As U.S. dairy farmers struggle, Canadians worry the problems will spread
Dairy war brews along the border
Milk is the essential ingredient in the yogurt under your granola, the cheese topping your Varsity pizza and the froth crowning your latte.
It’s no simple process getting that milk from the cow and into the glass to help you wash down that Insomnia cookie. And that process can differ greatly for farmers – sometimes just a few miles apart – on opposite sides of the U.S.-Canada border.
Valerie Patten has owned Blumer Farm in Alexander, New York, since 1988. The main stall on her farm holds nearly 450 Holstein cows. She loves the farm and its employees. But the last five years have been tough as the American dairy industry has been rocked by low prices, labor shortages, trade disputes and other hurdles.
Some of those challenges have been magnified by public policy here in the United States, she said. Two-thirds of Patten’s staff is Latino. Hiring them has become more difficult and expensive under the H-2A visa program.
“(Many) individuals in the United States are anti-immigrant, but they do not realize how dependent we are on their labor,” Patten said. “We wouldn’t have an industry,” she added, without immigrant labor.
In today’s economy, Patten struggles to generate consistent yearly profits, which would allow her to make upgrades to the cows’ living spaces. She can barely afford the baseline cost of adopting H-2A to begin hiring reliable labor. Patten is hoping for “a level of profitability to gain sustainability” in the dairy industry, she said.
Another issue: The United States dairy market is saturated with more milk than consumers know what to do with. Less money per gallon means farmers are producing more milk to generate the same revenue, driving down the price even further, according to Rick Welsh, a nutrition and food studies professor at Syracuse University.
The 2018 Farm Bill has exasperated the problem, doubling down on a regime that encourages overproduction, he said.
Also fueling the oversupply of milk is the emergence of new alternatives made of nuts, soy and other products. Dairy farmers say products marketed as “almond milk” and “coconut milk” are inaccurate and dilute the milk brand.
“Fairness,” said Patten, a third generation farmer. “All I want is fairness in this industry.”
North of the border
Canadian farmers operate in a much different environment. Instead of incentives to produce milk, they work on a quota system, with farmers buying the rights to produce a certain amount of milk.
Ben Loewith, also a third-generation dairy farmer, runs Joe Loewith and Son Ltd. with his father and uncle in Lynden, Ontario. The Loewiths operate their farm with the expectation that, “a business needs to expand every year, whether it is through diversification or increasing the size of the operation,” Ben Loewith said.
Critics of the Canadian system say there is no room for competition. Canadian farmers can buy as much quota as they want as long as they can afford it and have a large enough farm to produce it. The United States actually does something similar with the sugar industry, and Loewith says it helps his family farm grow because he can accurately predict his farm’s future income.
Still, Canadian farmers are concerned about the sustainability of Canada’s system as global pressure heightens to adopt free market practices. Last fall, the United States dairy industry encroached further into the Canadian dairy market through the renegotiation of the North American Free Trade Agreement, know as NAFTA.
The new United States Mexico Canada Agreement (USMCA) will replace NAFTA if it is ratified by all three countries as early as 2020. The deal opens up more of the Canadian dairy market to American farmers.
Canada also agreed to undo a pricing scheme that enabled the Canadian Dairy Commission to price skim milk powder at the same price as the cheaper American imported dairy powder, which had encouraged some Canadian companies to stop purchasing powder from 76 Wisconsin dairies and switch to Canadian powder, according to Meredith Lilly, associate professor of international affairs at Carleton University in Ottawa.
Approximately 30 percent of the protein Loewith’s farm produces goes toward powder products, he said. Loewith worries American imports will displace Canadian farmer’s protein and skim milk powder from the domestic and global market, which will lower the price of milk in Canada.
Loewith worries that these changes will eventually lead to the breakdown of the Canadian system, which uses quotas, cooperatives and other mechanisms to keep prices steady.
He never wants to get to the point where “if there is ever a glut in the system, the processor has an unbelievable amount of power to say, ‘I know your cost of producing milk is 50 cents, but I am going to offer you 40 cents. Take it or leave it.’”