Rising retaliatory tariffs on U.S. exports have begun to hurt many American farmers and manufacturers. Now cheese makers are among those struggling to do business.
Sean O'Connor founded his company R & G Cheese Makers nine years ago, but it's a tough job turning his dream into economic success. He said, "You're paying up front for the raw material, the milk and other ingredients and then, if you're aging cheese, you're waiting however long to realize your profits, assuming that you're able to sell it."
If they can't sell the cheese, it sits in cold storage. The USDA says there's a record amount of cheese sitting in refrigeration, nearly 1.4 billion pounds. Part of the issue is cows are producing more milk than ever, but American milk consumption has been declining for decades.
To deal with the sluggish demand, the big dairy guys have worked intently to open new global markets. Mexico is the number one foreign destination, receiving a quarter of U.S. dairy exports. Last year, the numbers climbed 8% from the year before. China, the fourth biggest export market, grew 49% from 2016. Both countries have slapped U.S. cheeses with retaliatory tariffs of up to 25%. Canada, another top taker, at a certain point hits American dairy exports with duties of up to 275%.
Michael Dykes, Int'l Dairy Foods Assoc. President & CEO, said, "We are exporting about 15% of our production. So we depend on trade agreements. We need a functioning marketplace. Having uncertainty in the market is not a positive thing."
Already, the big cheese manufacturers report declining sales and stalled contracts. But, the biggest concern is that customers will move permanently to Europe or Canada.
Eric Guenther, Adventure in Food Trading President, said, "They can do two things, they can try to find different markets to go after, to try to move some of those products if China and Mexico don't currently buy them, or they can sell it domestically here at a less price, lower price."
But until new trade agreements are in place, the uncertainty remains and the cheese remains on the shelf.