Chris Birch is a 46-year-old dairy farmer from Hilsdale, Ont., who wants to make it clear that he is not an opponent of the supply management system.
“Supply management didn’t work for me,” he said.
“That doesn’t mean it can’t work for someone else. If you are in the system, it is a good living. You don’t have income or marketing worries. How nice would that be?”
Birch may not be a dairy farmer much longer.
Dairy Farmers of Ontario, the provincial farmer-controlled marketing board, is trying to put him out of business because Birch and as many as 45 other Ontario farmers want to produce milk outside the domestic market.
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The farmers refuse to buy quota and intend to sell all their produce into the lower-priced export market on contract.
A final decision could come by early June, although an appeal to the provincial agriculture minister would delay the end result.
Birch’s case is a complicated political battle. At its heart is the issue of whether farmers could make money selling milk for a fraction of the domestic price if they didn’t have to buy costly quota.
The origin of the dispute came when the protected Canadian dairy industry launched an export program several years ago.
At first, the export sales were organized as a special class within the monopoly marketing system.
When the World Trade Organization ruled that those exports were effectively cross-subsidized by a domestically regulated pricing system, the marketing board tried to push the export program outside the supply management system.
At that point, some farmers like Birch took advantage of the opportunity by selling their domestic quota, paying off their debt and producing dairy goods outside the quota system for sale in American markets.
A WTO ruling last year insisted that cheap Canadian milk exports still benefit from illegal export subsidies because of high domestic prices and revenues. It did not comment on exporting farmers who were not quota holders and do not benefit from the high-priced domestic market.
Still, DFO decided that all farmers outside the system had to rejoin and all exports had to be regulated to stay within strict WTO limits on subsidized exports.
Birch and some fellow farmers had abandoned the domestic system, formed the Georgian Bay Milk Company and negotiated contracts to sell raw milk directly to American processors.
The big advantage is the lack of overhead investment in quota.
“I can sell into the U.S. market and make money,” Birch said.
“When I was in the system, I was never able to make enough to stay ahead. I could not afford to buy quota that would allow me to get big enough to be commercial. I don’t want to undermine the system. I just don’t want to be part of it. I can do better outside.”
DFO sees it as a danger to the system. Dairy exports outside the regulated system likely would bring retaliation from the United States and New Zealand, the countries that successfully challenged Canada at the WTO.
It is insisting any farmer interested in the export market must buy back into the system, buying quota for at least five cows at a cost of more than $125,000 at current prices.
Farmers outside the system insist it is too high a price. Without quota investment, they believe they can be competitive in lower-priced export markets.
Economist Al Mussell at the Guelph-based George Morris Centre says the challenge to the system, and exposure of the impact of quota debt on the need for higher milk prices, is telling.
“It is a significant challenge and maybe a comment on the connection between quota prices and high milk prices,” he said.
“Can you sell your product cheaper without that investment cost? The proof of the pudding is in the eating. They are doing it.”
