Ottawa Citizen

Canada’s fluid milk policy must evolve

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The market and policy factors that have led farmers to “dispose of skim milk in lagoons,” as the board chair of Dairy Farmers of Ontario put it recently, are not going anywhere. This is not a blip.

The Globe and Mail has reported that “since late May, roughly 800,000 litres of milk has been poured into farm manure pits, called ‘lagoons.’”

We got here from a combinatio­n of cultural shifts in eating habits and unrelentin­g bad policy. This puts the lie to the idea that the “stability” supply management creates in the marketplac­e is an unalloyed good. Does it matter that prices are stable if farmers aren’t able to sell their milk? The cost of food rose 3.8 per cent over the last year in Canada, and we’re dumping milk on manure piles.

One factor is a simple cultural change in the way Canadians eat. Per capita consumptio­n of fluid milk has been declining in Canada for decades, while consumptio­n of other dairy products — cream, butter, cheese, yogurt, ice cream — has grown or remained fairly steady. Of course nature has decided that you don’t get butterfat without skim milk, so farmers are finding themselves with excess skim milk.

This trend away from drinking milk has shown up in some other countries too, but it is not universal. If globalizat­ion has changed the way we eat, it has also changed the way people eat in Asia or South America. Consumptio­n of fluid milk in China and India, for example, while still much lower than in North America on a percapita basis, is on the rise. Rather than turn our excess milk into powder to export it, we dump it on manure piles. We don’t have enough production capacity here to turn the milk into powder, because Canada has decided that not having much of a dairy export market is a reasonable price to pay for its supply management regime. Stability, at all costs.

Theoretica­lly, what happens when there is a surplus of any good is that the price drops. But in Canada, while prices can change, they are not nearly as flexible as they would be if they depended on simple supply and demand. Consumer prices for fluid milk depend in part on the prices set by provincial co-ops or marketing boards, based largely on cost-of-production formulas. Prices for skim milk powder depend on the “support prices” set by the Canadian Dairy Commission­ers, based on “results of the cost of production study, arguments presented by various stakeholde­rs, an evaluation of the processors’ margin, economic indicators such as the consumer price index as well as their own experience and knowledge of the industry.”

None of this serves farmers, producers or consumers. It’s time to recognize that marketplac­es evolve and policies should too.

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