The future of quotas

The future of quotas The World Trade Organization (WTO) compressor roller continues to work. More and more agricultural producers are questioning and worrying about the future of the supply management system to which they are attached. The Agricultural Co-operator is launching a series of reports on the directions taken elsewhere with regard to quota systems. We are of the opinion that it is never too well informed and that these views can be useful to fuel your thinking as agricultural entrepreneurs.

The views expressed by these stakeholders, however, do not represent a position taken by the Federal Farm Co-operative or the Federal Co-operative on this issue. In the next edition, Canada's position. Value of dairy quotas in Canada: $26 billion (2006). The average value of quotas per dairy farm in Quebec is approximately $1.5 million.

Source: OECD PhOtO: ÉtieNne GosseLiN 20 Agricultural Co-operators: FEBRUARY 2009 FEBRUARY 2009: The Agricultural Co-operator 21 For Version 21, please visit our website at www.lacoop.coop/cooperator PhOtO: a PRECISER Supply Management Record Milk in the World Production of Cow and Bufflon Milk Country Distribution in 2006 Source: F.A.O., Food and Agriculture Organization Key figures for the dairy sector, www.cniel.com cheeses, have fivefold increased to 39,629 tonnes. These additional imports are a delight to Swiss people whose annual per capita consumption has increased from 2.3 kg to 20.7 kg between 2001 and 2007, notes the Federal Office of Agriculture in its 2008 report.

In return for the new social contract coupled with market opening, including concessions made to the WTO, Swiss producers have had to suffer a fall in milk prices, which demand $1 per kilo."The existence of the 27,000 milk producers is threatened," says Peter Gfeller, President of the FPSL, in a recent press release. The price of milk, now a negotiated deal between producers and trans-trainers, is being negotiated very closely between the FPSL and the four major dairy manufacturers in the country.

"Our challenge is to bring together the 30 to 40 Swiss producer organisations to form a white OPEC and to obtain more transparency on the price formation dictated by four people," explains Christoph Grosjean-Sommer. "In its income protection strategy, the FPSL calls on the State to increase direct payments by $300 per cow because "production and labour costs will be always higher than in the rest of Europe," says the FPSL, urging its members to reduce production costs, on average, by 15%, mainly from economies of scale, but also from increased productivity, joint use of machinery and the abolition of the Swiss milk quota, as of May 1, 2009.

"The alarm signal was Canada. The debt-to-GDP process of Canadian producers to buy quota leads to a cul-de-sac. When the value of the Continent - Gent is worth more than land, buildings and animals, you are putting the competitiveness of the dairy sector at risk," says Eduard Hofer, former vice-director of the Swiss Federal Office for Agriculture, recently retired. "Recognised as the father of dairy quotas, introduced in 1977 in the small dairy kingdom, Mr.

Hofer then preached its abolition for a major reason. He said that "the artificial cost of the quota is detrimental to the transfer of the farm to the next generation." The value of the Swiss dairy quota had already reached a value of approximately $233 million in the early 2000s."The state has always made it clear that one day the milk quota system could be abandoned without compensation," added Mr.

When asked about the relevance of quotas, Christoph Grosjean-Sommer, spokesman for the Federation of Swiss Milk Producers (FPSL), replied that "each country is looking to improve its production system. Ideally, there would be no price on the quota. The big issue related to quota transactions is: who is going to pay? In Switzerland, those who have sold their farms or who are looking to grow.

Should we have had to make a scholarship to promote dairy products or aid for young farmers? It is the government that must settle this." The phase-out of the dairy quota by Switzerland is a gesture long matured and is part of an agricultural policy adopted by the small Swiss people, 7 million inhabitants, at 77.6% by referendum on 9 June 1996. By this historic vote, the raclette champion has resolutely opted for a multifunctional, sustainable, GM-free and market-friendly L agriculture.

The agricultural world is given four tasks, now enshrined in the Constitution: (1) security of supply for the population; (2) conser -vation of natural resources; (3) maintenance of the landscape; (4) diversified occupation of the territory, from the plains to the pastures; the shift in the price of support to cover the costs of production to a system of direct payments to producers on proof of ecological benefits is at the heart of this new policy. "The old regime cost the state a fortune since it guaranteed prices which incurred overproduction while production costs continued to increase, not counting ecological damage," Mr.

