The Canadian dairy industry is caught in a trap that it needs to escape, warns agricultural economist Al Mussell.
Regardless of the Trans-Pacific Partnership’s continued acceptance of supply management, certain provisions could make the already tenuous industry situation excruciating.
“This could end up being a big deal,” said Mussell, lead researcher and operator of Agri-Food Economic Systems. “We just don’t know.”
Mussell made his comments following the Oct. 23 release of a paper looking at the vise that recent trade agreements mean for the Canadian dairy industry.
He said TPP is requiring the Canadian industry to handle im-ports of 3.25 percent of 2016 dairy production, but that isn’t the only stress on the system.
The deal also appears to allow uncontrolled amounts of “milk protein isolates” (MPIs) into Canada, which is essentially skim milk powder.
Mussell said that threatens Canada’s dairy production base because more U.S. MPIs are already coming into Canada and displacing more expensive Canadian MPIs, which are used to make processed dairy products.
Canada’s dairy system is based upon valuing milk by fat value, which means the protein element is often a leftover secondary product.
However, it is important for dairy farmer viability that those proteins have as much value as possible, and Mussell said higher volumes of U.S. MPIs will undercut that value.
The TPP appears to allow New Zealand and Australia the same MPI access that the U.S. enjoys, which creates the possibility that those countries will also try to move those products here.
“Canada is exceptionally sensitive to access for non-fat solids because our market is so far out of balance right now,” said Mussell.
“This stuff is backing up in our market, and it’s really creating a lot of strain.”
Ontario farmers have been trying to tackle the issue by finding a way to competitively price dairy proteins. As well, some provinces are requiring products such as cheese and yogurt to contain fresh milk products rather than MPIs, which preserves some markets.
However, Canadian dairy farmers are stuck with a mostly stagnant market, increasing imports and an inability to export much because of former trade agreements that allowed Canada’s supply management system to continue.
Some feel the TPP provisions don’t mean much because the MPI market is already saturated, but Mussell said processors have an incentive to import cheap foreign MPIs.
“I worry that over time people will just get better and better at this stuff,” said Mussell.
“It could be lots.”