Murray Sherk (left) and Ralph Dietrich, dairy farmers from Ontario, Canada, explain their country’s milk supply management program March 15 in Dodgeville, Wis. PHOTO BY RON JOHNSON
Murray Sherk (left) and Ralph Dietrich, dairy farmers from Ontario, Canada, explain their country’s milk supply management program March 15 in Dodgeville, Wis. PHOTO BY RON JOHNSON
    DODGEVILLE, Wis. – Imagine being paid $27 per hundredweight (cwt.) for your farm’s milk.
    That is the going price in Canada, according to two Canadian dairy farmers, Ralph Dietrich, from Mildmay, Ontario, and Murray Sherk, from Plattsville, Ontario. Dietrich and Sherk were in Wisconsin March 13 through 15 as guests of the Wisconsin Farmers Union (WFU) to speak at five meetings around the state. Their basic message was that Canada’s milk supply management, or quota, system is working just fine. As a result, Canadian farmers, they said, sell their milk at prices that are constant and stable.
    Darin Von Ruden, WFU president, explained the reasoning behind bringing the Canadian dairymen to Wisconsin.
       “Farmers, especially those in corn and dairy, are entering another year of tight margins in a time when they’ve already critically reduced variable-input spending and as many are encroaching on credit limits with their lenders,” he said. “We have been through tough times before. But something about this stretch feels different. We’re entering the third year of severe price dips in the dairy industry and there doesn’t seem to be any significant commodity price improvements in the foreseeable future,” he said.
       Von Ruden said there is a reason for the low milk price.
    “[They are the result of] outdated pricing systems that are not sustainable and no longer serving our farm families,” he said.
       That is why the WFU wants a new farm bill this year, Von Ruden said.
    “[New legislation should include] some kind of practical supply management program for the dairy industry,” he said.
    And, that program should include both producers and processors.
       While Canadian farmers are being paid approximately $27 for their milk, the price is much lower in the United States. The USDA’s Economic Research Service forecasts the all-milk price for 2018 at $15.75 to $16.25 per cwt.
       At the WFU meeting March 15 in Dodgeville, Wis., Murray and Sherk, both members of Dairy Farmers of Ontario (DFO), told an audience of about 60 that Canada’s milk supply management system has three goals. The first is to make sure farmers receive a fair return, derived completely from the marketplace, on their capital and labor costs. The second is to provide processors with a stable supply of milk so they can properly plan their production year after year. The third is to provide consumers with a consistent supply of milk and milk products at a fair price.
    Sherk described the situation of Ontario dairy farmers 58 years ago, before its quota system.
    “In 1960, Ontario milk producer organizations were fragmented and lacked unity in purpose. Their bargaining position in the marketplace was very weak. Returns to the vast majority of milk producers for labor, management and investment were inadequate. There were numerous inequities and inefficiencies in the milk marketing system,” he said.
    Because of this, the Ontario government commissioned a study in 1963 to try to solve the problem, Sherk said.
    “The answer came in the form of the Milk Act, which was passed in 1965,” he said.
    The Milk Act led to the formation of the Ontario Milk Marketing Board (OMMB). Sherk said the OMMB buys all the milk Ontario farms produce and sells it to processors.
    “That board successfully addressed the marketing problems and worked on responding to a continuously evolving set of domestic and international market challenges,” he said.
    “[Canada’s quota system] provides balance by letting farms act collectively to negotiate a price and adjust milk production to meet consumer demand,” Sherk said.
    Dietrich said three pillars make the supply management system work. These include producer pricing, producer discipline and import control.
    Farmers manage marketing boards that have been given their authority by way of laws approved by Canada’s provinces. All the milk produced in each of the country’s 10 provinces is sold to the provincial board. That board takes care of getting the milk picked up and delivered to processors.
    Production and demand are kept in balance, Dietrich said. At the national level, the amount of milk Canada needs to meet the demand of its own people is calculated and based on butterfat. This calculation helps avoid overproduction.  
    Then, a national production quota is issued to all the provinces. Each province supplies a percentage of the total milk that is needed.
    Provinces, in turn, issue quotas for milk production to farmers. A quota exchange lets dairy farmers to buy and sell quota.
    As for actual milk pricing, Dietrich and Sherk said some of it is determined by the cost of production and the consumer price index. Each part of the equation counts equally: 50 percent.
    Some of Canada’s four classes of milk are set at the world price. On the day of the Dodgeville meeting, Sherk said Canada’s average blend price was about 27 U.S. dollars.
    While the provincial milk marketing boards have a big say in the amount of milk farms are allowed to produce, and in the price of that milk, their authority stops there. That means retailers are free to price the dairy products they offer at whatever prices they wish.
    Converting Canadian money into U.S. amounts, and likewise converting metric measurements into U.S. terms, yields a gallon of milk that’s typically priced at about $3.26, Sherk said. A pound of butter typically retails for something in the range of $2.40 to $3.20 per pound.
    The amount of quota Canada’s dairy farms are allowed to own is not stagnant. Rather, it can rise and fall with economic and production conditions. In the last three years, the amount of quota to be divided among farms has grown by 24 percent, Sherk said.
    “That means more production at the farm, at stable prices, which means more investment,” he said. “In the last two years, processors have begun and are committed to more than $600 million in new processing capacity.”
    Dietrich and Sherk went on to say that supply management keeps the dairy industry stable, so cycles do not exist.
    The two offered some comparisons among Wisconsin, Canada and Ontario. They said Wisconsin has 9,500 licensed dairy farms. That is more than the 8,801 the state had on Jan. 1, 2018, according to the Wisconsin Department of Agriculture.
    Canada, according to the two men, has roughly 11,000 dairy farms, and Ontario has 3,850. When it comes to cows per farm, the Canadians said Wisconsin has an average of 134. Canada as a whole, they said, has an average herd size of 86, and Ontario’s average herd is 88 cows.
    Wisconsin, they said, produces 3.1 billion pounds of milk per year, while Canada produced 20.9 billion pounds, and Ontario accounts for 7 billion pounds.
    “Canada’s supply management system provides balance in the dairy sector by enabling Canadian dairy farmers to act collectively to negotiate price and adjust milk production to meet consumer demand. While farmers around the world face unexpected, wild market fluctuations, Canadian farmers sell their milk at constant and stable prices,” Sherk said.  
    As a result, Dietrich added, “Canadian dairy farming is one of the few agricultural sectors that is self-sufficient, providing income security for farmers and requiring no government subsidy. This means Canadian farmers can invest in their farms, communities and Canada.”