Agrifoods Cooperative announced Wednesday it has an exclusive licensing agreement with New Zealand-based a2 Milk Co. to process and sell dairy products under the a2 Milk brand in Canada.

a2 Milk Co., in a separate release, said it’s expected that “a range of liquid milk products will be launched (in Canada) later this calendar year.”

“A1 protein-free” refers to cows’ milk that exhibits only the A2 beta-casein protein, rather than the combinations of A1 and A2 beta-casein proteins in most milk.

Studies cited by producers of A1 protein-free milk suggest certain people who get gastrointestinal (GI) discomfort from consuming milk — including some who believe they’re lactose-intolerant — may instead be sensitive to a protein that’s released as A1 is digested.

From that, Agrifoods said Wednesday, a2 Milk Co. has had “proven success in growing the dairy industries in the markets in which it operates, including Australia where it has now achieved over 11 per cent market share.”

Certain dairy cows, by virtue of their genetics, naturally produce A1 protein-free milk. Any dairy farmer wanting to produce such milk would have to select, through genetic testing, for an “A2A2” genotype in a herd, since cattle with an “A1A1” or “A1A2” genotype would produce milk containing A1 proteins or both A1 and A2.

According to the Canadian Dairy Network (CDN), which manages genetic evaluation data for the dairy sector, breeds with a higher frequency of the A2A2 genotype include Jersey, Brown Swiss and Guernsey.

Any producer who wants to supply an A1 protein-free market would need to either keep only “A2A2” cows or divert milk from “A2A2” cows into a separate milk tank, CDN said.

‘Certified’

The terms of the deal call for a2 Milk Co. to provide Agrifoods with access to its IP and marketing assets as well as its “proprietary systems and know-how relating to the sourcing and processing of a2 Milk.”

The New Zealand company, which has been in business since 2000 and already has brand presence in the U.S., China, Australia, New Zealand, Singapore and Korea, said it will also “work with Agrifoods and local Canadian dairy farmers to source milk locally.”

Meanwhile, Agrifoods — whose brand portfolio already includes Meadowfresh, Organic Meadow, Rolling Meadow, Happy Planet and others — “will leverage its substantial capabilities in-market to establish distribution across Canada and has primary responsibility for funding this venture,” a2 Milk Co. said.

Some Canadian dairies, such as B.C.-based D Dutchmen Dairy and Ontario’s Sheldon Creek Dairy, already market what they call “A2 milk” under their own brands. It remains to be seen how the arrival of the trademarked a2 Milk brand in Canada will affect those businesses.

Under the terms of its brand license, the A1 protein-free milks produced in Canada and marketed through Agrifoods “will be the first and only milk certified as A1 protein-free under the a2 Milk brand in Canada,” the co-operative said Wednesday.

Agrifoods, with the license in hand, “will leverage the a2 Milk brand’s global success to create and grow consumer and retailer demand for these products in Canada.”

“Agrifoods’ proven expertise and experience combined with their infrastructure, established member network of dairy farmers and focus on long-term growth makes this an excellent partnership,” A2 Milk Co. CEO Blake Waltrip said in Agrifoods’ release.

Agrifoods chair Tim Hofstra said the deal offers a “tremendous” opportunity to grow the co-operative’s overall positions in specialty milks “by offering consumers more choices for authentic, farmer-owned, Canadian dairy products.”

Also, he said, “a2 Milk-branded milks will give lapsed milk drinkers the reason needed to come back to the dairy case.”

Ben Janzen, chair of the B.C. Milk Marketing Board, also hailed the Agrifoods announcement as “a big win for Canadian dairy, highlighting both the future focus and innovation of our industry.”

Dairy Farmers of Canada, as recently as 2017, has said evidence is limited to some small clinical trials in humans to assess GI tolerance of milk with A1 and/or A2 proteins, and that the evidence is “weak and inconclusive” on whether A1 may affect digestive function in some people with milk intolerance.

“More research is needed… in order to establish the validity of this hypothesis,” DFC said in a 2017 sheet distributed to health educators. Alberta Milk, on its website, agrees on the need for more research and noted such research is happening.

DFC also noted that other milks, including goat, sheep and water buffalo milk as well as human breast milk, can also be considered “A2.” — Glacier FarmMedia Network

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The trade deal, signed Friday in Buenos Aires by Prime Minister Justin Trudeau, U.S. President Donald Trump and Mexico’s outgoing President Enrique Pena Nieto, now goes to the respective countries’ legislatures for approval before it can be brought into force.

The Reuters news service reported Friday that USMCA’s “finer points” and wording were still not agreed upon just hours before the signing ceremony at the G20 summit.

“In the latest iteration of the USMCA, Justin Trudeau failed the Canadian dairy sector again by giving up oversight to the U.S. in the administration of our dairy system, and thus our sovereignty as a nation to develop and roll out our own domestic policies,” Dairy Farmers of Canada president Pierre Lampron said in a statement Friday following the signing.

“In spite of assurances by the federal government to the dairy sector that U.S. oversight had not been negotiated and would not be in the final agreement, they gave it up nonetheless.”

