Milk Producer - March 2009 - (Page 26)

ISSUESUPDATE By Bill Dimmick Tariff alert sounds Slumping world dairy product prices could drop low enough to threaten domestic market lummeting world dairy prices have put Canada on the alert for what the industry calls a breach of the tarif fwall. This development could potentially mean temporarily reduced milk prices paid to producers to keep imports from being dumped on our domestic market. Under the current World Trade Organization (WTO) agreement, Canada uses over-quota tariffs to control import levels of dairy products such as butter, cheese and fluid milk. This helps producers plan production and set quota levels. However, world dairy product prices—set in U.S. dollars—have been falling rapidly since mid-2008. Should prices fall further or the Canadian dollar gain more ground on its U.S. counterpart, this tariff wall could be breached. After paying tariff and transportation charges, an importer or retailer could bring products into Canada at a lower cost than purchasing them at domestic prices. The last time we came close to a potential breach occurred during the summer of 2006. World butter prices dropped to $1,600 per tonne and the Canadian dollar was pegged around P Laforge: A flexible pricing system is needed to minimize risks. 90 cents US. A calculation at the time showed imported butter would cost just 20 cents Cdn per kilogram more than the domestic product after taking tariff and transportation charges into account. As the graph shows, the recent plunge in world prices has put butter and other dairy products at levels close to breaching the tariff wall once again. In his address to the policy conference, DFC president Jacques Laforge called for a flexible price adjustment system to minimize risks associated with low world prices while capturing opportunities for higher prices to ensure adequate producer returns continued on page 29 World Price for Butter, SMP and Cheddar (Chart courtesy DFC) July 2008 to January 2009 ($ US/tonne, Oceania) 5500 4500 3500 2500 1500 Tariff Wall Breach 7/ 20 /0 08 8/ 05 200 8 /0 9/ 05 200 /1 8 0/ 20 05 /1 08 1/ 05 200 /1 8 2/ 2 05 008 /0 1/ 20 09 26 | March 2009 | MilkPRODUCER 05 Dairy Farmers of Canada (DFC) held its annual policy conference in Ottawa recently. Editor Bill Dimmick has filed these reports. 500 Butter SMP Cheddar 05 /0

Table of Contents for the Digital Edition of Milk Producer - March 2009

Milk Producer - March 2009
Contents
Editor's Notes
DFO Chair's Message
Dairy Update
DFC Promotion
Farm Finance
P5Pool Update
Issues Update
Weathering the Storm
Research
Applied Science
Ruminations
Markets
New 'N' Noted
Back Forty

Milk Producer - March 2009