A Shortage of Butter: Sounds Like Good News
for Dairy Farmers, It's Not
This is a classic case of a loophole, big
business capitalizing on any chance to improve the bottom line, and serious
unintended consequences. The impact of what
appeared to be a minor bureaucratic decision
is being felt in Canadian kitchens, food processing plants, and could do serious economic damage to
Canada’s dairy farmers.
A few years ago Federal officials were
trying to decide where so called “protein isolates” would fit into the stiff tariff
schedule that limits imports of cheaper dairy products like yogurt and cheese.
These high tariffs maintain the integrity of Canada’s supply management system that
tailors milk supply to Canadian demand using quotas, while assuring farmers a
fair price. Protein isolates are
essentially raw protein, like the whey protein used as a dietary supplement. Think
of whole milk with the fat and minerals stripped out. The bureaucrats decided the isolates are a
protein “substitute”, not necessarily a dairy product, so they come into Canada
tariff-free. No one paid too much
attention then, but slowly, over time, a trickle of cheaper
protein isolates, almost all from the United States, has become a tidal wave. Now Canada’s largest dairy processors like Parmalat, Saputo, and Agropur, are helping their bottom line by
using the cheaper protein in their cheeses and other dairy products. But it
doesn’t end there. The processors still need the fat from whole milk to mix
with the raw imported protein to produce their cheeses. This
is happening at the same time that dieticians and doctors are telling Canadians
it’s OK to eat butter again. So over the
last year butter, and butterfat, have
been in big demand, and for some, short supply.
Farmers nationally have stepped up production by more than 7% on a
butterfat basis to meet the shortfall, but because there’s no additional demand
for the protein in the whole milk
(usually made into skim milk powder), farmers aren’t paid the full cost
of production price for this additional milk, and a lot of the surplus skim
milk is being dumped or fed to livestock.
That’s unfortunate, but the more serious
impact I think is that it’s given the business media a fresh opportunity to attack
supply management. “Supply management
falls butter-side down” in the Globe and
Mail, and “Supply management is expensive, irrational —
and doomed” in i-Politics amongst others.
What especially irritates me about these articles is that they blame
dairy farmers (and always the articles are accompanied by shots of Holsteins) for
lobbying to protect a “broken” system, when it’s large multi-national dairy
processors that have created the problem. There’s no benefit flowing back to dairy
farmers or consumers from the importation of this cheaper protein. The
only exception: Quebec farmer-owned
Agropur, shame on it, is one of 3 dairy processors who’ve publically stated
they use the imported protein. Parmalat,
owned by a large Italian dairy, and Saputo
by a Montreal family are the others. Most in the dairy industry say other big
processors are probably using the imports as well.
Here’s some better news. As Islanders, we
can celebrate the fact that PEI’s dairies, ADL and Purity, do not use this
imported protein. And let’s also enjoy
the world recognition ADL cheeses have received recently: ADL, using a recipe from Cows, produces the
Avonlea Clothbound Cheddar that won SuperGold at the World Cheese Awards in
England in late November. And ADL’s own
labeled cheddars won several awards at the British Empire Cheese Show in
Ontario in mid-November. I’m not an
expert, but maybe the fact that only PEI whole milk, rather than a tasteless
imported protein isolate, is used to make these cheeses had something to do
with these successes.
One more thing for consumers to watch for:
this symbol:
that says 100% Canadian milk. That’s your guarantee too that there’s no
imported protein.
Unfortunately for farmers the trade in protein isolates won’t end
quickly or easily. The U.S. dairy industry would launch a trade investigation
before the ink was dry on any new government regulation trying to control it. The big multi-national dairies themselves are
playing a game of economic chicken saying they’ll stop only if the others
do. As well they’re getting ready for
more competition from cheaper European cheeses if the big EU trade agreement is
ever ratified. Consumers really are the
only economic force that could convince the big dairies to do away with these
cheaper imports and stick with all-Canadian milk. On PEI at least that’s easily done, we just
have to buy local.
