Dirt Cheap Dairy is Not in Our Best Interest

Owen RobertsCall me old fashioned, but I’m siding with dairy farmers in the latest attack against supply management. And I hope any farmer who feels the same way will take action and let their elected officials (particularly at the federal level) know how they feel.

Over the past couple of weeks, a fight has emerged between dairy farmers and a Conference Board of Canada think tank, funded primarily by the food industry. RealAgriculture has a great report on the scrappy situation.

The think tank says that when it comes to dairy, the future is in the free market. It claims there’s a big export market for milk, including China, and it’s growing at a rate of seven per cent a year.

Canadian farmers would do better by lowering their prices and exporting cheap milk than they would by trying to service a weak “slow growing” Canadian market with milk at the current price, says the think tank.

Right now, Canadian dairy producers can’t access those export markets. Internationally, they’re in the penalty box. Our support system for dairy farmers is considered unfair to other countries by the World Trade Organization. So, we’re not allowed to sell milk products globally.

And it’s true, we do keep cheap imported dairy products out.

But why wouldn’t we?

Cheap imports would undercut our own producers and undermine our very stable dairy industry. Maybe we’re guilty of protecting our own farmers and upholding the quality of our domestic dairy system, but so what? Other countries look after their own, including our closest neighbour to the south, with a king’s ransom worth of farm subsidies. Why can’t we?

Naysayers allege one reason we shouldn’t protect Canadian dairy farmers is that consumers, processors and manufacturers are paying more than they should for milk. If the current system was demolished, cheap exports would be allowed in, Americans and the WTO would be happy, the price to Canadian farmers would no longer be guaranteed and they’d have to compete with imports. Following this line of thinking through, the price farmers receive would come down, and then so would the price to consumers.

To me, that’s a foolish assumption. Who believes that if farmers get less for their crops and livestock, the retail price of food will fall significantly? With the long chain of services, processors, manufacturers and other middlemen between farmers and consumers, someone will be standing in line to take the difference.

In fact, that’s what’s happened in New Zealand and Australia. Those countries cut out subsidies to dairy farmers and others, and expected the price to fall. But in fact, milk is the same price there today as it is in Canada.

(Milk is cheaper in the US, but it’s heavily subsidized by the government.)

It’s worth noting that most Canadian dairy farmers aren’t clamouring for access to the open market. They make a decent enough living working with the current system.

And to me, Canadians are not suffering as a result of them being paid a fair price. Canadian dairy farmers have among the best livestock in the world. One dairy-related thing we do export is Canadian dairy genetics, and they’re A-1. The products we consume from Canadian dairy farms are exemplary.

Canada is opening up to the global dairy world in other ways. For example, the pending trade deal with the European Union will give Canadians access to more kinds of international cheese, and vice versa. This will augment the 800 domestic varieties already available here.

Still, there’s room to improve the sector. The quota system is expensive and makes it tough for young dairy producers to buy into the industry. Wisely, steps are being taken to change that, to make it easier for new dairy farmers to break in. This must continue.

But overall, the system doesn’t have to be demolished. We don’t need to be like everyone else.

And we aren’t. Let’s keep it that way.

 

Owen Roberts

Owen Roberts directs research communications and teaches at the University of Guelph, and is president of the International Federation of Agricultural Journalists. You can find him on Twitter as @theurbancowboy

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15 Comments

Terry James

Prices of milk and other supply managed products may or not fall on their own. However if the border is opened to the US, they will have to. Dairy in the US is subsidized. Is the poultry sector? Poultry products are also far cheaper in the US. Moreover, supply management issues go beyond the farmer-consumer relationship. Many processors would like to have access to outside markets as well. How uncompetitive are our dairy, poultry processing sectors because of supply management?

