Canadian dairy is a bit of a complicated issue to examine. On one hand, dairy production itself in Canada is highly regulated with stable markets and prices for producers and one of the more democratic agricultural sectors with much of the industry made up of small family farms. On the other, the dairy industry is one of the most aggressive marketers in Canada and the Canada Food Guide contains a large (some say unnecessarily and unhealthily large) daily dose of recommended dairy with two to three servings per day. Additionally, some dairy operations, especially larger ones suffer from animal mistreatment, overproduction and neglect.
The point of this post, however, is to accurately describe the manners of production and distribution, or “how-it-works”. In that sense, issues of lobbying, corporate control, animal welfare in factory farms and the health value of dairy will be left to a later post or posts. This post is to simply describe the system, and give some analysis of the status of the system in terms of sustainability and centralization.
The dairy system in Canada is notable for two reasons. First of all, dairy is one of the only agricultural industries where the small family farm still makes up the majority of producers. Second, dairy is also one of the only agricultural industries that is self-sufficient–providing both income security for farmers and in no need of government subsidies or support, thanks to a highly regulated using a system of supply management.
Production numbers
As of 2008, there were over 13 000 active milk shipping dairy farms across Canada shipping over 7.6 million litres of milk annually. While the number of dairy farms has declined by about eleven-hundred each year since 1992 (the number has been halved since NAFTA was signed), the average dairy farm is still relatively small, with an average herd size of about 65 cows. The American average American herd is twice that. This means that most Canadian dairies are small operations providing enough income for one or two full-time jobs.
The supply management system
The supply management system in Canada is administered by the Canadian Dairy Commission (CDC), which oversees the administration, distribution and marketing of all dairy products in Canada, including imports and exports. Dairy products under the jurisdiction of the CDC range from milk to cream to butter and cheese. The milk supply system is under the direction of the Canadian Milk Supply Management Committee (CMSMC). The CMSMC measures the demand for milk by consumers and sets the national target for production based on perceived demand, which is called the Market Share Quota.
Each producer owns a number of shares in the quota and is required to increase or decrease production for their quota determined by the demand. The price to be paid to the producer is then set by the CDC based on an annual study of production costs. The projected demand for milk is determined while the fair cost determined is paid to the producer. Critics have called the quota system overly bureaucratic, expensive to administer and difficult to start up in. However, if there were no quota system (of some kind) American companies or multinationals could easily dump their products (meaning subsidized products flood the market and undercut non-subsidized Canadian producers) over the border and skew the Canadian market in favor of lower prices.
Issues
Having said that, the supply management system has been criticized as a barrier to local production. A friend of the blog, Jan Slomp of the National Farmer’s Union, told the Kootenay Coop Radio food policy and culture program Deconstructing Dinner that it makes it difficult for smaller local producers to sell their products locally due to the high cost and small amount of quota permits in circulation. If a local farmer wishes to produce for a local market, they must buy into the quota system. This would not be difficult for a larger business, producer or corporation to do, while immediate capital is difficult to raise for small producers.
Can it work better? Perhaps we need to re-imagine a system that already works. Rather than having a nationally administered system, why not a provincially or locally administered system that plugs local producers into the nearby market? Limiting the allowable quota share would also protect local producers and would decrease the demand for them by larger organizations and lower the cost to get into the market.
Processors
Though the average producer in Canada is a small producer, the processing industry is becoming increasingly dominated by a small group of multinationals. Companies like Dairyland, Safeway/Parmalat and the Italian dairy giant Saputo continue to dominate the processing industry, while producer owned cooperatives have declined considerably. Producer owned cooperatives were originally established to give local producers access to local markets and with the consolidation of dairy processing, producers have less control over distribution. However, the three largest food chains control 60% of the market and the three largest processors buy 75% of the milk in Canada, suggesting that the power of large processors is only being offset by the regulatory power of the supply management system.
Sustainability
Due to the small size of most farms, dairy producers generally better than average environmental practices. In terms of sustainability, dairy farmers have, on average, exceeded greenhouse gas emission targets under the Kyoto Protocol by reducing emissions by 12% of 1990 levels by 2003. Canada also has stricter regulations regarding hormones and additives. While Monsanto’s bovine growth hormone has raised issues (and alarm, for good reason) of food health and safety in the United States, the product has been outlawed in Canada. Additionally, when animals are given anti-biotics to control infections they are removed from the line for a period of time. This is supposed to ensure that anti-biotic levels in the product are kept to a minimum. Unfortunately, I could not find any regulations or statistics on the acceptable levels or what that may mean.
Certified organic production is relatively small in Canada but is apparently one of the higher growth sectors in the industry. If animals in certified organic production are given any sort of synthetic treatment, they must be removed from the line of production for at least one year to prevent contamination. They are fed certified organic feed and must be raised on certified organic pastures with some access to sunlight, though this could mean a multitude of things and herds can be over 1000. Organic dairy is about 5% of overall dairy production in Canada. The only certified independent processor of milk in Alberta (as far as I know) is Picture Butte’s Vital Green Farms.
International trade
Supply management has been under attack from critics (usually American industry lobby groups, surprise surprise) charging that it is a NAFTA and WTO violation in form of a subsidy, which is technically incorrect, since dairy producers receive little in government money. This is part of the reason why supply management has survived multiple free trade attacks. It could also be thanks to the fact that the dairy industry has a well-funded lobby.
However, Canada is above average already in dairy imports at 6%, while the United States only allows 2.75% penetration of their dairy market in imports. Loosening import rules under supply management would probably increase dairy concentration and foreign ownership like most (if not just about all) of our industries and mirror the situation of the United States and other countries where large dairy companies dominate all sectors.
What does it all mean?
As far as “fair trade” goes, dairy is one of the better Canadian agricultural industries. With supply management in place, supply is kept in line with demand (even if this demand is stoked sometimes by propaganda) and producers are compensated fairly for their products. This has ensured that dairy farms have been kept in the realm of the family farmer. If you’re worried about putting the family farmer out of business, purchasing dairy at Safeway is probably not going to do it. Most milk is supplied from nearby as well, so in purchasing most milk you are likely buying relatively local.
The system, in terms of how it works in compensating producers and controlling production appears to work well for both the producer and the processor (in addition to the distributor, which profits the most, as always). Having said that, there are some choices that are more ethical than others if you wish to support a vibrant local economy. In choosing products, it is best to steer clear of the larger brands, such as Dairyland, Parmalat etc. Sticking with cooperatives such as Avalon Dairy (an organic BC producers cooperative), the aforementioned Vital Green (organic, local, independently owned) and even Foothills Creamery (conventional but smaller, independent and more or less local) are more likely to ensure sustainability or local economic viability (or both) and are much less likely to skew the market in the event of abandonment of the supply management system.
Sources:
Canadian Dairy Information Centre (Government of Canada)
Dairy Farmers of Canada (a producer lobby group)
Deconstructing Dinner, “Decievable Dairy, Part II”, October 18 2007.
Montreal Economic Institute, “Reforming Dairy Supply Management in Canada: the Australian Example”, (An essay on why we should change the dairy supply system to something closer to Australia’s. Canadian producers actually receive about twice as much per litre for milk than Australian counterparts).
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