Central Maine’s farmers are feeling the squeeze from the U.S. trade war with China.

The latest twist in trade negotiations between the U.S. and China, which has included several tariffs on goods imported and exported between the countries, came Monday when Chinese officials confirmed that they were suspending agricultural purchases in response to a new proposed tariff from the Trump administration.

A CNBC report said China is the fourth most-lucrative market for U.S. farm products, with $5.9 billion.

Jenni Tilton-Flood, owner of Flood Brothers Farms in Clinton, said dairy farms have been feeling the reverberations of a series of issues, including trade uncertainty. She said if a big purchaser cancels a shipment of product, it affects producers everywhere and changes the destination of the raw product. That means it would likely be sold for less elsewhere.

“You keep adding new (problems) and the pressures get higher,” Tilton-Flood said. “When something does happen in China and they decide they aren’t going to purchase products from a certain country, it does have reverberations.”

Her farm works with the Agri-Mark dairy cooperative, which Tilton-Flood said provides some security by finding a place for their product during tumultuous market periods. She said some farmers produce independent or directly contract to a milk producer. Tilton-Flood said even if her milk, which usually goes to H.P. Hood in Portland, travels a short distance, market conditions affect her total payout.

Catherine de Ronde, the senior economist for Agri-Mark, said China targeted the U.S. agricultural exports last year, along with Mexico. A report from Dairy Herd Management said the National Milk Producers Federation found an estimated $2.3 billion in revenue could have been lost from January to March this year because of tariffs that lowered milk prices.

De Ronde said a farm with about 1,600 milking cattle lost “just shy” of half a million dollars in potential income after tariffs were placed on Mexico for six months in 2018. Tilton-Flood’s farm, which de Ronde called “very large,” has about 1,800 milking cattle.

“The average Maine farm, which my guess is about 150 to 180 (cows), we’re talking about a $50,000 loss,” de Ronde said.

She said it’s too early to tell what the impact of China’s purchase suspension will mean, but her top concern was market uncertainty.

“It’s always hard to forecast what is going to happen geopolitically,” de Ronde said. “It’s making our jobs really hard and it’s hard for farmers to plan.”

Tariffs aren’t the only detriment to U.S. dairy — the other is a massive outbreak of African swine fever, which has decimated hog populations in China. The highly contagious fever can kill hogs within a week.

De Ronde said whey, a byproduct of cheese making, is exported to China to feed hogs. With the hog population declining by more than 50 percent, the market share declined by nearly the same amount.

Further, de Ronde said, milk producers are targeting middle-class Chinese families who could be the “next big dairy consuming part of the world.”

Julie-Marie Bickford, the executive director of the Maine Dairy Industry Association, said the price of milk is based on a complex formula that takes into account the price of storable milk goods, such as butter, cheese and powdered products.

She said production could be ramped up to meet a demand for a large client, but if the relationship goes sour, a lot of product will sit without high demand.

“If it doesn’t have a place to go, the prices plummet,” Bickford said, adding that the price is set “with no regard” to what it costs farmers to make the milk.

Tilton-Flood echoed that, saying she often doesn’t know what she’s being paid for her product until two weeks after she’s sent it away. Further, uncertain prices make it difficult for prospective farmers to borrow through banks.

“We have a cost of production, we have to do things and we have emergencies,” Tilton-Flood said. “It’s really hard to go to a bank and tell them to take a gamble.”

Bickford said farmers in Federal Order 1 — which includes New England states and parts of Delaware, Maryland, New Jersey, New York, Pennsylvania and Virginia — saw record high prices in 2014 when they received $24.29 per 100 pounds of milk they produced. In 2018, the same farmers received $16.09.

Maine farmers are paid slightly more — about a dollar — because the state has a milk commission, Bickford said, and its milk usually is processed and consumed within Maine. Maine’s Milk Commission uses the Federal Order 1 price in its price calculation, according to Bickford.

In 2016, a study conducted by the University of Maine found that the average cash cost of producing a hundredweight of milk was between $20.93 and $26.96. Anecdotally, Bickford said, that cost is going up.

“The cost of labor is huge,” she said, referencing the rising Maine minimum wage. “Dairy farmers are pretty resilient and pretty creative in how they financially juggle things to keep operating, but they’re starting to be up against it.”

Bickford said consumers will see only slight changes in milk prices, which is not indicative of the fluctuation farmers see in what they are paid.

