According to the latest data from the U.S. Department of Agriculture, dairy exports accounted for $491 million in economic impact for Michigan in 2016. Courtesy iStock
All eyes in the agricultural industry will be on Washington D.C. this year.
Michigan farmers and producers will be laser-focused on what the U.S. government will do with the United States-Mexico-Canada Agreement (USMCA) because Mexico and Canada combine for 60% of the state’s export market.
The agreement was signed by the three countries and is awaiting ratification. The U.S. House of Representatives ended 2019 by taking the ultimate first step by passing the trade agreement and forwarding it to the U.S. Senate with the expectation of it passing and signed by the president.
The U.S. Senate will begin the new decade with the agricultural industry awaiting the ratification of the agreement, which will replace the North American Free Trade Agreement (NAFTA).
The USMCA allows for more transparency and improves domestic support, export competition and market access between the three countries, according to the agreement. The agreement also addresses the technological advancement in the industry.
“What USMCA does is really modernizes NAFTA,” said Jamie Zmitko-Somers, deputy division director for agriculture development at the Michigan Department of Agriculture & Rural Development. “NAFTA is over 20 years old. The practices like e-commerce and a lot of the technologies from a biotechnology standpoint were not around when NAFTA was originally negotiated, so what the USMCA does on a broader level is really update that agreement and bring it in line with how commerce happens today. That is a really big aspect of it.”
From January to October of 2019, Michigan exports to Canada were valued at $685,082,207.
Prepared cereal, flour, starch or milk exported to Canada was valued at $134,482,449. Edible vegetables, certain roots and tubers had an exported value of $75,253,988. Some seeds, fruits, plants and grain had a $75,131,644 value. Those were some of the highest-valued items from January to October 2019.
For the first 10 months of 2019, Michigan exports to Mexico had a total value of $131,583,885.
Exported edible preparations of meat, fish and crustaceans were valued at $39,691,624. Dairy products, eggs, honey and other edible animal products had an export value of $19,873,966. Edible vegetables, certain roots and tubers had an export value of $19,081,558. Those agricultural items were some of the most valuable items exported to Mexico from Michigan between January to October 2019.
Zmitko-Somers said the agreement also allows access for more Michigan dairy products into the Canadian market.
According to the latest data generated with the collaboration of the U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Dairy Export Council and the National Milk Producers Federation, there were 1,810 dairy farms and 51 dairy plants in Michigan in 2016. The data also revealed that 3,954 jobs were created by dairy exports, there were $249 million worth of dairy products exported, which all resulted in $491 million in economic impact for Michigan in 2016.
Ken Nobis is the senior policy adviser for the Michigan Milk Producers Association. He also is a farmer who has a 3,000-acre farm with 1,100 cows in St. Johns. He said if the USMCA is implemented, it will put more value in the dairy industry.
Although dairy products such as concentrated and sweetened milk and cream, butter, yogurt and cheese are exported to Canada, Nobis told the Business Journal in 2018 that fluid milk is not exported to Canada because the milk that is exported to Canada is for processing and it is then re-exported from Canada to some other destination. The milk is not sold in Canada.
The USMCA deal will eliminate what Canada established as Class 7 products. They include skim milk powder, milk protein concentrate and infant formula, which Nobis said in 2018 that Canada used as lower-priced dairy ingredients to undercut U.S. dairy sales in Canada and other countries.
Zmitko-Somers said once the agreement is solidified, it will allow Michigan food companies and other exporters to enter into long-term contracts or purchasing commitments with buyers in the two countries, which was hindered by the uncertainty with NAFTA.
“Having this signed agreement by all of the countries will have buyers at ease and know that we do have an agreement that our federal government is behind and that we will not be pulled out of that agreement between the three countries,” she said. “We are certainly excited about the opportunities of having this agreement finalized and in place to be able to continue to work with our companies to explore the opportunities in both Canada and Mexico.”
The USMCA will not only provide a security blanket for farmers, processors and exporters, but it also allows new agricultural businesses in Michigan to become sellers and explore the Mexican and Canadian markets.
“We have a lot of new-to-export companies that can explore the Canadian market,” Zmitko-Somers said. “We are looking forward to opportunities to do export education around Canada and as well as working jointly with our partners in food export to offer a trade mission in September for specialty and natural food products into the Canadian market. So, hopefully, the agreement will be passed and in place and provide some great new opportunities for our food companies in Michigan. We are also doing a trade mission in Mexico in March.