Trump's Tariffs Are Kicking California's Dairy Industry While It's Down

Nearly 140 California dairies have shuttered in just three years, and things only seem to be getting worse.

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Aug 8 2018, 4:00pm

Photo via Flickr user Thomas Hawk

California is the nation’s breadbasket, supplying our supermarkets with ripe avocados, stinky garlic, smooth almond butter, and a whole fruit basket worth of melon, peaches, and plums, among other things. The state is also America’s leading producer of dairy, with the industry dating back to the opening of one of the first commercial dairies in the country in 1857. But while we may think of California as a land of boundless plenty, over recent years, those dairies have been suffering, closing in record numbers as milk producers face a complex web of issues like a nationwide surplus, plummeting prices and dwindling consumer interest in the creamy white stuff. More recently, the Trump administration's trade war with Mexico has further spooked an industry that has been suffering for years.

In late May, the administration announced onerous tariffs on imports of steel and aluminum from our southern neighbor, as well as Canada to the north—our allies, FWIW, but that mattered little to Trump. Within just a few days, the President got what he seemed to want, sparking trade wars with both nations. Canada announced retaliatory tariffs on imports of US goods including whiskey and orange juice, while Mexico targeted our apples, pork and potatoes—as well as our milk and cheese. US dairy was targeted with an especially heavy tariff of 25 percent. Stoking fears within an already vulnerable industry, the announcement caused an immediate drop in milk and cheese prices on the Chicago Mercantile Exchange, which sets American prices for agricultural goods. Such a hefty hike in export duties has the potential to devastate an already unstable industry.

“It’s a huge concern, in my opinion,” said Dominick Carinalli, an owner at Carinalli Dairy in Sebastopol. An organic-certified producer of raw milk for local sale, his dairy will be immune to to the trade war, but it’s still a concern for him and his fellow dairy producers. “You don’t earn export markets very easy. It’s a hard-fought battle,” he added. “I know that export is very important to the California dairy industry.”

As a whole, dairies across the country supply Mexico with a fair amount of milk products—17 percent of annual production. But California dairies are especially vulnerable to Mexico’s tariffs, exporting a whopping 30 percent of their production down south. In 2017, Mexico bought up $400 million of California-made cheese alone. That figure was noted in a June 26 letter sent to President Trump by the National Milk Producers Federation (NMPF), the US Dairy Export Council (USDEC), the International Dairy Foods Association (IDFA) and more than 60 dairy associations and cheese makers. In the letter, the groups and companies urged Trump to repeal the tariffs and work with Mexico, not against it.

“Unlike Canada, Mexico has long been a model for open dairy trade with the United States. Through investment and cooperation with Mexico, we have succeeded in becoming the country’s biggest foreign dairy supplier,” the letter reads in part. “Today, Mexico accounts for approximately one quarter of foreign demand for Made-in-America dairy products and is our most reliable trading partner.”

But, as seems to be the case with everything in the Trump era, the issue is a complicated one, with some dairy farmers maintaining support for the president’s protectionist policies in spite of the harm they might inflict on the industry.

Photo via Flickr user suz_tyler

Xavier Avila, a corporate board member at Land O’ Lakes who produces milk for the cooperative at his Adamscows Dairy in Fresno County, said that the issue was a thorny one, but that he’s still in favor of the tariffs.

“It’s directly affecting us,” he said of Mexico’s hiked-up tariffs against US dairy. “But I guess I’m a believer that when there’s a trade imbalance of hundreds of billions of dollars, that’s weakening America’s strength, there will eventually negative impacts of that.”

“I’m all for my farm and the dairy industry, but I’m also still an American, and I’m a blue collar guy,” he continued. “I’m one that thinks trade should be free, and if people are cheating it’s not really free.”

Above all, the dairy farmers we spoke with emphasized that while the tariffs pose a significant problem, they’re only the latest in a series of slumps and disappointments that the California dairy industry has weathered over the past few years. While any positive or negative outcomes of the trade war have yet to be seen, the reality of falling prices and shuttered dairies is one that existed well before Trump.

“Things have been this way for a long time,” said Joaquin Contente, an owner at Contente Company. “We‘ve been in this low level for close to three-plus years and things just keep ratcheting down.”

During that period, close to 140 California dairies have shuttered, a phenomenon that Contente has observed in the immediate area surrounding his Hanford dairy.

“We have lost, over the past five or six years, over 25 dairy producers within a five-mile radius from me,” he recounted. “And I’m not talking little small dairy farms. I mean dairies with a thousand, 800, 600 cows.”

Contente said that while he’s not in favor of Trump’s tariffs, he also doesn’t think enough time has passed to evaluate their effects—a task that, given the overall chaos of the local industry, could be hard to parse out.

“Our prices right now are pretty much at record low levels, but they were there before the tariffs were in place,” he said. “It’s a move that he’s chosen to make that’s impacting us in a negative way for the time being, but it’s hard to say if in the long run will it help us.”

“Look at what happened with Korea and the whole ‘Rocket Man’ deal, we all thought we were going into World War III, but then nothing happened. You’ve gotta admit, the guy’s got different tactics, so you never know where we’re gonna wind up.”