How dairy farmers can survive

The Canadian federal farm package offered last month may not answer the calamitous grain crisis in the world. President George Bush’s answer was a new Farm Bill, which buttressed America’s grains and oil seeds sector alone by $7 billion a year. Most dairy farmers in the U.S. no longer complain, with $2,800 a year going to dairy farmers milking 125 cows.

Agriculture Minister Lyle Vanclief’s response, finally admitting America did not break World Trade Organization (WTO) rules but only stretched them, is designed to offset some of the sick market conditions. However, dairy producers may share little of the benefits since they already sell top-quality products very efficiently.

Since farm families spend their lives on a perpetual treadmill, they know that basic changes lurk at every corner. The promised rewards for increased risk management and exports are welcome but are not the answer to yet another looming crisis. It comes down to how much longer producers will have a major stake in selling and pricing their milk?

Large corporations, some of them co-operatives, dominate today’s dairy world. The kingpin is the Swiss-based Nestle conglomerate having yearly sales topping $20 billion, with the U.S. Dean Foods in second place at $14 billion. New Zealand’s Fonterra group, a quasi farmers’ co-op, takes fourth spot at $10 billion. It must be noted that these figures are in billions, not millions, and so literally giant lakes of milk and milk products are involved.

Where does this leave Ontario’s dairy industry? Apart from milk production, the farm share of total profit gets smaller and smaller. Even the farmer-owned Gay Lea co-operative, once a giant and deemed a threat to farm families, is now only a middling enterprise. But it plays a crucial role in maintaining market competition.

Gay Lea’s early thrust came from its first general manager, Ed Brady of Lanark County. His talk of sales in the multi-millions scared many 20-cow farmers but he and his far-thinking directors saw well into the future. They knew success lay in manufacturing specialty milk products, whether butter, yogurt, sour cream or cottage cheese.

How right they were. Last year’s three top biggies were Saputo with Canada-wide and U.S. sales nudging a reported $3.3 billion. Saputo was started by an Italian immigrant who felt strongly that pizza toppings had a strong Canadian future. Next comes Italy-based Parmalat at $2.2 billion, followed by Agropur owned by Quebec farmers through their Co-op Federee. Its sales near $2 billion.

These success stories and global growth tell us something. These trends will only accelerate and unless Ontario farmers, especially their leaders, show imagination our sons and daughters will be left behind. True, small, specialized cheese factories will survive should they respond to consumer demands, but the other small plants will wither.

The future lies in processing our own milk or striking a partnership with a U.S. group. Here we will find our families’ future prosperity.