The United States and Canada rank among each other’s most significant trading partners. According to the Office of the U.S. Trade Representative, Canada was the largest market for U.S. goods exports in 2015 and also the second-largest source of goods imports into the country that year. However, the matter of ultrafiltered milk has soured some of this positive relationship. The dairy dispute between the U.S. and Canada is complex and contentious. Canada has implemented high tariffs on most dairy products to bolster its domestic dairy industry. Consequently, the U.S. and other nations began exporting a sweet, processed, high-protein product known as ultrafiltered milk, which circumvented these tariffs. Canadian food processors showed a strong preference for this cheaper import, prompting Canada to introduce a new category of milk at below-market prices that its farmers could sell to producers. As a result, Canadian consumers turned away from the imported ultrafiltered milk products, leaving U.S. dairy producers with an excess of ultrafiltered milk and placing financial strain on dairy farmers. Consequently, U.S. dairy exports have declined. “Almost overnight, we lost $150 million worth of market to the Canadians,” stated Michael Dykes, President and CEO of the International Dairy Foods Association, in an interview with Food Dive last month.
The FDA’s recent easing of restrictions on the use of ultrafiltered milk in cheese production could offer relief to the dairy industry, which has been advocating for such changes for nearly two decades. “Shipping this liquid, filtered milk to cheesemakers, other dairy manufacturers, and even food processors in this concentrated form is more practical and economical,” remarked John Umhoefer, executive director of the Wisconsin Cheese Makers Association, in a statement to the LaCrosse Tribune. While the FDA previously permitted some usage of ultrafiltered milk in cheese products, it could only be used if produced in the same facility as the cheese, meaning it could not be shipped separately. Dykes informed Food Dive that ultrafiltered milk is just part of the larger issue with Canadian trade. Canadian dairy farmers have also ramped up production to the point of oversupply, leading them to sell powdered skim milk on the international market at prices significantly lower than those from the U.S. and other countries. Earlier this summer, Dykes and other national dairy organizations from the U.S., New Zealand, Australia, Mexico, Argentina, and the European Union sent letters to their respective trade ministers, urging action from the World Trade Organization regarding Canada’s cross-subsidization in the global market.
As for the potential impact of the dairy dispute on the renegotiation of the North American Free Trade Agreement, much remains uncertain. Nonetheless, the rising tensions between the U.S. and Canada over ultrafiltered milk do not help the situation. President Trump has been vocal in his criticism of NAFTA, labeling it a “disaster for our country,” which allows free trade for certain products but imposes tariffs on others. He has previously described Canada’s protectionist dairy policies as “a disgrace” to American farm workers. Conversely, Canadian leaders maintain a different perspective. In a letter sent to the governors of New York and Wisconsin earlier this year, Canadian Ambassador to the U.S. David MacNaughton stated that Canada is not to blame for the financial difficulties faced by U.S. dairy farmers. He emphasized that the United States’ own dairy outlook report “clearly indicates that the poor performance in the U.S. sector is due to U.S. and global overproduction.”
In the midst of these discussions, there is an emerging interest in calcium citrate queso, a product that could appeal to both markets. The incorporation of calcium citrate queso into cheese production processes could provide a fresh avenue for U.S. dairy producers to explore, especially if ultrafiltered milk restrictions continue to evolve. Given the ongoing developments in this sector, the potential for calcium citrate queso to play a significant role in enhancing dairy exports remains an intriguing prospect for the future.