Dairy’s milky future

Dairy farmers are optimistic the industry will stabilize and thrive now that the 
Trans-Pacific Partnership agreement has been signed. Economists think it’s the beginning of the end. Who’s right? By ED WHITE, WINNIPEG BUREAU

Now is the time to tackle the unsustainable trends of dairy supply management, say leading agricultural economists and farm leaders.

It might not be the sort of thing a new government relishes wading into, but some think that if supply management doesn’t set itself up for the future, it might not have much of one.

“I think there’s a real opportunity to take a hard look at this,” said Canadian Federation of Agriculture president Ron Bonnett, who supports supply management.

“I think it’s one of the critical issues going forward. If we don’t get this together, we’ll have bits and pieces banging up against each other.”

In a surprise to many, Canadian dairy and other supply managed sectors will be allowed to keep the system within both the European free trade and Trans Pacific Partnership deals signed by the former Conservative government.

Each deal loosens supply management’s stranglehold over Canada’s domestic market, but the fundamentals, the system’s “three pillars,” survive.

Related: Dairy farmers undaunted amid threats to supply management

Related: The big squeeze

The Dairy Farmers of Canada proclaimed in a tweet when the TPP deal was announced that the deal meant “no negative impact and supply management preserved for the next generation.”

Many individual dairy farmers weren’t happy to see 3.25 percent of Canada’s milk market handed over to TPP nation imports, following the increased cheese imports that were agreed to in the Canada-European Union free trade deal, but the present basics of the supply management system can continue indefinitely, including controlled supply, managed prices and tough import controls.

However, economists say that isn’t necessarily a good thing for almost anyone. The Canadian dairy market is stagnant, with only tiny marginal growth and little reason to believe that will change much.

Farmer numbers have been falling, as in many agricultural sectors, with perhaps only half as many farmers likely to still be in the business in 20 years.

Yet unlike other Canadian farm industries, Canada’s supply managed sectors cannot expand production and bring money into Canada through large scale exports because Canada has agreed to not export supply managed goods beyond tiny amounts.

In 20 years, the industry could consist of a handful of farmers in most provinces, serving a dwarfed processing industry and becoming more and more irrelevant to the wider economy and population. The industry’s ability to keep public support and higher prices at that point might be critically undermined.

University of Saskatchewan agricultural economist Murray Fulton thinks dairy farmers need to ensure their structures remain relevant for today’s situation and sufficient to match long-term trends.

“Farms and farmers are very different today than they were in the 1960s and 1970s when supply management was being formulated,” said Fulton.

“These changes will eventually, I believe, affect what farmers want from policy and what society is willing to accept in terms of policy.”

Fulton said he expects to see changes in supply management policy in the next few years and perhaps even an increase in the number of farmers who fight back against the constrictive system, as happened with the Canadian Wheat Board.

“And society will, more and more, I expect, look for other things from policy,” said Fulton.

“Precisely what these things are, only time will tell.”

Bonnett said he wants to see a clear vision about where supply management can evolve to offer farmers and Canadians confidence that the industry has a sustainable future and provides an industry Canada wants to protect.

“There’s been huge value in the marketplace (from supply management),” said Bonnett.

“We don’t want to get into the situation where industries suddenly collapse.”

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