Dairy farmers wait for processors' response on policy reforms

Thursday, January 15, 2015

by SUSAN MANN

Dairy farmers will be getting a formal response next week from processors on proposed policy reforms designed to ensure the industry’s future profitability and stability.

Peter Gould, Dairy Farmers of Ontario general manager, said during an interview at Wednesday’s Dairy Farmers annual meeting in Toronto, producers across Canada developed the plan, called the Ingredients Strategy, and shared it with processors across the country last year. The plan comprises eight policy elements designed to act as a strategy to increase markets for dairy products and ingredients. The Ontario board had a special meeting with the Ontario Dairy Council board in March 2014 to discuss the details of the plan’s elements.

“We’re waiting their formal response and we were advised yesterday (Tuesday) that would be forthcoming next week in Ottawa at the Canadian Milk Supply Management Committee meeting,” Gould said.

Negotiations between farmers and processors, which haven’t started yet, will take some time to complete. In the meantime, the Ontario and Quebec dairy boards have devised a five-element plan as a way to bridge “from where we are now until the Ingredients Strategy is put in place,” Gould says. He noted he couldn’t say how long negotiations on the Ingredients Strategy would take but it would definitely be longer than two to three months.

The five-point plan includes:

• Expanding the Cheese for Fresh Pizzas program to other varieties besides mozzarella, including cheddar, brick, colby, Muenster and other named varieties, plus removing the not-for-retail-sale labelling requirement that has irritated processors and distributors.
• Providing promotional incentives to companies that choose to only use Canadian milk to make their cheese.
• Capping Canadian Dairy Commission purchases of skim milk powder.
• Moving forward with operational rules for cream transfers under the Skim Milk Redirection program.
• Increasing the growth allowance to two per cent from one per cent of national MSQ (Market Sharing Quota) to ensure domestic market opportunities are met.

“If we can agree on an Ingredients Strategy it will supersede the five points,” Gould said.

The five-point plan doesn’t fully address what the Ingredients Strategy will “but it will be helpful,” he noted. The plan will be reviewed at next week’s Canadian Milk Supply Management Committee meeting in Ottawa.

Dairy Farmers of Ontario’s position is it would like to see the five-point plan implemented next week, he said.

Another major project Dairy Farmers launched last year was to develop a formal, written agreement with Dairy Farmers of Canada to outline DFC’s responsibilities concerning product promotion. Farmers across Canada pay a $1.50 per hectolitre fee for product promotion. During the 2013/14 fiscal year, Dairy Farmers of Ontario collected $38 million from Ontario farmers and remitted that to the DFC.

Gould said the agreement will include elements of accountability, transparency (including a break down of how all the money is spent) and specific objectives as well as “how they’re going to undertake their activities, measure them and report to us.”

So far Dairy Farmers has had two meetings with DFC to discuss a draft document. “That discussion is progressing extremely well,” and there will be a broader discussion at DFC’s policy conference in February.

DFC’s promotion plans are in place for this year, and Dairy Farmers of Ontario isn’t pushing for changes right away. “We accept it’s going to take time to work through a formal agreement,” Gould says. The agreement is projected to be in place for January 2016.

During his report at the annual meeting Wednesday, Gould told delegates DFC has already agreed to the principle of a written agreement. DFC also plans to have a written agreement between itself and each of the provinces.

Gould said the goal of product promotion has to be growth “measured in kilograms of butterfat at the farm level. We will know they’ve succeeded when your quota grows as a result of these (promotional) activities.”

As part of its agreement with DFC, Dairy Farmers of Ontario wants a description of each promotional activity DCF does, how it’s going to be executed, the expected outcome, how the results will be measured and an evaluation of how things worked. Gould said his thought is if a promotional activity can’t be measured, “don’t do it.”

One of the three expectations Dairy Farmers of Ontario has leading up to the written agreement’ finalization is it wants an unbiased, comprehensive assessment of branded compared to generic advertising. “As producers we have been wed to a generic approach for a long time.”

Another one is Dairy Farmers of Ontario has requested a review of the blue cow 100 per cent Canadian milk logo. In an earlier interview, Gould said a number of processors aren’t using the logo and it needs to be used more widely.

photo: Wally Smith

Wally Smith, president of Dairy Farmers of Canada, said at the annual meeting Canada’s three largest processors aren’t using the logo. Gould said lots of processors aren’t using it but the industry needs to talk to both users and non-users to find out “what we can do to create value and position the logo as something that more people want to use.”

The third expectation is Dairy Farmers of Ontario wants a review of the industry’s approach to nutrition. “Promoting low-fat and no-fat dairy products does not grow the industry,” Gould said.

The dairy logo got a bit of a boost Wednesday as David Clanachan, president and COO of Tim Hortons, announced at the meeting the chain would be using the logo on some of its products featuring Canadian milk and cream. BF