PARMA, Idaho — Allan Huttema has operated dairy farms on both sides of the Canada-U.S. border.
Near Chilliwack, B.C., he owned a dairy established by his grandfather who emigrated from Holland after the Second World War. He bought the farm from his father in the early 1990s.
“The system was good for us. It provided us a stable living. Everything was great about it,” he said about Canada’s supply-managed dairy industry.
“The whole downside was, especially in the ’90s, there was no growth. There was actually decreases in quota, and it made it really hard to grow and be competitive. You just couldn’t get any scale, and when you don’t have scale, it’s hard to produce something efficiently.”
That said, Huttema would have continued the Canadian operation, but when his sons, Chris and Jeremy, wanted to enter the dairy business, he didn’t see a way forward.
His wife, Mary Jo, is an American citizen from a U.S. dairy family, so the Huttemas moved south, first to Washington and then, eight years ago, to a farm in Idaho near the Oregon border.
Other stories in this WP Special Report:
- Who pays more?
- The accidental case that brought us to the edge
- Dishing on the dairy industry
- U.S. milk industry sours
- Wisconsin dairy farmers seek Canadian advice
- Organic milk production no hedge against low price
- What happens if we end supply management?
- The word is Class; the number is 7
- Why are Minnesota dairy farmers in the red?
- U.S. dairy farmers respond to Canadians
Idaho is the third- or fourth-largest dairy producing state in the U.S., frequently switching places with New York for the number three spot.
The Huttemas milk about 800 cows and have just as many young animals readying for replacements. The goal is to gradually expand to 2,000 cows, substantially above Idaho’s average dairy size of about 1,350.
Huttema said he prefers the U.S. system primarily because Canada’s dairy quota is a major barrier to expansion. High British Columbia land values were another. A 2,000-cow dairy wasn’t in the Canadian cards.
Though the price of milk in the U.S. today is no higher than it was 25 years ago, efficiency improvements have made it possible to thrive in the dairy business, he said.
“You have to strive to do better. And that is one thing, when you are in the U.S. dairy industry, you have to focus on your farm. Everything matters,” he said.
“Here, it’s pennies on everything. You have to run efficient. That’s where the money’s made, in all the pennies everywhere. A lot of dairy families in Canada, the kids want to come in because it’s just a lucrative business. It’s not because they love cattle so much. It’s because it’s a lucrative, secure business.”
Huttema belongs to a 460-member co-operative called Darigold, which operates in Idaho, Washington, Oregon and Montana. That provides stability in terms of shipping rights.
“We have contracts. I’m not at risk of them not picking my milk up,” he said.
About 40 percent of Darigold’s milk is exported, so changes in the world price affect members’ bottom lines. That’s where objections to Canada’s Class 7 milk, sold at the lowest world market price come into play.
“We go out and we have to compete against every country in the world when we go sell our dairy exports, and when a country like Canada comes in and offers them consistently below what we can offer it for, it has an effect on prices.”
For him, the break-even price for milk is about $15.50 per hundredweight, but last month milk was bringing $14.65. In contrast, Huttema said the Canadian price was $34 per cwt., U.S. equivalent.
Surplus milk supplies in the U.S. have lowered prices, the expected result of an open market system driven by supply and demand, Huttema said.
“We call it competitive pay. The processors have to pay enough to get the milk supply that they need. And that will change as supply and demand changes, so right now we’re long on milk, so you see some processors drop the pay price to producers, and it kind of has to happen because that’s the market signals they get to stop producing more milk.”
Milk prices in Idaho are based on a government-surveyed price and futures on the CME. As cheese, milk powder and whey trade, the data converge at month-end and the price is established.
In Canada, milk price is based on the cost of production, including feed, management costs and other factors that are regularly reviewed and adjusted as needed.
Huttema said the solidarity of Canadian dairy farmers in support and defence of supply management is impressive. In contrast, American dairy producers are more independent.
“I’m not saying that’s good or bad. It’s just what it is. I like the unity in Canada amongst dairymen.”
He also said current disputes over dairy, playing out in North American Free Trade Agreement negotiations, are less about supply management than about fair trade.
“We don’t have a problem with Canadian dairy farmers. I’m family to some of them. I’m friends with lots of them,” he said.
“A lot are telling me that Class 7 is not a very good deal, that they would gladly do away with it because how do you justify taking less for your milk that you claim is under a cost of production and not give the benefit to the Canadian consumer, but export it? So you’re willing to produce for less for another country, but you’re not willing to produce for that same price for your own consumers… How is that a good thing?”
Huttema is keeping a close eye on NAFTA negotiations and the Canadian dairy industry’s efforts to defend the supply management system. He’s annoyed by some of it.
“They disparage us a lot. They say our milk is lower quality. They say we get subsidized … that all our milk has (rBST) hormones in it. Those things are all false.
“Quit disparaging us. We don’t demonize what they do up there as far as farming and their milk.”