To make this new social contract, "it took political courage. In our country, the state sometimes takes decisions against the will of producers," he adds. The new "green" agricultural policy costs about $4 billion a year to the Swiss Treasury and it also relies on opening up markets. The objective: to produce more milk in an eco-friendly way to launch Gruyère, Emmental and other specialty cheeses and fresh to the conquest of the European Union (EU), a pool of 450 million consumers whose crow's appetite believes at a rate of 2 to 3% per year.

Switzerland plans to make its already renowned cheeses the leading export market to balance its agricultural trade balance, a challenge - a challenge for the moment. In 2002, the small dairy kingdom signed a bilateral cheese agreement with the EU, eliminating all trade barriers over a transitional period of five years. And since 2007, neither the Alps nor even the Swiss cheese exports have increased to more than 56,000 tonnes while imports have withdrawn milk quotas. By Nicolas Mesly, quotas have been leased.

One quarter of the value of the quotas is rental contracts. "By removing the milk quota, the objective of the leases is destroyed. Producers who have rented their quota can take it back or leave production. The aim is to stop the flow of money between active producers," says Mr.

Swiss producers plan to increase their milk production by 10% by 2015, by putting the Swiss Guarantee label and other labels to the full. The State maintains a financial aid for milk processed into cheese until 2012 and also finances R&D programmes. The aim is to conquer the domestic and European market with innovative and non-traditional products "if you can make chewing gum with milk you will do it", jokes M. About 1500 dairy farms disappear - smells from the Swiss landscape per year, but some 500 young producers take over the torch.

Grosjean-Sommer estimates that the number of farms, with an average size of 20 cows, 20 hectares, will stabilize one day around 15,000. "In Switzerland, we ask ourselves how to optimize the system. Do we have a cow that produces 12,000 kg to 14,000 kg of milk on the plains or two cows that produce 5000 kg in the mountains? Our dilemma is that we receive a direct payment per cow and that the total sum of direct payments is capped.

In the end, it is the consumer - who will decide on the size of family farms and where they will be located." u Find out more Organisation for Economic Co-operation and Development (OECD) Canada Economic Survey 2008: www.oecd.org Switzerland Federal Office for Agriculture (OFAG): www.blw.admin.ch Federation of Swiss Milk Producers: www.swissmilk.ch France Key figures from the dairy sector: www.cniel.com National Federation of Milk Producers: www.maison-du-lait.com United States Wisconsin Milk Marketing Board: www.producer.wisdairy.com Dairy Business Innovation Center: www.dbicusa.gov Wisconsin Cheese Makers Association: www.wischeesemakersassn.org University of Wisconsin: www.wisconsin USDA: www.usda.gov Eduard Hofer, ex-vice-director of the Swiss Federal Office for the Export of Cheese,gov Wisconsin Cheese Makers du Québec, a dégrégré du Québec, a dégréme de la écoté du marchégies du Québec, agrété du Québec, du Québec, du décorété du décorté du décorté du décorté du décor du dét du dét du dét du détisse du détisse du détreté du détreté du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du dét du du du du dét du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du du

Quebec dairy producers know this state of the Midwest. Every year, in Madison, the world's most prestigious dairy cattle exhibition, the World Dairy Expo, is held. The event's organizers are also very familiar with the Belle Province. Our world-class breeders regularly earn great honours.

The development of specialty cheeses in each of the territories is on the rise, and the consumption of cheese per capita is increasing year after year.

The dairy sector in Wisconsin is free from a model of price fixing, quotas that allow production to be quotaed on the farm, agreements that allocate a volume of milk to the plants where it will be processed and regulations that restrict the export of dairy products. Restricted in their growth in Canada, dairy processors here have naturally turned to this market. Saputo and Agropur are among the many.

The large dairy cooperative acquired Trega Food in January 2008 from a family-owned company in Wisconsin, which was the result of the merger of three of the oldest cheese mills in the state. Trega Food owns three plants in Wisconsin and employs 300 people. It is made - that cheddar, feta, mozzarella, provolone and ingred - dairy diens. The turnover of the company, which transforms 650 million litres of milk per year, is US$300 million.

"Offering management is no longer a way to grow or export our products abroad," says Renée-Claude Boivin, spokesperson for Agropur. "In a small and mature local market where three players (Agropur, Saputo and Parmalat) share an equivalent 75% of dairy processing, we have no choice but to settle outside Canada. Furthermore, with competition laws, we could not be the only Canadian processor. The company is therefore keeping an eye out and is on the lookout for all the business opportunities that could arise to solidify its presence in the Canadian market and continue to expand abroad."

