Aslowdown in the consolidation of dairy farms across Canada may create a shortage of quota for producers who want to expand, an industry official warns.
The current rate of dairy farm consolidation is about half of what the rate was at the start of the decade. This will put pressure on producers’ ability to expand their farms because the quota needed to do so may not be available, said Richard Doyle, Dairy Farmers of Canada executive director.
The number of dairy farms in Canada has fallen steadily over the years as producers sell their quota and get out of the business. Usually, the quota is bought by existing operations to expand.
But while farm numbers are declining, the rate is slowing. DFM statistics show the average annual rate of dairy farm consolidation in Canada declined from five per cent in the 1990s to 4.3 per cent in the 2000s to 1.9 per cent between 2009 and 2010.
At this rate, if a producer wants to expand, the quota may not be there, said Doyle.
“I think we’re just at the beginning of that pressure point, if you want. The statistics seem to indicate that this is an issue we need to address,” he said in a recent interview.
Doyle said provinces may have to change their policies on how they manage quota to deal with this situation. One option would be to allow neighbouring dairy farms to merge without having to go through the quota exchange.
“That kind of concept may need to be reviewed. You may need to permit expansion that the farms can merge, merge their quota and merge their operations under certain conditions.”
David Wiens, Dairy Farmers of Manitoba chairman, said Manitoba does allow two dairy farms to amalgamate as long as there’s only one producer. DFM treats that farm as a single unit.
British Columbia does not allow farms to amalgamate without trading quota on the exchange but Alber ta and Saskatchewan do, said Wiens.
He said a slowdown in farm consolidation may be an issue in the P5 eastern milk pool, where the value of quota traded on the exchange is capped. This may create a disincentive among producers to sell quota.
But that’s not the case in Manitoba or the rest of the P4 western pool where there are no caps and quota is freely available, he said.
“We’re still at the stage where quota is available for those who want to expand,” said Wiens.
“We have not experienced the lack of quota being available in Manitoba. There’s always been sufficient quota.”
Wiens said dairy farms in Manitoba are consolidating at a much faster rate than in Eastern Canada. DFM reported a four per cent reduction in the number of dairy farms in 2008- 09 and a six per cent reduction in 2009-10.
As of last month, the number of dairy farms in Manitoba stood at 348. The value of quota traded on the April 1 quota exchange was $30,299.01/kg of butterfat. [email protected]
“Ithinkwe’rejustat thebeginningofthat pressurepoint.”
– RICHARD DOYLE, DFM