The federal government said Friday the deal “will preserve existing agriculture commitments between Canada, the U.S. and Mexico, and help bring together an already highly integrated industry.”

However, the government added, “as part of the overall balance of concessions” in the new deal, Canada has agreed to new market access in the form of tariff rate quotas for U.S. dairy, poultry and egg products.

The deal signed Friday also requires Canada to eliminate its current milk classes 6 and 7, the government said. Component prices for “certain products” in those classes will now be calculated using a U.S. reference price.

USMCA also establishes a “mechanism” to monitor exports of skim milk powder, milk protein concentrates and infant formula, the government said.

Federal New Democrat leader Jagmeet Singh, in a separate release Friday, said that clause “compromises Canadian sovereignty over its dairy industry, giving the U.S. power to interfere when Canada creates a new milk class in its supply management system.”

“Any American oversight of our Canadian dairy system would undermine Canada’s food sovereignty,” NDP agriculture critic Alistair MacGregor said in the same release. “How can they even consider signing this agreement that not only gives away more access to our domestic dairy market, but also lets the Americans dictate our dairy policies?”

With USMCA’s dairy concessions on top of those from the Canada-EU trade pact (CETA) and Trans-Pacific Partnership (CPTPP), Lampron said, “the combined concessions to other countries to our domestic dairy market is close to 20 per cent.”

Trudeau, Singh said, “has given in to Donald Trump and given up the last lever Canada had to protect farmers (and) dealt a devastating blow to supply management.”

The government’s decision “will have a lasting effect on our domestic dairy sector,” Lampron said. “This is nothing less than handing Canada’s sovereignty to the U.S. It is truly a dark day in the history of dairy farming in Canada.”

The government on Friday also released the text of a “side letter” on USMCA written by U.S. Trade Representative Robert Lighthizer, committing Canada to “ensure” that the British Columbia government changes certain rules related to retail wine sales.

Specifically, Lighthizer wrote, by Nov. 1 next year, B.C. “shall eliminate the measures which allow only B.C. wine to be sold on regular grocery store shelves while allowing imported wine only to be sold in grocery stores through a so-called ‘store within a store.'”

The U.S. last year had launched an action at the World Trade Organization over the B.C. policy, alleging it “limited sales opportunities for U.S. wine in Canada and gave a substantial competitive advantage to local wines.”

Lighthizer said Friday the U.S. would drop its WTO case if B.C. meets the commitments in the side letter, but would resume the panel selection process at the WTO Dispute Settlement Body if B.C. doesn’t follow through.

‘Beneficial outcomes’

Meanwhile, the federal government on Friday pointed to “a number of beneficial outcomes for agriculture” in USMCA, including new market access through tariff rate quotas for refined sugar and sugar-containing products.

The deal also provides for a “modernized” committee on agriculture trade, which will “provide a forum for parties to address issues and trade barriers,” the government said. It also creates “obligations for agricultural biotechnology that will increase innovation, transparency and predictability.”

The government also noted the USMCA preserves dispute settlement mechanisms which U.S. negotiators had reportedly sought to change or eliminate from the North American Free Trade Agreement (NAFTA) it replaces.

The deal, the government said, preserves the use of binational panels to resolve disputes on countervailing and anti-dumping duty matters.

Maintaining the use of those panels, the government said, is “critically important to preserving market access outcomes and defending Canada’s interests in trade remedy cases.”

USMCA, the government said, also preserves NAFTA’s state-to-state dispute settlement process and “improve(s) elements of this process including with respect (to) transparency and expediency.”

“The new NAFTA preserves tariff-free access in the North American trading bloc and secures essential cross-border supply chains that make North America more globally competitive,” Canada’s Foreign Affairs Minister Chrystia Freeland said in Friday’s release.

“Our job as a government is to safeguard economic gains and prevent economic threats, and that is what we’ve done with the new agreement.”

Export-minded farm commodity groups represented by the Canadian Agri-Food Trade Alliance (CAFTA) said Friday it “looks forward to its participation in the processes for the ratification and implementation of the new accord.”

Under USMCA, CAFTA said, “the tariff-free access for our members’ exports which exists under NAFTA will be retained as will other important provisions of NAFTA, such as the important mechanism for dispute settlement known as Chapter 19.”

Canada’s agri-food exports to the U.S. exceeded $30 billion in 2017 and to Mexico, almost $2 billion, CAFTA said. — Glacier FarmMedia Network

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The announcement last week in Teeswater, Ont., is the result of several years of work to bring revitalized ingredients processing to the province and to stem the flow of milk protein ingredients coming across the border in greater volumes.

Dairy ingredients have been a challenge for Canada’s supply management system as they are inexpensive and have been able to enter Canada duty-free.

The creation of a national strategy, approved this summer, has created a lower-cost class of milk for use in dairy ingredients. The aim is to have the national strategy implemented by February 2017.

Dairy Farmers of Ontario forced the implementation of that strategy with the unilateral creation earlier this year of what is now called Class 6, for milk destined for lower-priced ingredients, such as milk protein concentrates and milk protein isolates.

