New cheese export program a factor in boosting Ontario dairy farmers' quota

Wednesday, March 26, 2014

by SUSAN MANN

The Canadian Dairy Commission’s new planned cheese export program is helping to boost quotas for Ontario dairy farmers.

Dairy Farmers of Ontario announced on its website Tuesday farmers in Ontario, along with the other provinces in the eastern Canadian milk pooling agreement (Quebec, Nova Scotia, New Brunswick and Prince Edward Island), will be getting a 1.5 per cent quota increase effective April 1. “The (quota) issuance is in part due to the Canadian Milk Supply Management Committee’s recent approval of the cheese export program and the expected depletion of surplus butter stocks by dairy year end,” the notice says. “The fluid milk market has also shown strength over the recent months.” The dairy year end referred to in the notice is July 31.

Phil Cairns, Dairy Farmers of Ontario senior policy adviser, says 23 per cent of the farmers’ quota increase is due to the planned cheese export program, while the rest of the increase is due to the other factors of surplus butter stock depletion and fluid milk market strengthening. “Now we’re producing at slightly under the market level. The market is continuing to grow while production is headed down, so this (the quota increase) is to restore production back in line with where the market is headed, plus now we have the cheese exports,” he says.

About the strengthening of the fluid milk market, Cairns says one positive factor is the decreasing Canadian dollar may be taking a bite out of cross border shopping. A year ago the Canadian dollar was on par with the American dollar but now it’s hovering around 90 cents U.S. “Just with the exchange rate it will cost you about 10 per cent more to buy milk in the United States,” he says.

The Canadian fluid milk market had been declining about one to two per cent during the past year, but now that decline has flattened out and the market “has turned around and has started to show a bit of an increase,” he says.  

The Canadian Milk Supply Management Committee is chaired by the Canadian Dairy Commission and is a permanent body created by the provincial signatories to the National Milk Marketing Plan. It meets four times a year and is responsible for determining policy and supervising provisions of the plan.

Chantal Paul, commission spokesperson, says the cheese export program was launched in February after it was approved in January. The commission issued a call for submissions to exporters “to see if they would like to benefit from that program.”

The criteria include: duration of the export (the longer the duration the better chance the exporter had of being accepted into the program), the type of cheese (with niche market cheeses having a better chance of being accepted), and the minimum price had to be the equivalent of $40 per hectolitre in the program (with exporters offering higher prices having a better chance of being approved), she says.

The program is designed for Canadian companies to export Canadian-made cheese to other countries around the world, except the Untied States and Mexico. The cheese exports in the program are considered to be subsidized and NAFTA (North American Free Trade Agreement) rules prohibit NAFTA countries from sending subsidized exports to the agreement’s other members, Paul says.

The commission received about 30 export project proposals and considers the call for applications to be “very successful as requests exceeded the quantity of exports available within World Trade Organization limits,” she says. Applications came from several provinces but most were from Ontario and Quebec where the majority of the processors are located.

Under World Trade Organization rules, Canada is permitted to export about 6,000 tonnes of subsidized cheese annually. In an earlier interview, Richard Doyle, executive director of Dairy Farmers of Canada, says Canada lost a panel decision at the WTO in 1999 that said if a country maintains a higher price domestically than the world price, then any exports at the lower price is a subsidy. Dairy Farmers of Canada is the national policy, lobbying and promotional organization representing farmers living on 12,529 farms.

Paul says cheese was exported in the past through export programs “but not necessarily to really developed markets in the longer term.” But now the commission is trying to establish longer-term markets for those cheese products. The commission also uses planned export programs for “other subsidized exports.”

She says they will fill the amount they’re allowed to export under WTO rules for this year and probably the next dairy year too, which runs from Aug. 1 to July 31, 2015.

The program is not in response to the increased fine cheese access the Canadian government has granted to the European Union as part of a trade agreement Canada has reached with that region, she says. The planned cheese export program is “something that was discussed for a while.” BF