supply management

Image

He’s the Face of Canada’s Future Dairy Farmers… but will he realize his dream?

3 Comments


Farming is in this five-year-old farm boy’s blood. No doubt about that! Farming is a lifestyle, not just a job, and it’s driven by a love for the land and animals that often runs strong and true through the generations. If his dreams come true and he takes over our farm one day, he’ll be a sixth generation dairy farmer.

But what does the future look like for him? Around the world, the dairy prospects are currently very grim for aspiring dairy farmers, established dairy farmers, even five-year-old dairy dreamers. The world milk price is very very low, depressed by a huge glut of excess milk on the world market, thus driving farm gate prices down below the cost of production. Around the world – the US, EU, New Zealand, Australia – dairy farmers are producing milk at a loss. Many have been forced to give up their dream, closing their barn doors forever, shipping their animals off to auction. They just cannot continue to run a business while losing money hand over fist, regardless of how much they love their animals and land and farm.

Thankfully, here in Canada we are blessed to farm under different circumstances. Under our stable and secure supply managed system, farm gate prices have remained fairly stable. Our milk price is determined by the cost of production, not by the world milk price. Still, there are threats looming over our enviable system also.

Supply management is based on three pillars that ensure that our system works effectively:

1 Production management that matches supply with Canadian demand.

2 Predictable imports to ensure Canadian dairy market requirements are primarily met by Canadian milk production.

3 Farm gate prices that provide a reasonable return that covers production costs. Canadian dairy farmers do not rely on taxpayer subsidies.

Unfortunately the second pillar, government management of imports, has been slowly eroding over the past few years. A modified dairy product called diafiltered milk has been flowing over our borders tarriff-free because it has been classified as an ingredient at the border. That’s all fine and dandy, but once this ‘ingredient’ arrives at the processing plant, suddenly it is treated as ‘milk’. Canada’s dairy processors are required to adhere to our cheese standards, which require that a set percentage of each type of cheese must come from ‘milk’ while the remainder can be made up other ‘ingredients’. So this diafiltered milk, classified as an ingredient at the border, suddenly is re-classified at the processing plant as milk to meet the minimum milk percentage requirements. Not really fair, is it? And it’s not just small change we’re talking about here, but rather a huge hit to Canada’s dairy farmers, to the tune of 231 million dollars per year, and climbing.

There have also been troubling rumblings in the political world of late. Government support has historically been a critical part of supply management working well. This is why I, along with my fellow Canadian dairy farmers, have also been extremely unsettled to hear of a certain Member of Parliament’s recent attack on our system. This MP has shown little understanding for the current world dairy situation and has intimated that our Canadian dairy farmers would do well to imitate Australia’s example and dismantle supply management. Obviously he has not been following the news as the situation Down Under is very grim at the moment, not an ideal dairy utopia in the least! I don’t want to call extra attention to this MP and his stance on supply management by addressing these inaccurate and concerning comments, but still feel that Canadians should be aware of the battles facing dairy farmers, both at present and possibly in the future.

Just like an old fashioned three legged milking stool, our system only works if all three legs or pillars are strong and stable. Allowing one of these pillars to weaken or erode will unsettle supply management and even has the potential to topple the whole system, plunging Canadian dairy farmers into the turbulent and uncertain waters currently engulfing our international dairy farming compatriots. If that should happen, our five-year-old farm boy’s dream of following in our dairy farming footsteps would meet a sudden and heartbreaking end. Our small family farm would likely be unable to compete with the glut of foreign-government-subsidized milk flooding the world’s dairy market, and perhaps we too would be forced to close our barn doors and say goodbye to our cows and our way of life. We were unable to join our fellow Canadian dairy farmers drawing attention to these issues at the dairy rally in Ottawa last week and so are doing what we can to express our concerns in other ways, including here on social media. We’re calling on our government to show support to Canadian dairy farmers by enforcing the cheese standards and committing to continued support for our system.The Canadian dairy industry is a huge and beneficial contributor to our country’s economy and social fabric and we feel that as such we’ve earned our government’s support. Fellow Canadians, please join us in voicing your support for your Dairy Farmers of Canada. I’m sure none of us, farmers and consumers together, want to see our family farms disappear from our nation’s landscape.

