SNIPPETS: The Disadvantages of a Drop in the Dairy Quota for Canadian Farmers By Emily-Rose Clark

If the dairy quota in Canada were to drop as it has in Europe, Canada's small dairy farmers would face many of the same financial and psychological repercussions. The challenges faced by these producers could result in the complete loss of their business. 

The dairy farmers of Quebec spend numerous hours tending to their animals and the land they cultivate to feed these animals, to produce the milk and meals that contain milk which all other individuals find on their tables. Dairy Farmers work 365 days a year and are proud of their work, their businesses even if it is a demanding field to work in. However the possible drop of the dairy quotas in Canada would threaten the lifestyle, form of income and challenge their family values. The government has been protecting the farmers throughout history with provincial marketing acts, enabling the farms to keep going and for them to pass down their family values to the next generation taking over. Now days this protection can be seen through implementing quotas and price floors, which are a form of protectionism, also ensuring quality control over the products produced.

The government has been discovering and implementing ways to protect and aid local farmers and their products since the 19th century. In order to protect and aid local farmers the government created provincial marketing acts. However Veeman (2011) also states the producers were those who elected the board directors, and were able to vote on the marketing plans which were and were not implemented. Thus the producers had some say in the marketing plans that restrict them as well as benefit them. The first provincial marketing act created to solely benefit the dairy farmers was established in 1966, which Veeman (2011) explains as follows, “together with provincial milk boards, administers the national dairy supply-management program for milk.” (para. 5) Therefore, this act was created to limit the quantity of milk being exported and imported to Quebec in order to protect the local dairy farmers. These rules and regulations have developed into the quotas that have been implemented today by the government as a form of protectionism.

Dairy Farm Protest Pic © CBC.ca

The government created quotas and price floors as a form of protectionism, which is defined by Tuck (1993) as, “a system of important controls set up by a government to protect the country’s agriculture industry from foreign competition.” (p.331) These protectionist laws control the success and profit of the dairy farmers, by managing the supply of dairy products imported to Canada, and ensuring stable and reasonable prices for the products. It is important to acknowledge that although these protectionist laws create a form of protection from other countries bringing large quantities of milk products into Canada, it also implements boundaries amongst the farmers. Implementations such as farmers not being able to purchase another farm and combine it with the farm they already possess, to make a larger farm; thus not allowing for farmers to create large industrialized farms. Although the protectionist laws set some boundaries for farmers the farmers are very much aware of how greatly their business depend on the protectionist laws. A dairy farmer interviewed for an article by Van Der Linde (2015) states the following “The consumer has a reasonable price for their milk and the producer gets (paid) a reasonable price ... if were getting the same price as our neighbours to the south were getting, I think we would go out of business (para.4)”, providing evidence that the farmers are thankful for the protectionist laws.

The first form of protectionism implemented is the dairy quotas. These quotas directly restrict the volume of imports, to a maximum level in order to protect the domestic industries from foreign competition. In Canada the imports, which are restricted are milk, cheese, yogurt and any other form of dairy products, in order to protect the dairy farmers from the United States, New Zealand and so forth. Financement Agricole Canada, states that, “Parallèlement aux mesures de contrôle des importations et à la réglementation des prix, le quota constitue le fondement du système de gestion de l’offre pour les industries laitière et avicole au Canada.” (para. 2) This quote means that with the control of imports and regulated prices, the quotas form basics of dairy and poultries supply-management in Canada. Furthermore it depicts the quotas do not only protect the local farmers from foreign competition but also from over-production amongst the farmers of Quebec Canada, thus creating a equal chance to a certain extent for all dairy farmers. However as McKenna (2015) states this form of protection amongst the farmers and the foreign competition does not come cheap, “Quota for a single cow ranges from $25,000 and Quebec to 42,500 in B.C.” (para.2) Therefore, although the quotas protect the farmers enormously they cost them a great deal as well, but it is worth the price to keep their family farms in business.

