Cross-border confusion over subsidies

A subsidy, like beauty, is in the eye of the beholder.

Dairy Farmers of Ontario vice-chairman Peter Oosterhoff and Clyde Rutherford, president of the giant New York state Dairylea Co-op, don't see eye to eye on what constitutes agricultural subsidies south of the border.

Angry at the American dairy industry's latest efforts to break into Canada's dairy markets, Oosterhoff vented some steam before an audience of Canadian farm journalists in Niagara Falls recently.

"We can't compete against the American treasury and their billions of dollars of taxpayers' largesse," said Oosterhoff. He accused the Americans of being "two-faced on trade. They have one policy of buying American and another policy to penetrate other countries' markets by whatever means necessary. Just ask Canadian steel, sugar, pork and softwood lumber industries."

"There is either a great misrepresentation of facts, or they aren't facts," said Clyde Rutherford, president of the giant New York state-based Dairylea Co-op. He blamed governments for creating bad feelings between dairy farmers on different sides of the border. Rutherford said agricultural spending was cut in the current Farm Bill. By the time legislators were done haggling over spending, the planned increase of US$36 billion was cut. Agriculture now gets less financial support than it did in the previous Farm Bill, Rutherford asserted.

The U.S. government "has walked away from agriculture," he said, while conceding later that there are subsidies but "they are all on grain."

Oosterhoff disagreed, charging that the U.S. is still using its Dairy Export Incentive Program to pry open emerging markets in southeast Asia.

Growth is the answer, said Rutherford. He thinks North American dairy farmers should look beyond borders and join together to exploit 118 billion pounds of milk markets in emerging southeast Asia before they are taken over by the dairy industries in Argentina, Poland, New Zealand and Australia, where growth is expected to reach double digit figures.

"We are letting other people take those markets away from us," Rutherford said.

Hamilton-Wentworth dairy farmer David Loewith, who was also part of the debate, said regardless of which side of the border farmers are on, they don't get enough return on their investment. Low returns are the reason that farmers on both sides of the border use their children as labour. No other industry would stand for that, he said, and farmers shouldn't either.

Even in efficient operations milking 150 to 400 cows "most farms still work out to 50 cows per man," he said.

Rutherford milks 500 cows near Otego, New York. Last summer, his Syracuse-based co-op put out a call to Canadian dairy farmers to relocate their operations in New York. Six farmers took up Dairylea's offer of help with U.S. Customs. But some of them also kept their farms in Canada. "Obviously, the [milk] prices must be good if they can afford to do that," Rutherford said.

The advertisements to get farmers to move south were a bid to "create some excitement, which they did. We had 27 calls. Two were not nice calls."

Dairylea is a marketer of milk, not a processor, Rutherford asserted. Sales have grown from 1.8 billion pounds in 1989 to five billion pounds last year, while staying within Pennsylvania, Vermont and New York.

Rutherford said Dairylea provides services such as health insurance to its member farmers. It bulk buys electricity and dairy inputs, and helps farmers to smooth out the cash flow troughs in fluctuating milk markets. - DS

© copyright 1997 Agriculture Publishing Company Limited.


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Provinces still sour over milk promotion

By DON STONEMAN

Dairy Farmers of Ontario (DFO) leaders aren't waiting until milk consumption falls to say "I told you so."

DFO is pushing its milk pooling partners in Quebec, Nova Scotia, New Brunswick and Prince Edward Island to cough up cash for promotion before the current momentum of promotion campaigns in Ontario is lost.

DFO general manager Bob Bishop has asked a "panel of experts" to write a report on generic advertising. Bishop says the panel members - Agriculture Canada economists and University of Montreal business school professors - are considered to be unbiased toward the Ontario milk board's promotion efforts. Bishop is confident that the panel will agree that promotional spending makes farmers money. The DFO will use the report to convince its pooling partners that promotion pays.

Farmers aren't likely to open their wallets wide for a large percentage increase. The other provinces have lagged versus Ontario in terms of spending on promotion.

"It's a pretty hard sell," Bishop admits. "They have to go through all the soul-searching we've done."

Consumer habits change, he says, but not so fast that a sharp cut or a quick hit in advertising is met with immediate changes in buying patterns.

"You can't throw money in one year and pull it out and see what happens," Bishop says. "Markets don't move that quickly."

DFO measures the success of its promotional activities on an economic model developed by University of Guelph professor Ellen Goddard. She says that by spending $6 million on promotion programs that targeted specific consumer groups, the province's producers have sold an extra $24 million worth of milk.

Six million dollars is just about what Ontario has cut out of its promotional budget for the coming year. In the last 12 months, the Canadian Dairy Commission says, Ontario sales in fluid milk were up by nearly one per cent. But sales were down in other provinces in the Eastern Canadian pool, so there was no quota increase for Ontario farmers.