A Dairy Farmer’s Thoughts on the TPP

7 Comments

Now that I have had some time to let the recent announcements about how the TPP will affect the dairy industry sink in, here is my reaction:

First of all, I’d like to extend my thanks to Dairy Farmers of Canada, and especially to DFC President Wally Smith, for their untiring work representing Canadian dairy farmers’ best interests both in Hawaii in July, and in Atlanta and Ottawa during this round of negotiations. I know that they did their utmost to present our industry’s concerns and reservations about the trade agreement and lobbied unceasingly for the preservation of our supply managed system. And their hard work paid off! Remember, just a few months ago, supply management as a system seemed to be on the negotiating table, and just last week rumours suggested that up to 10% market access was being considered. Thankfully, neither of these two scenarios came to fruition.

So what does the TPP mean for our dairy industry? Well, I don’t pretend to be an expert, but I’d like to take some time to share my thoughts.

Under the TPP agreement, our trading partners now have access to an additional 3.25% of our dairy market, tariff-free, based on  2016’s milk production. Consequently, this milk will not be produced in Canada, and will result lost revenues for dairy farmers as well as a reduction in our GDP and tax revenue. Our government negotiators obviously thought this was an appropriate and acceptable price to pay to participate in the TPP. And of course, there are benefits to being involved in this trade agreement, also for other agriculture sectors such as beef, canola, barley, pork, wine, etc, who will all benefit in some manner from this trade deal. But while we are happy for their good fortune, this does not detract from the reality facing our industry: reduced demand for our Canadian milk which will be displaced by foreign imports. As a result, dairy farmers’ income will be reduced. The government has announced that it will be implementing new programs to help dairy farmers through this situation. While what this will exactly entail remains to be seen and/or expounded upon, here is the official announcement:
“The Government of Canada announced new programs for dairy, poultry and egg producers and processors to assist them throughout the implementation of TPP and the Canada and European Union Comprehensive Economic and Trade Agreement (CETA):
•The Income Guarantee Program will provide 100% income protection to dairy, poultry and egg producers for a full 10 years from the day TPP comes into force. Income support assistance will continue on a tapered basis for an additional five years, for a total of 15 years.
•The Quota Value Guarantee Program will protect producers against reduction in quota value when the quota is sold following the implementation of TPP. The program will be in place for 10 years.
•The Processor Modernization Program will provide processors in the supply-managed value chain with support to further advance their competitiveness and growth.
•The Market Development Initiative will assist supply-managed groups to promote and market their top-quality products.”

Dairy Farmers of Canada is still assessing exactly what these programs mean, and I’m sure they’ll be forthcoming with that information as it becomes available. DFC President Wally Smith said that he appreciates the government support which has “lessened the burden by announcing mitigation measures and what seems to be a fair compensation package, to minimize the impact on Canadian dairy farmers and make up for cutting growth in the domestic market.” We certainly would rather have emerged from these negotiations without having had to sacrifice any market access, but we’re still thankful that our supply management system has remained intact.

While I am grateful that our government will try to ensure our industry’s survival with these assistance programs, it galls me to think that one of the biggest points of pride in our industry is falling: these programs are likely to be viewed as subsidies. We can no longer pride ourselves on being able to produce our milk without government support. And I know that this is beyond our control, but I can’t help but feel that this is somehow represents a decline in our industry’s integrity. If only national food sovereignty was more important to our government, because if it was, we wouldn’t be in this position at all.

For our consumers:

THANK YOU so very much for your support and encouragement during the last few months. It’s wonderful to know that our work is appreciated and that you understand the benefits of keeping the milk in our grocery stores produced by Canadians, for Canadians. We’re grateful for the actions you took on our behalf: sending letters to our government in support of Canadian dairy, contacting your government representatives directly, and sharing our concerns with your friends via social media. I believe that this outcome is a result of the public outcry at the suggestion of opening our markets to huge amounts of foreign product, and that without your support and participation in our campaign to preserve supply management the final result would have been far more detrimental to our dairy farmers.

