Welcome to the Bull Vine Podcast, your go-to source for inside stories, cutting-edge research,
and the latest updates in the world of dairy farming.
Our 140th third episode explores the controversial Canadian system that could save American dairy.
So please grab a glass of milk, sit back, and let's get started with this episode.
Welcome to the Bull Vine Podcast.
I'm Bella and with me is Douglas.
Today we're diving into a hot topic, the crisis facing American dairy farmers and how
Canada's system might offer some surprising solutions.
That's right, Bella.
We're looking at a tale of two countries, one drowning in milk, the other sitting pretty.
It's a story of free markets versus managed supply and the stakes couldn't be higher for
our dairy farmers.
Let's start with the basics of Canada's system.
Douglas, can you break it down for our listeners?
Certainly, Bella.
Canada's dairy industry operates under what's called supply management.
It's built on three main pillars, production quotas, fixed milk prices, and high tariffs
on foreign dairy.
Now to many Americans, this might sound like economic heresy, but the results are pretty
interesting.
How so?
What does this mean for Canadian farmers in practice?
Well, it means stability, plain and simple.
Canadian dairy farmers aren't on the financial roller coaster we see in the U.S.
They can actually plan for the future.
By 2024, their industry had reached $11.5 billion in revenue, growing steadily at 2.8%
annually for five years.
That's the kind of predictability that lets farmers invest in their operations and plan
for the long term.
That does sound appealing, but surely there must be downsides.
You're right, Bella.
There's always a trade-off.
The main criticism is that Canadian families might pay an extra $3.39 to $554 annually
for dairy products.
But here's a question to ponder.
Would you be willing to pay a bit extra for milk if it meant saving your neighbor's farm?
That's a tough question.
I'm sure many of our listeners are thinking about that right now.
Do we have any insights from Canadian farmers themselves?
We do.
One Ontario dairy farmer put it this way.
My management isn't perfect, but it keeps us out of bankruptcy.
I'll take stable prices over free market roulette any day.
It's a sentiment that seems to be shared by many in the Canadian dairy industry.
Interesting.
Now, let's look at the U.S. situation.
Douglas, how would you describe it?
In a word, chaotic.
We're in the middle of what you might call a cow-tastrophe.
We're producing way more milk than we need, prices are wildly unpredictable, and small
farms are disappearing fast.
Let me give you some specifics.
First we have an overproduction nightmare.
We're churning out more milk than we know what to do with.
Wisconsin alone outproduces all of Canada.
It's utter madness.
Second, farm failures are rampant.
Between November and December 2024 alone, 9,000 cows were culled as farmers gave up.
That's not just numbers.
That's families losing their livelihoods, communities losing their backbone.
Third, we're dealing with extreme price whiplash.
Milk prices swing more wildly than a cow's tail in fly season.
U.S. milk production dipped 0.5% in December 2024 due to rock bottom prices and sky high
costs.
That sounds incredibly stressful for farmers.
How are they coping?
Many aren't, Bella.
That's the harsh reality.
We're seeing a lot of small farms go under.
But there's another aspect to this, government support.
In 2020, dairy farmers got a $2 billion bailout.
It's like we're practicing socialism, but with extra steps and none of the stability.
That's a provocative way to put it, Douglas.
Can you elaborate on that?
Sure.
We have this idea that we're operating under free market principles, but the reality is
that the government is heavily involved in propping up the dairy industry.
The difference is, unlike in Canada where the support is systematic and predictable,
our approach is more of a band-aid solution.
We're not addressing the root causes of the problem.
I see.
And what are those root causes in your opinion?
The main issue is the mismatch between supply and demand.
We're producing far more milk than we need domestically, which drives prices down.
But because there's no coordinated system to manage this, individual farmers have no
incentive to produce less.
In fact, when prices drop, many try to produce more to make up for the lower prices, which
just makes the problem worse.
It sounds like a vicious cycle.
Now we've talked about the problems, but what about solutions?
Should we be looking north for answers?
Some think so, Bella.
There's growing interest in elements of the Canadian system.
We're talking about ideas like implementing regional production quotas, expanding programs
like dairy margin coverage, and empowering local cooperatives to manage supply.
But it's not a one-size-fits-all solution, and it would require a major shift in how
we think about agricultural policy.
I can imagine that would be quite controversial.
How do you think different stakeholders would react to such changes?
That's a great question, Bella.
Let's break it down by looking at how a Canadian-style system might shake up our dairy landscape.
It's really a David versus Goliath situation.
For small farms, quotas could be a lifeline.
They would offer predictable income without the constant threat of being undercut by mega
dairies.
This could help preserve the family farm model that's been so central to rural America.
