Like farmers everywhere, Manitoba milk producer Henry Holtmann is in
business to make money.
So why is he promoting increased milk and dairy product exports, even though that product will be sold at prices that are sharply discounted from domestic prices and well below what dairy farmers say is their cost of production?
The Rosser, Man., farmer and director of the Manitoba Milk Export Corp. says it is a matter
of economics, politics and inevitability.
First, there are the
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economics.
Canada’s new dairy export policy, organized
outside the domestic
supply management system, offers producers a chance to expand production or dispose of surpluses without buying expensive quota needed to sell into the higher-priced domestic market.
Some farmers figure they can make money on the margin of their production.
“We have to provide opportunities for those who have the ability to produce milk at low costs and feel they can compete,” Holtmann said.
Prepare for future
For the moment, he and brother Tony are not planning to plunge into the export market. They have almost doubled their milking herd to 200 head and bought additional quota to cover increased production.
“Right now, we are sticking to domestic but I do expect to be involved in the future.”
Then, there are politics.
Take charge approach
Holtmann said the dairy industry wants to show the federal
government that it is more than a protected, inward-looking sector. It is also capable of contributing to Ottawa’s trade-oriented
agenda.
“We are responding to the decision makers in Ottawa,” he said.
“Trade is the buzzword these days and the word is out that sectors which are part of the team are in exports. We’d rather do it than have it imposed on us someday by government.”
And finally, dairy exports are inevitable, so why not try to make a virtue of it?
“We have always exported because it is impossible to always match production exactly to domestic demand,” he said.
“That surplus had to find a market. Now, we’ll just be doing it differently.”
The likelihood of future trade liberalization also raises the prospect of lower tariffs, more import competition in the domestic market and greater surpluses. Establishing export markets now will lay the groundwork for a more export-oriented industry in the future.
However, Holtmann conceded that with export prices hovering around 40 percent of domestic prices, increasing exports will not do much for the dairy farm’s bottom line.
“The export business is very competitive,” he said.
“For now at least, we’ll be doing more business, but we’ll be spinning our wheels on income. Maybe that will change sometime if subsidies are reduced and prices strengthen.”