Dairy farmers are finding the winds of change are blowing some of the cash off their bottom lines, industry sources say.
But even though producers are experiencing a cost-price squeeze, many of the most difficult changes have been accomplished, they say.
“Maybe we’ll have an opportunity to have a little tranquillity in the next few months,” said Lloyd Johnston of the Alberta Dairy Control Board.
“Things look reasonably positive.”
The western dairy industry has gone through a whirlwind of change on all levels in the past few years, as the once tightly controlled domestic industry readies itself for international competition.
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In recent years, provincial dairy industries had to drop the levy system after the federal government signed on to the World Trade Organization.
Trade rules
The nation-wide supply-managed system has been forced to change under world trade rules. Limits on the amount of imported milk allowed into Canada have been replaced by high tariffs, which make milk imports above certain quantities cost prohibitive. Under the WTO, the tariffs are scheduled to be gradually reduced, opening Canada’s industry to new challenges from the outside.
Producers have seen several milk distribution systems come and go, in the quest to achieve greater efficiency. As well, herds have expanded to become more efficient and competitive.
But higher costs and lower blended milk prices are cramping many small producers.
British Columbia producers are particularly pressured, facing increased environmental, labor and tax costs.
At the same time, processors have been cutting plants and concentrating operations in larger facilities.
Western milk pooling is alleviating some of the problems processor consolidation could have caused, said Brian Cameron of the Alberta Milk Producers.
Provincial governments had lowered interprovincial trade barriers, making it “hard to say there were four markets as opposed to one western market,” he said.
But because of pooling, producers whose provinces were losing processors and plants don’t have to suffer on price.
“Markets have shifted, but when producers pool, it doesn’t matter,” he said.
Pooling has stopped dairy farmers in one province bidding down the price of milk in attempts to keep processors from relocating.
“By sharing all markets and sharing all revenues, it really negates a lot of those effects on producers and frees up the processors to be as efficient and competitive as they can be,” Cameron said.
Alberta in particular has benefited from processor consolidation, as both Dairyworld Foods, a B.C., Alberta, Saskatchewan producer co-operative, and Lucerne have both closed some plants elsewhere and concentrated in Edmonton.
At the same time, controls over dairy product production have loosened, which is allowing some producers to gain from offshore sales, although these sales are usually below prices at home.
Cameron said the Alberta optional export program allows producers to sell milk that’s above quota to processors making products that will be exported. Producers who see they can sell more milk also see they receive a lower blended price, said Johnston, of the Alberta milk board. That leaves them in a dilemma.
“We either put our products out there at competitive (low) prices and retain the customer and keep the industry growing or as large as it is, or we keep our prices high and they don’t buy our products.”
Producers have decided for the former, but it hasn’t been easy, Johnston said.
The new opportunities to sell more milk have increased interest in the industry, he said. New and larger farms are being set up, which strengthens dairy production.
But that has also driven up the price of buying supply quota, which has left some producers unable to buy the quota they need to expand.