A few months ago, you showed in an overwhelming manner that you support milk produced by Canadian farmers. In a poll conducted by Environics Research, 89 per cent of you said it was important, or very important, that the milk products you use come from Canadian farmers! We’re so glad you are happy with the product we produce, and we hope that we can continue to count on your support. Thankfully, it is still possible for you to source Canadian dairy products and thus support Canadian dairy farmers. Dairy products that are produced with only Canadian milk are labeled with the 100% Canadian Milk logo of the little blue cow. If your favourite dairy items don’t have this label, contact the processor to ask if it produced with only Canadian milk and ask them to label it as such. Remember, purchasing products made from 100% Canadian milk means that the benefits of that sale remain in Canada: it benefits the farmer and the whole economy. Our farmers rely on many other Canadian businesses to produce milk: feed companies, equipment companies, banks, transportation companies, etc. and so by purchasing Canadian milk, you help to keep these companies in business as well, which bolsters the entire Canadian economy. By buying Canadian, we all win – consumers and farmers alike. What’s not to like about that?

I believe that our industry will survive this hurdle. It may not be easy, and it likely won’t be pretty. But now more than ever we need to remain strong and united. We must continue to supply our top-quality milk, produced according to the highest quality and animal welfare standards IN THE WORLD. And we will continue to do this because, really, could we do otherwise? When dairying is in your blood, there simply is no alternative. It’s not what we DO, but it’s who we ARE. We ARE Canadian dairy. And we’re immensely proud of that. I know that you will join me in continuing to fight to keep Canadian dairy farming viable for our consumers and, just as importantly, for the next generation, so that they, too, can become what they dream to be: dairy farmers of Canada.

Supply management: Better than Ever for Canadian Farmers, the Economy and our Consumers

Leave a comment

I support supply management. Period. As a member of a Canadian dairy farming family, proudly producing top quality milk for my fellow citizens, I know that supply management’s demise would mean the end of the dairy life that I know and love. Recent articles from various news outlets as well as a newly released study have brought these feeling to the foreground once again. In my opinion, the media’s discussion about the future of the Canadian dairy industry is sorely lacking any input from Canadian dairy farmers themselves. I’d like to add my voice, a dairy famer’s voice, to the discussion as well. In all likelihood, you’ve read one or more opinion pieces recently speculating about the fate of supply management as the Trans Pacific Partnership negotiations continue. According to various sources, Canada’s participation in these trade talks depends on our willingness to dismantle our supply managed poultry, egg, and dairy sectors. Looking north, the US sees Canada as a veritable treasure trove of untapped export opportunities. In the wake of falling global milk prices, increased competition from newly emerging dairy powerhouses like New Zealand, and lost markets due to the Russian embargo,  a new dairy export market would inject some much needed income into the US dairy industry. As though throwing a dog a bone, supporters of the TPP claim that Canada will also be able to export dairy products south of the line, but, in my opinion, this half-hearted benevolence does little to mask their true intent: flooding the Canadian market with mass produced milk. Additionally, a  recent article in the Globe and Mail falsely accused Canadian dairy farmers of producing too much milk and that milk dumping was occurring as a result, and used this standpoint as a grandstand to air anti-supply management sentiments. This article has since been soundly discredited, here, here and here, but the ideology behind those sentiments remains, and is extremely worrisome to my fellow dairy farmers and myself.  Here’s why:

What does Canada actually stand to lose if supply management crumbles? A study commissioned by the Dairy Farmers of Canada shows just that. This study “affirms the significance of the economic impact of the dairy sector in Canada. Conducted by EcoRessources, the study, entitled “The Economic Impacts of the Dairy Industry in 2013”, is third in a series which tracks the changes and impact of the sector over the years, beginning in 2009.” Highlights of this year’s study point to :

  • Local, provincial and federal tax revenue produced by the dairy sector: $6.3 Billion in 2013
  • Growth in Gross Domestic Product (GDP) output by $3.7 Billion in four years, to 18.9 billion in 2013
  • 215 000 jobs maintained by the industry
  • More milked shipped: 7.8 billion litres in 2013, up from 7.6 billion litres in 2009.
  • Less than 10% of Canadians’ disposable income is spent on food, one of the lowest in the world (1.03% on dairy).
Dairy Industry Statistics

Dairy Industry Statistics

In addition to this study that highlights the dairy sector’s vibrancy, viability and important contributions to the Canadian economy, recent analyses have also shown increased growth in the dairy industry due to Canadians’ higher demand for dairy products. The retail sales of cream (+5.5%), butter (+4.4%), cheese (+3.2%), and organic milk (+15%) registered quite remarkable growth rates over the past year. Dairy farmers have been asked to produce more milk than last year – 8% more in the past year here in BC alone! – to keep up with this increased demand.

