Bean There: The Price of Milk

It’s fair to say that a user-friendly discussion of the dairy industry in Canada would be in order right about now. With the current upheaval in trade talks, the media is over-run with pundits beating the drum for and against our present system of supply management, but the average person is being given precious little information on what it is and how we got here.

Jersey cows, Denmark. (Photo by BartLaridon, own work, CC BY-SA 4.0, (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons)

Jersey cows, Denmark. (Photo by BartLaridon, own work, CC BY-SA 4.0, via Wikimedia Commons)

What makes yours truly qualified to tell this particular bedtime story? Well, for many years I had a milk cow or two, which led to my own personal not-always-friendly engagement with Big Dairy. On the other hand, for over 10 years, I have lived and worked in the heart of Cape Breton dairy country. Some of my best friends are dairy farmers and I have found myself at 4 a.m., lugging milkers in their barns when help was needed. Impossible not to hear and relate to their point of view. So, grab a blanket, snuggle into your armchair and let’s begin.

 

Supply Management

Farming is hard. That’s a fact.

There’s a saying it’s the only business where you are forced to buy retail and sell wholesale. Although great efforts have been made over the years to unite farmers for fair prices, in the 1950s and ’60s, the dairy producers—that is, the companies that bought the raw milk and turned it into cheese, butter and nicely packaged 2%—were much more powerful than the farmers and dictated the price they were willing to pay. Since individual farmers were not in a position to package and distribute milk themselves, they usually got the short end of the deal. And don’t forget, without a steady and predictable income, farmers had little to use as collateral for a bank loan to expand or improve their operations.

In the early 1970s, after a great deal of lobbying, (this is the short version of the story) the supply management system was put in place across Canada. By purchasing quota—at what was then a small cost, priced per pound of butterfat produced—the farmer could get paid a set price for the milk which would cover the cost of production, including fair wages. Suddenly, farming, at least for dairy, became more predictable and a lot less risky. If you worked hard and smart, you didn’t have to fear being blindsided by a volatile market. And you had collateral to let you start talking to the bank to improve your equipment (and maybe buy a new washing machine).

 

Cheap milk, hidden subsidy

It still wasn’t Easy Street: the weather, a bad run of mastitis or a personal illness could still knock you for six, but farmers felt like they had improved the odds. Supply management systems were instituted in egg, chicken and turkey production as well. It’s hard not to see the appeal to farmers. More and more of them signed up, and as demand increased, gradually, the price of quota crept up too.

Pauline was the pet of President William Howard Taft and is seen here grazing on the south lawn of the White House. She supplied the Taft family with fresh milk daily. (By DCPL Commons (originally posted to Flickr as Pauline) [Public domain], via Wikimedia Commons)

Pauline, the pet of US President William Howard Taft, seen here grazing on the south lawn of the White House. (Photo by DCPL Commons, Public Domain, via Wikimedia Commons)

From the government’s point of view, the system was attractive as well. It got them off the hook for financial assistance. The price of milk is set to recover the real cost of producing milk from the consumer in a reasonably closed system. This instead of giving the farmers an outright payment as a subsidy to keep consumer prices artificially low. Don’t believe for one second that the US produces cheaper milk than we do (except, perhaps, in allowing shortcuts like bovine growth hormone). They just pay the difference through their tax system, through a complicated and generally opaque system of subsidies all along the supply chain—from the payments to corn farmers growing the ration fed to high-yield cows (boosting production and shortening their lives) to technological “innovations” that extract multiple embryos from a single million-dollar cow (irresponsibly flooding the gene pool for generations to come). The milk money has to come from somewhere—in Canada, we see it right on the price sticker. In the so-called free market, with its hidden subsidies, you don’t get to see a full, itemized bill, least of all one incorporating the environmental and social capital costs.

 

Quota woes

However, I won’t deny Canadian dairy has its own problems. That high price of quota? Yoicks! You better be rich—or inherit it or marry into it. Think of a young farmer, even one brought up to it, willing to take on millions of dollars of debt at the outset just for quota and cows. A debt that won’t be fully retired until that farmer retires herself, and sells off the quota.

