The newly struck United States-Mexico-Canada Agreement (USMCA), drafted to replace the North American Free Trade Agreement, grants U.S. dairy farmers 3.6 per cent more access to the Canadian dairy market, a compromise that has, according to one Napanee farmer, left many operators in Canada’s dairy supply management system feeling betrayed by a government that promised to protect their interests.
Kevin MacLean, a third-generation dairy farmer who owns Ripplebrook Farm in Napanee, has followed Canada’s international trade negotiations closely over the past several years, both as an operator in the industry and in the past as a representative for Dairy Farmers of Ontario.
“It appears as if we’re going to lose at least 3.6 per cent of our market share over some period of time,” he said. “We’re not sure what that period will be. How it rolls out, we’re not sure.”
That translates to about a $138,000 loss for MacLean’s share of the dairy market, money he would have to put out to recoup his lost milk quota if he wants to continue to supply the same quantity of milk to the market as he does today.
If he doesn’t replace that quota share, then his business will lose approximately $40,000 per year.
“I know that this is the last cut I’m going to take,” MacLean said.
MacLean said that another element to the dairy concessions was the elimination of Class 7 milk products — concentrated milk protein used in products like cheese.
Canadian dairy farmers created the product class in 2017 to compete with products coming from the U.S., MacLean said.
MacLean said that in recent years, the Comprehensive Economic and Trade Agreement (CETA) gave 2.25 per cent access to European dairy producers, and the Trans-Pacific Partnership (TPP) another 3.25 per cent to international markets.
“Over the last 10 years, all of these trade deals have added up to over 18 per cent of our market lost. My question is, why do we continue to be the sacrificial lamb in these trade talks?” he said.
Canadian dairy farmers are managed by a supply management system that controls supply and demand within the country, allowing milk prices to be set to prevent fluctuation and controlling the dairy permitted into the country from outside producers. Farmers supply the country’s demand through a closely managed quota system that dictates how much milk each farmer can sell, which provides a stable source of income for Canadian dairy farmers.
“In the States they don’t have that luxury,” MacLean explained. “They are subject to the peaks and valleys of the market. If they oversupply the market, the price goes down. In Wisconsin alone, 400 farmers have gone out of business this year. Eventually, if they keep going out of business, the supply will diminish, the price will go up. It’s just a roller-coaster ride.”
Canada’s quota system means that most Canadian dairy farmers are family-owned.
“We’re a family farm, and 97 per cent of the [dairy] farms in Canada are family farms,” MacLean said. “I know my cows by name. I know their calves. There’s a social connection to your animals. In the States, you are talking numbers with 1,000-cow herds.”
The Canadian government says it will compensate its dairy farmers for the market share loss, just like it did during the CETA deal, but MacLean says that for the $86,500 worth of the market that he lost in that deal, he was given $16,000, which had to be matched on his part by 50 per cent and could not be used to replace his operation’s quota loss.
“That’s the frustrating part, and you had to fill out a lot of paperwork to receive that. Only a quarter of the farmers in this county applied for that compensation, because it was so difficult,” he said.
According to a Postmedia Network article, Pierre Lampron, president of Dairy Farmers Canada, criticized the trade deal on Monday.
“We fail to see how this deal can be good for the 220,000 Canadian families that depend on dairy for their livelihood,” Lampron said in a statement.
“Granting an additional market access of 3.59 per cent to our domestic dairy market, eliminating competitive dairy classes and extraordinary measures to limit our ability to export dairy products will have a dramatic impact not only for dairy farmers but for the whole sector,” Lampron said. “This has happened, despite assurances that our government would not sign a bad deal for Canadians.”
MacLean has been talking to farmers in the region, and he says that the latest slice of Canada’s dairy market that the government has conceded could be the nail in the coffin for a number of local dairy operators. He knows at least three farmers in the Lennox and Addington County region who plan to close their operations following the trade deal.
“There are farmers that are considering leaving the industry for one reason or another. Age, no one to take over the operation, can’t pay the bills, financial reasons. This is going to give them a reason to leave,” MacLean said.
MacLean said the continued cuts to the Canadian dairy market are undermining the rural economy.
“There are 240 people or businesses that we’ve paid cheques to in the past 10 years,” he said. “These are real numbers, real dollars being put into our rural economy. Not a single American dollar is going to be paid to those businesses from this deal.”
As for the effects that the new trade agreement will have on dairy businesses, MacLean believes every farm will likely take a hit.
“I’ve lost an employee, so long-term I question whether I will replace that milker,” he said. “In the short term, I will probably be doing more work myself and spending less time with my family. That’s one employee on one farm. You compound that across all the farms in the province and that’s upwards of 3,500 to 4,000 jobs.”
MacLean hopes Canada will not follow down the path that the U.S. has travelled with the undermining and all-too-often demise of the small-town dairy producer. He cites small towns that have lost their family dairies in upstate New York as an example, describing those communities as “ghost towns” now.
“That’s what’s going to happen to our dairy industry in Canada if they keep allowing this to happen,” he said. “The small farmers are going to get out, the big farmers are going to get bigger. I don’t think it’s a road we want to go down.”
— With files from Jesse Snyder and The Canadian Press