Hurts us, but won't help U.S.: Canadian dairy farmers weigh in on trade deal

Ontario dairy farmers say the trade deal Canada reached with the United States and Mexico will hurt domestic dairy farmers while doing nothing to help U.S. farmers.

The head of the Dairy Farmers of Ontario says the deal undercuts stable pricing

Dairy farmer Norm McNaughton says the new trade deal will erode a supply management system that he says has brought stability to Canada's dairy industry. (Andrew Lupton/CBC)

Ontario dairy farmers say the trade deal Canada reached with the United States and Mexico will hurt domestic dairy farmers while doing nothing to help U.S. farmers.

Graham Lloyd is the CEO of Dairy Farmers of Ontario, an industry group that represents Canada's 12,000 dairy farms.

He spoke to CBC News Monday after stepping out of a meeting where he was briefing dairy farmers about the deal at a hotel conference room in Woodstock, Ont.

Lloyd said most in the room are disappointed about how the deal, known as the United States-Mexico-Canada agreement (USMCA), will affect their industry.

"They're obviously concerned about the continuing erosion of our marketplace and the true loss of revenue and income," he said.

The deal grants U.S. milk producers access to 3.6 per cent of the Canadian domestic market.

Lloyd says this eats away at Canada's supply management system, which uses production quotas so that the milk produced matches the demand of the local market in a bid to keep prices stable. Supply management has also been criticized as an unfair subsidy that keeps Canada's industry uncompetitive. 

Graham sees the concessions in the trilateral trade deal as a sop to powerful dairy lobby groups in key U.S. states such as Wisconsin. He says expanding American producers' access to the Canadian market won't fix what he sees as the underlying problem hurting U.S. producers: oversupply.

"There are a lot of farmers in Wisconsin and Illinois who are advocating for a system like Canada because they've identified that their problem is excess production," said Lloyd. "This is more about political pressure. Gaining access to a market that is literally one tenth the size of the United States won't be a solution to any of their problems."

Another aspect of the deal that has dairy farmers concerned is the elimination of Class 7. Essentially Class 7 created a discounted price on Canadian-produced milk ingredients — such as protein concentrates and skim milk — so they could compete with similar products exported into Canada from the United States. The pricing system was introduced in March last year, which made the American equivalents uncompetitive.

"By eliminating it, we eliminate the opportunity to be competitive," said Lloyd. "So that causes concern."

Fears for the future

Norm McNaughton operates Comrie Farms, a family owned dairy farm north of London.

He says USMCA creates uncertainly as he prepares to shift his farm to a robotic milking system. It's an expensive investment but one he says has the potential to boost production and cut down labour costs.

"It's for my son, it's for the next generation," he said. "We're trying to do things the right way and we hope the Canadian government stands behind us so we can supply the local market. This deal concerns us greatly."  

Like Lloyd, McNaughton says the deal erodes Canada's dairy industry, but won't help U.S. farmers.

"We've seen deregulation in other countries," he said. "I've visited Australia and other countries where quotas were removed and those farmers ... the suicide rates are high. I have friends in the U.S. dairy industry and I feel for them. The small farms down there are falling by the wayside."

Yesterday Foreign Affairs Minister Chrystia Freeland said farmers will receive compensation from the deal that replaces the North American Free Trade Agreement.

Freeland said the amount and type of compensation will be worked out in coming months while Canada, the United States and Mexico all work to ratify the agreement reached late Sunday.

Ontario's economic development minister Jim Wilson said because the deal took more than a year to hammer out, the government should have been able to give farmers some idea about the compensation that might be coming. 

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