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January 2017, Volume 23, Number 1

US Dairy, Trade, GMOs

In 1900, 40 percent of Americans were employed in agriculture, compared with less than two percent today. As agriculture was mechanized a century ago, many states required students to stay in school until age 16 in an effort to prepare youth for nonfarm jobs.

Most US milk is produced in the northern and western states, led by California and Wisconsin. Farm milk is an average 87.3 percent water, 8.9 percent skim solids, and 3.8 percent fat. Fluid milk consumption has been falling, while cheese and butter consumption has been rising.

US dairy policy uses milk marketing orders to set minimum farm prices paid for milk sold to consumers and used to manufacture cheese and butter. The federal Margin Protection Program for Dairy offers insurance payments of $4 to $8 per hundredweight of milk if the margin, the difference between the average price of milk and average feed costs, changes.

There are economies of scale in milk production that encourage fewer and larger dairies. Half of US dairies had 900 or more cows in 2012, up from half having 100 or more cows two decades earlier. The largest 1,800 dairies in 2012 each had at least 1,000 cows and included over half of all dairy cows. Megadairies such as Oregon's Threemile Canyon and Indiana's Fair Oaks farms each milk more than 30,000 cows.

In 2010, the average cost to produce 100 pounds of milk ranged from less than $14 for dairies with 2,000 or more cows to $30 for dairies with fewer than 100 cows. The US has about 8.7 million dairy cows, including 1.8 million or 21 percent in California; 1.3 million or 15 percent in Wisconsin; 600,000 each in New York and Idaho; and 500,000 in Pennsylvania.

Some 7,100 US dairies employed an average 103,300 UI-covered workers in 2015, up 30 percent from an average 78,600 in 2006 (NAICS 11212). Total wages of $3.3 billion made the average weekly pay $615 and the average annual pay $33,100 in 2015, up from $475 and $24,600 in 2006.

Average employment is a measure of year-round jobs; the number of individuals filling these jobs is larger due to turnover and seasonality. DOL estimates that UI covers 86 percent of farm workers, which would suggest a total of 120,000 year-round jobs in the US dairy sector, and perhaps 150,000 or more unique workers who fill these jobs.

California's 1,200 dairies employed an average 18,100 workers in 2015, up 30 percent from an average 17,200 in 2006; four percent of the state's average 421,300 jobs in agriculture (NAICS 11) was in dairies. Total wages were $634 million, making average weekly pay $675 and average annual pay $35,100 in 2015, up from $500 and $26,000 in 2006. California accounts for 17 percent of UI-covered dairy establishments, 17 percent of average dairy employment, and 19 percent of wages paid.

Wisconsin's 1,100 dairies employed an average 13,700 workers in 2015, up from 7,100 in 2006; half of the state's average 26,800 jobs in agriculture (NAICS 11) were in dairies. Total wages were $414 million, making average weekly pay $580 and average annual pay $30,200 in 2015, up from $420 and $21,900 in 2006. Wisconsin accounts for 15 percent of UI-covered dairies, 13 percent of average dairy employment, and 12 percent of wages paid.

California and Wisconsin account for a third of dairy cows and dairy employment. Average weekly pay for dairy workers rose by 35 percent in California between 2006 and 2015, and by 38 percent in Wisconsin. Average weekly wages for all agricultural workers (NAICS 11) rose from $430 to $580 or 35 percent in California between 2006 and 2015, that is, NACIS 11 weekly wages are lower than dairy wages, but they rose at the same pace as dairy wages. In Wisconsin, NACIS 11 weekly wages rose from $485 to $640 or 32 percent, that is, they were higher than dairy wages but rose slower.

Trade. The volume of world trade is growing more slowly than economic growth, up about 0.7 percent despite global economic growth of one percent in 2016. Trade grew at a 2.5-to-one ratio to economic growth during the 1990s, rising by five percent when global economic growth was two percent, and fell faster than economic growth fell during the 2008-09 recession.

