Free Trade? Despite policy reforms enacted as a result of the Uruguay Round Agreement on Agriculture, global dairy markets remain among the most protected agricultural sectors. Dairy trade is characterized by “megatariffs” (tariffs usually over 100 percent), tariff-rate quotas (tariff rate depends on the volume of imports), and export subsidies. A USDA study found that, in most regions, tariffs on dairy products are well above the average agricultural tariff and among the highest of all commodities (Gibson et al., 2001). In addition, many countries provide trade distorting income and price support to the dairy sector. As a result, much of the world trade in dairy products is driven more by policy intervention than by market factors.

What form? Support to dairy producers makes up a large share of some countries'aggregate domestic support for all commodities (on average, since 1995, 100 percent for Australia, 84 percent for Canada, 55 percent for the United States, and 12 percent for the EU). In the United States, income support for dairy producers includes direct payments and, in the recent past, ad hoc disaster assistance. Price support measures include government purchase programs (U.S.), intervention purchasing and storage (EU), and supply management through production or marketing quotas (EU and Canada).

Dairy Support Policies Source:

Number of Milk Cows Source: 07Dairy/milkcows.xlshttp:// 07Dairy/milkcows.xls

Some facts about Dairy Production of dairy products generally moves in the same direction as milk production in each country, with some exceptions. For example, while U.S. production of raw milk, butter, nonfat dry milk, whole dry milk, and other dairy products declines, cheese output expands slightly because the value of milk in cheese production is higher than its value in the production of other dairy products.

Questions to think about Support to dairy producers makes up a large share of some countries' aggregate domestic support for all commodities How might the removal of such support affect countries' relative competitiveness in international dairy markets? Would consumers worldwide pay more or less for milk and dairy products? And how would the Canadian dairy industry fare in a more liberalized environment?

&mode=zoomin&layers=&hidetextbox=&urlappend=%26map_scalebar_imagecolor%3D Map derived from Census

Canadian Dairy industry In 2005, dairy production generated total net farm receipts of $4.8 billion. The dairy industry ranks fourth in the Canadian agricultural sector following grains, red meats and horticulture. About 81% of Canadian dairy farms are located in Ontario and Quebec, 13% in the Western provinces and 6% in the Atlantic Provinces. The Canadian dairy cattle population totalled 1,546,300 head of which there were approximately 1,048,600 dairy cows in Canada as at January 1, The typical Canadian dairy farm has 66 cows. Nearly 38,000 people work on dairy farms and almost 26,000 others work in primary processing. The Canadian dairy sector functions under a supply management system, based on planned domestic production, administered pricing and dairy product import controls

Canada: Processing of dairy products The fluid milk market (table milk and fresh cream) represents 38% of milk production or 28.3 million hectolitres, while the market for manufactured dairy products such as butter, cheese, yogurt and ice cream accounts for 62% of production or 46.5 million hectolitres of milk. The dairy processing sector is relatively concentrated. Today, 15% of Canadian plants are owned by the three largest processors in the country, (Saputo, Agropur, Parmalat) and they process approximately 70% of the milk produced in Canada. More than 450 fine and traditional cheeses, including goat, ewe and raw milk, are produced in various regions of the country.

Canada: Associations and organizations related to dairy production Government and various partners in industry work in close cooperation to coordinate the movement of milk from the farm to the consumer. The Dairy Farmers of Canada (DFC), the Dairy Processors Association of Canada (DPAC), the Canadian Dairy Commission (CDC), provincial marketing boards and Agriculture and Agri-Food Canada (AAFC) work as partners to ensure a strong and dynamic Canadian dairy industry. The CDC supports the industry by implementing national policies for dairy production, by assessing changes in demand for milk and dairy products and production of milk, and by coordinating the pooling of milk revenue and the market-sharing systems. CFIA is responsible for setting standards for dairy products, for inspecting plants, and for regulating packaging and labelling. CFIA also enforces veterinary health programs and ensures the safety of dairy products.

Canada: International trade Canadian milk and dairy products are known around the world for there superior quality. In 2005 Canada exported mainly cheeses (27.1%) followed by dairy spreads (18.0%) and ice cream (16.0%). The major markets for dairy products exports are the United States, (48.1%) and the European Union (12.9%), in particular the United Kingdom (12.1%). Canadian dairy exports in 2005 amounted to $242.6 million while imports totalled $597.6 million. In 2005, Canada imported mostly specialty cheeses (29.2%), casein and its derivatives (18.3%), butter and fats and oils derived from milk (11.6%) and whole milk powder (10.6%). Our major suppliers of dairy products are the EU-25, (38.6%), New Zealand (23.9%) and the United States (22.8%). Source: