Murray Goulburn last week announced it will close three plants as part of a financial restructuring.
Bonlac Supply Company, whose 1500 members supply milk to Fonterra in Australia, says it will contact disgruntled MG suppliers in the coming months.
The local dairy industry usually doesn’t attract the attention of its meat-producing cousins, but U.S. President Donald Trump’s recent complaints about unfair competition and the sharp retort by Alberta Milk have boosted the sector’s profile.
“Our system in Canada is unique,” says Jeff Nonay, who raises 160 to 170 Holsteins at his family’s Lakeside Dairy Ltd., north of Edmonton near Legal.
“Every country has a system where agriculture is supported. That’s usually in the form of taxes. The dairy industry in Canada uses a much different system, in that we try to match supply and demand.”
The supply management system, in which farmers covered by production quotas sell milk, poultry and eggs at set prices and competing imports are restricted, is at the heart of the American complaints.
Nonay admits the Canadian approach is always an issue during international trade negotiations, but says other jurisdictions that don’t have supply management give producers subsidies from tax dollars instead.
“In the Canadian model, the consumers pay for their milk once. The revenue from the retail sales gets spread through the entire supply chain. In the U.S., consumers pay for it twice.”
Alberta’s 115,000-head dairy herd produced 725 million litres of milk in 2016, an increase of more than 100 million litres from 15 years ago.
Most of the 521 farms are based around Lethbridge, central Alberta and Barrhead, many run by families originally from Holland, a traditional dairy hotspot.
A slight majority of Alberta’s $588-million output was processed by two plants in Edmonton and one in Calgary and bought fresh to drink — milk in the store was likely in a cow no more than three days earlier — but nearly half is used to make cheese, yogurt and, increasingly, butter.
University of Alberta agricultural economist Ellen Goddard says the national supply management system set up in the 1970s evolved over decades to help smooth out volatile prices for a highly perishable product.
Some of the friction with the U.S. concerns finding the right balance for importing and exporting profitable new items such as ultrafiltered milk, a concentrate used to boost protein in cheese and other products that isn’t covered by North American Free Trade Agreement tariffs.
At the same time, international milk prices have dropped, Goddard says.
“We have ended up in a situation where these (American) dairy farmers, who are more vulnerable to world pricing than Canadian farmers, have lost some of their market.”
She’s concerned about the impact of supply management on poorer consumers because she says the cost of some Canadian dairy products is higher than it is south of the border, where farmers are subsidized.
“Is it better to have a subsidy paid for out of incomes taxes or is it better have higher prices that are paid the same regardless of income?” Goddard asks.
“I worry a little bit about lower-income people.”
On the other hand, our stable dairy industry can produce higher-quality milk and is better positioned to deal with environmental and animal welfare issues, she says.
“Some people would be relieved to be consuming Canadian products even if it was at a higher price.”
Nonay, 39, is the third generation of his family in the dairy business since his grandfather started farming near Spruce Grove in the 1950s.
He estimates dairy accounts for about half the revenue at his current 2,500-acre operation, along with grain crops and potatoes, and raising replacement heifers and bull calves.
The cows live in an open-air barn and each makes an average of 36 litres of milk daily, or two million litres annually for the herd.
His “girls” voluntarily wander into one of three robotic milking machines that determine if they’re ready to produce, then use automatic arms to wash their udders, attach hoses and pump.
Nonay, who regularly consults with a nutritionist, an agronomist and other experts to keep his farm up to date, employs seven full-time staff, including three for the dairy.
“In rural Alberta, (dairy) is huge. It’s very stable … lots of other industries and agriculture that relies on that base.”
Still, the number of producers is shrinking. Nonay can remember when Alberta had 1,200 dairy farms, but that’s down to 521 today, a drop he attributes to growing efficiency
Mike Southwood, general manager of Alberta Milk, says changing lifestyles are another factor in the change, saying larger operations allow people to share duties or hire staff so they can take time off.
“(Otherwise) it’s a 365-day-a-year job … You’re there every day milking cows, feeding cows.”
His organization, which represents producers, rejects arguments that supply management has led to inflated consumer costs, saying dairy products in Canada have comparable prices to other countries.
As national per capita fluid milk consumption declines, likely the result of people who don’t like animal agriculture and competition from other drinks, Southwood sees the industry branching into new areas such as using milk proteins in nutraceuticals and infant formula.
Nonay is experimenting with making his own artisanal cheddar. He expects his two young children will follow him into an agricultural career he loves.
“Working with the land, being outside the city lights. I love going to the city, but man oh man — those rural roads and wide-open spaces.”
Source: EdMonton Journal