June 19, 2018

Saputo chief executive supports end to Canada's dairy pricing system


Canada's milk ingredient pricing  system, which has strained the US-Canada trade relation, should end, opined one of its unlikeliest backers: Lino Saputo Jr., chief executive of one of  Canada's biggest dairies bearing his namesake.   

The pricing system, known as Class 7, was established in 2016 between Canadian dairy processors including Saputo and farmers. Under the system, processors could pay lower prices for Canadian milk ingredients used to make cheese and yoghurt, and export the rest.

However, the agreement also came following the entry of cheaper US volumes, which were not subject to high tariffs, into Canada. Consequentially, US shipments thinned out after Class 7 was implemented.

Saputo Jr. criticised Class 7 as "broken", revealing that his company felt forced to accept the system through its association. He also believed that abrogating Class 7 is "logical" and less severe than surrendering additional tariff-free volumes to the US. 

"The problem is everyone is putting their heads in the sand and no one really wants to find solutions until they're forced. We're in a position today when we can control our own destiny," Saputo Jr. said.

Despite the Saputo executive's remark which has taken the dairy sector "by surprise", its main lobby group, Dairy Farmers of Canada (DFC), claimed the  industry remains unified on its position. 

Furthermore, Class 7, according to Dairy Processors Association of Canada (DPAC), was purposed to "modernise" the system.

"We view efforts to expand the dairy sector's contributions to the Canadian economy as positive," DPAC chief executive Mathieu Frigon said in a statement.

- Reuters