Why Canadian dairy farmers are worried about the Trans-Pacific Partnership  Pic © National Post

Price floors are the second form of protectionism, which the government implemented to aid Canadian farmers. The Economic Times defines price floors as, “a situation when the price charged is more than or less than the equilibrium price determined by market forces of demand and supply.” (para. 2) In further detail price floors are when the government puts a minimum price on a specific product, in the case of dairy farmers their milk and other dairy products sold in stores. This minimum price allocated to the products allows for the farmers to receive stable and reasonable prices for their products. However by the government creating these price floors they are stopping the market for this product to ever reach equilibrium. Therefore when the market is unable to reach equilibrium it causes for consumers to pay higher prices for their products. Johnson (1995) states that “Canadian consumers would complain. They pay 10% to 15% more for supply-managed dairy and poultry products than Americans pay for the same goods.” (para. 8) From this it is easy to see that although the benefits for the producers are plentiful with price floors implicated in the market, the consumers must pay a much greater price than most other countries for their dairy products.

Without these two forms of protectionism countries such as the United States and New Zealand would be able to import large quantities of dairy products, which would but the small local dairy farmers of Canada out of business. This would occur because in Canada the farmers are not paid for the quantity of milk they produce but rather the quality of the milk they produce. Whereas in the United States for example the farms are paid for the quantity of milk they produce. Thus the farms are much larger, and concentrate on mass production. As they concentrate largely on mass production the quality of theirs product are much less than the quality of dairy products produced in Canada. In order for the milk produced in Canada to be of quality the government has strict rules and regulations that dairy producers must follow. The techniques used to achieve and maintain the high quality of milk, is the National Dairy Code, a large book or pdf file online with the multiple rules a dairy farmer must follow in order to keep their business open and sell their product. The following is an example of two rules from the National Dairy Code,

From these two rules it is apparent that the quality control of the milk products in Canada is considered to be very important and strictly watched. This demonstrates another reason why it is important for the quotas to not drop in Canada. If they were the milk that would be imported to Canada would not be of the same quality of the milk products consumers are receiving now. Consumers pay higher for the milk products in Canada than those in other countries but the can be reassured because of the quality control that the bacteria count in the milk is much lower, that there is no antibiotics or hormones in the milk as the cows in Canada must be removed from the pipeline if they receive medication to ensure it does not end up in the milk.

All of these forms of protection can be related to Keynesian’s theory of economics, which according to Shim and Siegle (1995) was the following, “Keynesian Economics focuses on stimulating aggregate demand and thus has been referred to as demand-side economics.” (p.201) Therefore in simpler terms Keynesians theory believed that is was essential to support and protect small business and to create demand for the product in a region. Rather than diminish the local companies leading to a loss of employment, which would be detrimental to the economy. This theory relates to the importance of quotas and them not dropping for the following reasons. Firstly as the theory states it is important to keep local businesses in business as they play an important role in the economy. Therefore, the protectionist laws put into play by the government do exactly this, protect the small local businesses allowing for them to grow and flourish.

Is Canada Ready For The Dairy Wars? Pic © The Globe and Mail

While the dairy quotas are important to the dairy farmers for all of the above reasons it is also important to acknowledge that it is important to keep the dairy quotas so that the farmers may continue to pass down their family values, their passion to the next generation in the family. Caron (2015), states the following “98% des fermes sont familiales au Canada.” (para. 1) Meaning in order for the farms in Canada to be family farms, they have been passed down from generation to generation.

