Canada’s supply management system ensures stability for Kawartha Lakes’ farmers

Jim Callaghan was just 8 to 10 years old when the family loaded up the cream they expected to sell to Silverwood’s in Lindsay, a now defunct dairy company. But on that day the company officials shook their heads and sent the Callaghan’s on their way. There would be no dairy sales for the family on that attempt, since Silverwood’s had a glut of supply that day. These were the days before ‘supply management,’ the admittedly boring name for the system that has brought financial stability to Canadian farmers for decades.

The 1960s was especially a period of overproduction, thanks to all the technological advances the industry was going through at the time. This resulted in such low prices for farmers to the extent that the government felt it should step in and come up with a better way of managing the industry to improve the livelihoods of farm families.

In an effort to reduce the surplus in production that had become common in the 1950s and 1960s — and so that a fair return could be given to Canadian farmers — a new system was brought in.

In the new system, each farm owns a number of shares in the market (or quota) and is obliged to increase or decrease production according to consumer demand. Since production is pretty much a match for demand, overproduction is avoided. Farmers are able to earn a predictable and stable revenue directly from the market, not from subsidies.

While Canadian dairy was the first commodity to operate under supply management, soon the nation’s egg and poultry producers would later come on board with the system, too.

It’s the same system that sends U.S. President Donald Trump into Tweeting fits every now and again in recent NAFTA negotiations. That’s because U.S. farmers, in contrast, are still playing the same game as Canada did back in the 1950s and 1960s – the never-ending quest to find buyers for a perishable product.

‘Definitely Things Improved’

Since Canadian farmers only produce as much milk as is needed by the Canadian market, this limits surpluses that would otherwise be headed for a world market at ‘dumping’ prices.

“I knew the system before (supply management) and it wasn’t very good,” says Callaghan, who notes it was “always hit and miss” in trying to sell the family’s dairy.

He also remembers how his family’s well-being changed after the system was brought in.

“You had an income that was more guaranteed every month. Definitely things improved once the supply management came in. We knew we had to be paid a reasonable price,” for what we were offering, he says.

The Callaghan’s – who run Maryland Farms, a 2,500 acre operation north of Reaboro – used their more stable income over the years to set about making more investments in their buildings and in their cattle.

“We’ve certainly enjoyed…having a system that works and that we can rely on,” Callaghan says, who represents the fifth generation on the family farm. (His boys are now the sixth.)

Jeff Thurston runs Thursthill Farms along with his family, including his father, Keith. He’s got about 1,000 acres north east of Lindsay and is a fifth generation farmer as well. He and his wife have four kids who all help out and who are in either elementary or high school.

Two robotic milkers work 24 hours a day, allowing about 85 cows to literally milk themselves when they feel the need. The transponders the cows wear around their necks track their activity level. If this is ‘off’ somehow, it sends an alarm to their smart phones when it reaches a certain threshold.

“The transponder also measures rumination time (cud chewing),” says Thurston. “We use this as an early indicator of overall health. You can usually see a drop in rumination at least a couple days before you would see visible signs of low health.”

Thurston is a big fan of supply management, too. The advances made on his farm have surely been made possible, in part, to a steady, reliable income.

“Back in the 1950s there were lots of small processors,” he says, “and they would just stop picking up milk at dairy farms if they felt they didn’t need it.”

Then farms had to dump it, he notes. So with the quota system “everybody just produces to the demands of mainly the domestic market,” he explains.

Thurston says the U.S. has “gotten themselves into a pickle.”

“They mass produce and flood their own market. The processors down there only pay what they want to pay and so it leaves them in a two or three year ‘down’ cycle in the market,” he tells the Advocate.

However, those U.S. farmers don’t want to give up their cows, he says, because then they wouldn’t be ready when the market hopefully comes back for them.

“Supply management takes out the peaks and valleys so we have a nice steady income,” he adds.

Thurston says another big difference between Canada and the U.S. is the amount of subsidy the U.S. farmer gets.

“We get our money out of the marketplace…we don’t need a subsidy. Sure, it’s protected, but it’s not a subsidy.

Subsidies – official and unofficial

In fact, U.S. farmers received about $17.2 billion in subsidies in 2016, according to the Environmental Working Group, an organization tracking farm subsidies since the mid 1990s.

