Breaking free from the chains of the past Where
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ground in the digital age From genomic codes
to robot facts We cut through the noise, no hold
them back not your daddy's dairy news tonight
we're sparking Welcome to the Bullvine Podcast,
where we tackle the tough questions shaping the
dairy industry today. I'm your host, and this
is the show that brings you bold insights, expert
analysis, and the conversations that matter most
to dairy professionals across North America.
Today, we're diving deep into one of the most
contentious topics in our industry, the fundamental
divide between Canadian supply management and
the American free market approach to dairy. While
you were celebrating Memorial Day or Victoria
Day this past weekend, two completely different
dairy philosophies were operating just miles
apart across the 49th parallel. We're talking
about systems so fundamentally opposed that they
might as well be from different planets. One
built on the idea that farmers deserve predictable
profits through quota systems costing up to $50
,000 per cow. The other betting everything on
market forces so volatile that the average dairy
farm had negative income in nearly every year
of the past decade. The question isn't which
system is better, it's which one will survive
the disruption that neither sees coming. From
trade wars and quota disputes to the rise of
plant -based alternatives and precision fermentation.
Both systems face challenges that could make
their current debates irrelevant. So buckle up.
because today's discussion will challenge everything
you think you know about what makes dairy farming
successful. This is analysis that cuts through
the politics and gets to the real economics affecting
your operation, whether you're milking 50 cows
in Quebec or 5 ,000 in California. Well, for
you in the dairy world. Yeah, absolutely. We're
taking a close look, a real deep dive into the
fundamental differences between the North American
dairy systems. It can be pretty baffling sometimes.
It really can. Our main source today is this
sharp excerpt called North American Dairy Systems,
Flaws and Future. And it pulls no punches looking
across the 49th parallel. No, it really doesn't
spare anyone. It lays out this stark comparison.
highlights the brilliant part, sure, but also
some... pretty significant, maybe even catastrophic
flaws in both the Canadian supply management
system and the American free market approach.
Makes you question things you thought you knew.
Totally. And specifically for you, our listeners,
knowledgeable dairy farmers, industry professionals.
Yeah. Our job here is to unpack the surprising,
maybe sometimes uncomfortable truths this source
brings up. We want to pull out those key insights,
the implications that actually matter for your
farm, whichever side of the border you're on.
Okay, let's get into it then. Let's unpack this.
The starting point, the basic idea the source
puts forward, is pretty straightforward. But,
wow, it's powerful. You've got these two nations
right next door running what's basically a live
experiment in farm ideology, specifically for
dairy. Supply management here, free market there.
And the source is basically saying, look, after
decades of pointing fingers back and forth, maybe
not always productively. Maybe not. It's time
for some brutal honesty about what each system
actually does. delivers and crucially what the
real costs are not just the obvious ones and
that leads us straight into well the elephant
in the room right or maybe the very very expensive
barn exactly the cost reality check let's talk
quota in canada yeah the numbers There's something
else. If you're not living it every day, it's
hard to grasp. The source points to early 2025
figures. Canadian dairy quota costs hitting somewhere
between $35 ,500 and $37 ,500 per kilogram of
butterfat per day. Per day. And they even mention
it creeping up towards, what was it, $58 ,000
per cow in some places? Alberta, I think? Yeah,
Alberta. So think about what that means. The
source gives this example. A pretty modest...
100 cow farm in Ontario could easily have quota
assets tied up worth $3 to $5 million. And that's
before you even think about land, the barn, the
actual cows, equipment, anything else. Wow. That's
just the price of admission, the right to produce
milk. Exactly. Now, let's flip that coin, go
south to the American side, zero quota cost up
front. Right. You get the land, the capital,
you can start milking cows. Seems simpler. On
the surface, maybe. The source describes this
situation as operating in a market just defined
by, well, extreme volatility, constant ups and
downs. And they back that up. There's this tough
statistic. The average US dairy farm had negative
net income. negative in all but one year for
that whole decade leading up to 2019. Think about
that. Losing money most years on average. Which
brings us to the source's big provocative question.
It sounds simple, but it really isn't, they ask.
Which system is really more expensive? When you
look at the long game, is it paying that, say,
$50 ,000 up front for a pretty guaranteed right
to make money in a stable system? Or is it rolling
the dice year after year in a market where Statistically,
you're likely to lose money more often than not.
It's not just about the upfront check you write,
is it? It's the whole financial world you operate
in. Exactly. It forces you to look way beyond
just the surface costs. It was really interesting.
Despite these hugely different economic setups,
the source points out some areas where performance
is, well, surprisingly similar. Yeah, that's
right. They look at per cow productivity. Okay.
Canadian farms, the source says, get almost identical
output per cow. They cite around 9 ,739 liters
on average. Compare that to the U .S., which
when you convert it is roughly 10 ,950 liters.
So not a massive gap like you might assume based
on how different the systems feel. Not at all.
But alongside that similar production per animal,
you see these huge structural differences. Like
what? Well, Canadian farms, generally speaking,
have dramatically lower overall capital needs
because they don't need that sheer scale chasing
tiny margins. Right. Less pressure to get enormous.
Which means... The source reports minimal debt
stress compared to a lot of those really large
U .S. operations. And you see that reflected
in ownership, too. 98 % family -owned farms in
Canada versus maybe 92 % in the U .S. Still high,
but a noticeable difference. 98 % is very high.
It is. And the source uses this analogy I thought
was pretty vivid. Oh, yeah? They describe Canadian
farmers kind of like old -school breeders, you
know, carefully perfecting their lines, slow
and steady improvements in genetics, management,
within that stable system. Okay, I can picture
that. Whereas U .S. farmers... often are seen
as chasing the absolute latest genomic trend,
pushing for massive scale, hoping that getting
bigger will somehow fix profitability issues.
That the need for scale might actually be creating.
Exactly. That's the irony the source points out.
Chasing scale to solve problems that scale itself
can sometimes cause. That analogy really does
paint a picture. And look, for you listening
right now, running your farm, these differences,
they're not just talking points for professors,
right? Not at all. The source really hammers
this home. This is strategic intelligence. It
directly impacts the choices you make, expansion
plans, risk management, day -to -day stuff. Precisely.
And it's not just data dumps. The source turns
it around into questions you should be asking
about your own operation. Okay, like what? Well,
if you're a Canadian farmer, for instance, how
does that big quota asset value stack up against
your operational debt? Are you actually using
the stability quota gives you like leveraging
it for long term investments, sustainability
stuff, energy efficiency, things that might be
harder to fund otherwise? Good question. And
have you really stress tested your exit strategy?
What happens if quota values, you know, don't
keep going up forever? What if they decline?
Hmm. That's a tough one to think about. And for
American farmers, what questions should they
be asking? The source prompts you to think, OK,
how much of my farm's actual profit comes from
the market versus government programs? You know,
things like DMC, the dairy margin coverage program
or the baseline prices from federal milk marketing
orders. Right. Disentangling that. Are you really
getting economies of scale? Or, and this is the
provocative bit from the source, are you just
spreading losses thinner over more cows? They
bring up that 2015 analysis again, claiming 73
% of U .S. farm returns came from government
support. So the question for you is, what slice
of your own income traces back to those programs?
These aren't comfortable questions, maybe. Yeah.
But pretty essential for figuring out how resilient
your business actually is within your system.
Absolutely. You need to know where the money
is really coming from. Which kind of leads us
into what the source presents as maybe its most
controversial point, this idea of an innovation
paradox. Ah, yes. The claim, surprisingly, is
that neither system, not Canada's stability,
not the U .S.'s competition, is really optimized
for driving truly revolutionary innovation in
dairy farming itself. It sounds wrong, doesn't
it? You'd think competition or stability would
fuel it, but the source builds a case. How so?
For Canada. Well, for Canada, they argue the
quota system itself, the limits on expansion,
can act as a bit of a break on certain innovations.
Why pour massive money into, say, a breakthrough
technology that dramatically boosts efficiency
or output if you can't easily expand your herd
to capitalize on it? So the incentive for those
huge leaps isn't quite there if your production
is capped. That's the argument. You might fine
tune, but maybe not chase the game changers quite
as hard. They use an example like perfecting
AI without rigorous performance testing. If you
can't grow anyway. Okay. And the U .S. side.
How does that system hinder innovation according
to the source? There, the argument is the relentless
focus on scale and just surviving economically.
Farmers are often trapped in this cycle, right?
Pouring every last cent into feed to maximize
immediate output per cow. Means there's nothing
left for other big investments. Exactly. Maybe
you have to skip crucial upgrades and advanced
herd health monitoring or labor -saving robotics
because you're just trying to manage cash flow
month to month, making payroll, paying the feed
bill. Survival trumps transformation. So where
is the big innovation happening then? according
to this source. They point overseas, places like
New Zealand, Denmark, the Netherlands, countries
that seem to blend market signals with some strategic
long -term support. They mention successful breeding
programs that really balance production with
health and longevity traits, not just chasing
one number. Interesting. They mention the U .S.
