Ontario’s goat industry ‘a bright spot’ says CEO

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Comments

It is nice to see young people have an opportunity to get into farming. It's also great to have that demand that comes with immigration.

One easily overlooked angle I would urge new entrants to consider is how to build a stable business in an industry that has had its share of processing challenges.

The first problem with all so-called "ethnic" markets is that they typically last for less than one generation - the next generation normally can't wait to throw things like goat meat out the window and become "Canadian" by eating poutine and all that other stuff. Therefore, there's a difference between "strong" demand today and long-term demand that, unless identified and evaluated by prospective goat farmers, could prove to be their undoing.

The second problem with so-called "ethnic" markets is that they tend to be small - this means that even if there historically has been rapid growth, there's a good chance that the market could become easily flooded and the price plummet to almost zero.

The third problem with "ethnic" markets is that the big players always anticipate a "wash-out" caused by over-optimistic beliefs held by new entrants that market demand has no limit, and scramble to become even bigger so that they will survive when, not if, the "wash-out" happens. This means that the big players are scrambling right now to get to rotary parlors and 2,000 milking goats, or more, before the inevitable crash bankrupts everyone with under 1,000.

The fourth problem with this particular market "opportunity" is that it is, for many prospective entrants, the "least-worst" option because they can't get into traditional dairying. "Least-worst" alternatives rarely, if ever, prove successful in the long run.

Although I am cautious rather than a pessimist, economic and business history teaches us that if you're not already milking 1,000 goats, wait a few years and buy a 1,000 head goat farm when every bank will have one for sale for cents on the dollar.

Stephen Thompson, Clinton ON

With over half the population of Toronto being "foreign born",l am not sure how you can class that as a small market ?Other Canadian cities are seeing the same ethnic flow, anyone that hasn't been to Calgary in a few years would be astonished at how much it has changed.
To say that the demand for goat meat or milk or cheese will never last is like saying Pizza,spaghetti,or sushi will never really catch on in this Country.
In fact a good deal of people outside of Quebec never heard of Poutine till a decade or 2 ago and maybe it would have been a lot healthier for everyone if we didn't.
Its not a question of will the goat industry survive but how fast it can keep up to demand or do we have to resort to imports to fill that demand.That's the problem facing fast food places like A&W with their hormone-free hamburgers, they have to import much of that beef.That is one of the main marketing problems with Agriculture in this Country, you snooze, you lose out to imports.

Today's so-called "ethnic market" is driven by recent immigration and depends on continually-more immigration to sustain it because of the assimilation of the next generation into Canadian society and culture.

For example, everyone of Dutch heritage over the age of 60 will remember "stumpot", but who, of Dutch heritage under 30, has ever eaten it, let alone ever heard of it?

I've never claimed that the demand for goat products won't last - I have claimed, and will continue to claim, that it won't support the number of people who want to go into it - and the numbers are horrifyingly-stacked against new entrants:

(A) 25 new producers have already applied for licences to start milking goats in 2016.
(B) nobody knows by how much the 240 existing producers will expand their existing level of production in 2016
(C) the existing market for goats milk of 42 million litres annually is exected to expand by 10% or 4.2 million litres in 2016
(D) if each new producer produces the average amount produced by existing producers (175,000 litres per farm), there will be an additional 25 X 175,000 = 4.375 million litres produced, even before any additional amounts from existing producer expansion is included, to meet a market that will grow by an estimated 4.2 million litres, meaning that 175,000 litres of milk (46.375 - 46.2 million) will have no market just from new producers alone.
(E) if existing producers expand their output by 10% (4.2 million litres) the total milk supply for 2016 will be 42 million litres (the existing level of production) + 4.2 million litres from expansion of existing herds + 4.375 million litres from new producers = 50,575 million litres of milk to satisfy a market that ostensibly only wants 46.2 million litres (42 million litres + a 10% expansion of 4.2 million litres), or an over-production of some 4.375 million litres, and quite-possibly a lot more than that, if my arithmetic is correct.

My point is, and always has been, that it doesn't matter how fast a market is growing, if it's a small market, all it takes is a very-small amount of production in excess of what's needed, to drive the price to effectively zero, and that's the gauntlet currently facing Ontario's dairy goat industry.

Stephen Thompson, Clinton ON

Bingo!
Finally, there is an admission that overproduction is possible! Flip/Flop. Black is White one day and the next White is Black. LOL.

