What You Think We Should Do With Canada
Talks around the North American Free Trade Agreement are heating up, with a potential resolution in sight. Whether or not something gets done on dairy remains to be seen, although some dairy officials think a resolution on Class 7 will get done. It’s becoming a larger political issue, as Senate Minority Leader Charles Schumer (D-N.Y.) announced that he is working with Speaker of the House Paul Ryan (R-Wis.) and Senator Tammy Baldwin (D-WIs.) in an effort to fix dairy trade problems.
Regardless of trade issues, the Canadian dairy industry continues to grow. Recent analysis from the American Farm Bureau Federation notes that Canadian dairy farmers are expected to increase milk production this year by 4%, to 21.6 billion pounds. Since 2014, Canada’s milk production has grown by more than 16%, more than any other major dairy-exporting region.
All of this production growth is filling product inventories. According to Fran Howard, after increasing milk quota allotments, Canada today is facing a saturated milk market in which production is outpacing the country’s growing demand for butterfat. Howard sites Canada’s Milk Producer magazine which states, “current indicators point to market saturation, resulting in all processors’ cream and whole milk requirements being met from domestic butterfat production.” While that’s good news for Canada, it likely means less U.S. butter will be shipped north.
A recent blog post received considerable reaction from U.S. and American producers. Here are a few comments:
“Leave Canada alone. Of all the major dairy producers on earth, they are the only ones that do a really good job of matching their production to the market demand. Plus they send a tiny amount onto the world market unlike EU and U.S. In fact, when EU and NZ abolished their quota systems, look what happened. Added a lot more cows, meaning a lot more product on the cheap world market. Same thing could happen with Canada. That means even lower US milk prices as competition becomes even larger.
The problem is not Canada. The problem is US dairy overproduction for the prevailing market place. It is long past time they fix their own system. Canada had the same problem and they fixed it and it has been working just fine despite all the hullabaloo that a few US politicians and the US ag press want to blow smoke about,” says Dave, a producer in Indiana who also does business in Canada.
Derrick Canning wonders what would happen if Canada removes supply management. “American products would flood the Canadian market, dropping prices and forcing Canadian dairy farmers out of business en mass. The American farm gate price would rise for 2 to 3 years due to the new market. When the global market becomes saturated once again, because of the capitalist greed inherent to us all, the price would fall and American farmers would have gained nothing. Well, since no one likes to suffer alone, they may gain solace in that 10,000 more farmers would be feeling their pain.
Gaining greater access to Canada will not fix the American Dairy industry. It will not make farmers more money. It might, however, make American’s feel better to have done something in spite of not really having done anything at all. Perhaps the thing to do with Canada is to watch them and, like some parts of the American dairy Idustry, learn from them.”
Geoffrey Vandenheuvel, a producer near Chino, California, says “Unleashing the Canadian dairy farmer has risks. They would be a significant competitor in the world market. Negotiating a lid on their class 7 volume is probably the most politically advantageous move. They really don’t want a wide open market and we can manage with giving them a controlled bigger piece of the action. Now is the time for pragmatic thinking not ideological driven policy.”
Several Canadian producers have offered their insights as well. “Canadian dairy farmers are genuinely sympathetic to the hardships currently facing US dairy farmers and their families. The new approach by the American political leaders blaming Canada and promising to destroy our system is creating a lot of ill will on both sides of the border that is benefitting no one,” says Bart Nelson, a Canadian dairy producer. “I would like to say that Class 7 pricing is benefitting the United States. I as well as most farmers have a new larger bulk tank built by the good people at Paul Mueller in Springfield Missouri. We also have been able to purchase a new round baler that has a large sticker on it saying proudly built in New Holland Pennsylvania. A strong dairy industry benefits both countries.”
Andrew Martin, another Canadian producer, gives his perspective. “By the way, we are also over supplied under demand. We are getting 1.5 % qouta cut. 100% agreed on your letter. It is so simple. U.S. government officials and farmers should simply simplify the problem, the principle which is a higher supply then demand.”
Jim Stoutjesdyk says he’s been a dairy farmer in both countries, but thinks Canadian farmers are a happier group. His advice is to “leave the Canadian system alone. It's the envy of most U.S. dairy farmers. If given the chance to sit down and discuss it over a plate of wings and a few jugs of beer the honesty of the American dairy farmer would come out. They would love a system that supports a fair price for the big investment of time and money that they have made!!! It's the processor that wants to keep their pipelines full!!! Leave your Canuck friends alone. They are not the ones with too much milk. It's Their neighbors south of the 49th!!”
What do you think? Let’s keep the conversation going. If you have thoughts on U.S./Canadian dairy relations, drop me a note at [email protected]