Analysts suggest several reasons for the slower growth of trade. First is the changing role of China, which increasingly makes its own parts and consumes its own goods. Shipping firms did not anticipate this change, and their capacity to move 20 million standardized shipping containers looks too large.

Two-thirds of world trade is between 15 mostly industrial countries. There is a small prospect that India will replace China as the world's factory due to automation. The number of free trade agreements peaked in the 1990s at over 40 a year, but the share of global GDP covered by FTAs has continued to increase, to 25 percent in 2015.

The Trans-Pacific Partnership would reduce trade barriers between 12 nations, including the US and Japan. Unions and both Clinton and Trump attacked the TPP despite inclusion of the International Labor Organization's Declaration on Fundamental Principles and Rights at Work to protect workers; these principles prohibit forced and child labor. After Trump was elected, US leaders said that TPP would not be approved.

The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada was signed in October 2016, but only after dairy farmers in French-speaking Wallonia received concessions. The EU, under pressure from member states, in summer 2016 decided that CETA would have to be approved by each of the 37 national and regional legislatures in the EU, and Wallonia with 3.5 million people refused (Belgium has five regional governments that each must approve CETA).

The most controversial part of CETA involves independent dispute arbitration tribunals that allow investors to sue governments if they believe national rules have been set that breach the terms of the agreement. However, CETA also protects Canadian dairy farmers by maintaining a supply management program that gives farmers milk production quotas, sets farmers' prices based on their costs, and limits imports.

Supply management, which has generated a quota price of C$30,000 per cow, also protects poultry and egg producers; new dairy farmers must pay C$30,000 per cow to have the right to sell their milk.

There are many reasons for skepticism about freer trade, in part because many trade barriers have already been reduced, so there is only a small gain from another FTA. For example, the increase in US GDP from TPP is projected to be less than 0.5 percent. If future FTAs do not include investor-state resolution provisions and other items favored by corporations, there is little to negotiate.

Trade Adjustment Assistance (TAA) was established in 1962 to assist workers displaced by freer trade, usually providing them with extended unemployment insurance and training for new jobs. Employers, unions and workers apply to DOL for TAA benefits, which are provided if DOL agrees that the reason for job loss was primarily increased trade.

Between 1962 and 2015, almost five million US workers were certified to receive TAA benefits, and 2.2 million actually received some TAA benefits. Most of those receiving TAA benefits are in metro areas with 80 percent of US residents, but rural areas have the highest rates of TAA benefits, primarily because it is harder for displaced workers in places with one or a few factories to find other jobs on their own.

Between 2000 and 2010, Ohio, North Carolina, Michigan, and Pennsylvania each lost over 300,000 manufacturing jobs. Unlike European countries such as Denmark, which have extensive counseling and training programs for displaced workers, many displaced US workers take Social Security disability benefits and drop out of the labor force. Those who find new jobs earn 10 to 15 percent less.

GMOs. Genetically modified organisms in major US crops aimed to increase yields and reduce the use of pesticides and herbicides. The New York Times on October 30, 2016 reported that these goals have not been achieved. Yields of major crops such as corn are similar in the US and Western Europe, which does not use GMO crops.

GMOs are associated with lower insecticide usage in the US, but the emergence of super weeds in the US has led to increased herbicide usage. The same companies, Monsanto and Syngenta, sell GMO seeds and the chemicals that attack insects and weeds.

Roundup-ready seeds lead to more usage of herbicides because the plants can be sprayed with weed killer and survive. Some weeds are becoming resistant to Roundup, which has led to more tinkering with the seeds so that they are resistant to other weed killers as well.

Europeans remain resistant to GMO crops, while mergers of seed and chemical companies promise more US efforts to develop GMO crops that lead to increased sales of GMO seeds and chemicals.

Brazil. Brazil is an agricultural powerhouse, and a leading exporter of sugar, coffee and soybeans. It is also a major beef exporter, with more cattle, some 215 million, than people, 205 million.