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June 19, 2018

Dairy Quota Value Big Reason Canada Won’t Give Up Supply Management

 |  By: Jim Dickrell

by Jim Dickrell and AnnaLisa Laca


There’s $22 billion worth of value tied up in Canadian dairy quotas. And it’s a major reason why Canada won’t give up its supply management program without a fight, according to Bloomberg.


Canadian dairy farmers use that value as collateral to support loans that underwrite their dairy operations. If the quota goes away, they lose that collateral—and possibly their farms.


While the U.S. dairy industry and the U.S. government had called for the dismantlement of Canada’s supply management program, both have since back off on that demand.


“It's not our job to tell Canada they shouldn't have a parliamentary system or supply management, but they can't use their supply management system to negatively affect our dairy producers south of the border,” says USDA Secretary Sonny Perdue.  


If Canada consumers want to pay more for dairy products that’s their nation’s business, he says. Note: Over the past five years, Canada’s own data show retail milk prices have been double those in the U.S.


Perdue says when over production, blend prices, high domestic prices and undercutting export prices converge, that’s “when it becomes a problem for our producers and our business” he says. 


Perdue, the U.S. Dairy Export Council and the National Milk Producers Federation are all calling for the elimination of Canada’s Class 7 program which offers subsidized dairy proteins on the world market. Those sales are undercutting U.S. exports, particularly to Mexico.