
Compensation for Canadian dairy farmers
In her first speech since the USMCA deal was put forward, Canada’s Foreign Affairs Minister, Chrystia Freeland says dairy farmers will be compensated as it’s “the fair thing to do.”
At a news conference held on Monday morning she says, “The dairy producers of Canada, their families, and their communities can count on the full support of our government. and that is something that has never wavered since the beginning of the negotiations.”
Freeland went on to say that, in all, the new trade agreement preserves and maintains the Canadian supply management system.
“It means (more) access to markets, similar to what was agreed upon in CETA and the TPP, but the future of supply management is not challenged. To mitigate the impact of these changes, the government has promised our producers they will be fully and fairly compensated for all loss of market shares. The government will also work with them to strengthen the industry even further.”
When asked if there was going to be compensation for other agriculture industries affected by the new agreement, Freeland reiterated there will be compensation for dairy farmers — not once mentioning any other sectors.
Even more access to poultry, egg market
You’ll be seeing a lot more chicken and eggs from the U.S. USTR numbers show the amount of chicken exported from America will be 57,000 MT by the sixth year, with a one per cent increase each additional year, for 10 years.
With regards to eggs, the red and white will see an intake of 10 million dozen eggs in the first year of the USMCA. There after, just like chicken, the export number will gain one per cent, every year after, for 10 years.
Changes to wheat grading system
The USMCA includes a part where it states, U.S. grown wheat delivered to Canada will be treated the same as Canadian-grown wheat within the current grading system in place. There’s also a new requirement that will force the three countries to reduce their subsidies and ag safeguards for products traded between the three countries.
According to SaskWheat, the pact also addresses agricultural biotechnology, including plant breeding, and requires the three countries to enhance their cooperation and exchange of information on biotechnology matters related to trade.
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