Kentucky Legislative Research Commission

FRANKFORT (Oct. 11, 2018) — A pending revised U.S. free trade agreement with Mexico and Canada could mean big gains in trade for Kentucky agriculture, state lawmakers heard earlier this month.

Kentucky Agriculture Commissioner Ryan Quarles told the Interim Joint Committee on Agriculture that the United States-Mexico-Canada Agreement (USMCA) which he referred to as “NAFTA 2.0” would almost eliminate tariffs on all U.S. commodities and have a positive impact on Kentucky agriculture. The agreement has yet to be ratified by the U.S. Congress or the other two countries.

One Kentucky agricultural industry eager for the agreement is the dairy industry, hard-hit by dwindling milk consumption and falling market prices. Rep. Rob Rothenburger, R-Shelbyville, asked Quarles if the USMCA would impact dairy trade with Canada, and the response was yes.

Quarles said the “major sense of contention” between the U.S. and Canada has concerned a class of processed milk products that includes skim milk and whole milk powder – classified by Canada as “Class 7 dairy products” – which Quarles said the U.S. believes has not been treated fairly.

The issue is one that “fortunately, the USMCA does address,” he told Rothenburger. “It is a bright spot for American agriculture.”

Here in Kentucky, Quarles said the dairy market has begun to stabilize thanks to efforts by the state to find markets for Kentucky milk. Last week’s groundbreaking in Somerset for $5 million plant expansion of Prairie Farms milk plant is also some bright news for Kentucky, he said. The national dairy outlook, however, is less reassuring.

“Nationwide there’s a contraction. I can’t tell you what’s going to happen next, but we’re trying with some of the federal rules; the milk ordering system is something I think can be tweaked that can help Kentucky,” said Quarles.

Kentuckians can help their dairy industry, he said, by drinking more milk. Per capita consumption of milk nationally is down three gallons per person since 2011 and down nine gallons per person since 1980, he added.

“The best thing we can do here in Kentucky to help show support for our dairy farmers is, number one, remind folks that milk is the (state’s) official drink,” said Quarles.

Also discussed was the impact of September’s heavy rains on the state’s grain crop this year. Committee Chairman Sen. Paul Hornback, R-Shelbyville, said farmers are seeing steep discounts in prices paid for soybeans and other grain because of damaged grain quality. He said that has been troublesome for farmers in a year where world grain prices are “terribly depressed” despite high yields.

“We’ve got to do a better job of being consistent in these grading methods” when grading grain quality, said Hornback. “This is a very serious issue, and it doesn’t just deal with soybeans.”

Speaking on the issue before the committee for the industry was Hopkinsville Elevator Company general manager Eston Glover III. He said this is the first time in 17 or 18 years that his company has seen damage issues with soybeans. Elevator companies both store and buy grain, like corn and soybeans, for market.

“This is a unique situation,” said Glover. He said the people who work for him are very experienced with grading in normal situations but that unique situations like Kentucky has experienced this year require “some extensive training. We have to retrain ourselves on the situation too, and make sure that we’re consistent.”

Hornback pre-filed legislation yesterday that he said will give the Kentucky Department of Agriculture more authority to investigate grain discounts and ensure consistency.

“I mainly want the (elevator companies) to know throughout the state that the Commissioner, myself and everybody else that we are watching, that you can’t take advantage of our farmers. That we have to do a better job at being consistent in these grading methods,” he said.