Agri-Mark, the company that owns Cabot Creamery, could continue to lose millions of dollars in revenue following President Trump’s announcement Monday of tariffs on $200 billion worth of goods from China and Beijing’s response the next day that it would tax $60 billion worth of U.S. goods — including almost all dairy products.
For dairy companies like [Agri-Mark], which merged with Cabot in the 1990s and has one third of the dairy farms in New England in its cooperative, news of more tariffs is not good for business. China is the third largest market for U.S. dairy products.
Although Agri-Mark doesn’t ship much Cabot cheese to China, its plant in Middlebury has been exporting 30 million of the 40 million pounds of whey products it produces each year to the Chinese market.
In recent years, the global market for whey, a byproduct of cheese making, has made up a small but valuable piece of Agri-Mark’s revenue. And nearly all of its whey products are sold to China.
China’s primary imports are Agri-Mark’s whey concentrate, the protein powder commonly found in supermarkets, and whey permeate, a cheaper sweetening substance used as an ingredient in a variety of processed foods. However, since Trump began the trade war with China in June, these products have been hit with a 25 percent tariff.
Bob Wellington, senior vice president of Agri-Mark, said these tariffs have resulted in significant revenue loss for the cooperative.
“It’s cut several million dollars into our bottom line,” he said. “It could be at least $2-3 million, and if they raise tariffs it could be even more.”
With this week’s exchange between Beijing and the U.S., China is planning to place a duty on nearly all U.S. dairy products. And, although it’s unclear whether it will raise the tariff on Agri-Mark’s whey products, Wellington said the escalation of the situation is not good for the farms that are part of the cooperative.
“It just makes our situation worse. We’re going to ask the Trump administration for compensation for paying those tariffs, but it’s a bad situation for us,” Wellington said. “I’m not sure how bad it’s going to be, but we have a feeling they are going to target dairy because it’s an easy one to target.”
One of Agri-Mark’s concerns is it doesn’t have supply contracts with China for 2019, and the uncertainty around the situation has made the cooperative begin to look at different markets for its whey.
“We’re trying not to rely on China. We are also concerned China is going to make a political statement — that they may say ‘we don’t want the U.S. product even if it’s cheaper.’ We don’t want to be at the mercy of China, they are a great customer, but we are going to have to look elsewhere,” Wellington said.
China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me. What China does not understand is that these people are great patriots and fully understand that…..
— Donald J. Trump (@realDonaldTrump) September 18, 2018
On Tuesday Trump took to Twitter to say China is “trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me” and “there will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!”
The president then said he would put a tariff on an additional $267 billion worth of Chinese goods, effectively threatening to place a tariff on all imports of Chinese goods.
Wellington said Agri-Mark so far has looked at expanding its supply of whey products to Vietnam, Cambodia and Indonesia, as well as countries in South America as uncertainty around the Chinese market continues.
Peter Vitaliano, vice president of economic policy at the National Milk Producers Federation, said that although Trump has said he is looking out for the best interests of dairy farmers, almost immediately after the first tariffs were announced, the price of milk per hundredweight dropped by $1.20.
Vitaliano said that price drop was enough to have caused a $1.3 billion loss for dairy farmers across the country.
Between the uncertainty surrounding the Chinese market and the ongoing negotiations on a new trade agreement between the U.S. and Canada, Vitaliano said it doesn’t appear the price of milk will stabilize soon for farmers who are already suffering from low milk prices — particularly in New England.
“The futures track is that through the first half of next year that lower price outlook is still there, and when you add the effects for next year we are going to be getting closer to $2 billion in losses than $1 billion,” Vitaliano said. “In dairy, small changes in supply and demand can have major price changes. Even after the tariffs come off it is going to leave importers feeling edgy about U.S. exporters and the possibility of the U.S. doing something unexpected.”
Wellington said he and members of the cooperative feel powerless to stop what is happening and are unhappy with how the administration’s actions are affecting international partnerships that have taken years to create.
“The irony of this is that we spent a long time of building up these markets and we have a lot of reputation and we’ve done everything right and now it’s completely out of our control — it’s falling apart,” Wellington said. “This is creating a major issue and we don’t know how long it’s going to last. And farmers are having another tough year, and if we don’t fix that it’s only going to get worse.”