The goat industry is here to stay ,a lot of people that used to drink cows milk have now switched to rich ,healthy goats milk! The trend will only continue once the consumer is educated about goats milk, it digests much quicker than cows milk! New products and cheeses have found there way into the stores. People ,not just ethnic consumers are looking at goats milk as a choice for their family health needs. The female goat is a powerful animal which can provide both milk and meat for a growing and changing consumer, Thank god their is NO SUPPLY MANAGEMENT to slowdown this remarkable never ending growth for young farmers!10 years from now, the goat industry will look back and thank the new Processors for becoming true partners in this unbelievable growth! The goat industry is on the right path to building a profitable choice for farmers ,stay focussed on your customers needs and developing long term markets by working together! Bill Denby ,importer/ exporter

While I didn't succumb to the temptation, many of my undergraduate classmates returned to the farm after graduating in 1972 to borrow money from the Ontario Beef Heifer Loan Program which, at that time, was attempting to help farmers cash in on the "unbelievable growth" potential in the beef industry - the beef industry crashed only a few years later and most people who borrowed money from the Beef Heifer Loan Program wished they'd never heard of it.

In addition, a truism in the investment industry is that "things always look rosiest at the top" which means that when people, especially farmers, tout something as having "remarkable never ending growth", it's time to sell, not buy. For example, anyone who lined up outside Bank of Nova Scotia branches in the early 1980s to buy gold at $800 per ounce believing then that the price of gold was on a "remarkable never ending growth" curve, learned that lesson the hard way as the price of gold promptly fell to $300 per ounce and stayed there for years.

While the goat industry has been here for a long time, and is here to stay, it is a small industry with a limited market that vaporizes relatively-quickly as immigrants, and especially their children, become assimilated into Canadian society and culture.

According to the article, Ontario's 240 dairy goat farmers produced 42 million liters of milk in a recent year, up 200% in under 10 years and at present are enjoying some 10% annual growth in primary demand.

Unfortunately, thin markets tend to get clobbered by "double-whammys" which in this case would be no growth (usually because nobody wants any more even if it was free) at the same time more producers get into the business expecting never-ending increases in primary demand.

For example, simple arithmetic shows that each producer produces, on average, 175,000 litres of milk annually. If the market increases by 10% annually above a base of 42 million litres, this 4.2 million litre increase can be supplied by 24 new producers at 175,000 litres each, or 12 new producers producing 350,000 litres each. Therefore, if instead of 24 new producers in 2016, there are 48 new producers each producing 175,000 litres of milk, this means that there will be a 4.2 million litre glut of goats milk that the market just doesn't want (assuming the processing industry even has the capacity to handle this much of an increase in volume in the first place).

If, God forbid, we had 96 new producers or, gasp, even two or three big producers going from 1,000 head to 2,000 head, it isn't going to take much to drive the price received by everybody to well-below breakeven for everybody but the biggest and highest-equity producers.

Therefore, the big producers:

(A) know this industry can't support the number of people wanting to get into it
(B) know there is going to be a shake-out
(C) are scrambling to be among the lucky few who will survive.

Stephen Thompson, Clinton ON

Steven are you on a mission to discourage every young person that wants to get into farming? The Farming industry in Canada needs young people to take a chance, That what farmers do every day! The goat industry is just one choice that is and will do just fine, the world is a changing place. Canada has huge opportunities for growth in exports, what we need is steady growth in supply and marketing. It appears that the Leadership in the Goat industry both for meat and milk see this and are encouraged by trade agreements that give access to processors and exporters. Your comments are always negative, you must be mad at Ag industries that are creating choices for young farmers. Canada's Ag industries are positioned well ,not only to supply growth at home and abroad ,you should try to encourage these farmers in the industry to help bring more young people into farming! Instead of attacking Ag industries ,like the Goat producers that have a blue print for SUCCESS! I and many more people do not understand your actions! Try and change your ways ,you make some good points on closed opportunities for young farmer that would like to get into milking cows. Farming is like a roller coaster ,their will always be highs and lows during the ride ,but never try to discourage someone NOT to TRY the RIDE! Bill Denby importer/ exporter

Agriculture has a long and sad history of chasing investment rainbows, all the way from the Ontario Beef Heifer Loan Program to Pigeon King and everything else in between.

I've spent far-too much of my almost 45-year career in agriculture, too much of it spent in the Farm Debt Review process, picking up the pieces after young and impressionable farmers listened to "sure-fire success" stories touted by others, only to crash and burn because they ignored sound business and investment principles.

