EDITOR’S NOTE: This is part 2 in a 3-part series exploring North American dairy and agricultural integration as a more unified continental, even global, food system has evolved in the background of USMCA review. Are the same old policy battles keeping pace with new realities at the farm level?

WASHINGTON — Just weeks after the Trump administration announced it would not renew the U.S.-Mexico-Canada Agreement (USMCA) “as-is,” and days after the July 20 announcement outlining proposed tariff actions ahead of the agreement’s review, debate has largely centered on tariff-rate quotas, market access, dispute settlement, and trade balances.

Whether the proposed tariff actions ultimately remain, change, or become negotiating leverage, they have refocused attention on USMCA even as a much larger transformation is already reshaping North American agriculture.

An earlier discussion at the June 24 Center for Strategic and International Studies (CSIS) conference, Three Nations, One Table: North American Agriculture under USMCA, suggests bigger questions may stand in the background.

Has continental agriculture, including dairy, evolved and integrated faster than the trade policies that govern it?

Panelists from all three countries described a North American food system that has become increasingly integrated through specialization, investment, technology, and supply chains that cross borders more than once before food reaches consumers.

Gregg Doud, chief executive officer of the National Milk Producers Federation and former U.S. chief agricultural negotiator, described the goal this way: “This is not a situation where we try to go in and dominate. This is a situation where we work together to increase consumption. Our objective is to make the pie bigger.”

That objective resonated with panelists who kept stressing the consumer benefits. Speakers pointed to abundant food supplies, year-round availability, and research estimating grocery costs are about 12% lower than they otherwise would have been because of North American agricultural integration.

Mexico’s Julio Berdegué described the continent as “completely interlocked,” noting that imports of U.S. and Canadian grain and oilseeds helped increase Mexican consumption of milk, eggs and meat by 26% during the past 15 years.

Processors have benefited as well

Specialized manufacturing allows milk to be separated into an expanding array of products and ingredients. Facilities increasingly focus on what they do best, whether producing cheese, drying powders, filtering and concentrating proteins or manufacturing value-added ingredients, while products move through continental, even global, supply chains.

The question for dairy farmers is different: As the pie grows bigger, is the farm’s slice keeping pace?

Highly specialized manufacturing rewards consistent volume, continuous throughput, traceability and increasingly detailed reporting on everything from animal care to environmental performance. Once processors invest hundreds of millions of dollars in highly specialized plants, interruptions become costly. The economics naturally favor dependable milk supplies capable of meeting those requirements every day.

That doesn’t make smaller dairies obsolete, but it does reshape milk procurement. It also helps explain why the structure of the dairy industry has changed so dramatically over the past 25 years.

Since 2000, the number of U.S. dairy farms has fallen nearly 78%, while average herd size has grown from 111 cows to 397. Meanwhile, U.S. milk production increased 38% with only about a 3% increase in cow numbers as genetics, nutrition, management, and component production have transformed the productivity of the dairy cow.

By the 2022 Census of Agriculture, roughly 8% of dairies, not quite 2000 farms, milked nearly two-thirds of the nation’s cows.

Those statistics tell two stories. One is remarkable efficiency. The other is increasing concentration.

Neither occurred because of USMCA alone. Technology, genetics, capital investment, and global competition have all played major roles. However, continental integration has accelerated many of those forces by rewarding scale and specialization in a way that is regionalized over blurred borders.

The same pattern extends beyond dairy

Beef, pork and poultry have become increasingly specialized as multinational companies operate processing assets across North America. Livestock, feed ingredients, and finished products often move where geography, climate or economics provide the greatest advantage, creating efficiencies that would have been difficult to imagine a generation ago.

Integration today no longer stops with products. It increasingly includes information.

Processors, retailers and food companies are asking producers for more environmental reporting, animal-care documentation, carbon accounting and supply-chain verification. At the same time, modern equipment automatically collects increasing amounts of data through software, sensors and connected technologies.

As these information systems become more integrated, farmers are asking new questions. Who benefits, capturing the value and leverage from the insights created when thousands of farms are aggregated into regional, national, continental, even global databases?

Those questions are largely absent from the formal USMCA review, yet they increasingly influence how agriculture operates.

Meanwhile, U.S. dairy farmers continue to be paid largely through domestic Federal Milk Marketing Order benchmark pricing formulas tied to four benchmark commodities, even as milk is increasingly transformed into a broader portfolio of ingredients serving domestic and global markets.

That disconnect has become more noticeable over the past two years, and in particular the past few weeks. Commodity prices for cheese, butter, nonfat dry milk and dry whey have weakened, taking back-to-back nosedives last week and this week, despite the increased global price indexes traded last week.

This is pressuring U.S. milk prices and reducing projected milk-over-feed margins for the remainder of 2026 that would trigger DMC payments when earlier forecasts did not. This is happening even as new processing investments and export opportunities continue to expand.

Nearly $11 billion in new U.S. dairy processing capacity has or is coming online, much of it designed to produce products destined for customers beyond North America.

The CSIS conference presented compelling evidence that North American agriculture has become more productive, more resilient and more efficient. The challenge now is ensuring that farmers get a fair slice of the bigger pie.

As the annual USMCA reviews move forward, negotiators and policymakers will undoubtedly revisit tariffs, quotas and market access.

Dairy farmers may be asking a different question than the traditional “access to Canadian TRQs” discussion that commands the headlines.

Negotiators and policymakers may want to drill down into results on the farm. If the industry objective is to make the pie bigger, and the pie is indeed getting bigger, how is the value that started on the farm with the transformation of the dairy cow being shared? Where is the farmer’s slice of that objective voiced by NMPF? Surely growth without value is not the ultimate prize.

Such important questions reach beyond trade to touch pricing, margins, data collection, market transparency, and long-term economic sustainability of dairy farms producing milk in a United States that would do well to avoid full transformation into cow islands and food deserts.