November 28, 2005

USDA: Canada dairy and products annual 2005

Milk production in Canada supplies two markets. The first market is the fluid milk market, which accounts for approximately 38% of total milk production and includes creams and flavored milks. The second market is the industrial milk market, which accounts for approximately 62% of total milk production and is used to make products such as butter, cheese, yogurt, ice cream and milk powders.

The Market Sharing Quota (MSQ) is a national management tool through which industrial milk production levels are allocated. The quota is set each year by the Canadian Milk Supply Management Committee (CMSMC) and is constantly monitored and adjusted when necessary to reflect changes in demand for industrial milk products. 

Based on six months of available production data from Statistics Canada for 2005, total milk production for calendar year 2005 is forecast to decline to 7.8 million metric tons (MMT) from 7.9 MMT in 2004. 

For 2004, total imports of fluid milk and cream, butter, cheese, and skim milk powder were approximately 65,000 MT, of which imports under IREP accounted for approximately 62.5% of total imports (40,600 MT). The total amount of products imported under IREP continues to become a larger portion of total imports as processors rely on them to be able to export dairy products onto the world market. 

The 2002 ruling by the World Trade Organization (WTO) capped subsidized exports of dairy products from Canada. The ruling also resulted in the elimination of commercial export milk (CEM) practices, as the CEM was ruled to be an export subsidy. Therefore, Canadian dairy producers are limited in the quantity of dairy products that can be exported from Canada. 

The ruling also resulted in a restructuring of the dairy industry in Canada to limit the production of over-quota milk, as the cap limits producers'exports, resulting in an inability to export it or the products it produced.  This, as well as the appreciation of the Canadian dollar, has negatively impacted total dairy exports from Canada. 

For the full USDA report, click here.