Milk Price Up? Blame Climate and Pandemic, not Supply Management

The 2021 farming season has been one for the books - but not in a good way. This was Year Two of a global pandemic having major impacts on farming supply chains. We suffered through an historic, devastating drought in the grain and hay growing regions of western Canada, coupled with the highest temperatures ever recorded on Canadian soil and an inferno of wildfires. Miserably low crop yields have been recorded by those farmers affected by the drought. We’ve seen prices for fuel, feed, seed, and fertilizer soar as a result of these factors. The list is both long and significant.

I’m not listing these challenges to complain. As farmers, we’re accustomed to caring for our animals and working our land under all circumstances. Farming is, and always has been, a gamble and a challenge. Mother Nature is never predictable. We adapt, we pivot, we respond to challenges with grit and determination to do right by our land and animals - as much as is humanly possible.

But I AM listing these challenges to help provide context to an issue that has been in the news off and on these past months: increased grocery store prices for food products. As early as last December think tanks specializing in food pricing were predicting sharp increases in grocery costs, especially beef, bread, and vegetables - mostly linked to supply chain issues due to Covid and climate related farming challenges. In August, steep increases in beef, pork, and bakery products were noted, to the tune of 10%, 5%, and 6%, respectively. At that time, a professor in food distribution and policy at Dalhousie University pointed at rising grain prices (and this directly impacts both animal feed and bakery grains) due to drought causing these increases on the grocery store shelves. It simply cost farmers more to raise animals and produce grains this year. Simple economics that we all can understand and appreciate, even though we don’t enjoy seeing the rising numbers on our grocery store receipts.

Now pricing increases are being predicted for dairy products. Every year the Canadian Dairy Commission - the crown corporation that manages the balance between supply of and demand for dairy products in Canada - examines and calculates the cost of milk production in Canada. In this past year, the CDC found that revenues for farms fell below the cost of production. This means that many dairy farms were producing milk at a loss - the price farmers were being paid for the milk did not cover the costs of producing said milk. We have been feeling the pinch on our farm as well. Fuel prices for our equipment are sky high, and prices for some grain commodities for feeding our cows have gone up by over 40%. The proposed increase of 6 cents per litre of milk produced will hopefully help to bring costs and revenue into a more sustainable balance on our farm and all Canadian dairy farms.

Our family farm is in a unique position to comprehend the challenges this increase will mean to all parts of the supply chain: we are farmers, we are a processor of dairy products, and we are consumers. As a farm, we are grateful for the increase in revenue to more adequately cover our costs of producing milk. But we are also a processor of milk - this summer we opened our own on-farm creamery where we process a portion of our farm’s milk and sell cheese and milk in our retail store. The Creamery will pay more for milk we buy from the farm. We will have to decide how or if we will pass on that increased cost to our customers who purchase our milk and cheese. As consumers (our family loves dairy products too!) we also appreciate how dairy plays an essential part in many families’ meals across our country. On our farm and across our industry we must endeavour to find the balance between supplying our community with reasonably priced food while producing enough revenue to provide proper care for our animals as well as to feed and clothe our own families.

We appreciate that this situation is not unique to dairy farming. As mentioned earlier, beef and hog farmers are in similar straits. To continue to produce food for our communities in these uncertain times, we must be paid more for the foods produced on our farms. We cannot farm at a loss for an extended period of time. Neither is this situation unique to agriculture only. When we constructed our cheese production facility earlier this year, lumber prices tripled over the course of a few months. Our contractor had no choice but to pass those increased costs on to us. We’re also noticing increased prices for some of the packaging we use for our cheese products, shipping costs, and cheese making ingredients.

These are challenging times, for farmers and consumers alike. As illustrated, price increases across all sectors of the economy have become the norm, unfortunately. Our supply managed dairy industry is definitely not an anomaly in this. Obviously it would be disingenuous to claim, as some have, that supply management is the cause of this increase. In the last five years, the consumer price index for dairy increased by 7.4%. This compares to 11.8% for meat, 20.6% for eggs, and 7.7% for fish. This current increase also compares to other similarly impacted agriculture sector increases. Supply management continues to be a good system that provides a fair price to both farmers and consumers.

Challenges abound across the world. We all know this. We’re in the midst of a global pandemic. Weather challenges are impacting farmers around the world. Supply chain issues are impacting everything from vehicles to appliances to construction materials. Price increases in times of upheaval are unfortunately inevitable. But that doesn’t mean that we should neglect our local businesses and farmers, especially not now! We must try to work together to support our local economies: dollars spent at home in our own communities have the most impact. Visit your local restaurant for takeout or dine-in. Stop at your local clothing store rather than shopping online from a multi-national corporation. Support your Canadian farmers. Buy local whenever possible and one day when we finally emerge on the other side of this pandemic, we’ll still have vibrant and healthy local communities surrounding us. That’ll be a win for everyone!