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Profitability and sustainability in the dairy business

Kevin MacLean wants consumers and politicians to know how valuable supply management is for Canada

For Kevin MacLean, the cost of quota is just part of being in a business he loves. “I’ve never seen quota as a risk. Just like you need land to crop, you need quota to dairy farm. It’s a long-term investment.”

MacLean echoes a sentiment sometimes heard in country circles. There are two things you never hear a farmer say, he says. “I wish I hadn’t bought quota, and I wish I had never tile drained that field.”

Near Napanee, Ont., which means he’s only about an hour north of the New York state border, MacLean milks 120 cows three times a day in partnership with his parents Barton and Barbara, and they own 150 kg of quota and 750 acres.

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In 1997, when he started farming, their 55 kg of quota was worth about $17,000/kg and it took about 60 cows to fill it. In 2004, they built a new barn and bought more quota ranging from $25,000/kg up to $30,000/kg. Today, they have twice the number of cows but produce enough milk to fill almost three times as much quota.

Yet for MacLean, 2015 was a balancing act, both with his budgets and in the barn. The blend price has been about 10 per cent lower in the last year, and with 25 per cent of his milk price now based on world milk values, his prices do fluctuate.

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But on his farm they’ve also seen a 10 per cent increase in quota production capacity, thanks to quota allocation increases in the spring of 2015 and the incentive days added during the summer and fall.

Since their barns were at maximum cow capacity already, they went to milking three times a day, which increased production by the 15 to 20 per cent needed to take advantage of this extra quota volume. The other option would have been to increase cow numbers, but after housing and milking a neighbour’s cows following a barn fire, MacLean saw the impact of cramming more cows into his barn space. So he knew 10 per cent more cows would have required investing in barn infrastructure.

“Now we’re able to fill incentives and make up for lost revenues,” says MacLean. “I want to get better instead of bigger.”

Instead he’s using his debt carrying capacity for other parts of the farm, like buying land. As part of an on-going attempt to improve margins, they also invested in a soybean roaster and an automated feed pusher. Now they can roast and feed their own soybeans, instead of trucking them away and buying back expensive protein supplement, and paying for all of the movement and steps in between.

Next year, MacLean plans to do some custom roasting for other farmers in their area, but even without that they can cash-flow the investment.

In 2014, MacLean was in the ninth annual Faces of Farming calendar, published by Farm & Food Care Ontario. “We (farmers) need to promote ourselves, in whatever we do — on our vehicles, in the media, and in every conversation. It needs to be part of our job.”

Kevin Maclean

Kevin Maclean

Their family proactively reaches out by hosting open houses. A few years ago they had Christmas with the Cows, inviting the public to see a milking during the Christmas holidays. The event was so popular they opened the barn doors again during March break the following year. “Society wants to see where their food is coming from,” says MacLean. “They want community-minded smaller family-run farms producing their food.”

So when the TPP negotiations were hitting the press with the debate over supply management, the local milk committee organized an open house event on his farm inviting the public, media, and the local MP. For added punch, they lined the driveway with signs of the various local businesses servicing their farm. Although we can’t control what politicians are going to do, we can keep in touch and keep telling our story to the public, says MacLean.

The sign at the end of their farm lane reads: “Proud to produce quality milk for Canadian Families.” But MacLean adds that we have to be able to do it profitably and sustainably.

Pointing south, MacLean says their farm could compete with U.S. farmers if we had an even playing field. Equipment, facilities, hydro, employee costs, and taxes — all these add to cost of production and are much higher in Canada. In dairy, the two largest expenses are feed and labour. The MacLeans hire three part-time and one full-time staff.

MacLean says they try to make it a good place to work, not where tight margins make for poor working conditions. “We have to pay our employees equitably so we can attract passionate employees who enjoy the job,” he says.

Like Jan Bassa (see “Focus on Efficiency”), MacLean is concerned our Can­adian processors haven’t kept up. For example, about 15 years ago he went on an agricultural tour in the U.S. and saw a dairy processor making protein power drinks and supplements from milk protein isolates. “I thought, why aren’t the processors doing that at home? Now, they’re still saying it’s three years away,” says MacLean, referring to the promise of new infrastructure being built with the Dairy Farmers of Ontario’s new ingredients strategy. “We are losing opportunities every day.”

He’s keeping a close eye on how the boards are dealing with non-fat components of milk. “Our ingredient strategy needs to be a national vision,” says MacLean.

This article was originally published as, “Take it public” in the March 2016 issue of Country Guide

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Senior Business Editor

Maggie Van Camp

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