Collective marketing and supply management

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PORTRAIT OF PRODUCTION

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

1.98

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THE MARKETS

 Québec produces 38% of Canada’s milk  Milk use:     23% (fluid milk and cream) 7% (yoghurt) 48% (cheese) 22% (butter, powder, evaporated milk and secondary processing)

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Market forces unfavourable to producers • 6,600 dairy farms in Qu ébec • - 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

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Farm prices unstable, retail prices rising

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Supply management and collective marketing: 

Two tools for obtaining a farm gate price:

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that covers production costs

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that is fair and the same for all

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that is stable and predictable

Supply management

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

GOVERNMENTS

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Limit imports

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Set a milk price based on production costs PRODUCERS

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Plan production to satisfy market needs

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Dispose of surpluses at their own expense 9

Simplified supply management diagram

DEMAND less IMPORTS TOTAL QUANTITY TO PRODUCE Province X Province Y Province Z Farmers Farmers Farmers -------------------------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 producers

 Determined 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)

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Terms negotiated between: Agropur (coops)

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FPLQ

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Québec Dairy Council (private companies)

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A single sales agent negotiates: plant supply, milk quality, milk classes and prices, payment terms 14

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Comparative performance

Trend in consumer prices of dairy products per country, in national currencies, from 1981 to 2006 (1981 = index 100) 16

Comparative performance

Trend in direct payments to dairy producers and export subsidies, by country, 1995 to 2004 17

185 160 135 110 85 60

Price stability

Milk price index, 2007-2008, per month

US Canada EU-25

Supply management: A solution or a problem?

Milk price index: March 2007 – March 2008 16 14 12 % 10 8 6 4 2 0 Impact of the global food crisis on consumers Europe France États-Unis * Note: For Europe and France, the index also includes eggs.

Subject to supply managemen t Canada

More stable production and retail prices 20

Supply management and joint marketing

 Benefit … PRODUCERS  A single point of contact responsible for negotiating  Equity in purchasing terms  Stable and predictable prices  Guaranteed supply of quality milk  Milk for developing new niches

Supply management and collective marketing

 Benefit… GOVERNMENTS  No subsidies to pay out for income support  A healthy farming sector which contributes to the economy  A sustainable agriculture model on a human scale

Supply management and collective marketing

 Benefit … CITIZENS  A stable supply of diversified, high quality and reasonably priced dairy products  Stable, paying jobs  A model of modern, human-scale agriculture, respectful of the environment

A legitimate and sustainable policy

Logical response to free trade and market concentration … Efficient way to ensure a fair price for producers … B U T

… requires an appropriate legislative framework.

… the producers must be disciplined.

Refocusing the debate

Restoring the real context

world trade in milk as % of total production, 2007 world trade in agriculture as % of total production, 2007 6.5% of total milk production is in world trade Less than 10% of total food is traded on world markets.

Refocus the debate

 The objective is not to diminish the size of trade  But to make sure that trade rules allow fair treatment of what is traded  And 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

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Thank you