The risk Canada runs by dismantling supply management is this: we could lose many of the above mentioned contributions and more than that, we would stand to lose what we value the most, a safe, secure supply of milk, produced to the highest quality standards that Canadian consumers have come to rely on. The ultimate sacrifice if supply management is eliminated would be our Canadian family farms. With an average size of 77 milking cows, we would have a very difficult time competing with the glut of foreign-government-subsidized milk flooding in over an opened border, most produced by mega dairies. This would likely mean the end of the dairy industry as we know it. Canada’s small, family run, environmentally conscious, local farms would likely be replaced by what experts call CAFOs – confined animal feeding operations. With CAFOs come a number of environmental risks, and they require special legislation to operate, but they can produce milk at a lower cost. I am quite active on social media, sharing our daily farm experiences, and I have had many conversations with consumers who are concerned about the environmental risks and animal welfare concerns that tend to be attached to CAFOs. The current situation in California is a prime example of this: farmers there are paying a huge price for over-concentrated farming and the subsequent consumer backlash against agriculture. Would Canadian consumers really appreciate our family owned and operated dairies turning into massive conglomerates?  I have my doubts…

IMG_2353

Our family owned and operated 80 cow dairy farm. Will it be a casualty if supply management falls?

Claims that Canada could become a big player in the export game have little standing. Since deregulation in Australia in 2001, exports initially grew for a short period of time, but have since dropped rather dramatically, from 6.1 million tonnes in 2002 to 2.9 million tonnes in 2011. From this we can see that more market access does not necessarily mean more industry growth. And we’re not comparing apples to apples here! Australia’s climate allows their dairy industry to rely on a cheaper, pasture based system, which is unfeasible due to Canada’s much harsher climate. Our cost of production due to the need to store and purchase feed and house our animals for extended periods of time is therefore higher, and would lead to challenges in competing on the world market. And of course, we cannot forget that presently there is an excess of milk globally, contributing to very low milk prices. What little Canadian farmers could export after deregulation would likely not have very much monetary value relative to the cost of production. Another interesting recent development, to me, is that the oft-mentioned comparisons of prices of dairy products for consumers in the US and Canada seem to have faded into the background. The lower Canadian dollar has resulted in the price difference shrinking considerably. Even with the government subsidized milk prices in the grocery stores, US milk prices are very close to, and sometimes even higher than, Canadian prices. Meanwhile, prices paid to US farmers have dropped in the last few months to below the cost of production (according to an American dairy friend). Dismantling supply management would likely not result in a decrease in consumer pricing, but could result in an increase in taxes to fund government subsidies if the cost of producing milk in Canada is not covered by farm gate prices.

Price of milk in Florida vs Prince Edward Island

Price of milk in Florida vs Prince Edward Island (photo and tweet credit:Randall Affleck)

So what can you, my fellow dairy farmers and consumers, do to help others understand the value of our current system? Talk about why you support the supply managed system, write about it, or, better yet, contact your local member of parliament. In an election year, our voices are more influential than ever and are more likely to be heard. MPs need your support to win their seats come November, and they need to know what is important to their constituents. With such a significant contribution to our country’s economic vitality, we have the obligation to make our voices heard; our voices matter. And our voice is this: We support supply management… because it works! It works for farmers, for consumers and for our country. Stand firm, Canada!