There is also an unofficial (and darker) form of U.S. subsidies not even considered on the books — the sheer number of undocumented migrant workers on U.S. dairy farms.

In a 2015 survey by the U.S. National Milk Producers Federation, the group found that half of all workers on U.S. dairy farms are immigrants and if those workers were excluded from the economic picture, the price of a gallon of milk would skyrocket 90 per cent south of the border. It would also be a $32 billion blow to the U.S. economy.

Take that issue off the table and there is still rampant overproduction. As John Barber writes in the Toronto Star last month, the U.S. subsidies and tariffs “have encouraged farmers to steadily increase production in the face of declining demand.”

“As a result they dump almost 200 million litres of milk a year on fields and into streams.”

Growth Hormones

Then there’s the issue of what the U.S. dairy industry puts into their cows – recombinant bovine somatotropin (rBST). This is a synthetic version of what is a naturally occurring growth hormone. It is approved for use in the U.S. to increase the production of milk but is illegal in Canada. Health Canada determined it had negative effects on the health and welfare of cows. Europe has taken no chances, banning all milk imports from the U.S. because of this issue alone.

“That is a bit of a concern,” says Thurston.

Callaghan agrees. “I wouldn’t want that (rBST) to be in our milk. When you start adding something that isn’t natural you don’t know what’s going to happen.”

In fact, it’s hard to find farmers against supply management in Canada. The people who are against it tend not to be farmers, but larger exporters with an unremitting growth mindset. Those who believe Canada shouldn’t have any protection for the dairy industry whatsoever (like, say, Maxime Bernier and his new ‘People’s Party of Canada’), claim Canadian consumers would pay less at the cash register for milk products. Yet data firm Nielsen says that Canadian milk was on average cheaper than the equivalent U.S. product last year, as was Canadian butter, cream, cheese and yogurt.

Even local federal Conservative MP Jamie Schmale is on board with the policy, as is his party. “Supply management makes sense for area farmers because it prevents surpluses and shortages,” says Schmale. He says the system provides a fair price from the marketplace and prevents significant price fluctuations for consumers.

He notes it also ensures domestic requirements “are primarily met by domestic production, which provides a stable marketplace for Canadian famers and their families.”

In an Abacus poll from 2017, 92 per cent of Canadians reported their satisfaction with Canadian dairy, including the range and quality of products available.

Thurston says the milk industry in the U.S. is “controlled by big processors.” He also notes there is a large percentage of farmers in the U.S. who are actually interested in the Canadian system.

“We still have to negotiate with our processors but it’s a partnership in a way,” says Callaghan.

“For our overall rural economy it’s better to have, in my opinion, ten 100-cow family farms instead of one 1,000-cow massive farm.”

Callaghan says he believes the government realizes that if we don’t have a good dairy system, under supply management, “every other related industry is also affected,” from veterinarians to farm equipment sales.

“If we have to start scraping the bottom of barrel, we’d have to cut back on buying equipment and so on,” Callaghan says.

Callaghan remembers being in Indianapolis a few years ago, talking to a farmer there who was looking at getting into a new agricultural sector. The Kawartha Lakes farmer asked him if he was interested in dairy.

“He said ‘I wouldn’t want their job or any part of that operation — they’ve got way too many problems,’” Callaghan recalls. “That sentiment is throughout the U.S.”

There is little doubt that deregulation of our dairy industry would lead to larger-scale farms in Canada at the expense of smaller scale operations. The way things are now for area farmers is obviously working, given the growth of the industry here. Dairy represents nearly 20 per cent of the farm cash receipts in Kawartha Lakes, according to the City.

Kelly Maloney, agriculture development officer for the City of Kawartha Lakes, says the agriculture and food sector is a top economic driver for the area.

“When agriculture does well, we all benefit.”

She says there is increased spending in the community when farms are economically healthy and sustainable. It also helps connected sectors.

“A strong dairy, beef and crops sector in Kawartha Lakes supports a full spectrum of agri-businesses in the supply, service, processing, marketing and distribution value-chain for agriculture and food.”

Maloney says economically sustainable farmers are able to plan for continued improvements in their farm operations, “and that can be seen and felt as…their spending ripples through our community.”