Comparing U.S. and Canadian Dairy Policies and their Impacts

June 02, 2017

A young Brown Swiss dairy calf

The cover of a research paper about dairy policies

An in-depth comparison of the US and the Canadian dairy systems, supply management versus milk marketing by free-wheeling chaos, written by Forrest McGraw.  There has been a lot of discussion about the benefits of the Canadian style supply management system but few people in the US really know how it works and how it was implemented.  This article both explains and enlightens.  What I found the most interesting was that dairy farms in Canada are consolidating nearly as rapidly in Canada as they are in the US.  But the US has much larger dairies than the Canada does.

The major difference between farm consolidation in the US and Canada is this: When a farmer in the US calls it quits it is usually because the farm is failing financially, leaving the dairy farmer and his family very little to fall back on after they have sold out and paid their debt.   In Canada farms rarely fail financially because the supply management guarantees a fair pay price for their milk. Farmers there usually call it quit because they want to retire.  In contrast, Canadian dairy farmers have a quota they have purchased through the years required to market their milk in Canada.  Upon retirement, they can sell their quota to other farmers which can be valued at $30,000 or more per cow.   The value of the quota for a 100 cow dairy is more than 3 million dollars, a fairly substantial nest egg.
The survival of the Canadian Supply Management system is under political attack in Canada and beyond because it significantly increases the retail and export prices of milk and dairy products produced in Canada slowing growth in the industry.  Unfortunately, as the number of farmers has declined in Canada so has their political clout and their ability to defend their Supply Management System from political attack.  While dairy farmers in the US were being paid roughly $1.41 per gallon the dairy farmers in Canada were being paid $2.57 per gallon.  As a result consumers in Canada pay higher retail prices for milk and dairy products.  To date, there has been little negative consumer reaction to those higher prices in Canada.  Canadians appear to be much more supportive of their farms. And the dairy farmers there are enjoying the higher pay prices, for now anyway.

'Comparing U.S. and Canadian Dairy Policies and their Impacts'

by Forrest McGraw

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