The Oregon Militia Is Picking the Wrong Beef With the Feds
Arizona rancher LaVoy Finicum guards the Malheur National Wildlife Refuge on Tuesday, January 5, 2016, near Burns, Oregon. Photo by: Rick Bowmer/APFor all the slapstick comedy on display at the still-occupied government complex—rival militias arriving to "de-escalate" the situation, public pleas for donated supplies including "French Vanilla Creamer"—the armed and angry men behind the fiasco are pointing their rifles at a real problem. In short, the ranchers who supply the United States with beef operate under razor-thin, often negative profit margins.
It's not hard to see why grazing rights are an issue. Ranchers' struggle for profitability gives them strong incentive to expand their operations to increase overall volume and gain economies of scale. A 2011 paper by the US Department of Agriculture found that the average cost per cow for small (20-49 head) operations exceeded $1,600, while for large ranches (500 or more head), the average cost stood at less than $400. Large operations are more efficient at deploying investments in labor and infrastructure (think fencing), the USDA reported.
To scale up, ranchers need access to sufficient land. And in the West, land access often means obtaining grazing rights to public land through the Bureau of Land Management. Hence the bitter dispute playing out in Burns, Oregon: The ranchers accuse the federal government of ruining their businesses through overzealous environmental regulation of that public land.
Now, it's clear that what the Malheur militiamen appear to be demanding—essentially laissez-faire land management based on private ownership and overseen by local politicians—is a recipe for ecological ruin. In a recent New York Times op-ed, environmental historian Nancy Langston described what happened last time such a policy regime prevailed in the area: "By the 1930s, after four decades of overgrazing, irrigation withdrawals, grain agriculture, dredging and channelization, followed by several years of drought, Malheur had become a dust bowl."
But the real beef that struggling ranchers should take up with the federal government involves not zealous federal regulation, but rather its opposite: the way the feds have watched idly as giant meat-packing companies came to dominate the US beef production chain. Ranchers run what are known as cow-calf operations—they raise cows up to a certain weight on pasture, sell them to a feedlots to be fattened on corn and soybeans (and other stuff), and from there the cows are sold to companies known as beef packers that slaughter and prep the meat for consumers. As the University of Missouri rural sociologist Mary Hendrickson points out, after a decade of mergers and acquisitions, just four companies slaughtered and packed 69 percent of US-grown cows in 1990. By 2011—after another spasm of mergers—the four-company market share had risen to 82 percent, Hendrickson reports.
Such consolidation at the top of the value chain gives farmers less leverage to get a decent price for their cows. A market dominated by a few buyers is a buyer's market. The Colorado rancher and rural advocate Mike Callicrate has been making this point tirelessly for years. Callicrate thinks the Bureau of Land Management has been overly burdensome for ranchers in the West, he tells me, but there's a bigger problem that is "rarely mentioned" either by the gun-toting ranchers or the media covering them: "the historically low, below break-even market prices for livestock."
As the big beef packers scaled up and consolidated their market share in the 1980s and '90s, giant retailers led by Walmart did the same. The result has been steady downward pressure on the beef supply chain: The retail giants pressured the beef packers to deliver lower prices, and the beef packers in turn pressured ranchers. The result has been a big squeeze.
In the chart below that Callicrate created for a 2013 blog post, drawn from USDA data, the trend is clear: Compared with 40 years ago, nearly a third less of every dollar you spend on beef goes into the pocket of the rancher who raised the cow.
Chart by Mike Callicrate 
Chart: USDA During the 2008 election, Barack Obama vowed to challenge the big meat packers and defend independent farmers and ranchers from their heft. As Lina Khan showed in a 2012 Washington Monthly piece, President Obama actually made a valiant effort to do just that—before surrendering to a harsh counterattack from the industry's friends in Congress.
The current presidential election would be an ideal time for beleaguered ranchers to bring corporate domination of meat markets back into the public conversation. Armed occupations of bird refuge visitor centers won't help with that struggle.