Supply Management Part 3: Addressing Recent Globe and Mail Article

4 Comments

Mondays are busy days on the farm and in the farmhouse. We generally take care of just the necessary chores on Sunday, so Monday really signals the start of a new, busy work week. But I’ll still usually find time to sit down with a cup of coffee, usually after the kids are on the bus to school, to go through my twitter feed. This is mostly a pleasurable, relaxing time of day for me. Not today. I was confronted with this article in the Globe and Mail by Barrie McKenna, who has added to his rather lengthy repertoire of anti-supply management opinion pieces with this: http://www.theglobeandmail.com/report-on-business/the-world-is-rapidly-closing-in-on-canadas-dairy-industry/article23678491/

I contacted a few of my friends in the industry, a dairy farmer and an industry leader. Here is what they had to say:

image (1)

Jennifer Hayes’ thoughts on the article. Find her on Twitter @FarmShigawake for more thoughtful commentary on supply management.

image

Wally Smith, President of Dairy Farmers of Canada, reacts to the article.

 

Initially, I was tempted to just move on with my day, but the more I thought about this article, the more I realized that I have much to say to Mr. McKenna, and that I would like to have my opinion, and the opinion, I believe, of all Canadian dairy farmers, heard as well. I don’t pretend to be an expert on trade, or supply management either, for that matter. But Mr. McKenna’s biased opinion piece leaves me with the impression that either he doesn’t understand the system or that he blatantly takes advantage of his readers’ lack of knowledge on the subject presented here.

Mr.McKenna’s first sentence already shows his bias. He says our dairy “regime” is sealed off from the rest of the world. While I know that we do use tariffs to limit imports of dairy products from other countries, Mr. McKenna conveniently leaves out the fact that we allow more tariff free imports than the US and the EU – 6% of imports are tariff-free in Canada, with only 2.75% tariff free imports allowed into the US. Additionally, as part of the new CETA agreement, Canada will allow 9% of the cheese consumed in Canada to come from the EU tariff free, up from the current generous access of 5%. The (EU) currently imports only a modest number of Canadian dairy products, despite the fact that the EU is a market about 15 times the size of Canada.

Moving further along in the article, Mr. McKenna references a confidential report from the Dairy Farmers of Ontario. But rather than being what he seems to think is a smoking gun detailing Canada’s dairy woes, it rather is a piece that “indeed is confidential, and was prepared in the context of reviewing policy and identifying growth opportunities among farmer delegates … it actually identifies that there is an opportunity for more competitive pricing to compete in the domestic dairy ingredients market which is already directly subject to international price competition from duty-free imports. More competitive pricing will create some export opportunities but these are small compared to the opportunities within the domestic market and below current permitted exports.” https://www.milk.org/Corporate/News/NewsItem.aspx?id=5461

I have difficulty believing the statement that Canada is facing a growing glut of unwanted milk. How on earth would Mr. McKenna like to explain the extra quota allotted to Canadian farmers over the last year and a half? BC farmers have received an extra 10% of quota, and Ontario, Quebec, Nova Scotia, New Brunswick and PEI have received 5%, while the remaining Western provinces have received an amount in-between these numbers. This extra quota has been allotted to encourage farmers to produce more milk to fill the increased demand for milk products by Canadian consumers. I’m sorry, Mr. McKenna, but numbers don’t lie.

Further in the article, the author states that creating a new market to compete with foreign imports of milk proteins or export at world milk prices amounts to an “illegal subsidy.” The irony is actually laughable. Mr. McKenna would like to see our borders open to imports – imports that are very highly subsidized by their country of origin. Care to explain your double standards, Mr. McKenna?

Mr. McKenna drops his two most infuriating comments at the end of the article. First of all, he says that consumers pay an inflated price. Now, if you remember, I addressed this in a previous post, here. Farmers are paid the cost of producing the milk. Period. The recent reduction in the price paid to farmers ($0.06/L for us on our farm) because of decreased costs of production illustrates this perfectly. Keeping prices artificially low in the store by supplying farmers with government subsidies (like in the US, which appears to be Mr. McKenna’s ideal system) does not benefit the consumer, but rather inflates their taxes. Secondly, he indirectly calls farmers greedy. Now, I personally take offense to this, and I’m sure other dairy farmers do as well. Is wanting a fair price for the product we produce “greedy”? Maybe he should talk to dairy farmers in the UK and France who are dumping their milk to protest the dropping milk price, a price with which they cannot cover the cost of production. Are they, too, greedy?

