U.S. dairy farmers respond to Canadians

MERIDIAN, Idaho — There’s robust defence of supply management among Canadian dairy producers and marketing boards.

They often compare the system to that of the United States, a supply-and-demand driven system that would likely be the alternative should supply management ever disappear.

Among the assertions made by Canadian defenders are these:

  • U.S. dairy producers are heavily subsidized.
  • U.S. producers use rBST, a bovine growth hormone illegal in Canada.
  • The U.S. system is driving smaller American producers out of business.
  • U.S. dairies use cheap foreign labour.
  • Unbridled U.S. dairy growth has created a surplus milk problem.

How do American dairy farmers respond to these assertions? We asked some Idaho dairy farmers.

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Among them are Allan Huttema, who milks about 800 cows near Parma, Pete Doornenbal, who milks 750 cows near Caldwell, Ted VanderSchaaf, who milks 1,200 cows near Kuna, Dave Heida, who milks 1,500 cows near Kuna, Ernest DeGroot, who milks 3,000 cows near Kuna, and Jim Davis, who milks 500 cows, also near Kuna, as well as Bob Naerebout, former lead at the Idaho Dairymen’s Association and Dairy West chief executive officer Karianne Fallow.

Are U.S. dairy producers heavily subsidized?

“From appearances, it looks like there’s a lot of money probably flowing at U.S. ag,” said VanderSchaaf.

“But I think it’s important to remember that a large part of that money is … food assistance program for the general public. For whatever reason, a lot of those funds are tied up in our ag spending bills. A lot of the money is actually not directly coming back to the farms.”

In terms of dairy, there is a margin protection program available, a type of insurance program funded by government. In general terms, when the difference between the cost of producing milk and the price of milk drop below a certain margin, payments can be triggered.

As Huttema explains it, dairy farmers must apply for the program and pay premiums, and the payout only applies to 25 percent of production.

“It seems like the smaller dairies it benefits more, because they can protect more of their production, whereas most of the large dairies haven’t even signed up for it. That is the only direct subsidy that we as producers get,” Huttema said.

In July the U.S. government announced $12 billion in farm aid for farmers suffering from ongoing trade disputes.

For dairy, it amounts to 12 cents per hundredweight of milk on half a dairy’s production, calculated on one of three years.

“You’re talking about a very small cheque considering how much loss we’ve incurred over the tariff deal,” said VanderSchaaf.

“I hear about it all the time, that we’re getting all these subsidies. Well, I don’t have them. I haven’t been getting those cheques.”

Huttema, who follows Canadian dairy news as a former B.C. dairy farmer, said he took exception to a recent news release from the chair of Alberta Milk that indicated more than 70 percent of U.S. dairy income comes from government sources.

“The question he needs to be asked is, can you specifically tell me what programs directly pay dairy farmers in the U.S.? Because we would love to know where to go to pick that cheque up.”

Added Naerebout: “As somebody involved with dairy all my life, I would say the exact opposite is true. I don’t see any subsidies coming to the American dairy producer. But I would say the whole Canadian supply system is being subsidized by the consumers through a higher price that your consumers have to pay.”

Do U.S. producers use bovine somatotropin (rBST) on their cows to increase milk production?

“That could be old information,” said Doornenbal.

“It was true at one point, but now that statement is largely untrue.”

The farmers said use of rBST is not allowed in Idaho and some co-operatives pay a premium to producers for not using it. At one of them, Darigold, the premium is 10 cents per hundredweight.

“I don’t know any processors anymore that are accepting rBST milk,” said VanderSchaaf.

A 2013 U.S. economic study, cited in Oregon’s Capital Press, said less than 10 percent of American dairies use the growth hormone.

Naerebout noted U.S. dairy producers fought to retain rBST when its use was challenged, in part to keep it as a potential tool and in part on principle, since it was deemed safe by the U.S. Food and Drug Administration.

Are smaller U.S dairy farms going out of business?

Yes, is the short answer, farmers said.

In 1980, said Naerebout, there were about 225,000 commercial dairy farms in the U.S. Today there are fewer than 40,000. There are also fewer farms in most other dairy producing countries.

“I don’t think that’s any greater criticism of the American dairy industry than the Canadian industry or the European industry when they were under quota systems. It’s what occurs.”

VanderShaaf said there hasn’t been a major reduction in Idaho, but other areas of the country are seeing consolidation. Low milk prices force economies of scale, he said, and there are fewer young people wanting to enter the business.

U.S. Department of Agriculture statistics indicate there were 40,219 dairy farms in January 2018, which was 1,600 fewer than the previous year.

The current oversupply of milk is discouraging newcomers as well as expansion of existing dairies. Few processors are accepting more milk than their current levels, at least in Idaho, said VanderShaaf.

“In the last 18 months, pretty much all the doors have been closed. Shipping rights have all of a sudden been a hot topic.”

A reduced number of dairy farms doesn’t bother Heida.

“The strong survive. That’s the way it works in the United States.”

Davis has had his dairy farm on the market for the past year with no offers. He said he is saddened by reports of smaller dairies in Wisconsin going out of business, but the last four years have been hard ones for everyone.

“We’ve got to have either less milk or more demand, one or the other.… We need to be able to get the milk out of the country too,” said Davis.

Do U.S. dairies use cheap foreign labour?

“They would have to define cheap,” said Naerebout.

“Most of our guys start out at … above $13 an hour. I know some guys that are paying $20 an hour. It depends on location. I would say it’s fairly common that an employee would be making anywhere from $2,400 to $3,000 (per month), brand new, not with a whole lot of experience, on any given dairy in Idaho.”

Minimum wage is $7.25 per hour. Doornenbal said he pays his milkers $13 for a 60-hour week. VanderShaaf starts his employees at $12 and Huttema pays $120 per shift for an eight-hour shift.

Heida takes exception to the suggestion of cheap foreign labour.

“That’s an absolute falsity. The reason why is, current minimum wage in the United States is $7.25 an hour. Nobody here, even beginning, makes less than double that. So to say that there’s a large supply of cheap foreign labor in the United States is simply not true.”

DeGroot, who has 32 employees, said he hires those who show up looking for work. Some are American born and others are originally from Honduras and El Salvador.

Said Davis: “People think you’re taking advantage of Hispanic labourers and stuff, but we can’t even get a guy to start for less than $14 an hour.”

Has unbridled growth created a surplus milk problem?

“That’s a blunt way to put it, but it’s supply and demand. That’s the way things play out. The market signal now is to produce less milk.… It’s not easy. It’s painful. But it does work,” said Doornenbal.

Huttema said milk production increases aren’t exclusive to the U.S., where average growth is 1.4 percent per year. Canada has also increased its production.

“We have to grow to be relevant. I think the statement has been made that in 25 to 50 years there’ll be 3,000 farms in the U.S., averaging 3,000 cows. and that will get us our nine million cows.

“It’s a great story to tell, the efficiencies gained on dairies.”

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