Fears of US dairy glut

Warwick Daily News - South West Queensland Rural Weekly - - News - Natalie Kot­sios news@ru­ral­weekly.com.au

SUB­SI­DIES aimed at cush­ion­ing Amer­i­can farm­ers from the US-China trade war could have sur­plus prod­uct look­ing for new mar­kets, putting global trade un­der pres­sure.

Dairy Aus­tralia trade man­ager Charles McEl­hone said the in­dus­try was closely watch­ing the im­pact of US Pres­i­dent Don­ald Trump’s $12 bil­lion farm sup­port pro­gram, which is be­ing rolled out as the US-China trade war es­ca­lates.

The ma­jor­ity of sub­si­dies have been al­lo­cated for di­rect pay­ments to farm­ers as com­pen­sa­tion for in­come losses due to higher tar­iffs im­posed by China, in­clud­ing about $127 mil­lion for the US’s 41,000 dairy farm­ers.

It means US farm­ers will be in­su­lated against the ef­fects of the trade war, and could keep pro­duc­ing the same or a larger amount of prod­uct de­spite lower de­mand, amid a pre­sumed drop in in­put costs.

“The net im­pact for the US dairy farmer could be a net pos­i­tive, as they get these di­rect pay­ments and the cost of pro­duc­tion goes down,” Mr McEl­hone said.

“It cre­ates a con­cern for Aus­tralian dairy be­cause that sur­plus prod­uct will have to find a home else­where and other mar­kets will come un­der pres­sure as a re­sult.”

Mr McEl­hone said while it was too early to tell the im­pacts of the trade war, the US would likely look to Aus­tralia’s key mar­kets of South-East Asia, Ja­pan and Korea to find a home for its ex­cess stock.

The US-China trade war shows no sign of res­o­lu­tion any time soon, with Mr Trump this month an­nounc­ing an­other $200 bil­lion in tar­iffs on Chi­nese goods, mean­ing more than half of Chi­nese im­ports will be sub­ject to ex­tra taxes.

China re­tal­i­ated by an­nounc­ing an­other

$60 bil­lion in tar­iffs on US goods, sub­ject­ing about

90 per cent of all Amer­i­can im­ports to new du­ties, while also an­nounc­ing a cut in tar­iffs for non-Amer­i­can goods from Novem­ber 1.

Me­cardo mar­ket an­a­lyst Matt Dal­gleish said Aus­tralia needed to bal­ance its strate­gic re­la­tion­ship with the US and its trad­ing re­la­tion­ship with China – the na­tion’s big­gest agri­cul­tural ex­port mar­ket by far, hit­ting

$12 bil­lion in 2017-18.

“If we can re­main open to free trade and are able to keep ne­go­ti­at­ing worth­while trade re­la­tion­ships, Aus­tralia could come out rea­son­ably well,” he said.

Mr Dal­gleish said Aus­tralian beef could ben­e­fit, as the US had only just re­ceived ac­cess back into China last year and trade pro­to­cols were not in place be­fore the trade war kicked off.

“It was a con­cern when the US got ac­cess as that was an­other com­peti­tor in the high-value end, but this has cer­tainly de­layed that, so it’s a net re­sult in favour of Aus­tralia,” he said.

❝ It cre­ates a con­cern for Aus­tralian dairy be­cause that sur­plus prod­uct will have to find a home else­where.

— Charles McEl­hone

PHOTO: CHRIS MC­COR­MACK

WATCH AND WAIT: Dairy Aus­tralia is keep­ing a close eye on how US sub­si­dies in the wake of the trade war af­fect sup­plies.

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