Agropur Cooperative became the first Canadian dairy processor to halt use of imported diafiltered milk from the U.S. under a temporary national program to encourage the use of Canadian milk in cheese manufacturing.
The targeted pricing program gives dairy processors access to Canadian “Class 4(m)” milk protein concentrates at reduced prices, effective May 1 through July 31, 2016.
The program was established by the Canadian Milk Supply Management Committee (CMSMC), which includes representatives of the marketing boards and governments of all the provinces. The CMSMC is chaired by the Canadian Dairy Commission (CDC).
Diafiltered milk, called ultrafiltered (UF) milk in the U.S., was given duty-free access into Canada under the North American Free Trade Agreement (NAFTA). However, in 2008 Canada adopted cheese-manufacturing standards requiring a minimum percentage of protein used in making cheese must be sourced directly from fluid milk.
Canadian dairy farmers contend the cheese standards have not been enforced, allowing imported lower-cost milk proteins, including UF milk, to displace domestic milk in the country’s cheese production. Published reports estimated Canadian dairy farmer revenue losses at $231 million per year.
The temporary program does not ban UF imports from the U.S. It does, however, make those products less economically competitive for use by Canadian processors.
Agropur said it was immediately discontinuing the use of imported UF milk from the U.S.
“We are proud to be taking the lead in the industry by immediately halting all use of diafiltered milk,” said Serge Riendeau, Agropur president. “While the interim national program is temporary, its creation is good news since it makes it possible for us to stop using imported diafiltered milk while remaining competitive and supporting our members and all Canadian milk producers.”
Agropur Cooperative processes milk on both sides of the Canadian-U.S. border. It has 3,367 members and 39 plants in North America, including 11 in the U.S. Upper Midwest.
With northern New York dairy processors standing to lose a market under UF milk import reductions, U.S. Senator Chuck Schumer (D-New York) has been vocal in urging the U.S. Trade Representative (USTR) office and USDA to push back against any policies restricting trade.
In recent weeks Schumer visited milk processors and dairy farms in the region likely to see some of the biggest negative financial impact. Stops included Cayuga Milk Ingredients, which represents 25 dairy farms in central New York. It completed a $100 million milk processing plant in 2014 and is wrapping up a $4 million expansion project to increase production capacity.
Cayuga Milk Ingredients exported more than $23 million worth of milk protein isolate and UF milk to Canada in 2015. Sales in 2016 were expected to generate $30 million, about 25 percent of the company’s total gross income.
Schumer also hosted a press conference at western New York dairy cooperative O-AT-KA of Batavia, which exports about 20 percent of its production to Canada annually. He said potential trade restrictions and tariffs on UF milk, which add up to 180 million pounds of milk and $19 million in sales, threaten O-AT-KA and the entire western New York dairy industry.
Upstate Niagara Cooperative, made up of nearly 400 dairies, is the majority owner of O-AT-KA. Dairy Farmers of America owns the remaining 10 percent. A $16 million expansion expanded UF capabilities in 2012.
The impact stretches outside of New York. According to an article in the Wisconsin State Journal, officials with Grassland Dairy Products in Greenwood, Wisconsin, said the loss of the Canadian UF market would cost the state’s dairy industry about $100 million annually. Grassland’s chief executive officer Leon Gregorich and president Trevor Wuethrich wrote a letter to U.S. Agriculture Secretary Tom Vilsack expressing "serious concern" about the issue. PD
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Dave Natzke
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