"When the Pronovost Commission asked him to suggest a state in the United States in which to make a mission on the new orientations of agriculture, I had immediately proposed Wisconsin," says Guy Debailleul, researcher and professor at Laval University. "Not only because the importance of milk production allows for a parallel with Quebec, but also because we tend to keep pictures of this production which is considered conventional, frozen. It is on the contrary showing a lot of innovation.

This dairy state has put in place a structure and programs that promote value-added product development, incentives that are lacking in Quebec where industrial farms will become a long-term handicap for our dairy sector if the system is not relaxed."Baptized America , Wisconsin, the nation's second largest dairy basin after California, with nearly 11 billion kilos of milk produced in 2007, has long been named "producers of conveniences."

Ingredients - dairy and cheeses made in industrial quantities were, for many, the perception that they had. A title that many people from this state have worked out to change. Because in the shadow of the large factories, multiple cheesemakers shape a host of specialty and artisanal products, and consumers ask for it again.

In total, there are 600 cheese varieties. A thriving industry that relies on 150 years of experience (see box on page 27). u D Dean Strauss and Patrick Geoghegan. "Wisconsin is the leader in the production of cheese in the United States with 25% of national production," says PhOtO: PDPaPhOtO: WMMB 24 The Agricultural Co-operators: FEBRUARY 2009 FEBRUARY 2009: The Agricultural Co-operator 25 France to see you at the dairy quota in 2015!

By Nicolas Mesly in France, like the 26 other members of the European Union, is preparing its bye bye for milk quotas in 2015. Established in the EU and Hexagon in 1984 and inspired by Canada following a meeting in Ottawa with former Agriculture Ministers, Socialist Michel Rocard and Liberal Eugène Whelan, the European dairy quota was intended to stop the growth of milk production to bring it back to the level of domestic consumption and to curb the subven ional exports of huge surplus milk products.

"Unlike other countries, it was decided not to market quotas at the outset to avoid increasing the farm's debt and to lead the sector's competitiveness. This is also the reason for the abandonment of the quota in Europe, " explains Thierry Roquefeuil, a dairy producer and administrator at the Fédération nationale des producteurs de lait (FNPL). France, which now has 90,000 dairy farms, has instead chosen an administrative system for the management of quotas by disbursing and linked to land, "which allows for the establishment of milk production by region and the installation of the milk supply".

A system which has been drifting from the fact that, sometimes, quota land has been somewhat better valued than land without quota, but "milk is now the production that installs the most young people all production due", says Roquefeuil, who owns a herd of 50 cows in lacta - in the south-west of the country. The number of dairy enterprises is decreasing at a rate of 3% to 4% per year and half of this is taken up by young people while the other one is going to expand.

France, a dairy mamel of Europe, receives the share of the Lion of Brussels aid, i.e. EUR 10 billion each year, all production combined.

They must align with the Yoyo price of milk powder, butter and cheese on the international market, which, although these products represent only 7% of world milk production, has a decisive impact."The current price of milk is 33 euros per hectolitre - in France and could rise to 29 euros at the end of 2009," says Mr. Like Swiss farmers, French producers dream of a white OPEC to negotiate a better price with processors. "The French dream is to be Canadian!

Producers are masters of their production and distribute milk to industrialists. This is something that was not done in 1984 when quotas were set up," says Mr. A dream out of reach, believes the producer, because of the diversity of the parties involved in negotiating a single basic price – large industrial groups, cooperatives – different territories and controlled designations of origin (AOC) or other labels at stake. If 2015 is displayed as the end of the quotas, "it is not the end of the mastery between supply and demand".

The FNPL is therefore not in the process of meeting the French target of 5% milk production increase by 2013 if the market does not absorb production. "Otherwise, the price of milk powder is falling and it is the price that will keep a producer in production," says L.L.elevator, who expects a rapid restructuring of the dairy industry in the country of 1000 cheeses, because since 2003, production volumes have been negotiated on a contract basis between producers and companies. "Those that will have products consistent with the market will be able to pay milk properly.

On the other hand, those who will be more exposed to too great a variation - aunts will have more difficulty," he concludes. Thierry Roquefeuil PhOtO: a PRECISER Offer Management PhOtO: gRACIEUSETE DE JOan KIMBaLL Building on Innovation A study carried out by the University of Wisconsin in 2005 concluded that to boost the production of specialty cheeses and artisa - nals, it was necessary to strengthen their image and improve support for companies. The recommendations of this study led to the creation of the Dairy Business Innovation Center (DBIC), a non-profit organization funded by the federal government.

