Tuesday, November 19, 2013

Gap between big, small dairy farms widens

The profitability gap has widened between large and small-volume dairy farms in Ontario, according to a new research publication by Predrag Rajsic, Postdoctoral Fellow in the Food, Agricultural and Resource Economics department at the University of Guelph.

In the 1980s, those who bought quota lowered their cost of production by increasing volume sold.

Now it’s both technology and larger volumes that are enabling larger-scale producers to achieve a lower cost of production, Rajsic found by delving into data from the Ontario Dairy Farm Accounting Program.

He compared the situation now with a similar study 25 years ago and found that the small-scale farms are falling behind and, if nothing changes, will disappear.

He notes that this is contrary to the intentions of the politicians and dairy farmers who sought supply-management powers to preserve small family farms.

What’s holding back an even faster widening of the gap between the most and least profitable dairy farms now is the inability of farmers to buy quota in Ontario.

That’s because the policy-makers have imposed a cap on quota prices which has all but dried up offers to sell quota.