Quebec’s dairy industry

Collective marketing and supply management

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PORTRAIT OF PRODUCTION

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2008 Canada QuebecDairy farms 13,600 6,600Production (litres) 7.6 billion 2.8 billion Average herd 67 cows 55 cowsProduction per farm (litres) 550,000Total farm receipts 4.96 1.98(billions of $)

THE MARKETS Québec produces 38% of Canada’s milkMilk use:

23% (fluid milk and cream) 7% (yoghurt) 48% (cheese) 22% (butter, powder, evaporated milk and secondary

processing)

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Why collective marketing and supply management?

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Market forces unfavourable to producers

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• 6,600 dairy farms in Québec

• - 3 processors buy 82% of the milk

• 13,600 dairy farms in Canada

• - 3 processors buy 70% of the milk

• Situation is similar elsewhere in the world

Farm prices unstable, retail prices rising

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How does it work?

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Supply management and collective marketing:

Two tools for obtaining a farm gate price:

that covers production costs that is fair and the same for all that is stable and predictable

Supply management Since 1971, a federal-provincial agreement has allowed the adjusting of supply to demand

GOVERNMENTSLimit importsSet a milk price

based on production costs

PRODUCERSPlan production

to satisfy market needs

Dispose of surpluses at their own expense

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Simplified supply management diagramDEMAND

IMPORTSless

TOTAL QUANTITY TO PRODUCE

Province X Province ZProvince Y

FarmersFarmersFarmers

-------------------------Individual quota ----------------------

Who makes the decisions ?

The Canadian Milk Supply Management Committee (CMSMC) chaired by the Canadian Dairy Commission (CDL):

Joint decisions by the representatives of producers and governments

Processors are consulted.Consumers are observers.

Milk price for producersDetermined based on the

production costs of a sample of dairy farms

Allows the 50% more efficient to cover all of their costs

Enables producers to live off the market, without subsidies

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Since 1956, the Farm Products Marking Act has allowed the adoption of joint plans

The joint plan is a collective tool that enables some 7,000 farms that are independent producers to unite as a single company to market their milk

Managed democratically by producers within the FPLQ

Marketing Agreements (MA)Terms negotiated between:

Agropur (coops) FPLQ

Québec Dairy Council (private

companies)

A single sales agent negotiates: plant supply, milk quality, milk classes and prices, payment terms

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What are the benefits?

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Comparative performance

60

70

80

90

100

110

120

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

Canada États-Unis France Australie Nouvelle-Zélande

 $ constants

Trend in consumer prices of dairy products per country, in national currencies, from 1981 to 2006 (1981 = index 100)

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Comparative performance Trend in direct payments to dairy producers and export subsidies, by country, 1995 to 2004

0,00

10,00

20,00

30,00

40,00

50,00

60,00

70,00

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

$ CA/ tonne

Canada États-Unis Union européenne Australie Nouvelle-Zélande

Price stabilityJa

n/07

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Oct

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Dec

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Mar

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60

85

110

135

160

185Milk price index, 2007-2008, per month

USCanadaEU-25

Supply management: A solution or a problem?

Europe France États-Unis Canada02468

10121416

Milk price index: March 2007 – March 2008

%

Impact of the global food crisis on

consumers

Subject to supply

management

* Note: For Europe and France, the index also includes eggs.

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More stable production and retail prices

Supply management and joint marketingBenefit … PRODUCERSA single point of contact responsible for

negotiatingEquity in purchasing termsStable and predictable pricesGuaranteed supply of quality milkMilk for developing new niches

Supply management and collective marketingBenefit… GOVERNMENTSNo subsidies to pay out for income support A healthy farming sector which contributes

to the economyA sustainable agriculture model on a human

scale

Supply management and collective marketing

Benefit … CITIZENSA stable supply of diversified, high quality

and reasonably priced dairy productsStable, paying jobsA model of modern, human-scale

agriculture, respectful of the environment

A legitimate and sustainable policy

… requires an appropriate legislative framework.

… the producers must be disciplined.

Logical response to

free trade and market

concentration …

Efficient way to ensure a fair

price for producers …

BUT

world trade in milk as % of total production, 2007

world trade in agriculture as % of total production, 2007

Refocusing the debate Restoring the real context

Less than 10% of total food is traded on world markets.

6.5% of total milk production is in

world trade

Refocus the debateThe objective is not to diminish the size

of tradeBut to make sure that trade rules allow fair

treatment of what is tradedAnd to make sure that policies leave sufficient

margin to countries for them to be able to exercise their food sovereignty e.g., the right of countries to adopt farm policies based on

their own particular realities

Thank you