Western Producer staff
Publicly, Canada’s dairy industry is united in its fear of the dire consequences that would flow from a more open border between Canada and the United States in dairy products.
Conventional wisdom is that the loss of Canadian protective tariffs would mean the death of supply management, with U.S. dairy giants undermining Canadian prices and taking domestic market share.
Quebec, it is thought, would be a big loser since its dairy industry depends on supply management and a captive Canadian market for its industrial milk exports.
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Yet new American research suggests that at least one sector of the Canadian dairy industry need not be so fearful – Quebec dairy processors.
A Cornell University study on implications of an American win in the current trade dispute suggests a more open border actually would open new markets to the Quebec industry.. The American academic analysis suggests Quebec dairy has far less to worry about than does the industry in other parts of Canada.
As described at a dairy conference in Toronto last week by respected U.S. dairy analyst Steven Larson of Hoard’s Dairyman magazine, the Cornell study looked at milk surplus and deficit areas in the two countries.
The U.S. East Coast is a high-cost, milk-deficit area. The U.S. west and mid-western states are low-cost surplus producers. In Canada, it is the reverse.
With open borders, Cornell economist Andy Novakovic “believes that milk would flow from Quebec toward our population centres on the eastern seaboard,” said Larson.
“Likewise, milk from our western and northwestern states likely would flow northward to British Columbia and the Prairie provinces.”
In effect, win or lose in the trade fight, Quebec should find a market for the production from its efficient dairy industry, if not in Canada then in the United States.
As an aside, this scenario would appear to offer some comfort to Quebecers threatened by the federal government with losing the security of the supply management system if the province chooses to leave Canada.
With or without Canadian supply management, Quebec dairy farmers and processors could well continue to find markets. Does this mean the Quebec dairy sector wins either way? Not quite.
A new American market would be good news for Quebec processors.
On the farm, it would be a different story. Loss of supply management, which likely would accompany opening he border to dairy trade, still would be a multi-billion blow to Quebec dairy farmers.
Almost overnight, quota value worth close to $2 billion would devalue or disappear. That, in turn, would be a disaster for the province’s rural credit union system, which has lent hundreds of millions to farmers using quota as collateral.
The collapse of many rural credit unions would follow.
Quebec dairy interests may be the best positioned among Canadian interests to cope with an American trade win in the tariff challenge.
Even for them,though, it would not be a pretty sight.
