OTTAWA – The government decision to phase out the federal dairy subsidy within five years has left dairy farmers and dairies squabbling over how to do it.
At the core of the dispute is the question of who should absorb the hurt from loss of the subsidy.
The Dairy Farmers of Canada group insists farmers not suffer. As the subsidy is phased out over five years from its $160 million 1996-97 level, consumer prices should rise to compensate.
“The direct payment is a consumer subsidy and therefore any reduction to it must be recovered from the marketplace,” DFC president Claude Rivard told the Commons agriculture committee May 16.
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Kempton Matte, president of the dairy processor lobby represented by the National Dairy Council of Canada, warned that consumers would not tolerate price increases.
The government is getting out of the dairy subsidy business, he told MPs. “But now my sector is being asked to replace it….We can’t make promises that we don’t have the ability to keep.”
Worth $247 million
The split between the two key dairy industry players was laid out before the committee as MPs considered the implications of the subsidy’s end, announced in the federal budget. It was worth $247 million five years ago and will disappear by 2001.
Farmers and dairy processors are traditional allies and they joined in opposing government proposals to eliminate the subsidy.
Now that the government decision has been made, they have parted ways. A heated meeting between the two lobby groups May 6-7 failed to bridge the gap.
To placate the dairy farmer lobby, the government promised last winter that loss of the subsidy would be made up by higher consumer prices.
Rivard told MPs the dairy farmer lobby will insist that the government live up to its promise. They insist producer-funded promotion and advertising “will more than compensate for the negative impact of the price increases.”
Matte disagreed. He said consumers will resist the price increases and they have alternate products to turn to if they want.
“Every sector is being hurt and we think every sector – farmers, dairies and consumers – should absorb some of the share of the hurt,” Matte said in an interview.
The government has not commented on the controversy.
However, the farmer and processor lobbies agreed on one point. The first cut in the elimination process should be delayed until Feb. 1, 1998, instead of the Aug. 1, 1997 date the government announced.
Matte said dairies are prepared to pass that reduction on as increased consumer prices, but a committee should be set up to figure out how the rest of the cuts can be absorbed.
Rivard said farmers reject that proposal. They want a guarantee that all cuts will be passed on to consumers.