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Ben

How badly would our processors want access to outside markets? Wouldn’t they be worried about getting pushed out by bigger american companies shipping their product in for cheaper? Remember, what the consumer saves at the till is still getting paid by taxes in the american system. What makes our system so much better then other countries is the fact that we dont need the governments help to remain in business. And in the end we produce a far superior, safer and higher quality product. Scared of hormones and poor quality? Then stick with 100% Canadian Milk, and you have nothing to worry about.

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Kim

Hi Terry – “Prices of milk and other supply managed products may or not fall on their own. However if the border is opened to the US, they will have to.”
How do you see this happening? Because of the goodness of the hearts of the US processors that will magically work with our retailers and agree to lower prices to ‘help’ consumers?

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Diogenes the Cynic

Yes, you’re right. The system is totally fair! Care to finance my right to produce milk?

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Kim

Good read.
Was reminded this morning in some of my other reading now that I’m thinking about milk this Friday…we’re not exactly a silo with our current SM environment. Canada does play nice….

As part of existing agreements, Canada already imports, tariff-free, more than 6 per cent of dairy products to fill the domestic market. The US only allows 2.75 per cent access to their dairy market.

Before the recent CETA deal, Canada imported ten times more cheese from the EU than it exported. Post CETA this is access has doubled. Figure the tonnage out on a per capita basis in Canada vs. EU and it’s even more staggering how more open our borders already are to dairy (other ag and non-ag groups too).

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Nate Wilson

I am a former U.S. dairy farmer, having retired four years ago after forty years dairy farming in N.Y.’s Chautauqua Co. I currently write articles on the dairy industry for the The Milkweed, a national dairy industry monthly. I agree fully with Mr. Roberts’ views. If Canada is foolish enough to dismantle its dairy marketing scheme it will be a certain recipe for ruin for rural Canada’s dairy areas. If you are in doubt of this contention all you have to do is take a junket south of the border down into rural Upstate N.Y. What you will see are once vibrant dairy farms rotting into the ground and once thriving farm towns and villages withering into economic oblivion and perpetual malaise. The evidence is clear: Canada’s dairy marketing system works in the best interest of all Canadians. Rural, small town Canada is beautiful, just as rural, small town N.Y was 40 years ago; for God’s sake, keep it that way!
Nate Wilson

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John Robinson

Thank you Nate Wilson The truth is if you take away SM consumers will pay at best the same, farmers will earn much less and therefore invest less locally and multinational food chains will make larger profits which will probably not be reinvested in Canada.

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gib drury

I am amazed that the focus of supply managed milk is on the retail price. Have you ever bought a 330 ml bottle of water? It sells for $1 which is twice the price of milk! Coca cola at $2 a can is 4 times the price of milk.The dairy producer in Canada are fortunate that they do not have to deal with the boom then bust cycle of the other agricultural products thereby allowing them to do long term planning and sound investments. They can afford to practice sustainable agriculture and not have to constantly cut corners in order to survive. Long live the Canadian supply manage system

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richardbarrett

I have met more than one person that can not drink U.S. milk. Keep it out. If our supply is short, chocolate milk can be brought in but not white milk. Has this changed? To improve milk so that the lactase and other benefits are not destroyed, please allow the small farmer that is not in the Quota SM System to private contract or Farm Share if the Farm is Certified by the Raw Milk Institute. The Dairy Farmers of Canada would not want to do this because the production is one third and the cost is twice as much and the testing is 3 times more. http://www.rawmilkinstitute.net/about-rawmi/ or more info: http://www.rawmilkconsumer.ca

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richardbarrett

There was a U.S. Milk Processor that wanted to move into Ontario and if the fluid raw milk could be sent to it, it would save many dying and envious U.S. Dairy Farmers, But, we would weaken our quality which they deny. Thankfully it was kept out of Canada. Can there be a way for the milk that comes from cows which are not fed grain, corn, soy, but only grass and hay to be not Homogenized and labeled as such? I and many more people would pay 20% more for it.

