Trade deal to hit dairy farmers hard

The Dairy Farmers of Canada estimates milk quota will have to be cut by more than two per cent, 
and producers will collectively see an annual $150-million drop in income

The proposed trade deal with Europe could cost Canadian dairy producers $150 million a year in lost income, according to the Dairy Farmers of Canada.

Details of the Comprehensive Economic and Trade Agreement (CETA) are still being hammered out and it’s expected to be two years before the deal is ratified by the European Union’s 28 member nations. But once in effect, European cheese makers would receive an additional tariff-free access of 18,500 tonnes over and above the current 13,471 tonnes they’re allowed.

Translate that back into milk production and the impact on Canadian dairy producers is “much more significant than what has been reported,” Dairy Farmers president Wally Smith told the Commons agriculture committee.

“The loss to the dairy farmers is real,” Smith said. “The additional access is equivalent to a 2.25 per cent cut in farm quota, representing a farm income loss of nearly $150 million a year.”

That’s equivalent to the entire milk production of Nova Scotia, he noted.

Ottawa has promised to compensate those affected and the Dairy Farmers of Canada has begun discussions on that issue, said Smith.

“DFC is trying to work with the government to ensure that there is no impact on Canadian dairy farmers and cheese makers,” he said. “In spite of all the negative emotion amongst Canadian farmers resulting from the CETA agreement, the DFC leadership is intent on engaging in constructive dialogue with government to mitigate the negative impact to our industry.”

It was initially estimated that while the deal would allow Europe to capture one-third of the “fine cheese” market in Canada, it would amount to just four per cent of the overall cheese market. But Smith said that if the entire tariff-free quota is used, the EU will capture 7.5 per cent of the Canadian cheese market.

And it will be riding on the coattails of the marketing efforts of Canadian dairy farmers, he added.

“The domestic cheese market has been a priority market segment with a yearly strategic investment totalling $30 million dedicated to developing this market across Canada,” Smith said.

“Over the last decade we have invested heavily into developing and growing the specialty cheese market, and we have been successful. What has happened, by giving that access to the European Union, not only are you costing the farmers directly on their income, and having to reduce production, you are also taking away the investment that’s been made to grow that speciality market.”

It will also have a wider economic impact as the Canadian dairy sector accounts for 218,000 jobs, and pays more than $3 billion in local, provincial and federal taxes annually, according to DFC.

The organization also dismissed any idea that more Canadian cheese might head across the Atlantic. Canada has been unable to fill the existing duty-free quota of 4,000 tonnes of aged cheddar and to match the highly subsidized European milk prices Canadian farmers would have to sell their milk to processors at $28 a hectolitre, said Richard Doyle, the group’s executive director.

“Quite frankly, not a single producer in this country, based on our cost of production, could actually recover their cash costs,” he said. “No return on investment and no return on labour.”

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