EU-Japan trade agreement worries U.S. ag groups

Cows move toward the milking parlor on Bettencourt Dairy No. 1 in Wendell, Idaho. A new trade agreement between the European Union and Japan threatens one of the largest export markets for U.S. agricultural products such as cheese, pork and beef.

Efficiencies of scale usually give large dairies an edge in weathering downturns in the market. But that’s not the case for Box Canyon Dairy of Wendell and others in Idaho that have lost their market entirely.

Box Canyon is set for a complete herd dispersal sale on Dec. 14. The owners declined to comment, but the sale will include 17,000 head — 9,000 milking and dry cows and 8,000 heifers — according to the Toppenish Livestock Commission in Washington state, which is handling the sale.

“They lost their market,” Rick Naerebout, CEO of Idaho Dairymen’s Association, said.

The brokerage Box Canyon was selling milk to let the owners know in early fall it would no longer be able to return the value of the milk. The broker would still buy the milk but at distressed prices. There isn’t a viable market for the dairy’s milk, and all the other processors are full, he said.

“They had to make the tough decision to disperse their herd. It was a shock to the entire industry,” he said.

The industry looks up to Box Canyon and holds the owners in high regard, he said.

“It was a gut check for everybody,” he said.

If it could happen to Box Canyon, it could happen to anybody, he said.

The dairy is owned by Tom Heida, Jeannie Wolverton (now Onaindia) and Jerimy Craig, according to the Idaho State Department of Agriculture.

The multi-generational dairy was already having a tough time, being told last winter the broker had lost volume contracts. This second round of lost markets added to the problems, Naerebout said.

IDA has heard of a few more large dairies in Idaho and northern Utah that are in the same situation, and some dairies had already fallen victim to lost markets last year, he said.

“Box Canyon is not alone,” he said.

Idaho has grown its milk supply quicker than processing capacity. Herd size is stagnant, but dairymen’s efficiency in turning feed into milk has grown per-cow production, he said.

Total production is sitting at an average annual increase of 1 percent. It’s not a huge increase but it all adds up, and there’s no home for that additional milk, he said.

Idaho has always been an ingredient state, and there’s been a lot of competition in the commodity market. Growth in U.S. production means additional supplies have to go to export markets, he said.

There’s been a lot of headwind in that regard with competition from the EU and New Zealand, and now retaliatory tariffs by Mexico and China are playing into markets, he said.

“It all adds up to uncertainty, and there’s been a reluctance to invest in additional processing. Not just in Idaho but across the country,” he said.

But he does think Idaho’s ability to produce milk efficiently will draw more processing. Milk is a processor’s biggest cost, and Idaho can produce it cheaper than most other places in the country, he said.

Combined with a state government that facilitates new business, one could make the argument that Idaho is the best place in the country to invest, he said.

While some large dairies are sitting idle or empty, he doesn’t think that will happen with Box Canyon.

It’s such a nice facility with a great herd, milking an average of 82 pounds a day, that someone else will likely come in and milk the cows, he said.

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