Dairy Business Innovation Act too, right, with
its funding boost. They do, but they frame it
as sort of reactive, like, okay, our system isn't
generating enough innovation organically, so
let's create a program to try and force it. Ah,
treating the symptom, not the cause. That's the
implication. The source suggests both countries
are so busy managing the problems within their
systems, defending supply management, or navigating
free market chaos, that they've stopped asking
if the systems themselves are the root problem
for innovation. And they put it bluntly, don't
they? Yeah. The question is, when was the last
time you heard about a truly revolutionary dairy
farming innovation coming out of Canada or the
U .S.? Are we just too busy defending our models?
That idea of defending the past instead of building
the future, that's a powerful theme here. Yeah.
And it connects to another reality check the
source provides around milk quality. Right, SEC,
somatic cell count, key quality indicator. They
cite the U .S. national DHI average dairy herd
information average at 181 ,000 cells per ml
back in 2023. Pretty good, objectively. Definitely.
But then they compare it to Canada's regulatory
maximum SEC, which is way up at 400 ,000. And
even looking at competitive provincial averages
in Canada, like Alberta's 205 ,000, well, the
U .S. national average is actually lower. So
what's the takeaway there, that U .S. milk is
just better? Not necessarily better across the
board. The source's point is more nuanced. It's
that a higher regulatory standard like Canada's,
doesn't automatically mean superior performance
everywhere. Best farms in both countries achieve
excellent quality, often way below any standard
or average, but the systems create different
incentives. In the U .S., the market pressure
is intense, volume is key, so achieving high
quality becomes a way for successful farms to
differentiate and maybe capture premiums. In
Canada, with more stability, the need to push
quality far, far below the regulatory minimum
might be less urgent for some operations. The
drivers are different. Got it. So standards don't
equal performance. Incentives matter. Exactly.
And this fundamental incompatibility, these different
incentives, they spill over into that ongoing
friction we often see labeled as a trade war.
Yeah, the one the source says nobody's really
winning. Right. You see the headlines, U .S.
dairy exports booming. And the source confirms
at $8 .2 billion in 2024, second highest ever.
And Canada is importing more U .S. dairy to a
record $1 .14 billion. Sounds like trade is working
then. But here's the catch. According to the
source, they look at the actual market access,
specifically the fill rates for U .S. tariff
rate quotas, the TRQs. That's the amount agreed
upon that can come into Canada at lower tariffs.
The average fill rate, a pretty dismal 26 .72
% for the calendar year allocations. So barely
over a quarter of the agreed -upon quota is actually
being used. Why? If the products are needed or
wanted. The source points to how Canada allocates
those import quotas. They tend to give them overwhelmingly
to domestic processors, existing players. Who
might prefer to use Canadian milk anyway? Precisely.
Rather than giving them to companies whose main
business would be importing. So the negotiated
access gets effectively neutered by the allocation
method. The U .S. has even won dispute panels
on this, lost one too. But the source says it's
resulted in virtually zero real change in market
penetration. So it's not just trade rules, it's
the systems fundamentally clashing. That's the
argument. Like the source says, you can't fix
a vacuum leak on your milking system with diplomatic
talks. The underlying mechanics are incompatible.
That brings us back to another point of contention,
the cost to the consumer. The shell game, as
the source calls it. Yeah. On the surface, it
looks simple. Milk costs Canadians, what, about
$4 .81 a gallon? Americans pay around $3. Case
closed, right? Canada's expensive. But the source
says, hold on. Don't just look at the sticker
price. It's like assuming the cheapest bag of
feed is always the most economical choice for
your cows. You got to look deeper. And the deeper
dive reveals. That critical data point. The 2015
analysis suggesting 73%, nearly three quarters
of total U .S. dairy farmer returns came from
government support programs. That was estimated
at $22 .2 billion in subsidies that year. Wow.