On the other hand, mega dairies would likely fight tooth and nail against production limits.
These operations have been built on the idea of economies of scale, producing more to reduce
per-unit costs.
Quotas would fundamentally challenge this business model.
Then there's the regional aspect.
States like California, with their massive dairy operations, might strongly resist any
move towards a quota system.
But for states like Wisconsin or Vermont, where smaller family farms are still a significant
part of the industry, this could be seen as a way to level the playing field.
That's a complex picture, Douglas.
It seems like any change would create winners and losers.
Are there any other factors we should consider?
Absolutely, Bella.
We need to talk about the real cost of what we currently call cheap milk.
Sure, Americans generally pay less for dairy products at the checkout than Canadians.
But let's crunch some numbers.
U.S. taxpayers shell out roughly $22.2 billion annually in dairy subsidies.
That's about $173 per household.
And you're still paying for milk at the store.
So in a sense, we're all paying twice for our dairy.
Once through taxes, and again at the supermarket.
When you put it that way, it does make you wonder who's really benefiting from the current
system.
Are there any other aspects of the dairy industry we should discuss?
Yes, there are a few more points we should cover.
Let's talk about what I call the great cheese surprise of 2024.
Just when we thought things couldn't get any more curdled, the September 2024 U.S.
Dairy Product Production Report dropped a bombshell.
Cheese production fell 18 million pounds short of forecasts, while butter overshot expectations
by 4 million pounds.
It's as if our cows decided to churn instead of cheese.
This dairy rollercoaster isn't just giving farmers whiplash.
It's making the whole industry queasy.
With cheese stocks tightening and butter piling up, we're looking at a market more unpredictable
than a cow with mad cow disease.
That does sound chaotic.
Are there any other challenges facing dairy farmers?
Indeed there are, Bella.
We can't ignore the interest rate squeeze.
As if volatile milk prices weren't enough, dairy farmers are now getting squeezed by rising
interest rates.
In 2024, rates climbed to levels unseen in 16 years.
It's comparable to attempting to milk a cow while riding a bucking bronco, nearly impossible
and likely to end in tears or worse.
These sky-high rates are forcing farmers to rethink everything from expansion plans to
equipment upgrades.
It's no longer just about keeping the lights on.
It's about surviving in an industry that seems determined to put them out to pasture.
That's a vivid image, Douglas.
With all these challenges, are there any potential solutions on the horizon?
Well, some in the industry are looking to exports as a potential lifeline.
Stephen Cain from the National Milk Producers Federation puts it bluntly, the export market
is going to be key for us moving some of this product overseas.
But here's the rub.
We're not alone in this.
The EU and New Zealand are also major players, turning the global dairy market into a high-stakes
poker match.
Interesting.
Are there any other strategies farmers are considering?
Yes.
There's been a growing interest in organic dairy production.
Some farmers are transitioning to organic practices faster than you can say grass-fed.
The USDA is even sweetening the pot with $58 million in assistance for organic dairy operations.
But it's not all green pastures and happy cows.
The organic route comes with its own set of challenges.
Higher production costs and a niche market make it a gamble that not every farmer can
afford to take.
It seems like there's no easy solution.
As we start to wrap up, Douglas, what do you see as the bottom line here?
The bottom line, Bella, is that the U.S. dairy industry is at a critical crossroads.
We need to take decisive action now to ensure a sustainable and prosperous future.
Based on our discussion and the research we've done, here are some key recommendations for
farmers and policymakers.
One, implement regional production quotas to curb overproduction and stabilize prices.
Two, expand and enhance programs like dairy margin coverage to provide better financial
security for farmers.
Three, empower local cooperatives to manage supply, fostering a more grassroots approach
to industry regulation.
Four, invest in innovation and diversification strategies to help farmers adapt to changing
market conditions.
Five, develop a comprehensive export strategy to capitalize on global market opportunities.
Six, reform federal milk pricing formulas to better reflect current manufacturing costs
and market realities.
Seven, establish a voluntary program for dairy farmers looking to exit the industry, ensuring
a dignified transition.
Eight, remove interprovincial trade barriers on dairy products to foster a more competitive
domestic market.
Those are some concrete suggestions, Douglas.
Any final thoughts?
Yes, Bella.
The choice before us is clear, adapt and thrive or cling to outdated systems and watch our
dairy heritage wither.
We must act boldly to preserve not just an industry, but a way of life that has defined
rural America for generations.
The future of American dairy depends on the actions we take today.
Thank you, Douglas, for this comprehensive look at the challenges and potential solutions
facing the U.S. dairy industry.
And thank you, listeners, for staying with us through this in-depth discussion.
Until next time, keep those udders moving.
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