Let me paraphrase my opinion like this: supply management is a great system. It ensures a stable economic outlook for farmers and stable prices in the grocery stores for consumers. Stability on the farm means that farmers can dedicate more of their time and investments in sustainability, technology and advancing animal welfare. With supply management, we all win, consumers and farmers alike. And no, Mr. McKenna, dairy farmers don’t think the system is broken. I am a dairy farmer, and I support supply management – because it WORKS.

Supply Management Part 2: Recent Developments and Comparisons

3 Comments

Perhaps you’ve heard some of the latest news from New Zealand, detailing their current dairy woes. Since my last article explaining supply management was published, several readers have reached out, asking about New Zealand’s deregulated dairy industry. Long promoted as “the Miracle Down Under“, New Zealand has traditionally been held up by various anti-supply management groups and individuals as an example of how the Canadian dairy sector would prosper if our dairy industry were to be deregulated. Supply management critics purport that dairy prices for consumers would drop, but farmers would be able to compete in the world market and begin to export milk products, thus expanding the dairy sector.

Those dreams have been shattered over the past few months. Due to global issues, such as the ban on dairy products from the EU by Russia and the drop in China’s imports of skim milk powder, global milk supply has increased dramatically, causing prices to drop. The global milk price has HALVED since last February. Farmers in New Zealand now can no longer cover the cost of production by the price they are paid for their milk. Farmers are currently being paid about $0.45 per liter of milk. They are doing whatever they can to cut costs, reducing labour costs, feed costs, and lowering production. The dairy industry in New Zealand accounted for one-quarter of their exports and one-third of their economic growth last year. It’s still too early to put real numbers together, but economic experts expect that this situation will definitely negatively affect New Zealand’s economic outlook as a whole.


But what about the price consumers pay for their milk? The decreased price paid to farmers must coincide with a lower price for consumers? NO! The price of milk in New Zealand grocery stores has actually increased by 3.2% in October alone. Consumers there generally pay between $1.75 and $2.50 per liter of milk. Compare that to our price: approximately $1.48/L, which has risen at less than the consumer price index for the last 30 years, and actually dropped by 0.4% in the last fiscal year. I’ve corresponded with “Kiwi” dairy farmers who complain that consumers don’t seem to realize that the astronomical supermarket costs are not associated with the dairy farmers, who can barely scrape by, but with the processors and retailers who set whatever profit margin they desire.

I suspect New Zealand has now lost the rights to the title “Miracle Down Under”. For both their farmers’ and consumers’ sakes, I hope it doesn’t become the “Debacle Down Under”.

IMG_3633

Our 70 milk cows. 76 cow herds are the average in Canada. 98% of our dairy farms are family owned. Herd size in NZ is much higher: 393 cows on average. 25% have more than 500 cows and over 490 of these have more than 1000 cows. 65% are owner operator businesses, the rest are part share or equity partnerships.

Both Canadian dairy farmers and consumers are fortunate to enjoy a dairy industry that is strong, stable, and self reliant. Supply management benefits Canada’s economy as well as our local economies. Milk products, especially fluid milk and cream, are generally sold locally, creating local jobs and revenue. The dairy sector’s GDP contribution increased from $15.2 B in 2009 to $16.2 B in 2011, and has created thousands of jobs, increasing from 215,104 to 218,330 over the same time frame. Additionally, the dairy industry contributes more than $3B in local, provincial and federal taxes every year. A situation like the one “down under” would be disastrous to dairy farmers, would not benefit consumers, and would likely result in economic instability for the agriculture sector and quite possibly for the Canadian economy as a whole.

support Canadian dairy

I hope supply management critics and our politicians sit up and take notice: this is NOT the type of future that would be beneficial to Canadian farmers or consumers. The current Trans-Pacific Partnership trade talks are rumoured to be a threat to supply management. Our Canadian negotiators should ask themselves if the situation in New Zealand is one that Canadian voters would appreciate and support. Canada has signed other trade agreements without sacrificing supply management, and, in my opinion, these present global circumstances heavily favour retaining the current system to protect all Canadians – farmers and consumers alike. I challenge our politicians and policy makers to stand up in support of supply management because, really, in all likelihood, the future of dairy would be looking rather grim without it.