Ontario Agriculture

The network for agriculture in Ontario, Canada

Dairy farmers can sometimes get a bad reputation. Because of supply management, I'd agree that some farms can hang on longer than they would if they were open to the free market. The free market can be very good and eliminating the least efficient very quickly. Unfortunately - it can also eliminate some good farmers who just get mixed up in a market they can't control (just ask a hog farmer).

However - I think those least efficient dairy farmers are going to have to make improvements quickly or face some tough choices. In the recent dairy management school I took part in (if you missed me talking about that - click here), we got a chance to talk policy and economics with George McNaughton of the Dairy Farmers of Ontario. Right now, they are looking at having to make price reductions because a number of products are about to flood the market thanks to a low world dairy price and high Canadian dollar. Essentially what that means is that a combination of price and currency means processors in Canada can pay for the product as well as the import tariff, and get it cheaper than they can buy from local producers. (As a side note - can you guess which country poses the biggest threat? It is not the US. It is New Zealand) That means dairy farmers have only two choices. Sell at the cheaper price in order to compete, or dump the milk. It's not hard to figure out which one is more viable.

This isn't the first time dairy farmers have had to sell their milk for a lower price than what was set by the Canadian Dairy Commission, however it has only lasted a few weeks before the loonie cooled off, or world prices started to rise. However, talking with economists has me feeling that lower dairy prices could be sticking around longer than normal. Just take a look at TD's latest dollar outlook. It is pegging the loonie to sit between 1.02 and 1.05 for the next year.

I'm supportive of what the DFO is doing - even though they really don't have much of a choice here. All we as farmers can do is make sure the cows are milking as well as they can, and we make sure expenses are as low as they can be.

And how knows, maybe a lower price will result in a bit more demand - and a bit more quota for farmers to fill.

Do you agree? Or maybe have a different opinion on this altogether? Let me know in the comment section.

Views: 244

Comment

You need to be a member of Ontario Agriculture to add comments!

Join Ontario Agriculture

Comment by Wayne Black on May 22, 2010 at 11:58am
A lower price may not increase demand significantly. But it will eliminate many inefficient producers. It also would lower the price of certain 'barriers to entry' (land & quota costs). This may encourage beginning farmers or smaller producers back into the dairy sector - not for the money but for the love of taking care of the livestock. On the flip side, it may encourage remaining producers to get larger to gain better 'economies of scale'. A 1000 hd herd would become more common.

Agriculture Headlines from Farms.com Canada East News - click on title for full story

What We have been Working on for You: OFVGA Activities Update January 2020

Marie-Claude Bibeau was reappointed as Minister of Agriculture and Agri-Food when Prime Minister Justin Trudeau announced his new cabinet last month.

Suggested Clauses for Tomato and Carrot Negotiations

This associated producer agreement shall be reviewed on an annual basis at a meeting called by the processor in advance of negotiations.

DFO'S 2020 BOARD EXECUTIVE AND OFFICERS ELECTED

Dairy Farmers of Ontario’s (DFO) Board held a special meeting to elect the Board Executive for 2020.

Agnetix Secures Funding In Series Seed Preferred Round

Next-Gen Horticulture Lighting Technology Attracts Capital from Diverse Investors

Manitoba premier says grain-drying would be exempt from a Manitoba carbon tax

Manitoba Premier Brian Pallister is pitching his plan for a carbon tax to agricultural producers as a much better alternative than the current federal one.

© 2020   Created by Darren Marsland.   Powered by

Badges  |  Report an Issue  |  Terms of Service