73%. Compare that to Canada, the source points
out. Farmers there get their income directly
from the marketplace via regulated pricing, which
includes their cost of production. There aren't
those massive direct government price subsidies
flowing in the same way. So the source flips
the script. The question becomes, who is really
paying more for their milk? Is it the Canadian
consumer paying directly at the till? Or is it
the American taxpayer, whether they drink milk
or not, funding the system through federal programs
like DMC or the price floors in the FMMOs? And
the answer is complicated. Very. The source concludes
it depends entirely on your situation, your tax
bracket, how much milk you buy, and also what
you value more as a society. Food security and
farmer stability or pure market efficiency. They
use another analogy there too, right? Yeah, like
choosing between investing in a super precise
TMR feeding system versus managing pastures.
One has high upfront costs and controls. The
other is variable, maybe cheaper sometimes, different
risks. No single right answer for everyone. Okay,
shifting gears a bit. The source flags an uncomfortable
reality facing both systems right now. A shared
crisis. The generational transfer issue? Yeah,
this is a big one. The source is pretty blunt.
They say both systems are, in a way, aging out
of existence. Oof, how so? Well, for Canada,
it comes back to those quota values. While they're
great equity for existing farmers, they create
what the source calls insurmountable barriers
for young people trying to get in without...
inheriting the farm or having access to millions
in capital. Starting from scratch is almost impossible
financially. That's the picture painted. And
for the U .S., what's the barrier there? Market
volatility. The source argues that the constant
risk, the high chance of those negative income
years we talked about, makes dairy farming an
impossible business plan for many young entrants.
Unless you inherit significant assets or have
an unusually high tolerance for financial risk,
maybe even an irrational one. So it's not that
young people don't want to work hard. No, the
source is clear on that. It's not about willingness
to work. It's that the entry points are structurally
broken in different ways. Canada, financially
impossible for many. U .S., economically irrational
without a huge safety net. And while both systems
are wrestling with these internal problems, succession,
costs, innovation, the source throws a curveball.
They say the really big disruption is coming
from outside. Yeah, this is the part that should
probably keep people up at night. They argue
that both systems are kind of navel -gazing,
debating internal rules while a tidal wave is
building offshore. And they list the specific
threats, things that bypass the traditional cow
model entirely. Like what? Okay, first. Plant
-based alternatives. Already grabbing significant
consumer trial 20, 30 % in some surveys. People
are trying them. We see that on the shelves.
Then precision fermentation. This is the tech
that can create identical dairy proteins way.
Casein in a lab using microbes. No cows needed.
Wow. Identical proteins. And looking further
out, but developing fast cellular agriculture,
actually producing real milk from cell cultures
in a bioreactor. And the source points out the
money flowing into these alternatives, right?
Absolutely dwarfs traditional dairy R &D budgets.
Investment is pouring into alt proteins. So what's
the impact of all this, according to the source?
The critical point is... These new technologies
don't care about supply management quotas. They
don't need huge land bases for economies of scale
like traditional dairy. They operate on totally
different principles. Meaning, the source argues
they render both the Canadian and the US systems
equally obsolete. Trying to defend either system
against this kind of fundamental technological
shift. It's like trying to protect the jobs of
people milking by hand when the milking machine
was invented. The game itself is changing. That
really reframes the whole debate, doesn't it?
Protect this system or that system. Yeah. What
if both are facing the same existential threat?
Exactly. But the source doesn't just leave you
hanging there in despair. They offer a way forward,
a strategic framework, things successful farms
should focus on no matter which system they're
stuck in or operating within. Okay. What's the
framework? Three main areas. First, focus like
a laser on what you can control. The fundamentals.
Yep. Milk quality parameters, consistency. cow
comfort, longevity metrics, driving operational
efficiency everywhere, feed, labor, energy, resource
optimization. Nail these basics. They're universal.
Makes sense. What's second? Diversify your risk
strategically. And this looks different depending
on where you are. For Canadian farmers, maybe
it's leveraging that quota stability. Use it
to make those long -term investments we talked
about, sustainability, maybe even some on -farm
processing. Things that are harder to finance
when income swings wildly. Okay. And for U .S.
farmers? Develop multiple revenue streams. Don't
be solely reliant on that volatile commodity
milk check. Maybe it's custom work, niche products,
agritourism, renewables. Get creative. And for
both systems, invest in tech that reduces your
dependence on labor because that's only getting
tougher and more expensive. Got it. Control the
controllables, diversify risk. What's the third
leg? Build adaptive capacity. This means keeping
your finger on the pulse. Monitor consumer trends.
