As successive trade deals offer foreign dairy products more access to Canadian consumers, B.C.’s small, family-run farms will face increasing pressure to merge and consolidate.
David Janssens’ Nicomekl Farm — while large by B.C. standards at 450 milking cows — is dwarfed by the scale of American dairies, which have gobbled up smaller farms by the thousands.
This week U.S. negotiators are turning their attention to Canada’s dairy industry in the marathon renegotiation of the North American Free Trade Agreement, with U.S. President Donald Trump demanding an end to tariffs and supply management.
Even a more moderate increase in access to Canadian markets will pit this province’s relatively small dairy herds — 135 milkers each on average — against massive and technologically advanced American operations that house thousands of cows each, experts say.
“I was in west Texas recently where dairies have five, even 10,000 cows and their small farms, with less than 1,000 cows, are going out of business,” said Janssens. “There is a huge evolution in the industry there that we don’t want to see here.”
While farms in the United States may be family owned, the workers at large operations are usually Mexican, he said.
“Smaller farms in Canada are mostly family-run, meaning the family is doing the work,” said Janssens, who took over the farm from his father.
Canada’s family-run dairy farms are simply too small to compete, according to Werner Antweiler, an associate professor at UBC’s Sauder School of Business.
“Canada has been inching forward through trade agreements, opening up our market, and that is a signal to farmers that they need to find efficiencies and consolidate,” he said. “They haven’t invested in the kind of equipment that farms in the United States and Europe have.”
Antweiler argues that supply management is a “market distortion” which creates artificially high prices that punish Canadian consumers.
“It would be better if reform resulted from our own internal discussion, but instead it is being forced upon us by NAFTA,” he said.
Under the supply management system, a typical B.C. dairy farmer must invest in production quota worth at least $3 million to $5 million for the right to produce milk.
Marketing boards set the price dairy farmers are paid for their products, based in part on the cost of production.
American dairy farmers do not pay for quota and benefit from $22 billion in direct and indirect Farm Bill subsidies, which means prices paid by consumers are much lower than in Canada.
“American dairy farmers are producing more and more milk, but they don’t have any place to put that milk, they have no market for it,” said Treavor Hargreaves, spokesman for the B.C. Dairy Association.
In fact, dairy farmers in Europe and Australia are being bailed out by their governments because of the global collapse of dairy prices.
“Trump has a bull’s eye on dairy, so that concerns us, but I doubt it’s the end of supply management,” said Janssens.
It’s more likely Canada will offer limited tariff-free access to Canadian markets for American dairy products in exchange for some other concession, as it did in the Comprehensive Economic and Trade Agreement with the EU and the Trans-Pacific Partnership with our Pacific Rim trading partners.
Canada gave up 3.25 per cent of our domestic dairy market in the TPP, a figure that did not change when the United States dropped out of the deal.
“Now we will give even more access to the Americans, we know that,” said Janssens. “What form it will take, we don’t know. But when they come into our market, they will want to sell high-value products, which hurts our bottom line.”
Trade-offs made at the bargaining table haven’t always worked in favour of Canadian producers.
“In CETA we allowed more access for European cheese in exchange for our beef and pork going to Europe, but that hasn’t materialized, to our displeasure,” said Janssens. “The cheese is coming in, but our beef isn’t getting to Europe.”
The United States exports $636 million in dairy products to Canada annually, about 0.1 per cent of Canada-U.S. trade.
Source: vancouversun.com