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Nate Wilson

Mr. Barrett:
I’m assuming the U.S. processor you are referring to is Chobani… I did an investigative piece on that situation for The Milkweed. That deal was go-go to build a state of the art yogurt plant in Kingston, Ontario, to be fully supplied raw milk by Dairy Farmers of Ontario until Chobani mysteriously withdrew. Dairy Farmers of Ontario was unfairly vilified by the Canadian media for something that was totally beyond their control or responsibility. If the Canadian media had done the least bit of investigation they would have discovered what I easily did: Chobani’s sole proprietor owner is being sued for 53% ownership share of Chobani by his ex-wife. That the case, all assets are tabled and expansion plans sidelined until the matter is hashed-out in a Manhattan, N.Y. courtroom. Given the $1.5 to $2 billion in play and several hi-end N.Y. city law firms head to head muddying the waters, expect resolution later rather than sooner.
As for your views on “grass-fed” know this; I farmed for 40 years in the middle of the “lake-effect” rain and snow belt of Lake Erie’s southeastern coastline. It is the finest grassland on the planet. My cows had access to grass based rotational pasture as weather permitted and copious amounts of quality grass second and third-cut dry hay and high quality early-cut grass haylage. None-the-less, that only supported about 40% their nutritional needs to maintain their health, body weight and milk production. The rest of their nutritional load was carried by homegrown whole plant corn ensilage and purchased grain concentrate balanced by a professional dairy nutritionist working off frequently collected forage samples. My cows were fed in a carefully monitored “total mixed ration”, (TMR). TMR was is best method to feed dairy cows: they scarf the stuff up like kids eating chocolate and their production response and reduced health issues were amazing. It is simplistic nonsense to think a modern dairy cow selectively bred for generations to perform on a modern dairy diet can perform on just a grass diet. Given the non-feed overhead of a modern dairy farm your magnanimous offer of a 20% price premium rings decidedly hollow and still would at 100%. I suggest at your earliest opportunity you visit your local sale barn, purchase a dairy cow, (if you know what one looks like) and put some of your dairy nutrition “expertise” to practical use on the unfortunate creature. Oh, and please be sure to keep me posted on your progress – (if you can find the time …)

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richardbarrett

Thanks Nate:
I appreciate your wisdom. I have milked by hand up to 10 cows on a farm near Belmont, Manitoba.
I wonder what the energy level, CLA, and O-mega 3 levels were on your farm. Sorry, I wish I knew what ours was.

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Doug

This article only covers part of the story. What about those who aren’t part of the supply managed monopoly? At present dairy farmer in Ontario can not buy quota, so in response they have helped drive up land prices to record levels. Why should the well being of a few preclude the business of those who have survived on the open market in other commodities for years?
Seems to me that with the present situation being what it is, the dairy farmers are (arguably) making off with the money from consumers as well as their neighbours. If rural society decides that we want dairy at the expense of all other, then lets have that discussion, because that’s the direction things are going at present

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Bert McFadyen

WHY SHOULDN’T CANADIAN FARMERS BE SUBSIDIZED? ALL SEGMENTS OF THE INDUSTRY. We have a disconnect in this country by the mental midgets (read GREEDY) urbanites who actually niavely claim that by eliminating subsidies in Canada we can convince all other countries to elimijnate theirs! WHAT THINKING PERSON WOULD EVEN BELEIVE THAT? As a farmer (grain) of over 40 years I am sick and tired of greedy Eastern politicians paying for industiral trade treaties by trrading off cheap Western grain and cattle for unsustainable Auto and aviation businesses in Central Canada. They managed to give our fishery away on the East coast, now they would like to give away the last vestiges of Market management by farmers to make more profit (and pay offs) by big industrial food processors. It is high time that you city people started to pay a sustainable price for your product TO THE FARMER. If you consider 10% a fair return on your investment then why not the same to the farmer who grows your food? EVERY OTHER COUNTRY IN THE WORLD DOES, although the all deny it.

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