A few days ago I was asked what OECD is. A couple days later, it showed up in one of my morning agricultural information emails. It’s an international group of economists that work together to try to promote sustainable economic growth and a rising living standard, including by bringing food prices down to a level that everyone can afford. At first glance, that looks like a very good idea. Most Canadian provinces also have think tanks that also are filled with very conservative-thinking, short-sighted economists who are often used by various levels of government to help keep our food economical.
Short-sighted economics always looks for the cheapest way to feed people. This means buying the cheapest food which is often surplus food that is dumped onto the world market at prices below the COP (cost of production) but is always food not needed by some country and definitely not the best food produced by that country.
Fifty years ago in Canada, most farmers milked cows only in summer to produce milk less expensively on pasture, and that milk was processed into butter which was stored and sold throughout the following year. Some dairy farmers milked cows year round to supply the “fluid milk” market (milk, cream, chocolate milk, buttermilk, etc.) When Canada had more butter and skim milk powder than the market needed, it was bought by the Canadian government and either sold on the world market at bargain prices, donated to poorer countries, or if no market could be found, it was shipped out to sea and dumped overboard. Eggs were also marketed on the supply and demand market and sometimes they were also dumped at sea.
That was when the Canadian government and a group of forward thinking dairymen got together and invented the supply management system of marketing milk. That system was based on three principles. First, a cost of production based on real figures gathered from a randomly chosen group of dairy producers. That sample of farms were changed periodically and all costs and expenses were scrutinized by the government. This accountability was closely monitored yearly. That COP that was agreed on by all was used to calculate the price received by the dairy farmers the next year. A similar system is also used by egg and chicken producers. Beef farmers were also offered a similar system but turned it down.
The supply management system also depends on two other very important controls. A quota system controlled by dairy farmers and the Canadian Dairy Commission, who monitor the consumer needs and adjust the quota several times per year. The milk that is needed for consumer demand determines the amount of quota given out or reduced based on the amount of quota that each dairy producer holds. The third control is the responsibility of the federal government who controls imports of dairy products into the Canadian market at prices below the COP. Some countries consistently sell foods at below the COP.
New start-up farmers who will be in the supply management system and next generation farmers receive some free quota to encourage new farmers to continue to provide a safe, secure supply of food for Canadians. Today’s modern dairy farm can cost millions of dollars, and the banks and other lenders will never lend that kind of money unless that dairy farmer is very committed to remain in business for as long as the loan lasts. No young farmer would get involved in farming unless there was a stable, profitable future ahead.
When a cow is bred, a calf is born nine months later, the heifer calf grows into a heifer who can be bred at 13 months and hope she gets a calf. Then nine months later, she has her first calf and then begins to give milk. Milk production cannot be just turned on and off like a light switch.
New Zealand did away with their quota system a few years ago and milk prices began to fluctuate. Three years ago we had a bus load of New Zealand dairy farmers visit our farm and although one farmer had milked 600 cows the week before he visited Canada, the milk price dropped below the COP and he sent all his cows to slaughter and bought a vacation in Canada. He told me that he wished that they had their quota system back. When I asked about the future of his farm, he told me that if the price of milk increased, he might again milk cows.
Dairy farmers have been improving the supply management system little by little for 60 years and it is still not perfect, but under collaborations with consumers, processors, retailers, and government we will keep improving it without reducing quality or depending on government assistance.
Chris Judd is a farmer in Clarendon on land that has been in his family for generations.
