By  E. W. Lang

The USMCA passed the United States House of Representatives this week by a 385 to 41 vote. This trade agreement among Mexico, the United States and Canada replaces the old North American Free Trade Agreement (NAFTA) from 1994.

NAFTA resulted in dramatic increases in ag and other products crossing borders, and significantly more revenue for U.S. farmers, partly at the expense of more U.S. manufacturing jobs moving south of our border. There are always trade offs with this kind of thing. NAFTA had some, and the USMCA will have some, along with the requisite unintended consequences, sure to be discovered over time.

The USMCA seems to be a zero sum game for most parties involved, other than the chicken and milk cow folk on both sides of our northern border. We gained access to Canadian dairy markets amounting to 3.6% of the dairy industry up there, this at the expense of Canadian milk producers. We lost about that much of our dairy market share Canada a couple years ago, manifest in some Wisconsin and Michigan dairy farmers abruptly losing their milk buyer. There was some retaliatory action on Canadian lumber imports, resulting in a 24 % increase in the price of all wood products, at least for a time.

The Canadian poultry and dairy production sectors are both regulated by government quota that restrict how much of each product farmers can produce. Apparently U.S. poultry producers are going to be able to move more product north of the border, once this agreement is ratified. Advantage USA on two counts, dairy and poultry.

Conversely, Canadian milk and poultry producers end up with the short end of the deal, based on what we know at this point. It sounds like all other farm commodities enjoy largely the same export/import treatment of 25 years ago under the original NAFTA. Like I said earlier, it's a zero sum game for most of agriculture.

As a side note, I write this from the perspective of a dairy farmer, I'd like to note that Iowa is the leading egg producer of all the United States. As such, I hope that my undergraduate brethren now realize they should have spent more time listening, and less time smirking, during the poultry lectures in university.

One alleged winner in this Agreement are the autoworkers. And by that I mean autoworkers only, not factory workers, generally. More - 75% vs. 62% - auto parts will have to be made in the United States, and 30% of production will have to be done by workers making an average of $16 per hour. And though $16 isn't a very high average, all this regulation burdens the auto industry. As such, this clause is largely a campaign device, rather than an actual benefit to people on the automotive production line.

There is also a mechanism for the U.S. to monitor pay and working conditions in Mexican factories. Mexico really doesn't like this for reasons obvious. It's not like we would ever allow Canadian referees to determine if we're playing hockey right. And we don't let the Mounties ride in to inspect our Maple Syrup industry, or to monitor how often we say "please" and "thank you" in social settings. Again, this is a campaign device that was needed to ease USMCA passage in the House as an election year approaches.

Corn growers and their fellow travelers, the ethanol producers, got bad news this week in the form of EPA blending requirements. It looks like some ethanol plants will remain closed as the federal government has just designated winners (petroleum) and losers (corn/ethanol) in a segment of the energy industry. Corn producers should get some livestock so they have something to do the other ten months a year. I've also been thinking of a couple ethanol gentlemen, and I use that term loosely, who crossed me 15 and 20 years ago. Tough darts served cold are the best kind.

Butter is closing out the week at $2.00 per lb., up four cents but still near the three year low of $1.91. Barrel cheddar closed at $1.67 per lb., down three for the week. Blocks ended at $1.86 per lb., up six over the last five trading days. The block barrel spread is 19 cents, which seems high. Perhaps barrels are too low or blocks are too high. Your guess is as good as mine.

Class III Milk Futures for calendar 2020 run from $17.25 to $17.69 in each of the trading months. Dec., 2019 Class III is $19.35 per cwt. Dec. Class IV is $16.72 and Class IV for 2020 runs from $17 to $18.25 per cwt.