What happens around the world or in your own backyard matters when it comes to agriculture in Canada. It’s a global market.
Whether it is about exports or related to producers whose businesses are entirely focused on domestic use, every acre and animal matters, especially if these are in the United States.
Canadian grain farmers might not feel like they share a lot with their dairy producing cousins, but their margins after operating costs both run about 23 percent. So, no one is getting rich with a scenario like that, despite supply management.
On the dairy side the gross is a little more than $6 billion a year. For western grains and oilseeds, it is more like $16 billion.
Unlike grains and oilseeds, dairy consumes crush byproducts and off-grade or feedgrains that would need to be marketed into the U.S. if not for domestic consumption.
And while the Americans are using Canadian dairy as an excuse in North American Free Trade Agreement negotiations, that doesn’t mean we should.
The American system is filled with subsidy programs and labour laws that Canadian taxpayers won’t tolerate matching.
The Margin Protection Program for Dairy Producers in the United States protects farmers against drops in dairy margins and provides payments when milk prices are low, relative to feed prices. Only low-priced corn is keeping dairy near profitability right now.
In addition, a large portion of dairy farm labour in the U.S. is provided by lower-cost non-citizen workers. Again, it’s a non-starter in Canada.
When times get really tough in the U.S. dairy business, short-term bailouts through emergency funding have been the practice. Canada has already rejected those scenarios.
U.S. subsidies closer to home for grain producers come in the form of something akin to our dairy system. The U.S. renewable fuel standard is paid for by American consumers with each tank filled. It requires fuel wholesalers to blend 24 percent renewable, crop-based content into each American gallon of fuel. The program now takes up about 40 percent of American corn. Without this mandatory domestic consumption, the price of all commodities that could be raised on U.S. farmland would collapse, along with farmland prices, there and here.