Global Milk Supply Insights: Canada

The EU abolished milk quotas in April, but what is the state of play in other parts of the world? Rhian Price and Charlie Taverner of Farmers Weekly investigated effects being felt in Canada, as well as New Zealand, the United States and the Netherlands. Click HERE to read about the issues being felt in New Zealand, and look for continuing articles that will focus on the United States and the Netherlands.

• 11, 962 dairy farms in 2014
• 959,300 dairy cows and 444,200 dairy heifers
• Production was 7.8bn litres in 2013
• Dairy trade deficit of CA$491m (£255m)
• Supply management scheme run by the Canadian Dairy Commission (CDC):
◦ 1) Quota system to limit supply.
◦ 2) Provincial marketing boards use these to determine price
◦ 3) Strict tariffs to limit imports

Wendon Holsteins was named a 2009 Master Breeder Herd by Holstein Canada
Wendon Holsteins was named a 2009 Master Breeder Herd by Holstein Canada

Farm facts:
• Supply Saputo – Canada’s largest dairy processor
• Runs the Wendon herd of high genetic merit Holsteins
• Sell embryos worldwide
• Has 405ha
• Producing about 35 litres a cow a day at 4% protein and 3.3% fat

In Canada hefty quotas as high as CA$44,000 (£23,000) prevent overproduction of milk.

While the quotas make it near enough impossible to expand or start up in dairying unless you have adequate capital, it does mean dairy farmers aren’t faced with volatile prices.

Logan Chalack milks 50 cows north of Calgary, Alberta, where quota is among the most expensive in the country, second to British Columbia.

Mr Chalack has just spent CA$1.5m (£780,000) investing in an additional 40kg of quota at CA$38,000 each so he can milk 25 extra cows.

“We are building a new free stall, robot barn for 60 cows,” explains Mr Chalack.

Cows in the tie-stall barn at Wendon Holsteins
Cows in the tie-stall barn at Wendon Holsteins

The remaining 15 show cows will be kept in the tie stall barn and be milked on a machine.

Because of quotas Mr Chalack says the milk price is relatively stable at 80c/litre (41.6p/litre).

“It is still a good lot of debt, but where the quota is good is we are guaranteed our milk price every month. So we can plan to pay our debt.”

Farmers who produce in excess of their quota do not receive payments in some provinces.

Milk producers can, however, lease quota if they think they are going to go over production. As they won’t get up to full capacity until July this is something the Chalacks are taking advantage of.

“Right now we’re leasing the quota. We are almost making more money leasing it out than milking the cows.”

Mr Chalack says he wouldn’t change the Canadian quota system.

“We’re happy with the quota. It is not possible in Canada to milk 15,000 cows like in America. But larger producers make a lot of money when the milk price is strong but lose money when things are bad.

“We produce some of the highest quality milk in the world and having the quota system allows us to do that because we don’t get too big and we receive one of the highest prices for our milk.”

Although it isn’t difficult for established producers like the Chalacks to expand, the quota system makes it almost impossible for new entrants to start up in dairying.

But there are government-led schemes to help new starters establish a farm such as the Alberta New Assistance Programme.

The government will match quota by loaning a small amount of the province’s dairy production quota up to a maximum of 15kg/day and it is slowly reduced over eight years.

By: Rhian Price and Charlie Taverner of Farmers Weekly