June 19, 2017

Canada Digging In for Supply Management

 |  By: Mike Opperman

While the U.S. pushes for greater access to markets across our northern border it appears Canadian producers and processors have dug their heals in when it comes to making any meaningful change to their supply management system. That’s a big deal as the U.S. looks to renegotiate NAFTA.

"I think the Conservatives are now more aggressively supporting supply management in the face of criticism,” Wally Smith, president of Dairy Farmers of Canada told Politico’s Pro Agriculture and Trade last week. “While they've always supported it, they are more public in their comments, and I think that will influence the government's position heading into NAFTA renegotiation.” Smith expects Canada's supply management system will survive NAFTA renegotiation.

Despite their supply management system, Canadian milk production has increased more than 10% since 2010—the same as the U.S.—and 2016 was up around 3.5% over 2015, according to Agriculture Canada. The rise in the consumer demand for butterfat has resulted in a surplus of milk protein. Earlier this year Canada created a Class 7 pricing category which significantly lowered the price of milk protein and effectively shut out U.S. processors that had established a significant export market. That decision caused about 100 producers in Minnesota, Wisconsin and New York to quickly find new milk markets.  

Even if the new pricing policy were removed, Smith told Politico it would not help U.S. dairy producers. "We're a sovereign nation, and we have our own domestic product we need to utilize. If U.S. farmers weren't in this situation of so much overproduction, I don't believe it would even be an issue," he said, adding that Canada's government is "thrilled" that the nation's dairy industry came up with "an innovative way" to meet the needs of a changing domestic market.