Dairy
The Alberta way of Life
Since the early 1970's the Canadian Dairy Industry has operated under a system of Orderly Marketing (Supply Management). This system was introduced to eliminate the negative effects of seasonal mismatch of milk production like variable processor demand for milk. The International Farm Comparison Network found that milk is one of the most volatile commodities. It is only natural for business, farmers and processors, to prefer stability. Thus the reasons supply management was first introduced in Canada are still valid today! This last 2 years dairy farmers in Europe, USA and New Zealand and other countries suffered from really low milk prices and high input costs. Meanwhile, the Canadian Dairy Industry has a different story - Demand for dairy products is increasing in the past year and prices have remained much more stable and fair for all - farmers and consumers alike!
Moreover the Canadian system does not cost anything to tax payers. It also has maintained the family farm: from Hoards Dairyman News. The vast majority of dairy operations in Alberta truly are family owned and operated. Almost always the dairy business involves several family members that include two or more generations. It is for reasons like this that we view dairying as one of the most "Family" of family businesses!
All dairy producers hold a production quota which represents the minimum amount of milk that the are required to deliver daily. These productions quota's (TPQ) define how much milk is needed for the domestic market. Milk pricing based on a multiple component pricing system. Producer quota's can be bought from producer to producer (minus 5 % assessment fee) or through Alberta Milk Quota exchange system.
Producers manage their productions and quota write a 40 day flexibility range (-30 to +10 days). The are allowed to skip ahead of their monthly quota until their cumulative position hits 10 days. Lower limit is multiplying your daily quota by 30. Producers are permitted to produce behind their monthly quota eligibility and carry the under productions forward into the next month, however 30 days is the max under productions that can be carried forward. A credit exchange auction is held every month to let producers buy and sell under productions credits.
Production in incentive days will be issued and increase productions during low production months. These are on a "use or lose" basis and cannot be transferred nor can they be carried forward. This was also done to create maximum flexibility in the system. Currently there is a lot of optimism in the industry with an outlook for regular quota increases to make domestic demand. Quota prices per January 2017 are $39000/kg TPQ.
Alberta has a viable dairy industry with 540 producers and are average heard size of approx 120 cows; housed in monthly free stall set ups. The climate, moderate summer tow cold winter, favors a good productions and Alberta cows are therefore among the top on Canada for milk production. There is also an abundance of cheap feed grains on the prairies so feed costs are very reasonable. Also the large, cheaper land base is an advantage for the dairy industry to flourish.
Remember: "Supply Management is the golden goose in Agriculture."
It has brought stability to dairy producers, processors and consumers. Therefore: the efficiency and competitiveness of dairy farmers has continually improved and continue to do so. At the same time they respond confidently to consumer demands about food safety, animal care, environmental sustainability and more!