Farmers are loathe to listen to any outside advice near the top of any market - the farm community, caught up in the "buy land, they're not making it any more" frenzy in the late 1970s, universally ignored a cover of one edition of Fortune magazine in 1979 which warned "Investors in farmland are on dangerous ground", only to see the price of farmland collapse several years later, taking most of an entire generation of farmers along with it.

We've all heard the same "the sky is the limit" stories spun about Pigeon King, llamas, alpacas, emus, mustard seed, beef heifer loan programs, US Ag Secretary, Earl Butz exhorting farmers in the 1970s to "plant fencerow to fencerow", ethanol and God-only-knows-what else as we are now hearing about goats. I warned anybody I could about Pigeon King and those who listened to me sing my praises - those who didn't are still paying for their investment folly.

I defend my position that goat farming is little more than a niche offering an opportunity for a few rather than for many and that, thanks to consolidation already well-underway, people who get into it now, especially without a lot of money behind them, aren't likely to survive.

Finally, given the almost 50/1 price/earnings multiples currently affixed to farm land, it's bad enough for Mr. Denby to exhort young people to "take a chance" to start any type of farming, it's unconscionable for him to be exhorting them, to use a Blackjack term, to take a chance and "hit 17".

Stephen Thompson, Clinton ON

When using a conversion of one imperial gallon being 4.55 litres, each of Ontario's 240 registered dairy goat farmers produces, on average, just over 105 gallons of milk daily.

(A) 42 million litres divided by 240 producers = 175,000 litres per producer per year.
(B) 175,000 litres divided by 365 = 479.45 litres per day
(C) 479.45 litres per day divided by 4.55 = 105.37 imperial gallons per day

In agriculture, as anywhere else, it's all about volume and since, on average, half the industry is producing less than 105.37 gallons per day, there's going to be a shake-out and the bottom-half (and probably a lot more than that) is going to disappear.

I need only point to the mainstream dairy industry, where in spite of rip-off farm gate prices imposed by supply management, that industry has seen, if my numbers are correct, about a 90% attrition rate in farm numbers during the past 40 years.

In the goat industry, this sort of attrition rate would mean the entire goat milk market in Ontario could, and probably soon will, be supplied by no more than a few dozen producers instead of several hundred.

Stephen Thompson, Clinton ON

Steven ,this has happened to every industry in Canada ,auto, oil, manufacturing and so on ,Does that mean you QUIT before you even start! I find that you like writing only NEGATIVE points instead of being POSITIVE. Why would anyone take or even consider any advice from you, It appears you have never taken a chance in your live, you sound like one of those bean counters that only looks at statistics! You would not know how to start or finish ,if you could not read it in a report. You should try some of the things first hand you so often comment on, then maybe farmers would take you SERIOUS! Maybe ,you should get out and see the world first ,how new markets are opening to Canada. This is the perfect time to get into farming, it was like in the seventies. The suppy management sectors were exploding with opportunities, I took a chance and bought out my father at 18 years of age and never looked back. Went from milking 30 cows to over 100 ,those years were the best for young farmers to get into milking cows! Growth ,and then government stepped in & controlled the industries, milk ,chicken and turkey, tobacco and more! Now look at the mess those farming industries are in, Hopefully the Goat Industry learns from the past ,never give up your right to market your product to GOVERNMENTS! They will screw it up over time, not farmers! Like I have written ,I lived the growth and took a chance and would do it again but without Government control. I was one of the first importers/exporters to break into the U.S MARKET WITH SHIPMENTS OF RAW MILK, I HAVE HELPED AG CANADA ON TWO TRADE AGREEMENTS ,BEEN TO THE CANADIAN TRADE TRIBUNAL , TAKEN THE DAIRY FARMERS OF ONTARIO 7 TIMES IN A ROW TO COURT, AND YES ,STILL FARMED THOUGH ALL OF MY CHALLANGES. I BELEIVE STRONGLY THAT FARMERS HAVE TO HAVE CONTROL OF THEIR PRODUCE IF THEY ARE TO SURVIVE IN THE WORLD AND AT HOME. I ALSO FAUGHT EVERY DAY FOR YOUNG FARMERS SO THEY MAY HAVE A CHOICE IN FARMING. I BELEIVE THAT THE GOAT INDUSTRY IS ON SOLID FOOTING AS LONG AS THEY WORK WITH ALL THEIR PARTNERS IN THE INDUSTRY TO ACHEIVE THEIR GOALS! I see this as a positive Future for young farmers to be a part of , they need to get involved from the beginning if they want to SUCCEED! Always remember to keep control of what you produce ,but work respectful with Processors and Governments. I believe CONTRACTING is the only way this industry will Grow and be Profitable for all players! Bill Denby .importer/ exporter

I bought my first farm in 1973 at a 10 times price/rent multiple and my last two in 1996 at about a 12-15 times price/rent multiple - I took a chance but didn't assume near the risk that somebody buying a farm today at a 50 times price/rent multiple would be assuming.