Yes, the bank counts cows and quota as fine collateral for a loan, but they aren’t so keen on the land needed to feed those cows as collateral. No resale value to speak of, you see. A lot of dairy farmers have to skimp on land purchase and scramble to maximize production to pay that crushing debt. Short on land, they plant expensive, high-yield corn for the feed ration—you can get another loan for seed and fertilizer—which is hard on soil compared with lower-yielding barley, for example. But when land is short and costs add up, stewardship takes a back seat. Lactating cows are increasingly kept off fresh pasture, their feed brought to them to conserve every calorie for making milk.

A few years ago, the dairy farmers tried to cut down on the ballooning cost of quota by capping the price. Predictably, the price dropped like a stone, to $24,000/kg butterfat, well below the $35,000 it had been. Banks, realizing that their precious collateral was shrinking, started calling in the loans. Rather than see hundreds of their cohort go under, the farmers were forced to back down.

 

Disappearing dairy

The high investment cost means that dairy farms are getting fewer and bigger. Not many milk a few dozen cows anymore. Corporate control of the processing end is concentrating rapidly as well. In Nova Scotia, Scotsburn has been swallowed up by Saputo. Bigger players, with more at stake, also like to exert more control, to safeguard that investment. Protectionism is certainly one tool they like. There may well be an argument for protectionism to safeguard a decentralized, diverse dairy industry, especially in a country with a small, scattered rural population, but with that corporate concentration the rationale is becoming less clear.

Saputo sign. (Photo via CBC http://www.cbc.ca/news/business/saputo-plants-close-1.3502612)

Saputo sign. (Photo via CBC)

My one-cow operation garnered a lot of unwelcome attention from the Dairy Farmers of Nova Scotia, jealous of their market share. I had wanted only to sell a little cheese made from excess summer milk and had even put in an inspected dairy room. I could have had 1,000 milk goats but the one cow, they insisted, would bring down the full regulatory weight of a 100-milker operation – including the necessary $35,000 of quota.

At the time, there were even provisions for producer processing in the Natural Products Act that would allow for my tiny business idea. Hand-milking one cow wasn’t going to edge out Scotsburn. Unfortunately, thanks to me, that loophole was closed, and I didn’t make enough cheese to pay my lawyer enough to take it to the Supreme Court.

 

Fear-mongering

For many years, dairy farming associations touted health concerns as a reason for their tight grip on milk distribution. I don’t want to enter into the raw milk debate here. Both sides tend to get a little hysterical. Let’s just say I doubt it either cures cancer or inevitably kills you. We’ve come a long way from Addie Hoodless helping to found the Women’s Institute and the Canadian Victorian Order of Nurses in 1902 in her mission to save children and babies through milk pasteurization. Go Addie! However farm and family hygiene has improved in so many ways since then.*

Adelaide Sophia Hoodless, 1993 Canadian stamp. (Source: http://collectionscanada.gc.ca/pam_archives/index.php?fuseaction=genitem.displayItem&lang=eng&rec_nbr=2266356)

Adelaide Sophia Hoodless, 1993 Canadian stamp. (Source: Collections Canada)

Still, the industry is not above fear-mongering to drive home their demand for tight control. A Department of Agriculture spokesperson some years back babbled idiotically about pasteurization causing the end of tuberculosis outbreaks in cattle. Ummm…No. The spread of TB was halted when we first developed an accurate test for TB in live cattle, so that infected cows could be culled, and then developed a vaccine so that uninfected cows didn’t contract it. Science works, but you have to understand it in the first place. Pasteurization did prevent outright deaths from a host of diseases caused by a lot of unknown and little understood pathogens (including TB), from poor, turn-of-the-19th-century hygiene.

Increased per-cow production means a commensurate increase in stress and health problems in the herd. It stands to reason that the farther cows get from their innate ruminant nature—even to the point of never seeing pasture—the more intensive care they will require in their management. The average age of a milking cow keeps dropping. In New Zealand, cows are kept as long as they get into calf—15 years or more. Here, once they’ve hit peak production (after only three to four lactations) they are culled.

