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The Stability Story in Canada’s Dairy Industry

18 December 2012

The fluctuations of the dairy markets and the performance of Canadian dairy farmers are analysed after a turbulent year for milk prices. The effects of industry regulations are investigated by Dairy Farmers of Canada.

In 2012, the world dairy markets saw prices go down again, while feed prices are increasing. American dairy farmers are generally losing money as a result, a situation that is similar to the story of Canadian pork producers and other sectors. The Farm Bill has expired on September 30th, temporarily leaving the US dairy farmers without a safety nets until Congress returns in November. The ongoing debate around the Dairy Security Act, which focuses on the margin between farm-level milk prices and feed costs, clearly indicates the failure of existing programs to create a stable environment.

Retail and Farm Price of Dairy Products in the UK (1995 = 100)

Source: UK National Statistics, UK Department for Environment, Food & Rural Affairs

On the other side of the ocean, farmers have protested low prices in the streets of Brussels, Scotland and Great Britain. A number of co-ops and retailers were proposing to reduce the price they paid to farmers as these farmers faced increased costs. The UK farmers organised the “SOS Dairy” campaign, complete with a social media component and a song that went viral. Thankfully, the public support made the buyers back away from the proposed cuts.

In the mid 1990s, the United Kingdom deregulated its dairy industry. As a result, farm prices went downwards and became more volatile. Meanwhile retail prices for milk, cheese and other dairy products kept increasing at different rates. In Australia, deregulation also created more price volatility at the farm level while retail prices increased.

Farmgate and Retail Price Indices, Australia (1990=100)

Source: Dairy Australia; Australian Bureau of Statistics; DFC compilation

Deregulation and volatility do not benefit consumers and fail farmers. Canadian dairy farmers are quite aware of the difficult situations their fellow dairy farmers in other countries are facing. It reinforces our belief that supply management remains the best system in the world. Farmers are actively working to meet and anticipate the needs of the evolving marketplace in Canada. DFC sees supply management as a key to maintaining the prosperity and viability of the Canadian dairy industry and expects the government to live up to their commitment to continue to defend supply management, so Canada’s dairy industry stays strong.

Further Reading

You can view the full report by clicking here.

January 2013

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