Ferme Janibert Inc, Ange-Gardien, QC De gauche à droite: Maxime Robert (19), Maryse Forgues, Marjolaine (16), Yves et Xavier (18) en compagnie de Duster et Justme, fille de notre vache souche. Pic © L'Agriculture

An example of this would be Ferme Janibert, my boyfriends family farm, when his brother, sister and himself take over the farm they will be the fifth generation to have the farm. While the farm is passed down every generation from family member to family member the family values are passed along with it. Family values are most commonly ideas passed down from generation to generation that depict the families’ beliefs of how the family lives their life, the common goals and the roles of individuals. In the case of dairy farmers they pass down the values of working together, working hard, learning that each individual has a role to play that benefits the other, like a social role in society. An example of this is when one individual may be in control of the agricultural part of the business, the other the well being of the cows, another the feeding of the animal and the other the maintenance of the machinery, however all of these roles work together in order to produce the milk. Caron (2015) depicts this idea of working together with a family who live on a goat farm, “Des gens qui ne comptent pas leurs heures, qu’ils gèrent une ferme de 5000 acres ou un troupeau de 100 chèvres, qu’ils y accomplissent, seuls ou en équipe, 100% des tâches.” (para. 3) This states that farmers are individuals who do not count their hours, who run a farm of 5000 acres, a heard of 100 goats, who split and share the tasks 100%. Another example of the importance of family values is seen from an interview with a family who has lived on the family farm for 67 years and they state the following about family values, “You learn to care for people and things when you grow crops and raise animals. We wanted to bring kids up with those values.” (Moscovitch, n.d., para. 9). Theses values are important to the farmers as well as the farm is, it is a way of life for these individuals and if the quotas to drop this way of life would no longer exist for them.

Cheddargate Pic © Kourosh Keshiri

If the dairy quotas were to drop in Canada, the protection the local farmers are given from the government would vanish, leaving their business, their family businesses as risk of disappearing to the larger farms of the United States. The local family farms of Canada, whom produce quality milk, could not compete with the mass production of the U.S. leaving them to collapse and become unemployed. Therefore, in order to protect the local farmers and allow them to continue to be passed down from generation to generation the quotas must be kept as they have been throughout Canadian history. 

Caron, S. (2015, March). L’agriculture familiale. L’agriculture Plus Que J’amais. Retrieved from https://www.agricultureplusquejamais.ca/de-l-equipe/lagriculture-familiale/#.VmBPuty4nFI

Johnson, T. (1995). Agriculture’s war and peace. Alberta Report/ Newsmagazine, 22(39), 20.  National Dairy Code, (1997). Revised September 2013. Retrieved from http://www.dairyinfo.gc.ca/pdf/dairy_code_sept_2015_I_e.pdf

Le quota laitier, un outil de gestion bien utile. (n.d.). Financement Agricole Canada. Retrieved from https://www.fcc-fac.ca/fr/agriconnaissances/production/le-quota-laitier-un-outil-de-gestion-bien-utile.html

McKenna. B. (2015, June). Canada’s dairy industry is a rich, closed club. The Globe and Mail. Retrieved from http://www.theglobeandmail.com/news/politics/canadas-dairy-industry-is-a-rich-closed-club/article25124114/

Moscovitch. P. (n.d.). Farm family values. Saltscapes Magazine. Retrieved from https://www.saltscapes.com/people-culture-section/people-culture-category/2064-farm-family-values.html

National Dairy Code, (1997). Revised September 2013. Retrieved from http://www.dairyinfo.gc.ca/pdf/dairy_code_sept_2015_I_e.pdf

Tuck, A. (Ed.). (1993). Oxford: Dictionary of business English. Oxford, NY: Oxford University Press. 

Shim, J. K., & Siegle, J. G., (1995). Dictionary of Economics. New York, NY: John Wiley & Sons, Inc.

Van Der Linde, D. (2015, July). Why Canadian dairy farmers are worried about the Trans- Pacific Partnership; ‘We could go out of business’. Financial Post. Retrieved from http://business.financialpost.com/news/agriculture/why-canadian-dairy-farmers-are-worried-about-the-trans-pacific-partnership-we-could-go-out-of-business

Veeman, M. (2011). Agricultural marketing board. The Canadian Encyclopedia. Retrieved from http://www.thecanadianencyclopedia.ca/en/article/agricultural-marketing-board/

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