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Agriculture needs exports and needs Trade Promotion Authority

Wisconsin dairy farmer Pete Kappelman is Chairman of the Board of Land O’Lakes Cooperative, treasurer of the Board of Directors for National Milk Producers Federation and serves on the Board of Heifer International. Last week he was invited to talk to members of the House Agriculture Committee about trade. “Eighty percent of the ag committee is new this year and Chair Conway wanted those new members to really understand how important trade is to agriculture.”

Kappelman told the group that the export market takes about fifteen percent of total U.S. dairy production these days so the industry has a big interest in pending trade deals. Of particular interest, the Trans Pacific Partnership (TPP) and two members of that deal: Canada and Japan.  “Both of those are markets which are very inaccessible to U.S. dairy.”  He says he knows they aren’t going to throw their doors open to U.S. dairy products but “we would like to at least crack the door.”  Kappelman thinks Japan will make some concessions but has not seen any hint of change from Canada.

Another concern for U.S. dairy in the deal is New Zealand however, Kappelman says the reality is, “New Zealand dairy is about the size of California. The reason they are so powerful is because they export about ninety percent of it.”  He says we have no need to fear New Zealand, their price of land and in turn cost of production is going up to the point “we can compete.”

The elephant in the room is China; the global dairy market plunged when the Chinese stopped buying a year ago. Kappelman says they overbought and are building their domestic supply, phasing-out smaller farms which were the source of the melamine contamination scandal and building larger, modern dairies producing a quality product.  However, he doesn’t think they will be able to meet the growing demand for dairy and will return to the global market.

Another variable in the global market right now is what European producers will do as the Common Agricultural Program quotas end on April 1^st.  Some think there will be a rush to expand production; Kappelman says their milk prices have been depressed ever since the global market declined a year ago and there really isn’t that big of an incentive to increase production right now.  Their cost of production is another detriment.

Kappelman also called on the House members to pass Trade Promotion Authority for the President. He says it is the only way to get a trade deal done: “If they agree to a deal and then our Congress tampers with it, they won’t trust us to approve what was agreed upon.”  He stresses that if we want to get a good deal done with the TPP and after that, the European Union, Congress needs to pass TPA.  He notes one of the requirements of the Authority is that the Administration keep Congress informed on what is being negotiated.

Overall, Kappelman thinks the new House Ag Committee realizes agriculture is “a powerhouse for exports” and a big reason the U.S. trade deficit is not bigger than what it is.

Listen to Kappelman’s comments here: