The winners of Canada’s outstanding young farmer award in 2010 have a stark message for the dairy sector – their costs and debt are too high to be sustainable.
Ryan and Lauren Maurer from Grenfell, Sask., who shared the Canadian Outstanding Young Farmer award with an Ontario couple last autumn, told the Canadian Federation of Agriculture annual meeting in late February that the Canadian dairy industry should move to a more “open market” system.
The Maurers are grain, oilseed and special crops producers who farm east of Regina. Twenty years ago, Ryan said his family got out of the dairy business because of the cost.
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“The protection provided to the supply managed sector has increased quota values and created a monster of debt,” Ryan said.
“The debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio in the Canadian dairy industry is double that of the U.S. dairy industry.”
He said the grain and oilseed sector is far less vulnerable, adding the Canadian dairy industry would be ill prepared to withstand the shock of a health crisis.
Maurer speculated that if the next health scare is “milk fever” rather than “swine flu,” the Canadian dairy industry would be in trouble.
“With such high levels of debt, would there be enough surplus to function and withstand the fight?” he asked.
“By moving to a more open-market system, the supply managed sector would not only be in a better position to maintain its future viability, it would also work to aid the agriculture industry as a whole.”
When a Quebec delegate challenged Maurer’s criticism of the current dairy structure, the young Saskatchewan farmer did not back down.
“Sometimes I look to the extreme to see where we are headed,” he said.
Dairy farms are consolidating and someday a farmer with millions of dollars worth of quota will have few buyers.
“I hesitate to see it as a sustainable model.”
He did not provide details about how a more market-oriented system would function or reduce quota prices or debt.
Maurer said he recognizes that supply management has been an effective tool for helping dairy farmers get their income from the market.
But it has built-in time bombs that threaten its future.
“In Canada if the supply-managed industries keep some of the current core values and at the same time implement innovation, this sector which has been targeted as a hindrance can emerge as the leader of a new and progressive system to help not only their own sector but all Canadian agriculture sectors,” he said.
He also waded into the debate about whether land should be used to produce grain for biofuel rather than food.
Maurer said farmers should not be restricted in their ability to produce grain to be used as a biofuel feedstock and he suggested those who engage in the food versus fuel debate are being hypocritical.
Significant acres already are used to produce malt barley.
“The very people who are promoting the food versus fuel debate do not recognize the significant acres currently committed to the production of alcohol,” he said.
“This grain could easily be eliminated to provide food acres. Beer is not the sixth food group.”
