“You don’t fill a room like this when things are going good on the farm,” Wisconsin Farmers Union President Darin Von Ruden said quietly to me as we watched another wave of farmers flood into the conference room.
He was right. I hadn’t seen this many farmers turn out for a regional meeting – free meal or not – in a long time. About 100 farmers crammed into the Dairy Together gathering in Eau Claire March 15. The scene repeated itself as farmers packed rooms for four more meetings held around the state throughout the week, including in Edgar, Fond du Lac, Dodgeville and Westby. It’s worth noting that the rooms were crowded with members of not only Farmers Union but also Farm Bureau, National Farmers Organization, Organic Valley and the Dairy Business Association, who sat side-by-side considering the future of Wisconsin’s dairy industry.
The draw was a chance to hear about Canadian supply management straight from Murray Sherk and Ralph Dietrich, vice-chair and chair, respectively, of the Dairy Farmers of Ontario (DFO). The meetings generated some cautiously optimistic discussion about how U.S. farmers can work together to stabilize dairy prices.
Stabilizing the market
“Certainly we’re not going to say we have all the answers,” Sherk said. “We have found success with the supply management system we’ve had in place for over 50 years, though, and hopefully it can get you thinking about some things that may be helpful for your situation here in the United States.”
In the 1960s, Canadian farmers and government officials agreed that production discipline was key to avoid unstable market conditions. To ensure the sustainable development of their dairy industry, the federal and provincial governments implemented a supply management system that is based on collective marketing and production that is adjusted to meet the needs of the Canadian market. The system is administered by the Canadian Dairy Commission.
DFO, which represents nearly 4,000 dairy farmers in Ontario, purchases all the milk produced in the province and coordinates sales to processors and the transportation logistics for hauling the milk. The organization is overseen by the Ontario Farm Products Marketing Commission, which works to ensure that the system is filling the market for Canadian dairy needs.
The objectives of this system are threefold, Murray noted: ensure farmers receive a fair return, provide processors with a stable supply of milk, and provide consumers with a consistent supply of dairy products at a fair price.
“What we’re seeing with dairy in Ontario are prices fairly close to what we had three or four years ago – pretty stable,” Murray said, as he showed a graph charting average milk prices back to the mid-1990s. “This wildly fluctuating line here represents U.S. prices – which have been in the trough the last three years.”
Sherk said Canada’s supply management aims to meet the domestic needs of the nation rather than focusing on exports and has helped Canadian farmers avoid those extreme highs and lows. He noted Canada has 11,000 licensed dairies compared to the 8,700 licensed dairies in Wisconsin alone.
Sherk and Dietrich raised the question of whether or not U.S. farmers are relying too heavily on exports as their salvation. “The daily excess production of Wisconsin, New York and Michigan equates to more milk than the daily production of Ontario,” Dietrich pointed out.
Canadian milk is marketed through two pools that help stabilize the system. The Eastern Canadian Milk Pooling Agreement (P5) includes Prince Edward Island, Nova Scotia, New Brunswick, Quebec and Ontario while the Western Milk Pooling Agreenment (WMP) include Manitoba, Saskatchewan, Alberta and British Columbia). In its role as a national industry facilitator, the Canadian Dairy Commission (CDC) administers these pooling agreements on behalf of the dairy industry.
“We take a blend price of all that pooled milk,” Dietrich said. “With what’s happening here in the U.S. with Dean Foods dropping 100 farmers in several states —that would never happen in Canada,” he added. “If we had a processor quit, we would all share that loss at the same percent.”
Prices that are fair to farmers and consumers
There are about 450 dairy processors in Canada, although the market is dominated by four major players. Ontario is home to 72 processing plants. “We work closely with our processors,” Dietrich said. “In Ontario, we certainly view them as partners.”
Dairy pricing is reviewed annually and may fluctuate, based on a formula that takes into consideration the cost of production and changes in the Consumer Price Index. “Our average blend price today is equivalent to about $27 per hundredweight,” Sherk said, adding that while the price Canadian farmers receive is much higher than that of their U.S. counterparts, consumer prices are comparable with Canadian dairy products currently around $3.26 per gallon of milk and $2.40 to $3.20 per pound of butter.
“While farmers around the world are experiencing wild fluctuations, Canadian farmers are selling at stable prices,” Sherk said. “There are challenges with our system for sure, but all in all, we have a fairly stable, predictable system at the farm level that allows farmers at any size to make a profit.”
