Comparing government support for Canadian versus American dairy farmers is not a simple black and white process. While Canada’s dairy sector operates under a regulated supply management system, the U.S. government’s support for its dairy farmers is less direct.
Support, in its various forms, equaled 73 percent of U.S. dairy farmers’ market returns in 2015, according to a report published by a Canadian trade consulting firm on Thursday.
The 588-page study by Grey, Clark, Shih and Associates — commissioned by Dairy Farmers of Canada (DFC) — says the American government contributed around $22.2 billion in direct and indirect subsidies to the dairy sector in 2015.
Lead author Peter Clark shared the numbers at DFC’s annual policy conference in Ottawa this week.
“The support is completely ignored,” he said. “When it comes to farm support, the U.S. has the deepest pockets; deeper even than the European Union. Our study provides detail nationally, and on a state basis, the losses to U.S. dairy farmers. USDA data reveals that for more than a decade, U.S. farm gate prices for milk fail to cover costs of production.”
Based solely on the USDA’s national average farm-gate price and national average costs of production, Clark says American dairy farmers lost money every year from 2005 to 2016.
The report figures support granted to U.S. dairy farmers in 2015 represented approximately C$0.35 per litre — almost three-quarters of producers’ revenue.
The calculations include government expenditures outside of dairy programs, such as subsidized irrigation water, nutrition programs and government loan programs. For example, the benefits of state and local irrigation programs are estimated at $2.1 billion.
Clark calls the subsidies “an 800-pound gorilla in the room,” with the U.S. dairy industry demanding increased access to Canada’s supply managed market in the current North American Free Trade Agreement (NAFTA) negotiations.
“U.S. politicians have been quick to demonize Canada for its different system. Fair trade is in the eye of the beholder. For example, some 41 countries, including the U.S., has WTO approved tariff-rate quotas. The U.S. challenged Canada’s rights to use their quotas within NAFTA over 20 years ago. The U.S. lost. But the U.S. does tend to cast a very broad net when they complain about trade,” said Clark.
The report follows similar analysis conducted by Grey, Clark, Shih and Associates in 1990, 1998, 2003, 2005 and 2010. In 2010, the firm found U.S. government support equaled 62 percent of American dairy farmer returns, totalling nearly $20 billion.
The U.S. Dairy Export Council has not yet responded to a request for comment on the report.