In Blackjack parlance, I took a chance by asking for another card when I held 13 - buying that farm today would be like telling the dealer to "hit me" when I held 17. The former is a calculated risk, the latter is sheer-stupidity, yet farmers, even when sheer-stupidity lands them before the Farm Debt Review Board, don't seem to be able to see the difference.

Regardless of whatever "footing" the goat industry eventually finds, the 240-farm goat industry of today will never, especially after the inevitable shake-out, grow large enough to support more than several hundred Ontario farmers out of a total farm population of about 40,000.

It's, therefore, short-sighted, and even cruel, to think that what might work for a few-dozen goat farmers lucky enough to survive the eventual shake-out of that sector is, and/or will be, a shining example of how to grow and sustain the entire agricultural industry.

That's not being negative, it's being realistic!

Stephen Thompson, Clinton ON

Just because you bought a farm in western Ontario does not mean ,it is the only place to farm in Ontario. Mariposa dairy is locate where I live and farmed ,the people that own the dairy have done quite well! They had a dream to produce and process the goats milk they produced and TOOK a chance, To day they are one of the biggest producers and farmers in our area! Bruce's dad was in the dairy business and milked about 30 cows, Way back then Bruce seen that their was a market for unregulated goats milk, instead of taking over his fathers farm! Imagine that ,Look what he and his wife Sharon have built from nothing but hard work, guts and a dream! With people like them in the goat industry great thing are yet to come, Young farmers need to look to success stories, instead of reading Stephen Thompsons negative comments ,they are worth as much as the Canadian dollar these days! I am not saying go out and get in debt 5 million dollars ,young farmers need to budget out their costs! But never be afraid to borrow money ,because unless you take a chance you will never have your dream come true! To Days goat industry is lucky to have Bruce & Sharon as dreamers ,that hard work , brains ,good planning and taking a chance ,can position you well in twenty years! Bill Denby importer / exporter

While "hard work, guts and a dream" can be a recipe for success when you are producing for an expanding, broad-based market and starting at a time of low P/E multiples for land, it's also just as much a recipe for failure that has landed, and will land, too many farmers in front of the Farm Debt Review Board because they started at, and/or expanded at, absolutely the wrong time and because business fundamentals were stacked against them.

Mr. Denby seems to believe that aspiring farmers can simply ignore:

(A) stratospheric P/E multiples for land
(B) the business truism that small markets can, and often do, collapse completely because of only a few-too-many producers.
(C) the business truism that when people are flocking to get into something, especially a small market, it's time to get out.
(D) the business truism that nobody cares about how much it costs any given producer to produce something.
(E) how close to failure many of farming's so-called "success stories" actually are because, regardless of past success, they are ignoring signals that they need to fundamentally and substantially change what they are doing.

Unfortunately, for every so-called "success story", everyone in the farm management profession has dealt with at least ten (and most-likely many more) abject failures because farmers, and especially aspiring farmers, listened to their dreams instead of facing business reality.

That's why aspiring farmers should seek out, and heed, as many farm management professionals as possible, and NEVER heed people like Mr. Denby.

Stephen Thompson, Clinton ON

I continue to find his comment more funny, This is a guy that has never Milked A cow ,been in the Dairy Business but thinks he knows it all! I have met more bean counters like him in the past, That think they know it all ! They only know whats written in a report or written in a book, THEY HAVE NO LIVE EXPERIENCE ON NOTHING! I have followed Mr. Thompson' s Attack on Supply management farmers for YEARS ,This guy knows Nothing only what he can find in a book. He likes to spit out his garbage to make farmers think he is important. This time Steven you failed on your attack on the goat Industry, The low Canadian Dollar is helping exports of Cheese and other Goat products and will continue to drive price and growth for years. Unrestricted access to that market and our domestic market will create stable growth for years to come, That is one thing you can't find in your book. The impact that import & exports have on the growth of a growing market, This is the time for young farmers to look to the Goat Industry as a option in farming. Never take advice from someone like Steven that has never done anything ,just writes about it! Bill Denby importer / exporter

Mr. Denby is so-unable to disprove my numbers showing that when it comes to the "double-whammy" of:

(A) relatively large numbers of new entrants when compared to the overall numbers of farmers already in the dairy goat industry.
(B) ongoing, substantial expansion of existing dairy goat operations

setting the industry up for a "too may cooks spoil the broth" scenario in the next few years, that he resorts to heaping demeaning and dismisive personal invective.