The result of those family farmers’ success reaches well beyond the farm gate. “What supply management has done is allow our rural economy to survive,” Sherk said. “Maintaining family farms keeps kids in our schools and keeps rural communities vibrant.”
Access for beginning farmers
Attendees were curious to know if supply management inhibited young farmers from getting started. They also questioned how Canada’s dairy industry discouraged corporate or foreign investment in agriculture.
“All licenses have to be approved by the board, which is made up of farmers,” Dietrich said.
Sherk added, “In order to have a license you also have to live on the farm or within 10 kilometers (about 8 miles).” In addition to having to live in proximity to the farm, he also made the point that non-farm corporations simply cannot own quota. So, to put a fine point on it, processors like Grassland in Canada could not own a farm and produce milk.
The cost of quota has inflated beyond what the founders of the Canadian system ever expected, a fact Sherk cautioned U.S. farmers about, saying, “Over time quota accumulated value to a price that people were willing to pay in a stable environment. Some check to prevent that cost from getting exorbitant may be something you need to address as you look at how this system could work for you.”
When markets are favorable, more quota is made available to farmers. “We’ve had some significant growth due to resurgence in the demand for butter,” Dietrich said. “In the last three years, we added 24 percent new quota at the farm level.”
To encourage beginning farmers, DFO administers a New Producer Program, which allows one new producer applicant per month to participate on the quota exchange and buy in at a minimum of 10 kg and a maximum of 35 kg of quota with some exemptions. There is also a New Entrant Program that is designed to assist those with an interest in dairy farming who may not otherwise have the financial means or opportunity to get started in the industry. Through that program, DFO will match 12 to 16 kilograms of quota for ten years and takes back one kilogram per year starting in year eleven.
“That provides a new producer with the opportunity to produce the milk without the initial investment so they can better cash flow,” Sherk explained.
Could It Work Here?
“Who here has heard it said that ‘Supply management would never work here in the United States?’ ” Wisconsin Farmers Union Government Relations Director Kara O’Connor asked the farmers crammed into the room for the Edgar Dairy Together meeting on March 15.
Hands shot skyward and heads nodded knowingly at the phrase.
“Okay, well let me ask you this,” O’Connor said. “Who thinks the status quo is working?” Not a hand went up as the group reflected in somber silence.
One needs to look no further than their local auction barn or drive down a neighborhood lane to see the direness of our situation here in America’s Dairyland. We lost another 500 dairy farms last year and since 2003 have lost nearly half our dairy farms, dropping from over 16,000 herds in 2003 to 8,719 in March 2018, according to DATCP reporting of dairy producer licenses.
I, for one, have stood on the barn walk and watched the cows load on the trailer, once on my home farm and again as my uncles exited the dairy business. It’s not a feeling I want any of our remaining dairy farm families to experience. Yet more will – likely another 500 farms this year if we continue the trend – as we wait on the saving grace of promised export markets and funnel dollars into pleas asking folks to buy another gallon of milk or add more cheese to their pizza. I watch, and I worry that continuing down a path destined for more of the same.
Farmers Union believes we can’t settle for more of the same. We believe that family dairy farms are worth fighting for – and that notion is what has spurred us to consider all the options, including supply management. We look forward to continuing to work with farmers and farm organizations across the state to address dairy prices, and we know the time to act is now, before another year has passed and more family farms have been lost.
Watch for more events and more ways to participate in Dairy Together with Farmers Union in the coming weeks. In the meantime, you here’s a few ways you can help move the conversation forward:
Check out this video of the Dodgeville meeting and, if you like what you hear, share it with your farmer and consumer friends, with your co-op board and with others you feel should consider the possibilities. View it here: http://www.wiseye.org/Video-Archive/Event-Detail/evhdid/12277
If you’re sharing on social media, use the #DairyTogether hashtag to keep this issue trending!
Are you feeling passionate about the possibility of supply management? Write a letter to the editor or opinion piece – or reach out to the Farmers Union for help on how to do so. (You can email me directly at firstname.lastname@example.org).
Share this info sheet with media or other friends to help them understand what’s going on in the dairy industry. Or visit www.wisconsinfarmersunion.com/dairy to see more resources, including handouts from the Dairy Together meetings featuring more info on dairy supply management.