Manitoba dairy producers who sat down with the Co-operator at the recent Manitoba Dairy Conference don’t look like bargaining chips — but lately that’s exactly what they’ve become.
In successive rounds of trade deals they’ve repeatedly lost market share to imports from other jurisdictions, most recently in the United States-Mexico-Canada Agreement (USMCA). While they weren’t alarmed for the immediate future, they do find the ongoing trends worrisome.
Why it matters: Manitoba milk producers aren’t in imminent danger, but they do worry the sector’s long-term picture is growing bleak.
Alain Philippot, from St. Claude, said there’s no denying the impact will eventually filter down to the farm level.
“It’s certainly going to affect us,” says Philippot. “Not next week, because there’s time to ratify it and there’s a phase-in period, so it won’t be all at once. But it certainly will affect us. It’s four per cent of our market that’s gone forever.”
The Canadian government puts the market share they have surrendered at 3.6 per cent, but the number crunchers at the Dairy Farmers of Canada, place it closer to four per cent.
Producers at the meeting all shared a strong attachment to the nation’s supply-managed marketing system for milk and worry about the effects that this and other trade deals are having. Carol Boonstoppel, from Grunthal, said the cumulative impact is becoming worrisome.
“It’s a continuation of a trend that has already started,” says Boonstoppel. “This four per cent now adds up to 20 per cent over the last number of deals and we still have a few trade deals on the table. You give away a little piece here and a little piece there and every country wants that one per cent more than the other.”
Philippot agreed the cumulative and ongoing nature of the concessions is worrisome, as each one seems small individually, but taken as a whole they’re becoming very significant.
“What happens when the U.K. comes now, after Brexit?” Philippot said. “They will want to make a trade deal with Canada. Do we have to give up more, and more? It becomes that ‘death by a thousand cuts.’”
The sting from those cuts is felt more sharply when placed against the backdrop of a heavily subsidized U.S. dairy industry. A 2018 report commissioned by the Dairy Farmers of Canada estimated that various types of U.S. government support for the dairy industry in 2015 was equivalent to 73 per cent of market returns. Matt Plett, of Blumenort, said the Canadian system is fairer all around and caused fewer ripples in the international marketplace, unlike the flood of public funds from other jurisdictions.
“The whole strength of the system is that it satisfies the domestic market. We’re not geared for export,” Plett said. “A lot of what export ends up being, is some country’s undisciplined production finding an outlet somewhere on the world market. They need a dumping ground because they don’t have production discipline. Canada has production discipline. We don’t want to get into the game of overproducing, destroying our margins, going to government for help and then looking for some export valve into another country. That’s not what built our industry.”
“Dairy production is planned so far ahead,” Philippot said. “It’s just going to keep coming no matter what and it only lasts on the shelf a week. So, we need to supply only what the market will consume at the right time. And that’s very tricky,” he explains, noting that Canada is very good at it. “We have it to within half a per cent. Why would you overproduce only to put on sale what people didn’t want more of?”
When asked if working in a closed system has put the Canadian dairy industry at a disadvantage in a world where international trade deals are the new normal, all three were quick to defend the system and the strength of the Canadian dairy farmer.
“It’s a myth that Canadian farmers can’t compete,” says Boonstoppel. “Yes, we can if it was a level playing field.” And while acknowledging that Wisconsin could destroy the industry by dumping its surplus on the Canadian market, she says, “if we were on a level playing field, with no government funding, Canadian farmers could very much compete with most American dairy farmers.”
None of the farmers seem to feel that there was any threat to their immediate livelihoods as a result of the USMCA alone but they are concerned about where things are trending and how far things will go.
“We’ve given four per cent away forever,” Philippot said. “It won’t come back. Is that going to continue? Will the next government want to give more away to protect the auto industry, or softwood or something else?”
Boonstoppel brings the question closer to home.
“What do you tell your 16-year-old?” she asked. “Do we tell him to go find another job in another trade even though his dream is to be a dairy farmer? The uncertainty of the future is what really scares most of us.”
Not just market share, other USMCA provisions worrisome too
There are two other provisions in the USMCA that directly affect the dairy indus- try, over and above giving up market share.
The first is the scrapping of the “Class 7” designation. Class 7 was a new milk class Canada recently added to address the surplus of non-fat milk solids.
“We created Class 7 to create a market for waste, in a sense,” Alain Philippot, of St. Claude, said.
The other provision is the oversight clause, which forces Canada to run any changes to domestic policy by the U.S.
Matt Plett, of Blumenort, points out that these provisions are of equal or great- er concern to many producers than the market share.
“It’s a troubling aspect that one supposedly sovereign nation needs the over- sight of another sovereign nation to dictate its own internal policies,” Plett said.