Canada struggles to agree on dairy industry regulations

By Beth Newhart contact

- Last updated on GMT

The US exports far more to Canada than Canada exports to the US, for a 5:1 Canadian deficit on dairy alone. Pic: ©GettyImages/IMNATURE
The US exports far more to Canada than Canada exports to the US, for a 5:1 Canadian deficit on dairy alone. Pic: ©GettyImages/IMNATURE

Related tags: Trade, Dairy farmers, Canada

Last weekend at the G-7 summit in Quebec, President Donald Trump spoke about high tariffs on Canadian dairy trade, prompting an industry-wide debate.

The US has paid between 240% and 300% on exporting dairy products to Canada for the last several decades. Like most countries, Canada uses tariffs to control what is being sold to them and to protect their own sellers and entrepreneurs.

Free market downsides

In the case of the dairy industry, President Trump’s suggestion of a tariff-free trade zone with G-7 member nations would result in the US flooding the Canadian market with low-priced dairy surplus, threatening the livelihood of Canadian dairy farmers and processors.

Pierre Lampron, president of the Dairy Farmers of Canada (DFC) association, issued a statement in response.

“Canadian dairy farmers and their families are concerned by the sustained attacks by President Trump with an aim to wiping out dairy farmers here at home,”​ Lampron said.

“The root of the US’ problem is that they are producing too much milk in an oversaturated world market. Canada already produces enough milk to fill Canadian demand. As Canada has less population than the state of California, and that Wisconsin alone produces more milk than all Canadian farms combined, clearly, the Canadian market is too small to make a dent in US overproduction,”​ he explained.

The Dairy Processors Association of Canada (DPAC) appointed new CEO Mathieu Frigon last week, effective June 11. Frigon has worked in the Canadian dairy industry for 20 years and has been with DPAC since 2016.

In the release announcing his appointment, Frigon pledged to “[lead] the DPAC team in working with industry partners and governments toward continued growth and innovation”​ during this “exciting and challenging time for the Canadian dairy sector.”

According to Frigon, the US is already winning on the dairy trade front with Canada. The US exports far more to Canada than Canada exports to the US, for a 5:1 Canadian deficit on dairy alone.

Free market benefits

But not everyone in Canada is on board with keeping foreign dairy products out. Since 1970, Canada has tightly controlled its dairy industry with a supply management system.

The government decides and regulates exactly how much dairy to produce each year - just enough to fulfill the needs of Canada. They also set prices in order to support the industry and keep it profitable.

This results in very little freedom of innovation within the market and higher prices for the Canadian consumer. According to cost of living calculator Numbeo, the average gallon of milk in Canada costs C$8.30, while the average gallon of milk in the US costs the equivalent of C$4.19.

It’s all an effort for Canada to have complete control over their dairy, though it’s not the way things are run across the board within the country. Other agriculture industries such as beef and grain do not see such tight regulations and import tariffs from the Canadian government, and are thus more susceptible to price fluctuations.

Politicians and media commentators alike are taking sides in the debate and believe Trump’s comments could have the potential to create real change in the industry.

“There is no serious case for supply management — a policy that is is as unjust, inasmuch as it imposes the heaviest burden on the poorest families, as it is inefficient; that locks out new farmers and deters existing farmers from seeking new markets,​” said Andrew Coyne, Canadian columnist with the National Post.

Looking ahead

However, Lampron and Frigon still took issue with President Trump’s implication that the Canadian dairy tariff is abnormally high or unusual. In fact, “10% of the Canadian dairy market is already open to tariff free imports – compared to only 3% in the US.”

Moving forward, both associations are committed to preserving the jobs of the dairy farmers and processors they work with across Canada above all else.

“We stand behind the Canadian government and its decision not to give into the demands of President Trump [as it] works toward the best possible deal for Canada,”​ Frigon told DairyReporter.

Related topics: Markets, Pricing Pressures, Fresh Milk

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1 comment

Supply management

Posted by Ron Faber,

Supply management is a very common practice in all countries. In canada it is used for dairy and poultry as well. The auto sector uses supply management extremely well as an example. The problem that the United States has in regard to dairy is over supply of milk because it is not supply managed. Their total free enterprise attitude is great usually. In this case it has back fired. Perishable products also have limitations. I am a supporter of supply management in canada. It was brought in in the early 70s when it was possible to implement a structured marketing model. Would be almost impossible today. The complaints of supply management increasing the cost of products on the shelf are not as extreme as some reports claim. I have shopped in the usa and I found away from the borders towns in cities such as Palm Springs for example. The prices are as high and in us dollars. That tells me the processor and the retailer are making the gains. Not the farmer. I prefer to buy milk and poultry products from family run farms in canada. If it gets opened up. That will be over. And the prices will not come down. I am convinced of that. It’s a great system. It’s a fair system. We have beautiful safe fresh local products and I believe priced very reasonable for what it is. It would be a sad day for canada if supply management is thrown out.

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