Post-USMCA, fate of dairy industry is largely in the hands of Canadian consumers

Article appeared in the Clipper Weekly News Nov. 2018, By Teresa Carey…

Anola area dairy farmer, Lisa Dyck, has been in the dairy game with her husband since 2000. Together, they manage 120 cows on their 1,000 acre farm. Like other dairy farmers across the country, Dyck is concerned about how the recent renegotiation of the former North American Free Trade Agreement (NAFTA), re-named USMCA after the three North American countries, will impact the Canadian dairy industry.

While Prime Minister Justin Trudeau pledged to compensate dairy farmers for ceding 3.59 per cent of the dairy market to US under the USMCA deal, details of that compensation remain hazy.

“It makes me nervous and insecure,” Dyck confessed. “On the one hand the government says they are standing behind us; on the other hand the government is selling us out.”

However, Dyck does understand the dilemma Canada faced at the negotiating table.

“I don’t know that there’s any negotiating with Trump. He put a gun against everybody’s head. I’m not going to point fingers and blame.”

Despite the pressures faced by Canada, negotiators were able to whittle down an initial grab for 20 per cent by the US. Still, Dyck feels that the combined impact on the dairy sector of three recent trade agreements, USMCA, the Trans-Pacific Partnership (TPP), and the Comprehensive Economic and Trade Agreement (CETA), could be significant.

“It’s like they’re chipping away at our market,” she said.

The Canadian system of supply management, which regulates perishable commodities (eggs, milk and poultry) and envied by some US producers, has been in place since the 1960s. Since then, the supply of milk has been kept neatly in step with its demand, which is extremely important in the case of dairy products which cannot be stored for long periods, unlike grain and meat.

The US does not have a supply management system for its perishables. For years, US dairy farmers have been over-producing milk, which will go to waste if markets cannot be found.

“In the last two to four years, US dairy farmers have not been earning the cost of production and many have gone bankrupt,” Dyck explained.

“This deal does nothing for (US) farmers, but it hurt our farmers here,” she points out.

The supply management system has worked well in Canada. It has helped give dairy farmers stability to manage their operations in such a way as to enable them to make a living at farming. It has also served to keep dairy prices stable, in contrast to beef prices which will fluctuate as market conditions dictate.

“The government doesn’t mandate supply management. Its what the farmer wants,” Dyck said. “Beef farmers had a choice to have supply management but voted against it. They get subsidized. Grain farmers do too. Our government’s priority is to keep famers alive,” she said, adding that dairy farmers do not want a handout.

A spokesperson from the National Farmers Union, Leo Manion, has a word of warning regarding the fate of the dairy sector if the supply management system ceases to work.

“Dismantling supply management will do little to ease the States’ overproduction issues and not for long, and will destroy one of the few successful farming models Canada has left,” he said.

As for the prospect of cheaper milk coming to Canada as a result of the USMCA deal, Dyck believes that is just fallacy.

“The reality is that people have to make money,” she said, noting that Walmart, which has been selling its milk for 98 cents/gal. in the US, actually does so at a loss despite building their own processing plants and buying its milk direct from farmers. In the case of Walmart, selling milk at a loss is a trade-off that helps the company get a steady stream of customers through its doors. However, it is unreasonable to expect many Canadian businesses to follow suit.

What is important to note is that Canada’s regulations around milk are much stricter than those of the US. For instance, the hormone rBST, which increases milk yields, is allowed in the US, but not in Canada. While the milk from cows given rBST has been deemed safe to consume, it does pose health concerns for the cows, according to Health Canada. Also, Canada often has stricter, longer antibiotic withdrawal periods than many other countries. In the past, there have been concerns about antibiotic residue in US milk, although tests conducted by the FDA over successive years have documented steady declines to safe levels now.

Many consumers may not fully appreciate the regulatory stringency to which Canadian dairy farmers are subject.

“All Canadian farmers get audited on the quality of our milk and the treatment of our animals,” Dyck said.

Each month, inspectors visit the farms and checks its books and logs. Inspectors check to make sure safety and sanitation issues are strictly adhered to and that farmers are in compliance with regard to medications.

“Our milk gets tested every single time the milk truck comes. It goes to the lab which tests for water, iodine and antibiotics—every time,” Dyck explained.

If the milk does not pass tests, it will have to be dumped. That spells a lot of spilt milk as one tankful holds 3,600 L. Dairy producers which fail a second test are barred from selling milk. Period.

“I don’t know if people understand the pressure dairy farmers face,” Dyck said.

Dairy product producers, Canadian retail stores, and Canadian consumers will all play roles in how the USMCA agreement ends up impacting the Canadian dairy producers. If, for example, lower-priced US milk becomes readily available to dairy product manufacturers, Canadian farmers could lose out. Ironically, the resulting lower manufacturing costs may not end up being passed on to consumers.

Stores, too, will have a part to play in the industry’s ultimate success. They will need to ensure the Canadian brand, identified by a black or blue cow logo on packaging (indicating that a product is 100 per cent Canadian dairy made), is kept visible to consumers.

Most importantly, perhaps, it will be the Canadian consumer which will decide the fate of the dairy producers in Canada. It will be up to them to buy into “Buy Canadian” over the long haul.

High quality is not the only reason to choose Canadian over US milk products, Dyck points out. The money consumers spend on Canadian dairy products goes directly back into the local economy: Local farmers support veterinarians, animal feed producers, mechanics, lending institutions, as well as supporting their communities by paying taxes and providing jobs.

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About Teresa

Teresa Carey is a ceramic artist, writer, photographer, journalist, publisher and nature lover. She lives in Manitoba's Interlake on a small acreage close to the shores of Lake Winnipeg.

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