National Pooling Report Advances Single Milk Pool Discussion

Areport to the Canadian Milk Supply Management Committee this month could be the first step toward establishing a long-discussed national all-milk pool for dairy farmers.

The report by a two-person industry committee caps months of talks with provincial milk boards to gauge their feelings about national pooling.

The response so far has been generally positive but not very specific, said Rick Phillips, Dairy Farmers of Canada’s director of policy and strategic planning.

“Everyone’s willing to talk about greater co-operation,” said Phillips, who co-chairs the committee with Gilles Froment, the Canadian Dairy Commission’s senior director of policy and corporate affairs.

“It’s very difficult for us to actually say much more than motherhood, really.”

Phillips and Froment wrapped up their consultations recently after meeting with the Dairy Farmers of Ontario board. They will submit a report to a CMSMC meeting in Toronto April 20.

Phillips was noncommittal about what the report might say. But he indicated it could suggest processes for achieving a national pool if the industry decides to go in that direction.

ROAD MAP

The CMSMC last year asked CDC and DFM to develop a possible road map for a national milk pool.

Canada’s nine milk-producing provinces currently pool markets and returns for special industrial milk classes but not for all milk.

A single milk pool has always eluded Canada’s dairy industry, despite on-and-off discussions about it since the mid-1990s.

Instead, provinces morphed into two regional pools: the eastern (P5) and the western (P4). Each one pools returns from fluid milk sales and shares markets and revenues.

Manitoba started in the eastern pool and later switched to the western one after briefly belonging to both for a while.

Regional differences are often cited as a reason for having two regional pools instead of one national pool.

The western P4 pool has a higher percentage of milk going into the fluid market. The eastern P5 handles more industrial milk used to make dairy foods. Each fears a possible loss of producer revenue if all their milk went into a single pool.

Another problem is that the two pools are separated by Northern Ontario, a vast area with few dairy farms. Sharing markets would mean hauling milk interprovincially across that distance, which is seen as geographically impractical.

GROWING CONSENSUS

Still, there’s a growing consensus among producers that a national pool is needed to protect domestic dairy products from cheaper foreign imports.

Canada’s supply-managed dairy, egg and poultry industries are protected by tariffs as high as 300 per cent or more to keep out more than an allowed volume of imports. But certain economic conditions could change that.

A combination of low world prices and a strong Canadian dollar could make imports cheap enough to come in over the wall, causing a so-called tariff breach and undermining domestic markets and producer prices.

That almost happened in 2006 and 2009 when world milk prices were at record lows and the Canadian dollar was rising.

World prices have recovered since then and the risk of a tariff breach today is small, despite a loonie currently trading above parity with the U.S. dollar.

But the industry believes that, if a tariff breach did occur, foreign exporters would target specific high-priced consolidated markets such as Toronto, Vancouver or Montreal. Cheap imports would drive down local prices and incomes of producers in those markets would fall.

FORMULA REVIEW

National pooling would help soften the losses by spreading them across the country, according to the industry.

Phillips stressed national pooling is still a long way off and it’s up to the CMSMC to decide what to do with the report.

The report by Phillips and Froment will be filed one day after another meeting, also in Toronto, of a committee reviewing the national milk pricing formula.

The current formula expires Feb. 1, 2012 and a new one must be in place by then.

The milk formula and national pooling are two separate things, said John Core, Canadian Dairy Commission chair. The first deals with price and the second deals with revenue sharing.

But if the industry does end up with a national pool, the pricing formula could be part of it, Core said. [email protected]

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Everyone’swilling totalkaboutgreater co-operation.”

– RICK PHILLIPS, DFC

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