Quebec’s dairy industry

1. Quebec’sdairyindustry Collective marketing and supply management

2. PORTRAIT OF PRODUCTION 2008 Canada Quebec Dairy farms 13,600 6,600 Production (litres) 7.6 billion 2.8 billion Average herd 67 cows 55 cows Production per farm (litres) 550,000 Total farm receipts 4.96 1.98 (billions of $)

3. 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)

4. Why collective marketing and supply management?

5. Market forces unfavourable to producers • 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

6. Farm prices unstable, retail prices rising

7. How does it work?

8. 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

9. Supply management Since 1971, a federal-provincial agreement has allowed the adjusting of supply to demand GOVERNMENTS • Limit imports • Set a milk price based on production costs PRODUCERS • Plan production to satisfy market needs • Dispose of surpluses at their own expense

10. DEMAND less IMPORTS TOTAL QUANTITY TO PRODUCE Province X Province Y Province Z Farmers Farmers Farmers -------------------------Individual quota ---------------------- Simplified supply management diagram

11. 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.

12. 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

13. 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

14. 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

15. What are the benefits?

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

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

18. Price stability

19. Supply management: A solution or a problem? Impact of the global food crisis on consumers Subject to supply management * Note: For Europe and France, the index also includes eggs.

20. More stable production and retail prices

21. 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

22. 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

23. 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

24. 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

25. Refocusing the debate Restoring the real context 6.5% of total milk production is in world trade Less than 10% of total food is traded on world markets.

26. 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

27. Thank you