Canada remains a hot bath for dairy farmers

Text & photography: Press agency along the galaxy   

Canadian emigration brokers have seen an increase in interest in emigration among Dutch dairy farmers recently. Regulations surrounding phosphate and nitrogen and an increasing cost price that makes it increasingly difficult to stay below the Dutch milk price are driving dairy farmers out of the country. Even people over 50 without a successor are considering crossing to Canada, say several emigration brokers.

The Canadian system is based on 3 pillars: import tariffs to control milk imports, production discipline in our own country through a quota and milk price determination based on production costs. The import tariffs ensure that milk from outside has little chance of influencing the dairy market. To keep internal milk production at a fixed level, every dairy farmer has a quota. Everything is based on at least maintaining current dairy consumption in Canada. If Canadians eat and drink less, there will be no expansion, but everyone will have to hand in their quota. The reality is that the Canadian population is growing by a few percent every year and dairy farmers receive a few percent more free milk quota every year.

Milk price based on cost price
Milk price, cost price, circumstances and the political climate in Canada make many dairy farmers in our country salivate. There is only additional environmental regulatory pressure on waterways and in the more densely populated regions. Another plus: appreciation for farmers is greater, because they are seen as good for the economy. The average milk price is also impressive, converting to around 54 euro cents per liter. Promotion costs for milk and costs for the quota system are deducted, leaving 50 euro cents per kilo of milk. A dairy farmer with high levels of milk has a net price of 57 cents per kilo of milk in Canada.

The milk price is determined annually based on the cost price of an average dairy farm. The reference is the cost price on several hundred dairy farms. If this increases, the milk price will also increase. This is why the cost price of milk in Canada is €0,05 to €0,20 lower than the selling price.

The organization Dairy Farmers of Canada (DFC), by and for farmers, has the mandate from the Canadian government to arrange the entire milk supply (Milk Supply Management) and to pay farmers a milk price that covers the cost price. Sometimes this happens again in between. For example, if the prices for diesel or fertilizer rise sharply, there will be an increase in the milk price.

Shielding the domestic market
The system has many advantages. The consumer pays relatively little, the dairy industry receives a constant milk supply over the months, the farmers receive a milk price that more than covers the cost price, the countryside has sufficient farmers left and the government has to spend little time and money on the sector. But how can Canadian dairies pay such a high milk price? FrieslandCampina or A-ware will quickly go bankrupt with this milk price. "Because we firmly protect our domestic market, consumers pay for dairy products at least the price it costs to produce milk," says emigration mediator Ben van Dyk of Real Estate Center/Farm Real Estate.com. He emigrated from the Netherlands to Alberta in 1980. First was a dairy farmer there, later a poultry farmer and now runs an agricultural real estate agency.

Yet, on average, consumer prices in Canada are not much higher than in other Western countries. How is that possible? '63% of the consumer price goes to the dairy farmer. That percentage is clearly higher than in, for example, the United States and most European countries. So there is less money stuck in the middlemen," says Van Dyk.

Little innovation and stimulation
The system of a high internal milk price in combination with low interest rates has worked so well for Canadian dairy farmers in recent years that almost everyone wants to invest. But there are also disadvantages. There is little or no innovation in dairy products and dairy farms are not encouraged to work innovatively and in a more market-oriented manner. The danger is that Canada is heading for a sector that continues to wallow in a warm bath, but sooner or later misses the boat when it comes to doing what the market demands. Canadian dairy farmers, Dutch emigrants in particular, also express a lack of challenge and expansion opportunities. A spread out bed can get boring sometimes. On the other hand, there are many guarantees and a well-filled wallet.

Meanwhile, the continents that believe in freer world trade are trying to open up Canadian protectionism a little more. Under this pressure, the Canadian government has concluded several trade agreements in recent years. The CETA treaty was concluded with the EU. Canada also participates in the 'Trans-Pacific Partnership', in which countries such as Japan, Australia, Mexico and New Zealand can practice free trade. And Canada is working on a trade agreement with neighboring countries America and Mexico. This treaty is called USMCA and is the successor to the former NAFTA. All this causes hairline cracks in Canadian protectionism here and there.

Dairy farmers in the country fear that the trade agreements will affect their rights. But Canada takes good care of its farmers. For example, the 10.600 dairy farmers in Canada will receive an amount of €1,4 billion in compensation for the free trade agreement with Europe (CETA).

The amounts are paid out in stages, spread over 5 years, and allocated on the basis of animal numbers and milk production. A company with 200 dairy cows receives an average of €200 per cow per year in compensation for five years. This compensation makes farmers satisfied. Especially since the consequences of the CETA agreement for dairy are expected to be somewhat less than expected. 'More luxurious dairy products will mainly come onto the market from Europe, while the Canadian dairy industry mainly produces basic products. And population growth continues, so on balance I don't expect us to deteriorate much," Van Dyk thinks.

Succession less obvious
Just like in Europe, it is becoming less and less obvious in Canada that companies are taken over by children. The number of quitters is growing, the average age of farmers is 55 years old and only 9% of farmers are younger than 35 years old. Some companies without a successor are taken over by existing companies, others are sold to emigrants. More and more often, not only outdated group stable farms, but also modern large-scale dairy farms are coming up for sale.

Van Dyk mainly thinks it is a luxurious discussion. 'Dairy farmers have so much money that they can send their children to universities. As a result, children are more likely to choose a different profession that pays even better.' He also puts the high average age of 55 into perspective. '55 in Canada or 55 in the Netherlands, that's a big difference. The 50-plus dairy farmers here are pre-retirement and often go on holiday. Labor is not a problem here, Mexicans and Filipinos do the work for a decent wage. All things considered, I believe that Canada's milk quota system is one of the best systems in the world. As a farmer you can very well live to a very old age.'

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