“It’s a challenge to explain to consumers,” she said. “They might see a little bounce in the grocery store, but they don’t see the volatility that the farmer does.”

MEAT INDUSTRY ALSO IMPACTED

The effect of tariffs has also been felt with livestock and slaughterhouses in Maine.

Alicia and Corey O’Connell pose for a portrait at Briggs Farm in Somerville. Kennebec Journal photo by Joe Phelan

Corey O’Connell, owner of Briggs Farm in Somerville, said his farm is struggling to maintain a price point that allows profit and a reasonable cost to consumers. His farm has 11 pigs, about 40 chickens and two beef cows. He said the cost of grain to feed the livestock is a large portion of his production cost, but butchering expenses add to the price conundrum.

“We just processed four pigs and paid $1,400 to have it done,” O’Connell said.

Butchers often charge by “hanging weight,” he said. According to the Oklahoma Department of Agriculture, Food and Forestry, a 1,000-pound cow will have a hanging weight of about 61 percent of its original weight. The hanging weight does not include the hide, head, hooves, viscera, lungs and heart, or any blood lost during their removal. After bones and fat are removed, about 430 pounds of meat will remain.

Butcher costs have been on the rise over the years, according to Trey Gilbert, plant manager at Guilford-based slaughterhouse Herring Brothers Meats, where O’Connell said he processes his animals. Gilbert attributed the cost increase to higher costs for electricity, supplies and minimum wage workers. Along with those increases, the hides left over from processing animals have diminished in value. Gilbert said tariffs from China have dropped the prices of cowhides.

“I have to pass that along (to the customer) to keep going,” he said. “It hasn’t been good for business.”

China’s import tariffs on U.S. goods, which affect about $60 billion in goods, according to MSNBC, include a number of types of cowhide.

Gilbert said four or five years ago hides would fetch as much as $60 each, but he recently offloaded 3,000 hides for $8 apiece. Each hide also requires a bag of salt to cure it, which varies between $3 and $6.

“I probably lost money,” he said, adding that he held on to the hides in hopes the market would rebound but ran out of space.

Todd Pierce shows salted cow hides at his family’s business, West Gardiner Beef. Kennebec Journal photo by Andy Molloy

Todd Pierce, the owner of West Gardiner Beef, said hide prices have dropped below salt costs in some cases. He said his company has started hauling them to compost piles. He said slaughter costs have gone up due to the hide market’s crash. Pierce increased slaughter costs from $50 to $80, but said he could have increased them more to help close the gap.

Tori Jackson, professor of agriculture and natural resources at the University of Maine Cooperative Extension, said the new tariffs throw a wrench into local food producers’ plans. She said livestock and dairy farmers are especially affected because their product takes longer to produce.

“It’s difficult for livestock producers, specifically, because they’re making calls years in advance,” Jackson said. “When things change midstream, there’s very little they can do to mitigate those costs.”

Diversified farmers, who grow vegetables, hay or produce canned goods, Jackson said, can ride through trade condition changes a bit easier by turning to those different markets. She said diversifying can be difficult because it requires different types of labor, along with additional time and infrastructure.

“It’s really the best risk management strategy a farmer has,” Jackson said. “When one thing goes wrong, they can pivot a little more easily than if they were putting all of their eggs in one basket.”

She said the cooperative extension held a butchering school in April to help address a need for labor in the field. Jackson said butchers operate a volume business, which puts them at risk for revenue loss if farms need to process fewer animals.

“It’s hard to find people who want to eviscerate chickens for eight hours a day,” she said. “I don’t envy those folks at all because their costs are very high.”

Jackson said larger slaughterhouses and butchers would really be hit hard by these tariffs because of the number of hides they would need to offload after processing animals. But Maine’s farmers, who emphasize the use of local butchers and selling to local consumers, are slightly more insulated — though not immune — to the effects of tariffs.

As for the general problem of keeping prices down, Jackson said local farmers could remedy the issue by doing market research with their consumers. She said farmers should be asking their consumers exactly what they expect from the farm’s products and tailoring their operations to that guidance.

“All the data shows that consumers, if they have that existing relationship with a farm, are more than willing to pay that extra 50 cents a pound … the farmer needs to break even or make profit on a certain product,” Jackson said. “It really comes down to those existing relationships and how much time and effort has been put into those before (adverse events) happen.”


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