04/12/2013 05:25 EDT | Updated 06/12/2013 05:12 EDT

Worldwide, Dairy Farmers Are Crying Over Spilled Milk

As Canada continues to pursue international trade agreements, it puts more attention on domestic industries and how they are performing.

As it relates to the dairy industry, this inevitably leads to a discussion about supply management and the situation here at home. But it is worthwhile to take a step back and have a look at the global dairy industry, the challenges faced around the world and what it means to Canada's dairy farms.

If you look around the world at successful dairy farms, they are consistently faced with the issue of competitiveness, which I define as the ability to product a commodity profitably in a sustainable manner year after year.

In dairy, from a global perspective, achieving this kind of competitiveness without government financial assistance can be a challenge. Dairy is the most volatile market in the world, and is very much impacted by weather, climate and the environment.

This also means different parts of the world deals with these challenges in different ways in terms of the policies and regulations that govern their domestic markets.

But despite what critics of the supply management system may say, the grass is not greener on the other side of the fence. There are significant challenges facing dairy farmers in other parts of the world, and interestingly many of them are because of low standards for pricing that are putting the viability of farms at risk.

  • In California, more than 400 dairies have closed in the past five years, largely because of the soaring cost to feed cows and a regulatory system, described as antiquated by its critics, that kept farm gate prices for milk artificially low.
  • In the United Kingdom, Welsh farmers are demanding more support from their government after being hit with a perfect storm. Last summer, this call began in protest to a cut in the minimum price for a pint of milk that fell below the cost of production. A harsh winter intensified the discontent; an estimated 25,000 sheep and cattle were killed during the coldest March seen in the country in the past 50 years, with heavy snows contributing to the collapse of 100 agriculture buildings.
  • New Zealand dairy farmers are hoping a spike in global milk prices will help cover the effects of a devastating drought that is threatening its economic growth and reducing its dairy production.
  • Dairy farmers in Australia are engaged in protests against milk prices that have fallen below the cost of production.
  • The European Union is the world's largest producer of milk, but dairy farmers across the continent are protesting excessive milk quotas that far exceed consumption in the EU and prices below the cost of production. This despite the reality that roughly 40 per cent of the EU budget is spent on subsidies and other financial supports for farmers, including dairy.

The situation in the EU is tough. Canada's largest dairy processor, Saputo, recently brought an end to a seven-year venture in Europe when it closed its processing plants in Wales and Germany. Besides facing tough competition from established brands, it also found that a deregulated market is not a guarantee of profitability.

The same scenario played out for Quebec-based Agropur, which elected to close its plant in Argentina because it simply wasn't profitable.

While we have our own challenges in the Canadian dairy sector, we are also fortunate to be working within a system that offers stability and consistency, not only for the producer but also for the consumer.

It is a system that supports a stable, sustainable industry, and does so without any kind of government subsidy. We are proud of that.