Dairy Farmers Avoid Livestock Industry Trauma

While hog producers experience an industry meltdown and beef producers struggle to emerge from BSE’s shadow, it’s steady as she goes for Manitoba milk producers.

Figures released at an April 3 Dairy Farmers of Manitoba meeting showed an industry with no huge problems and only a few relatively minor hiccups.

“We’re doing quite well,” acknowledged David Wiens, DFM chairman, as the milk-marketing board kicked off its annual round of spring meetings. “It’s been very stable.”

Indeed, reports by Wiens and DFM general manager Brent Achtemichuk delivered to roughly 50 producers at the meeting were notably uneventful.

Mani toba producers are expected to produce 317 million

“It’s been very stable.”

– DAVID WIENS, DFM

litres of milk during the 2008-09 dairy year, similar to their 315-million-litre output in 2007-08.

HIGH FEED PRICES

Cattle and hog producers say the high price of feed is killing them. But a cost-of-production formula gave dairy farmers increased prices for fluid milk over the last two years because of higher feed costs and low bull calf prices. Producers also saw industrial milk price increases in September 2008 and again in February 2009.

Monthly milk transport costs rose only marginally in 2007-08 despite the high cost of fuel. At the same time, the addition of more trailers along pickup routes increased the volume of milk hauled per kilometre by nine per cent.

Manitoba recently harmonized its fluid milk price with the other western provinces after years of negotiating.

The province expects to end the dairy year only 0.3 per cent above its 100 quota utilization target, thus avoiding overproduction penalties.

Manitoba’s solids non-fat to butterfat (SNF:BF) ratio remains close to its yearend target of 2.3499, which should also mean no penalties. Should penalties occur, DFM has a $700,000 reserve fund to pay them.

Canadian industrial milk demand was down in February, due in part to higher retail prices resulting from the producer price increase. However, industrial milk sales have since rebounded. A two per cent growth in industrial sales for 2008-09 is predicted.

STABLE GROWTH

A major reason for stable growth in the dairy sector is that the supply management shields Canada’s milk producers from volatile world markets, noted Wiens, who farms near Grunthal.

Record-high world milk prices over the last two years led to overproduction and a sharp price drop last fall. However, unlike other commodities, Canada’s dairy industry does not go through “a brutal way to establish equilibrium and reduce surpluses” through price collapses, Wiens said.

By balancing supply and demand, the dairy sector avoids violent price swings such as those experienced in the United States, where milk prices today are well below production costs, he said.

Stable prices and predictable incomes enable dairy farmers to plan for the future, while other sectors fight just to stay afloat, said Wiens.

He suggested the recent world financial crisis gives supply management increased credibility by demonstrating the value of a regulated system.

The only cloud on the horizon for supply management is the ongoing concern about a draft text at the World Trade Organization negotiations which would lower import tariffs and increase market access. High tariffs to control imports and limit market access are underpinnings of supply management.

But the WTO talks appear stalled with no immediate sign of a breakthrough, Wiens told producers. [email protected]

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