There is much in the news of how President Trump is upset with Canada’s agricultural management systems and his blaming of them for the delays in the Fair Trade/NAAFTA talks. Here is how it works in the Canadian dairy industry and why it is very important to protect its existence. If not then we will be in the same predicament as American dairy farmers are today.
It is the very fact that the U.S. dairy industry does not have a supply management system like Canada’s excellent one that their dairy farmers suffer at the mercy of their unregulated system and regularly go through boom and bust cycles. And why they are looking north of the border to sell their surplus products.
Canada is one of the few, if not the only, country in the world that had the foresight to regulate the production of milk. We used to have oversupply, like the U.S. has, and learned that regulating the industry was better than costly, long-term storage facilities paid for by taxpayers. In 1973, farmers, after joint consultation with the government, agreed that their next three years of production would henceforth determine what they would be allowed to ship on a yearly basis – called their quota. That way our dairy farmers would stand on their own two feet with assurance and dignity, and processors could count on a guaranteed supply. In other words, this was the best way to manage the supply.
Supply-management was born. If a farmer produced more than his allowable quota, they would receive almost nothing for that milk; quite the incentive for complying and only producing what was needed for the Canadian market.
Here’s how the vicious circle works with our neighbour to the south: when the price of milk drops in the US from over-supply, dairy farmers continue to produce more milk in order to survive, and avoid bankruptcy. However many dairy farms do fail, thereby causing a shortage of milk. In a shortage the price rises. When the price rises again, they still produce extra milk in order to pay off the additional debt incurred when the price was low. This unregulated supply and demand market causes great havoc to dairy farmers in America. What has not been mentioned in any news reports, and only adds to the oversupply of milk, is that almost 50 per cent of all American dairy farmers’ incomes are derived from hidden subsidies – a fact not mentioned by Mr. Trump in his complaints about Canada. Canadian dairy farmers do not receive subsidies. None.
Hence, Canada’s superior supply-management system, designed to fend off this very problem, ensures that Canadian farmers have stability and a reliable paycheque – the envy of most, if not all, American milk producers.
It’s not a bed of roses, though, as Canadian farmers all face economic challenges due to the ever-rising costs of production. In order to succeed, farms have had to grow bigger.
Americans are not the only ones with a lot of milk to get rid of. New Zealand and Australia are in this game too, with small populations and low-cost over-production. Like America, neither has a supply management system, so they want to palm off their cheap, lower-quality surpluses to Canada. With Canada’s current high standards, these countries’ milk would not qualify to be sold here.
President Trump blames us as a means to solve America’s problem by making us the ‘bad guys’.
In Canada both farmers and consumers have hugely benefited from the vision of a supply management system, with stability for farmers and an assured supply of high-quality milk for families.
So, Canada, please don’t give into the bullies. And Mr. Trump, stop playing the blame game; keep your hands off our dairy farmers and take care of your own. Try supply management.