Older cows are also more prone to infection and susceptible to stress. Good farmers are getting smarter about the free use of antibiotics and there are strict rules about contaminating the milk stream with milk from cows in treatment but overall the system definitely has its pressure points. The reluctance to diversify the dairy industry by allowing, for example, a separate stream for organic milk or small-scale cheese making, largely stems from an understandable fear of the political troubles that might arise from opening up our nicely closed system. That fear certainly seems to be at the root of the belly-rumblings we are hearing about trade today. But, rightly or wrongly, to outsiders it all looks like monopolists tightening their hold on their monopoly.

 

Rutabagas and kumquats

Much has been made of the milk systems in other countries. New Zealand, for example, dismantled its supply management system and now ships butter and milk products all over the world. Fine. But I have been to New Zealand and visited those farms. You know they have a different climate, right? They grow grass ALL YEAR LONG. Try growing that kind of forage in a Nova Scotia January.

Feed costs and land shortages are not the only factors keeping cows in barns. I drove up to a farm I was to tour in Waipu, NZ, and looked in vain for the barns. I mean, the guy milked 600 cows, the buildings had to be huge! Instead, all they had was a low shed, not even completely walled in, with their rotary milker inside. I asked about storing hay or silage and the farmer shrugged. “We make a couple of hundred square bales in case the rainy season is a bad one.” For 600 milking cows? A friend here who used to milk 50 put up 5,000 bales. And he made a tower of silage. The New Zealander change pasture every 12 hours, that’s why they invented the electric fence. He didn’t even own a tractor, just a bunch of ATVs for fetching and herding.

A country with more variable weather and the same thinly scattered population we have, Australia, also dismantled its quota system. The price of milk went up and farmer bankruptcies did too, necessitating a suicide helpline for desperate dairy farmers.

What I’m saying is that comparing US agricultural subsidy programs and New Zealand’s Garden of Eden climate with our admittedly imperfect system in Canada isn’t even apples and oranges, it’s rutabagas and kumquats.

Dairy calves near Okato, NZ. (Photo by Dave Young, CC BY 2.0, via Wikimedia Commons)

Our food, ourselves

And suppose we opt for cheaper milk from countries with nicer climates and less stringent labor, health and environmental laws? China, you’re thinking? How about the United States? The longer the distance from the start of the food chain to the consumer, the greater the probability that something we can’t control can go wrong. Especially in a foreign, sovereign state. Maybe that price point is worth the risk. I’ll let you take the first sip. (I can still remember when protests of excruciatingly foul conditions on mega-hog farms in Kansas, Colorado, Nebraska and Oklahoma did not result in an industry review or more stringent regulations but laws preventing protests and even oversight. Don’t want to hobble that free market!)

And we haven’t even begun to talk about how that system could be dismantled. Who is going to pay those farmers—or their bankers, really—for the money they have invested in quota? I think you know the answer. And governments being what they are, will the farmers be lucky to get 50 cents on the dollar and go under anyway?

The dairy sector under our system is stable and self-sustaining, making it an important anchor element in Canada’s agriculture. Do we really want a future where we “outsource” a significant part of our food production—our food security—to other countries? We’re not just talking about treat foods like coffee and bananas, here. Or strawberries and fresh green beans in winter.

Look, you don’t have to buy the whole dairy industry line about the vast amount of milk you should drink or take as gospel the hygiene horror stories to understand the underlying problem. How we manage—and manage needed change—in OUR food system in OUR country should be up to us. Trade is trade and yes, trade is good. But food is too fundamental to leave its creation and distribution to political pundits with ideological axes to grind, or bureaucrats trying to make backroom deals at any price.

*Still, go get the damn polio and TB shots for your kids. What are you thinking?

 

Featured image: Winking Jersey cow, Netherlands, by BartLaridon, own work, CC BY-SA 4.0, via Wikimedia Commons)

 

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Market gardener, farmer, workshop leader, seed-saver, political candidate and mother, Michelle Smith has spent over 30 years coping with the challenges of our bioregion and in the process has built a store of practical and technical knowledge. The Inverness resident has served on the board of Seeds of Diversity Canada and represented Alternative Producers with the Federation of Agriculture but can do nothing about her hair. She is pictured with a head of Club Wheat, a seed that shares her approach to hairdressing.

 

 

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