ANALYSIS: Cash cows

The typical dairy farmer and the average canola grower in Sask­at­chewan have similar goals. Both want to produce the highest quality food, while maximizing their profit. But there is one important difference.

The typical dairy farmer and the average canola grower in Sask­at­chewan have similar goals. Both want to produce the highest quality food, while maximizing their profit. But there is one important difference.

The typical dairy farmer in Saskatchewan pays about $33,000 in annual levies to the provincial dairy association, SaskMilk. The average canola grower pays $325 annually to SaskCanola, the provincial commission.

These figures are based on data from the organization’s annual reports for 2017.

Related story: Dairy farmers fine with checkoffs

The story is similar in other agricultural provinces. In Manitoba, Alberta and Ontario, dairy farmers contribute $10,000, $20,000 or $30,000 a year to provincial and national dairy groups.

SaskMilk vs. SaskCanola

SaskMilk levies:

  • In 2017, 161 dairy farmers paid $3.9 million in promotion levies to SaskMilk and $1.7 million in an administration levy, for a total of $5.6 million.
  • The average Saskatchewan dairy producer paid $24,223 in promotion levies and another $10,000 in administration levies to SaskMilk.

SaskCanola levies:

  • In 2018, Saskatchewan’s 23,000 canola growers paid $7.4 million (before refunds) to SaskCanola.
  • The average canola grower paid $325 in levies to SaskCanola. The actual average may be higher because a percentage of those 23,000 canola growers may not have seeded canola in 2018.

Source: SaskCanola and SaskMilk

Grain, oilseed and pulse growers contribute 75 cents to $1 per tonne of grain to their respective associations and commissions, which equates to about $1 per acre of land. A 3,500 acre farm would pay around $3,500 in levies, divided among the various commodity groups.

The dollar difference between grain and dairy producers might explain why dairy organizations appear to have a notable influence over the public and politicians across the country.

This summer, a percentage of canola, grain, pork and beef producers were outraged when the federal government announced $1.75 billion in support payments for dairy farmers. The cash was compensation for the potential market loss from the Comprehensive Progressive Agreement for Trans-Pacific Partnership and other trade deals signed in the last couple of years.

The dairy farmers were paid in a year that’s been tough for canola, pork and beef producers because China has banned or slowed the import of those commodities from Canada.

Many believe China’s actions are connected to Canada’s detention of Meng Wanzhou, an executive with Chinese-owned Huawei. The U.S. justice department wants Canada to extradite her to the United States, where she will face charges of breaking sanctions on Iran.

Grain growers like Stephen Vandervalk of Fort Macleod, Alta., were shocked that dairy producers received a cheque and other Canadian farmers got nothing.

“At what point do you say this is absolutely ridiculous?” Vandervalk asked when the compensation was announced. “Why would an industry (dairy) that has guaranteed income, a guaranteed market … (need financial support)?”

Others were more tactful.

”The Government of Canada needs to provide support to farmers facing the impact of escalating global trade volatility,” Ontario farmer Markus Haerle said at the time.

“Equitable treatment is expected and reasonable. This isn’t about dividing farmers, this is about consistency in policy.”

Having millions to spend on communications and lobbying is no guarantee of public sympathy and political support. However, when it comes to money, Canadian dairy farmers operate at a different level than the groups that represent canola, pork, pulse, wheat and beef producers.

The Western Producer contacted the Dairy Farmers of Canada multiple times, asking for its financial reports. Many commodity groups, national and provincial, include detailed financial statements in their annual reports. Dairy Farmers of Canada provides an online link to its financial statements in its annual reports, but the link did not work as of writing.

Even without a DFC financial statement, it’s possible to calculate its budget using reports from provincial dairy groups.

Dairy producers pay two primary forms of levies, which support provincial organizations. One is usually called a promotion levy, or the marketing, nutrition and education (MNE) levy.

“All levies come from producers, including the promotion levy,” said Joy Smith, policy and communications manager with SaskMilk.

“The levy is applied based on production, so a smaller farm pays less than a larger farm (it’s all in proportion). All dairy farmers across Canada pay a consistent MNE levy rate of $1.50 per hectolitre of milk.”

The annual reports show that producers also pay an administration checkoff. The rate varies from province to province. In Alberta, the administration assessment is 50 cents per hectolitre of milk.

The levies add up, quickly.

In 2017, Canadian dairy farmers produced about 90 million hectolitres of milk, which generated $135 million in promotion checkoffs and possibly another $45 million in administration levies.

Quebec dairy farmers paid about $61 million in levies to the provincial association, Les Producteurs de lait du Quebec, in 2017. Les Producteurs transferred more than $27 million of those levies to the DFC.

Ontario, the other big dairy province, used to transfer about $30 million in levies to the DFC, but a couple of years ago Dairy Farmers of Ontario opted out of that arrangement. It now keeps its levies and runs its own promotion and other programs.

The remaining provinces transfer about $20 to $25 million to DFC. So, its annual budget is likely in the range of $50 to $55 million.

A DFC spokesperson said the estimate is “not far off the mark.”

The DFC budget is an order of magnitude larger than comparable organizations in Canada. In 2017 the Canadian Cattlemen’s Association received $3.7 million in check-off revenues, while in 2018 the Canola Council of Canada had $5.7 million in levies, with $2.8 million coming from growers.

That’s a possible explanation for why national television ads for canola growers or beef producers are a rarity because the groups don’t have the millions needed for such campaigns.

Dairy producers have a political advantage over other farmers because the majority of them are located in Quebec and Ontario with dozens of swing ridings in federal and provincial elections. Most of the grain is produced in Western Canada, where one party, the Conservatives, win many seats with 70 percent of the vote.

Voting patterns aside, having $50 million to spend on promotion and education doesn’t hurt. Plus, Dairy Farmers of Ontario has $45 million of its own for marketing and promotion efforts.

The education aspect of DFC activities is a gray area, a representative of a national commodity group said.

Education may be defined as talking to a politician or media figure who publicly questions the supply management system.

Still, the influence of money has limits.

Knowing the right people in Ottawa may be more important.

An organization with a small budget can be effective if its representatives have excellent relationships with politicians, bureaucrats and other policy makers, said Erin Gowriluk, Grain Growers of Canada executive director.

On the other hand, money can help build new relationships. When Dairy Farmers of Canada hosts a public relations event in Ottawa, it doesn’t serve beef on a bun and warm beer in a drafty tent. The DFC events are “done well,” a commodity group rep said.

The dairy farmers spend buckets of money because they have to, another rep said.

They have to create good will with politicians and the public because the supply management system is entirely political, meaning it could be modified or eliminated by a future government.

In the wake of the $1.75 billion compensation package, there is more resentment toward dairy farmers and their special status within Canadian agriculture.

In the last two months, canola, pork and beef producers have been asking: where is our federal government support?

Another question is about levies and money. Do national groups, which represent commodities other than dairy, need more funding? Or should they direct more money to government relations and public relations?

Can the canola council realistically have national influence if the organization, which represents a $30 billion industry, has 2.5 staff in Ottawa?

The tug-of-war for check-off dollars between commodity groups and grain farmers suggests their funding formulas won’t change anytime soon.


About the author

Analysis Robert Arnason | Winnipeg Bureau's recent articles


Stories from our other publications