New negotiations around the North American Free Trade Agreement isn’t the only threat to supply management. It had plenty of threats from within the country but the NAFTA talks now underway give supply management opponents a bandwagon on which to climb.
Worth $6.2 billion in farm receipts annually, and once separated, fractionated and value added, worth $17 billion to processors, the Canadian dairy industry is a critical link in Canada’s agriculture sector.
The regular part of farm receipts is an important element in its value to agriculture. Profitable dairy farms result in a thriving feed in-dustry and appropriate land use, for production of forage, grains, oilseeds and manure spreading.
Many agricultural acres in Ontario and Quebec rely on the local dairy farms for their markets. The dairy farms, in turn, support land values and supply trade, as well as being critical rural employers.
Dairy farms have an expense-to-receipt ratio of 0.77. So 23 cents out of every dollar earned goes to income, capital purchases and tax.
There is a myth that dairy farmers enjoy much higher margins than their cousins in the grain industry.
It might be because their income is more regular, and this is perceived as profitable. The Census of Agriculture shows that 21 cents of every dollar in the grain and oilseed business is margin, a 0.79 ratio.
Supply managed poultry and egg is 0.84. Non-supply managed beef and hog production are 0.90, leaving just a dime on those farmers’ kitchen tables for every dollar that came through the farms’ gates.
Doing away with supply management might make NAFTA easier to negotiate but competing with desperate and government subsidized America producers will not im-prove the Canadian economy.
Canada has the world’s highest level of adoption of new dairy farm technology, largely barn and parlour robotics.
If the American model is so good why haven’t its farms invested in these animal, feed and human efficiencies that reduce the carbon footprint of dairy production?
First, a non-resident and often undocumented labour pool; second, smaller and mid-sized dairy farms in the U.S. readily admit they can’t afford the investment as their margins are too tight due to low milk prices. Currently, most report negative numbers, despite government assistance in feed and dairy, lower taxation and cheaper labour.