Canada is poised to move forward with two new policies– Canada’s National Ingredients Strategy and Ontario’s Class VI pricing program– that will significantly impact northeast dairy farms. Both are expected to go into effect this year.
O-AT-KA Milk Products Cooperative, Inc. Director of Dairy Ingredient Sales and Regulatory Affairs, Craig Alexander explains that through these policies, Canada is creating a special reduced class of pricing for certain dairy products. The pricing class is set to the lowest price identified in a worldwide survey. That price is well below Canada’s cost of production and the United States’ cost of selling the ingredients to processors there.
“This is in order to eliminate imports and dump their skim solids on the world market,” Alexander said. “They have also raised other prices for other domestic milk use that will encourage more production.”
According to a letter sent to several state governors, Canada is poised to expand the product scope of that program while instituting it nationally and in addition to disrupt skim milk powder markets around the world by using the new program to dump excess skim milk powder on global markets.
Once the policies go into effect, Cayuga Milk Ingredients (CMI) CEO, Kevin J. Ellis, says it is not going to be a pretty picture for dairy farmers in the Northeast. Ellis says that CMI will decrease its daily capacity by 400,000 pounds. Currently, the plant processes 2.3 million pounds per day. That will drop to 1.9 million pounds per day.
“We’ve been able to buy other’s surplus and increase the through put at our plant. But now, we’ll be limited to our dryer capacity,” Ellis said.
Alexander estimates that the Northeast will have an excess of 300 to 400 million pounds of milk annually once the new policies are enacted. This is bad news for a region that is already struggling with a higher supply than demand or ability to handle.
“The milk surplus is real,” Ellis said. “It’s a forgone conclusion that Canada is going to do this. Now it’s a matter of when and how fast these changes will take effect. It’ll likely lead to even more dumping at plants in the northeast.”
Dairy leaders in the northeast continue to urge state and federal officials to consider all the tools at their disposal to ensure Canada understands the seriousness of this issue and the value it derives on a daily basis for the numerous Canadian exports that come across the borders of northern U.S. states
“We hope for more concrete actions by states to show Canada that their exports and trade relationships will be damaged by moving forward,” Alexander said.
“With the Trump administration renegotiating the terms of the North American Free Trade Agreement (NAFTA), the Canadian actions cannot be taken lightly,” Ellis concluded.