Vic Fremlin says the United States dairy industry isn’t going to get any better unless it changes its ways by producing less milk in order to increase its profit margin.
Trying to produce and filter more of its product into Canada’s dairy market is not the path to success, the long-time dairy farmer and owner of Lock City Dairies said Tuesday in a telephone interview.
Last week, American dairy giant Dean Foods filed for bankruptcy protection, claiming declining milk sales is taking a toll on the industry.
Dean Foods produces more than 50 brands, including Country Fresh, Land O’ Lakes and Dean’s. The company says it plans to continue operating and is working within the industry to find solutions.
The U.S. dairy catastrophe has caught the interest of U.S. President Donald Trump who wants to infiltrate more American dairy into the Canadian market.
But Fremlin argues that Dean Foods and the entire U.S. dairy industry is in a precarious position because the American system is broken and dairy farmers can’t make any profit, let alone break even.
“They think that by producing more product they’ll make more money. But that’s not the case. It’s the opposite. They need to produce better quality products, and less quantity in order to get better sales,” Fremlin said.
Canada’s supply management controls ensure that Canadians get the best dairy quality, which improves the market.
And it’s a market product that’s wanted by others, including in China and Japan, which in turn provides a gain to the Canadian market, Fremlin said.
Higher quality standards in Canada, which include no BST or growth hormones or additives, result in better quality products attractive to consumers.
The supply management control system in Canada protects quality and helps the dairy industry, Fremlin said.
The system allows dairy farmers to get a fair market price for the product at the highest quality. Quotas are set for a reason to ensure that the quality remains high and the market isn’t over saturated.
“You don’t dare do anything to jeopardize your quota. We’re allowed to have volumes of certain margins and the consumer doesn’t have to pay for this. It’s all paid by the farmers,” he said, something that’s opposite to the American system.
“Our supply management requirements are such that we don’t take assistance from the taxpayer. We are totally independent.”
Canada has already ‘sold out’ seven per cent of the dairy market to the United States as part of the new NAFTA agreement. A further seven per cent goes to the European market, Fremlin said.
While he expects American dairy to enter Canada over the next year, Fremlin said he’s confident consumers will see that the products are not produced in Canada and the quality is not the same. As well, the more milk they ship, the less they receive per litre.
“That’s not going to help American dairy farmers. They’re cutting their own throat. Producing more product, versus quality product, is not the answer to their problems,” Fremlin said.
He suggests the American market has seen a downturn of about five or six per cent this year while the Canadian market has enjoyed a one per cent growth rate during the same time period.
Fremlin said he believes that the Ontario Dairy Association needs to do a better job to educate consumers about the industry and how it works.
“It’s a very complicated system, but it’s a very successful system and recognized by others,” he said. “Others around the world now want a piece of our market.”
Fremlin said the dairy industry is also good for the Canadian economy, and especially rural areas where the family dairy farms exist.
“Agriculture is very powerful but we need to feed our own people and our standards are triple-A standards and it’s wanted for that reason,” he said.
He said that about every 20 cents of every dollar is driven to the dairy industry, whether it’s to pay staff, purchase equipment and other materials or hire veterinarians, among other things.
“This is a lot of money that helps the rural areas and I don’t think the Canadian government would be dumb enough to give up any more of our market,” he said.
Fremlin said the U.S. dairy industry has been in trouble for a decade and the only way it can fix the market is raise prices 25 per cent and lower volume by 10 per cent.
“That will probably put them into a profit margin,” he said.
In the meantime, the American dairy industry is blaming millennials for less diary consumption as well as an increase in beverage choices ranging from bottled water to juices or organic products.
In 2018, Dairy Farmers of America reported a 7.5 per cent decrease in sales and the organization blamed lower milk prices for the loss.