“This means an extra level of security for the future,” said Ralph Dietrich, chair of Dairy Farmers of Ontario. “This is the reason we implemented Class 6 pricing. We want to create the environment so processors make the investment in Ontario. This is a direct result of the ingredient strategy, so we are very pleased with it.”

At one point, Ontario had most of the other provinces and Dairy Farmers of Canada against its ingredients strategy, but Dietrich said there had been two earlier attempts to create an ingredients strategy over the past 12 years, and with greater amounts of dairy ingredients being imported into the country free of tariffs like there was “no tomorrow.”

“We always felt it was the right thing to do. We felt so strongly about it and the urgency of the timing. We did receive the wrath of the country for that and we don’t blame them.”

The price of Class 6 ingredients will be closer to world price, designed to give processors the option of buying Ontario and eventually Canadian ingredients versus imports.

Tying more of Canadian dairy production to world price will mean more variation in the price paid to dairy farmers.

Dietrich said the DFO has no control over what products can be imported legally, but it can find a way for Canadian products to compete.

Ontario regularly has too much skim milk and sells much of it into the feed market, which is at a lower price than the world price for milk, so having markets for skim milk and greater drying capacity in the province should create more stability for the lower value dairy ingredients. Last fall some skim milk was discarded because there was no market for it.

This year, Dietrich said the demand is better balanced and there isn’t as much of a skim milk surplus.

Dietrich also said that the ingredients strategy will make smaller processors more competitive, as many of them have been loyal to Canadian milk, but that has made them less competitive versus processors importing ingredients.

In the first phase, $60 million will be spent in expanding processing capacity in Teeswater, where Gay Lea has a plant. The Teeswater plant has been part of Gay Lea since 1981.

The first phase will also fund a new research and development centre for dairy ingredients in Hamilton. Dietrich pointed to opportunities in pharmaceuticals derived from dairy products as an important area of potential future use for dairy ingredients.

The first phase will also result in some improvements to current plants.

Gay Lea Foods CEO Michael Barrett could not be reached for comment before publication.

Gay Lea is in a significant expansion mode, recently announcing a joint venture with Vitalus Nutrition to build a new dairy ingredients and butter processing facility in Winnipeg. It has also purchased Stirling Creamery and Black River Cheese, along with a minority interest in Mariposa Dairy Ltd., in 2016. It also is a major player in Ontario dairy goat milk processing, with the purchase of Hewitt’s Dairy in 2014.

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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Mississauga-based dairy co-operative Gay Lea Foods and ingredient processor Vitalus Nutrition of Abbotsford, B.C. on Monday announced a joint venture to be based at an unnamed “existing food manufacturing facility” in Winnipeg.

The joint venture, the companies said, calls for “significant upgrades to modernize” the plant, which in turn will call for “increased drying capacity in Western Canada, and new butter production to respond to market demands.”

The companies didn’t say Monday when they expect to have their operation up and running. A company representative wouldn’t say who now occupies the plant, which is in the Fort Garry area in the city’s southwest. Financial terms of the joint venture also weren’t disclosed.

The new venture marks a westward expansion for Gay Lea, an Ontario producer co-op with production plants and distribution sites in both Ontario and Quebec.

Dairy Farmers of Manitoba, the organization in charge of dairy supply management in the province, will arrange the raw milk for the new plant, the companies said.

Manitoba dairy farmers, they added, will also now get “the opportunity to join Gay Lea Foods as member owners.” The co-op in January this year also expanded its membership to include Ontario dairy goat producers.

DFM chair David Wiens said in a release Monday that the new venture “will help ensure the continued sustainability of the Canadian dairy industry today and for future generations.”

Gay Lea CEO Michael Barrett said the co-op “is excited by the opportunities that the joint venture brings to both the co-operative and Canadian dairy, through increased processing capacity for ingredients and butter while extending our open membership to farmers in Manitoba.”

Vitalus president Philip Vanderpol said the venture will “increase much-needed drying capacity while further developing the dairy ingredients industry, adding growth and new market opportunities for Canadian dairy.”

The B.C. company comes to the table with a proprietary enzymatic process to convert milk byproducts to galacto-oligosacharides — “high-value” carbohydrates used as additives in infant formula and other foods.

Vitalus, whose product lines also include milk protein concentrate (MPC), whey proteins, pasteurized cream and whipping cream, last month picked up a $10 million federal AgriInnovation loan, via the Growing Forward 2 ag policy funding framework, to commercialize a new prebiotic made from milk permeate.

Milk permeate — the lactose byproduct left after milk goes through the filtration process to make MPCs — is otherwise used to help standardize skim milk powder. Prebiotics are non-digestible carbohydrates that act as food for probiotics, the “good” microorganisms that support healthy digestion and help protect the body from harmful bacteria.

Vitalus’ prebiotic can be used in infant formula and other dairy products and beverages, as well as in fruit drinks and fruit preparations, to “enhance their nutritional characteristics,” the federal government said Sept. 9.

The government on Oct. 8 also announced a $3.5 million loan for Vitalus from the Western Innovation (WINN) Initiative, a separate fund to help small- and medium-sized companies move ideas to market. — AGCanada.com Network

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