The DBIC brings together experts who work to improve the performance of businesses, develop business plants, invest ing profiles and requests for subsidies, and develop product marketing.These services are offered free of charge to producers.

"There have been significant investments in education, research and new cheese production methods as well as in old ones," she says. "Producers and cheesemakers are working hand in hand. "In collaboration with the University of Wisconsin, a Master Cheesemaker Program, the only one of its kind in the United States, has been set up. It is now known as master cheesemakers."

"We're taking 15 cents per 100 pounds of milk from the farm," explains Patrick Geoghegan. "Fif hundred are paid to the National Dairy Board. "The rest, ten cents, each year, generates $24 million - lions used to promote dairy consumption."

"Cheers are using the method of manufacturing, history, branding and labelling to capture consumer imagination," says John Umhoefer, Managing Director of the Wisconsin Cheese Makers Association. "The efforts of these producers have even stimulated traditional cheeseries, including cooperatives, to produce these new cheeses with exotic flavours."In addition to the 130 or so large traditional manufacturing plants in Wisconsin, there are 1200 licensed cheesemakers and 50 artisans with the Master Cheesemaker title.

"In 2008, specialty cheese production increased by 3% compared to 2007 and dairy exports jumped by 130%," said Patrick Geoghegan. "We are very strong promoters of free enterprise," says Dean Strauss, president of the Professional Dairy Producers Association and owner of a herd of 685 dairy cows. "In the early 1990s, when we founded the association, Wisconsin per - says many dairy producers because their companies were not sufficiently competitive.

Our association, which brings together companies of all sizes and even outside the United States, has set up an educational programme and aims to provide solutions to succeed and be more competitive. Our managers are now looking at the business aspect of milk production. If we want to expand, we do so. We are trading on the stock exchange for milk prices in the form of futures contracts.

And price contracts are being drawn up with processors. It's a management style that I like. I'm my own boss."Wis Wisconsin's dairy and cheese production going on so fast if it had been regulated as it is in Quebec?

"Probably not," says Cropp. "A higher price for producers would mean a higher raw material for processors, which would mean a higher price for retail cheeses, which would reduce consumption.

"Canada will have to restructure its dairy industry, and it will be able to do so," says Mr. But in the short term, the market will likely be flooded with foreign products.

We ship cheese and dairy ingredients to the market."The average price of the approximately 13,500 dairy producers in Wisconsin in 2008 was US$19 per 100 lbs of milk (US$41.80 per hectolitre).A price based on, among other things, the price of cheese on the Chicago Stock Exchange."The price varies according to the supply and demand of the various components of milk and the yield it provides," explains Robert Cropp, marketing and policy specialist at the University of Wisconsin.

The market is therefore essentially the one that dictates its evolution."A situation that small producers find difficult due to the recent increase in the costs of most of the inputs they use."The number of farms is decreasing at a rate of one per day," says Patrick Geoghegan of the Wisconsin Milk Marketing Board. "The result is that the average farm, which has 90 cows, is growing.

The oldest people who leave the production sector, the youngest people invest and grow, benefit from scale savings and hire staff to improve their quality of life."Some people are making a big contribution to dairy production per cow.

Others are turning to intensive grazing to reduce access costs - so much to sacrifice a little on production. Others are relying on the upgrading of their milk. By processing directly on the farm or through small cheese shops."We have all the types of businesses, from small family farms to very large businesses," says Mr.

"With a milk price of almost half the price in Canada, is it not a good idea to introduce a quota system?" "The idea of introducing a form of supply management has been proposed a few times over the years," says Robert Cropp. "In particular, in the early 1980s, when we recorded milk surpluses that had pulled prices down.

But the concept has never been very popular with smaller producers and older producers.""Each year, Canadian dairy producers move south of the border, particularly in Wisconsin, to produce in a non-interventionist market." Patrick Geoghegan Number of cheese products Switzerland France Québec Wisconsin 450 1000 300 600 PhOtO: ÉtieNne GosseLiN Sources: Federal Office of Agriculture, Evaluation of milk production data 2006-2007; Key figures in the dairy sector, www.cniel.com; Agéco, FPLQ, MAPAQ, PATLQ, Statistics Canada, Dairy Highlights 2008; USDA; Valacta; Wisconsin Milk Marketing Board; Wisconsin Agricultural Statistics 2000 9009 2000 302 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 2000 402 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0