Thursday, July 5, 2018

Canada needs Class 7 milk, economists say

 Economists Doug Hedley and Al Mussell say Canada needs Class 7 milk pricing and should not give it away in the North American Free Trade negotiations.

Without it, they predict the Canadian market would be swamped by excess skim milk.

They point to the World Trade agreement reached in Kenya that will make subsidizing agricultural exports illegal after 2020.

But Class 7 exports could continue, they say, because Canadian farmers are accepting low world prices for the milk that goes into skim milk powder production.

Whether that reasoning will stand up to World Trade Organization scrutiny and challenges is open to question.

But an end to subsidizing exports could sharply reduce global trading in dairy products because most major producers, including the United States and European countries, subsidize milk production.

Hedley and Mussell said those subsidies have global markets for dairy products in a malaise and are squeezing dairy farmers out of the industry.

Europe, they say, is building up huge inventories of surplus dairy products as its dairy farmers use their blanket non-commodity-specific farm subsidies to stay in production.

New Zealand uses Fonterra as a monopoly business for dairy exports and that has irked the Americans who want that changed, they say.

In this global situation, Canada is not the main problem for dairy farmers and markets and should not be pressured into making deals under NAFTA that would leave its dairy industry vulnerable to the global problems that remain unresolved.