What do people want regarding health? sustainability
convenience don't ignore it be market aware and
build relationships with your processor explore
opportunities for differentiated products not
just lowest cost commodity and critically Invest
in data systems. You need good information to
make fast, smart decisions when things inevitably
change. What's really interesting is the source
observes that the most successful farms, the
ones really thriving in both Canada and the U
.S., they're already doing this stuff. Yeah,
implicitly or explicitly, they share these traits.
It's fascinating. What are those shared traits?
Intense focus on the fundamentals they control.
Quality. cow comfort, efficiency. They find ways
to diversify or manage risk within their system's
constraints, using quota stability in Canada,
finding other income in the U .S. They invest
in their people. Big one. Skilled, motivated
teams run farms, not just systems. People are
key. And maybe the biggest trait, they adapt.
They're always looking, learning, adjusting.
It goes back to that neighbor's grass idea, doesn't
it? Right. It's not greener because the system's
magic. Yeah. The successful farms are just using
smarter management tailored to their reality.
Exactly. And the source's big conclusion about
the path forward is this. The future belongs
to farms that learn from the best of both worlds.
How do you mean? Combining that long -term thinking
and stability that quota can provide with the
relentless focus on efficiency and innovation
that competition can drive, it's like breeding.
Right. You want proven reliability, but you also
need cutting -edge genetics for progress. You
need both. But the source is really clear. The
answer isn't for Canada to become the U .S. or
the U .F. to adopt supply management. Absolutely
not. They stress that point hard. Solving either
system's problems isn't about copying the other
guy. The solution is forward, not sideways. The
real story, then, isn't the decades -old SM versus
free market debate? No. The real story, according
to the source, is how everyone individual farms
entire systems adapts when the fundamental rules
change. Like when new tech comes along and potentially
makes the old way obsolete. the test wow okay
this deep dive pulling from the source material
yeah it's given us a huge amount to process some
pretty challenging ideas it really has and the
source doesn't let you off the hook easily it
ends by posing some final really critical questions
directly to you the listener questions about
your farm's future yeah they cut right to the
core for you the canadian farmer they ask In
this world of improving affordable plant -based
options, how long can you realistically ask consumers
to pay significantly more at the checkout to
subsidize farmer stability? Tough question. And
for you, the American farmer, how sustainable
truly is a system that seems to rely on negative
average farm income most years, requires billions
in taxpayer support, and pushes relentless consolidation
just to function? It may be the biggest question.
hitting both sides of the border. How does either
of your current systems really adapt or even
survive when the basic premise that dairy products
fundamentally require dairy cows starts to become
technologically optional? What's your farm's
actual concrete strategy for navigating this
post -traditional dairy world that's clearly
starting to take shape? Because the source is
emphatic. It doesn't matter if you milk 50 cows
or 5 ,000. Thinking about that future, planning
for it, that's the most important conversation
you should be having right now. Look. This industry
has shown incredible resilience before, right?
We went from hand milking to robots, local markets
to global trade, eyeballing bulls to genomic
deep dives. Change happens. But that past survival
doesn't guarantee future survival for every single
farm. Things change. And the final word from
the source is pretty clear on who wins. Yeah.
The farms that thrive won't be the ones clinging
to and defending the past. They'll be the ones
actively building the future, investing in adaptation.
Regardless of which side of that border they
happen to be on. That's the challenge and the
opportunity. A powerful place to leave it. Thanks
for joining us for this deep dive. That wraps
up today's deep dive into the great dairy divide
between Canada and the United States. If this
analysis challenged your thinking about dairy
systems, and it should have, then we've done
our job. The reality is, both systems are facing
disruption that makes their current philosophical
differences pale in comparison to what's coming.
Whether you're operating under supply management
or free market conditions, the farms that thrive
will be those that stop defending the past and
start building the future. Want to continue this
conversation? Head over to www .thebullvine .com
where you can read the full article. access additional
resources, and join the discussion with dairy
professionals from across North America. You'll
find detailed analysis, industry insights, and
the kind of forward -thinking content that keeps
you ahead of the curve. Don't forget to subscribe
to the Bullvine Podcast wherever you get your
shows. And if today's episode got you thinking,
share it with someone in your operation who needs
to hear this perspective. Remember, the dairy
industry has survived transitions from hand milking
to robotics, from local sales to global markets,
from visual breeding to genomic precision. But
survival isn't guaranteed for every operation.
The question is, are you ready for what comes
next? This has been the Bullvine Podcast. I'm
your host, and until next time, keep questioning,
keep innovating, and keep building the future
of dairy. Thanks for listening.