The dairy farmer lobby flexed its political muscle last week and appears to have won a skirmish in the battle to insulate milk producers from looming federal subsidy cuts.
Along the way, federal agriculture minister Ralph Goodale agreed to try to postpone by six months the planned Aug. 1 start of the dairy subsidy phase-out. The delay could cost the federal government $16 million.
Dairy processors appear to have agreed they will pass on to consumers all the impact of at least the first round of subsidy cuts through higher prices.
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The agreements came after the Dairy Farmers of Canada lobby insisted last week the government and the processors had until Jan. 27 to agree to co-operate in delaying the subsidy cut and in shielding dairy farmers from the impact of the lost subsidy.
In return, the farmers said they would abide by an earlier deal not to seek 1997 price increases despite higher production costs.
Otherwise, they would demand an increase in milk prices this week.
First came the government pledge of co-operation.
Goodale promised he would ask finance minister Paul Martin to leave the full $160 million dairy subsidy untouched until Feb. 1, 1998.
“There are estimates this could cost in the range of $12 to $16 million,” Goodale said. “I have been asked whether a temporary deferral might be a possibility. I’m prepared to give it my best shot.”
Late Jan. 27, the National Dairy Council of Canada said its processor members agreed they will pass on to consumers the impact of the Feb. 1, 1998 subsidy cut.
“The board agreed with the proposal,” said Dale Tullock of the National Dairy Council.
However, the council’s estimate of the consumer price increases needed to cover the impact on farm revenues of the subsidy cut were slightly lower than DFC estimates.
