For June Dairy Month, Trump Should Celebrate the Canadian System Not Denounce    

Uncertainty is nothing new for farmers.

Freak weather changes and fluctuations in the market make planning for the future a gamble, never a sure thing.  Dairy farmers have to deal with the additional issues of needing to keep their herds healthy and well-fed, as the price farmers receive in part depends on bacteria counts, and also the fat and protein content of the milk.  If things weren’t hard enough, milk is a highly perishable product, which unlike grains, cannot be stored and then sold when prices improve.

Giving farmers even more headaches these days is Trump’s on-again, off-again trade war.  Specifically, farmers have to endure even more uncertainty than normal as prices for inputs like seed or fertilizer may rise with tariffs, while their export markets abroad are endangered.  In this mix of the President’s ongoing trade spats, he’s ridiculing Canada for protecting its dairy farmers with their supply management system, alleging that it harms US farmers.

But here’s the reality – Trump’s plans don’t work for US farmers. In fact, his intention to increase exports and enter the Canadian market fails both American farmers and our partner to the North.

Mexico has long been the main customer for our dairy exports and is regularly the number one importer of all US goods.  This is a mutually beneficial arrangement as Mexico is a milk deficit country and meeting their domestic consumption needs requires imports. That’s how trade should work — when one country has stuff to sell that another country wants to buy, everyone wins.

With our neighbors to the North, the story is much different.

Canadians do not want our products forced into their market.  Actually, Canadians want their system to stay as it is. It’s not difficult to see why. The Canadian supply management system ensures dairy farmers a fair price for their milk by tying domestic dairy production to consumption. Prices are negotiated in periodic meetings between farmers and processors to assure a baseline cost of production for producers and an adequate supply for domestic needs.  Unlike the US system, in which price controls were lifted for dairy in the 1980s, Canadian dairy farmers have a semblance of certainty year after year.  US dairy producers must fend for themselves, adopting a ‘get big or get out’ mentality and increasing production whenever they can to maintain some kind of financial security.  This push to constantly increase production leads to chronic overproduction and price volatility.  Also unlike the US system, Canadian farmers do not rely on tax-payer financed bailouts, or inadequate insurance payments that keep American farmers hanging on by a thread.

Furthermore, the production treadmill promoted by US government policy has caused the loss of small farms and the hollowing out of rural communities. Trump continued this ‘get big or get out’ mantra the first time he was in office, targeting Canadian dairy much like he is doing now.  During the renegotiation of NAFTA into the USMCA, the Canadian market was slightly opened to U.S. dairy exports.

Heralding this change a ‘win’ for farmers, it has proved to be anything but.

Specifically, even though exports to Canada have nearly doubled since 2018, US farmers continue to exit the industry at alarming rates.  At about 34,000 operations in 2020, the year when the USMCA was officially passed, that number fell to just about 26,000 by 2023 – a 25% decrease.

The moral of the story is that exports don’t keep farms in business, but instead allow larger operations to capture market share for themselves while driving out the smaller operations that have long defined US dairy.

Particularly as we celebrate June Dairy Month, we should learn from the Canadian system instead of denouncing it.  Granted, Canada’s supply management is not perfect – few government policies are. But their system provides for fair returns for farmers and certainty in a profession already marked by so many challenges.  A similar production management system in the US could ensure farmers a fair milk price thereby eliminating the need for taxpayer subsidies, while providing consumers with fairly priced locally produced dairy.  Let’s stop championing an economic vision for agriculture that has already been shown to be a failure.

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