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Collective marketing and supply management
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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 $)
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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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4
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
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Farm prices unstable, retail prices rising
6
7
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
GOVERNMENTS
PRODUCERS
 Limit imports
 Plan production to
 Set a milk price based
satisfy market needs
 Dispose of surpluses
at their own expense
on production costs
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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)
 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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Comparative performance
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
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Jun/09
May/09
Apr/09
Mar/09
Feb/09
Jan/09
Dec/08
160
Nov/08
Oct/08
Sep/08
Aug/08
Jul/08
Jun/08
May/08
Apr/08
Mar/08
Feb/08
Jan/08
Dec/07
Nov/07
Oct/07
Sep/07
Aug/07
Jul/07
Jun/07
May/07
Apr/07
Mar/07
Feb/07
Jan/07
Price stability
Milk price index, 2007-2008, per month
185
US
Canada
EU-25
135
110
85
60
Supply management: A solution or a
problem?Milk price index: March 2007 – March 2008
16
14
Impact of the global
food crisis on
consumers
12
10
%8
Subject to
supply
management
6
4
2
0
Europe
France
États-Unis
* Note: For Europe and France, the index also includes eggs.
Canada
More stable production and
retail prices
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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
6.5% of total milk
production is in
world trade
world trade in agriculture as % of
total production, 2007
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
Thank you