Friday, March 29, 2024

Dairy rivals unite against Canada

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The New Zealand dairy industry is again lending its weight to calls for Canada to drop milk pricing policies it believes are distorting international skim milk powder markets.
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The industries of the United States, Europe, Mexico, Australia and Argentina as well as NZ have written to their trade ministers calling on them to consider “all avenues” to challenge the measures.

“In the absence of such efforts Canada’s Class 7 policy will seriously further distort and disrupt international dairy trade,” they said.

The letter released overnight followed one sent by the industries to trade ministers in September last year.

That letter raised concerns about a milk pricing agreement between Canadian milk producers and processors, which, it said, had the potential to lead to unfair competition from Canadian dairy products in overseas markets.

“That agreement has become reality and so too have the substitution of Canadian ingredients for our imports and the undercutting by Canadian protein exports of our exports in third country markets,” the industries wrote in their latest letter to ministers.

It also included the Argentinian dairy industry, which was not a signatory to the September letter.

The industries said Milk Class 7 allowed Canadian processors to buy subsidised milk at low prices, which had the effect of shutting out imports.

They claimed it had the additional effect of creating a pool of skimmed milk powder surplus to domestic needs, which was now finding its way on to world markets.

In the first four months of this year Canadian skimmed milk exports increased by 273% to 11,900 tonnes, the letter said.

“Moving this protein onto the thinly traded global market of two million tonnes of SMP per annum will add to the already swelling global supply of milk protein and depress market prices for farmers around the world.”

Prices for skim milk powder at Fonterra’s Global Dairy Trade auction fell from US$2600 a tonne to US$1900 a tonne between February and April this year but rallied to US$2100 a tonne at last week’s auction.

In calling for their governments to take action, the industries said the Canadian policies contravened its agreement at the World Trade Organisation Nairobi ministerial meeting in December 2015 to not introduce new export subsidies.

“We are now writing … to ask the authorities in Argentina, Australia, the EU, Mexico, NZ and the US to pursue all avenues available to challenge these measures, including WTO dispute settlement and bilateral trade agreement relationships.”

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