I have claimed, and I continue to claim:

(1) sustained double-digit growth, in any business or industry, is unrealistic and one doesn't need to have ever milked a cow to know that.
(2) relying on domestic ethnic markets is like building a house on quicksand and, again, one doesn't need to have ever milked a cow to know that.
(2) any "small" market is always at substantial risk of being flooded with too much product, thereby driving prices to fire-sale levels and, once again, one doesn't need to have ever milked a cow to know that.

I am not "attacking" the goat industry but am pointing out what, based on my background and my experience, I believe to be the substantial financial and business risks facing both new entrants and existing dairy goat farming operations - Mr. Denby would seem to be advising young farmers to ignore these risks even though the largest dairy goat operations already very-much recognize these risks and are taking steps to address them.

Stephen Thompson, Clinton ON

I've been milking goats for over 15 years, when we started we were also compared to emu, llames and alpacas. in that time we have seen only growth other than a few hiccups in the road we have always had a milk cheque, we have sold every tank of milk that we have ever produced. Our price per liter has steadily grown as has our market.
Goat products are not only for ethnic markets if you look at a local grocery outlet like the one in Goderich On there are more than 20 goat milk related items on the shelf, in comparison to when we started in the dairy goat industry there was only one. that's a substantial increase over 15 years in a prominently non ethnic region of the world.
Over supply is going to happen at some point, only when were in that situation do other processors take a look at the prospect of investing. At one time a large canadian icecream processor was looking into goat milk, since there was not a lot of volume they backed out. only an oversupply situation would attract a buyer like this. What if Mcdonald added goat cheese a burger? there isn't enough goats in ontario to produce that kind of volume. We haven't touched the close to the ceiling on goat milk products it has a will continue to be a viable enterprise for all involved.
There is another equation that our bean counter because of lack of practical experience has not realized. goats don't live for ever, they are not easy to raise, and often hard to keep alive, the larger the numbers the harder this gets. I was asked once if 48% mortality was normal for kids? no its not but its a reality some farms are facing. goats are for their size the most expensive animal in agriculture today, thats not only because of the growing industry its because they are hard to raise. We get calls every month with someone who wants to get into goats and my first question is have you purchased a herd? the usual answer is "i cant find any" this is just one of the problems facing new entrants right now. As i look at last months milk cheque statement I see that volume of milk projected for the month of December and actual volume is quite different here is another example of why the bean counter numbers are not realistic. 1/4 of those new entrants will quit because they will have excessive mortality and find out that goats are way more work than they thought, another 10% will go broke because everyone told them they can get a 3-4 liter average.
Dairy goat farming is here to stay being compared to pigeons is the ultimate slap in the face for those of us who have put everything they have into this industry and work long hours to make it work. I sure am glad Stephen Thomson you are not my accountant I prefer to deal with people who support agriculture on SW ontario.
Dave Boonstoppel
Avidly Dairy Goats

Mr. Boonstoppel is giving his own "ultimate slap in the face" to those great-many people "who put everything they had" into the pigeon business and in spite of long hours trying to make it work, it didn't. Many now wished somebody had given them a "slap in the face" before they invested.

Unfortunately, I've met too many farmers who put everything they had into their business and/or sector, including long hours - if that was any guarantee of success, we'd never have had the Farm Debt Review Board.

In addition, being supportive of agriculture means, above all else, being realistic about agriculture rather than just simply being a cheer-leader. Being a cheer-leader is for politicians and guest speakers at annual meetings. And, go figure, my clients, especially the ones who went into pigeons before they hired me, tell me they'd far-rather deal with someone who isn't afraid to challenge their dreams rather than just blindly-support them. They also tell me that their previous farm financial advisors were ditched because they were supportive when they should have been challenging.

Stephen Thompson, Clinton ON

You seem to be "cheer-leading" for your own self now . Fact is that just like every thing in life those who signed up for pigeon king , emu or even a mortgage all do so on their own . No one told them to sign here or held a gun to their head and said you have to . Bad advice happens all the time hopefully you don't pay to get it .
So for you to look in the mirror would be worth how much to all of your clients who you told to not participate in the RMP program ? Just pointing out some twisted logic here as to why some think it can be had both ways .

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