With other provinces sharing in the sales, but unwilling to make a huge percentage increase in promotional spending, Ontario dairy farmers are sitting on their wallets. The Ontario collection rate for promotion has been cut back to $1 per hectolitre of milk sold from $1.34, to match promotional spending in other provinces.

Spending on advertising has been cut accordingly. DFO's preliminary budget calls for spending $13.951 million this dairy year, down from $20.3 million last year. Despite the decrease in spending, Ontario isn't dismantling its promotion team at DFO, says product promotion director Michael Pearce.

Television advertising will continue to run year-round. But airtime will be cut by 39 per cent, resulting in an estimated cut of 20 per cent in the target audience. Magazine advertising will be slashed, and more than half of the outdoor billboards will be removed.

DFO sponsorship of university hockey and the Vanier Cup, Canadian university football's championship, has not been renewed.

The decision to cut promotion hasn't sat well with the board. "To me, to scale that back hurts all of us," says Bruce Saunders, of Holland Centre, in Grey county. "It's the only way for us to go ahead and keep selling butterfat."

© copyright 1997 Agriculture Publishing Company Limited.


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Cream sales are rising to the top

Keep those 18 per cent dairy creamers pouring. Richard Doyle, Dairy Farmers of Canada executive director, says sales of 18-per-cent cream, the stuff that goes into coffee, have risen by 52 per cent in the last few years.

That's good news for both fluid and the industrial markets in Canada. Cream sales eat up skim-off, the excess butterfat that is left over when reduced-fat fluid milk is bottled and lower-fat cheeses and yogurts are made.

Consumers keep on buying more of the lower-fat products, but farmers keep on cranking out higher-fat-test milk, Doyle says. Fluid skim-off rose 19.7 per cent in the last two years. Ontario's average butterfat test rose to 3.98 last year, up more than half a percentage point over the 1994-95 dairy year.

Butter and cheese consumption isn't helping much to move milk. While retail cheese sales rose last year, food service cheese sales slipped 22 per cent. Doyle says this follows a trend toward more eating at home. Butter and cheese account for 87 per cent of the industrial milk sold in Canada, he says. Cheese alone takes up 54 per cent of the processing milk sold. Retail accounts for 60 per cent of the cheese market, ingredients take up 15 per cent, and food service accounts for one-quarter.

Butter sales are barely changing. Doyle blames this on the perception that butter is nothing more than fat. Retail butter sales rose 1.1 per cent from the 95-96 dairy year. But total sales were down 4.2 per cent as ingredient and food service sales slipped. - DS

© copyright 1997 Agriculture Publishing Company Limited.


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New inspectors target bacteria

By DON STONEMAN

Dairy Farmers of Ontario plans to crack down on chronic bacteria count violators when it takes over raw milk quality responsibilities next year.

Keeping milk free of inhibitors remains the No. 1 priority, says Grant McLaren, of Drumbo, Oxford county, chairman of DFO's raw milk quality committee. But high bacteria counts are next on the list.

Relatively few of the province's dairy farms are offenders, but those who are tend to repeat the violation. Only 300 producers violated the 99,000 bacteria count level between August, 1996 and July, 1997. But offences totalled more than 1,300.

DFO will consider new penalties for selling bacteria tainted milk over the winter and present the proposals to dairy committee members at spring regional meetings.

Farmers at the DFO's annual policy making conference near Orillia last month were concerned that it takes too long to shut down offenders.

Currently, a producer isn't assessed a first penalty until milk has an average count of 99,000 bacteria count for two of the previous three months. Under existing regulations, a farm can ship high bacteria milk for nearly five months before milk pickups are shut off. Usually, high bacteria counts signal unclean milk contact surfaces or poor milking procedures, says George MacNaughton, farm policies and programs manager. Once the contamination source is found, it can be cleaned up the same day.

DFO aims to address bacteria concerns earlier and field staff will work with producers to clean up the milk, McLaren says. The goal will be to maintain bacteria counts at less than 10,000 per ml of milk, and start looking for the source if counts pass 20,000.

Farmers can expect to see a trend to fewer inspections reversed when DFO starts enforcing regulations under the Milk Act some time next year. Farms will get a routine inspection every two years under the DFO regime.

DFO will increase its field service staff to 16 from 10 by hiring former Ontario agriculture ministry milk inspectors. Each field staff member will be responsible for overseeing between 400 and 500 producers. They will split their time between inspecting farms and dealing with policy issues. But with the new daily quota system, far less time will likely be spent dealing with policy questions, MacNaughton says.

The DFO's policy of charging back lost milk on bulk tanks and in silos to the farmer responsible for the inhibitor violation remains a concern. McLaren admits that last year's crackdown on inhibitor violations was less effective than expected. Inhibitor penalties are down 24 per cent and the incidence of contaminated loads from inhibitors fell by 31 per cent, less of a decline than expected. But rarely do producers who let drug residues slip into the milk they ship repeat the offence.

© copyright 1997 Agriculture Publishing Company Limited.


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