Report Highlights: 

Milk, cheese, butter and skim milk powder production is forecast to increase in 2015 due to the need to build stocks. Imports of these products will remain close to average levels due to the import controls in place. The need to gain efficiencies through lowering production costs will keep imports of milk protein substances strong (TRQ not applicable to US trade). The CETA has been signed, though not ratified, and there are several elements of the agreement that could affect the competitiveness of U.S. dairy products in the Canadian market.

EXECUTIVE SUMMARY 

- The Canadian dairy sector functions under a supply management system, based on planned domestic production, administered pricing and dairy product import controls. 

- Production, trade and consumption trends have stayed relatively stable over time, due to the factors stated above, compiled with the fact that there are not significant changes in GDP or population growth to drive increases in demand. 

- In 2015, milk production is forecast to increase slightly from 2014 estimated levels to 8.535 million metric tons (MMT) in order to maintain butter stocks and meet demand. The 2014 estimate for milk production (including on farm feed use) is 8.409 million metric tons (MMT). This is marginally below 2013 levels (0.5 percent). 

- Post forecasts butter production to increase in 2015 to 90 thousand metric tons (TMT) to meet the steady demand and maintain stock levels. Post’s estimate for butter production in 2014 is 85 TMT, 10 percent lower than 2013 levels. 

- Cheese production has been slowly increasing over time in response to consumer demand. In 2015, cheese production is forecast to reach 390 TMT, a slight increase from 2014 estimated levels of 389 TMT. 

- Skim milk powder production in 2015 is forecast to rise to 80 TMT in response to increased butter production. Skim milk powder production in 2014, is expected to reach 77 TMT, this represents a 4.5 percent increase over 2013 levels. This increase is the result of a return to more average (lower) levels of butterfat in the milk. 

- Import controls and export subsidy limitations mean that trade in milk, butter, cheese, and skim milk powder stay relatively stable over time. Trade under certain products (dairy ingredients) not covered under tariff rate quotas has been increasing over time due to Canadian manufacturer’s trying to gain efficiencies through investments in technologies that lower production costs. Exports of milk protein substances to Canada under 3504.00.11 and 3504.00.12 was nearly $129 million in 2013, with US trade accounting for $78 million (60 percent share of the trade). In 2014, the value of trade had already surpassed 2013 levels by the end of October when it reached $142 million, with U.S. exports accounting for $84 million dollars (67 percent share of trade). 

- In the fall of 2014, Canada submitted its 2011/2012 marketing year export subsidies notification. Canada reported subsidized exports totaling 9.3 TMT ($31.2 million) for skim milk powder, 4.8 TMT ($14.4 million) for cheese, and 22.5 TMT ($6.8 million) for other milk products. Canada reported no subsidized exports of butter. 

- For 2013, the Canadian dairy trade balance remained at a deficit of over $470 million (CDN$ 490 million), an 11 percent increase over the previous year’s level. 

- In late September 2014, the Comprehensive Economic Trade Agreement was signed by Canada and the European Union and the draft consolidated text has been made public. The EU has been granted concessions on dairy that will allow the EU even greater cheese access into the Canadian market (expanding of the cheese quota and elimination of in-quota tariffs). There are some elements of the agreement that could impact U.S. competitiveness of cheese and milk protein substances into the Canadian market. 

SNAPSHOT OF CANADIAN DAIRY INDUSTRY 

- The Canadian dairy sector functions under a supply management system, based on planned domestic production, administered pricing and dairy product import controls. 

- In 2014, the first seven month of data show total cash farm receipts having increased 3 percent above 2013 levels for the same time period. (source: Statistics Canada) In calendar year 2013, total net cash farm receipts from milk and cream sold off farms reached $5.7 billion (CND$ 5.91). This is unchanged from year 2012 levels. 

- For 2014, the first 6 months of data shows sales of milk and dairy products 4 percent above year 2013 levels for the same time period. In 2013, manufactured shipments (sales) of milk and dairy products reached $15.6 billion and represents 17.6 percent of Canada’s total food and beverage sector. This represents an increase of 7 percent over year 2012 levels. (Source: Statistics Canada) 

- The dairy industry ranks third in terms of value in the Canadian agricultural sector following grains and red meat. 

- Better feeding, disease control and genetic advancements have increased the amount of milk produced per cow resulting in needing fewer dairy cows to meet Canada’s domestic requirements. For example, since the year 2000, the Canadian dairy herd has fallen to 959,300 head, which represents a 13 percent decrease. (Source: Canadian Dairy Information Center) 

- The number of dairy farms has decreased nearly 40 percent since the year 2000. The number of dairy farms has dropped to 11,962 in 2013 from 19,363. (Source: Canadian Dairy Information Center) 

- Consequently, farming units have grown in size and have become more efficient in operation. The number of dairy cows per farms has risen from an average of 57 dairy cows per farm in the year 2000 to an average of 80 dairy cows per farm in 2014. This represents an increase of over 40 percent. (Source: Canadian Dairy Information Center) 

- The provinces of Quebec and Ontario are the provinces were dairy production is most concentrated. Quebec accounting for 37 percent of the dairy cows in 2014, followed by Ontario with 33 percent. The province of British Columbia had the next largest number of dairy cows and accounted for 8 percent of the total number of dairy cows. 

- The typical Canadian dairy farm is quite specialized, with most of its revenue coming from milk production and the sale of dairy cattle. It is a family-owned operation. The farm owners are in their mid-forties and have built up considerable equity in their operation. The typical family farm is accustomed to using advanced technology in practices such as artificial insemination, breed selection and labor-saving milking systems. Computerization of feeding and herd management systems, and equipment innovations are also rapidly changing the way things are done on the farm. The industry has experienced a 36 percent decline in the number of dairy farms over the past decade. However, individual farming units have grown in size and have become more efficient in operation. 

The dairy processing sector is relatively concentrated. The latest statistics show that the three largest processors in the country (Saputo, Agropur and Parmalat) process approximately 75 percent of the milk produced in Canada. The fluid milk market represents almost 40 percent of milk utilization, while the market for manufactured dairy products such as butter, cheese, yogurt and ice cream accounts for more than 60 percent of utilization. 

PRODUCTION, CONSUMPTION, TRADE AND STOCKS FOR MILK, CHEESE, BUTTER AND NON-FAT DRY MILK 

MILK: 

Production: 

In Canada, provincial milk marketing boards maintain responsibility for setting production limits of its own fluid milk, pricing formulas, quota policies and other regulations. Industrial milk production levels are allocated using a national management tool called the Market Sharing Quota (MSQ). Quota is allocated on a butterfat basis. It is set by the Canadian Milk Supply Management Committee (CMSMC), which applies the terms of the National Milk Marketing Plan (a federal-provincial agreement) to establish each province’s share of the MSQ. The provinces are then responsible for distributing shares of the quota to producers according to provincial policies and in accordance with pooling agreements. 

Milk production in Canada supplies two markets. The fluid milk market includes creams and flavored milks. The industrial milk market is milk used to make products such as butter, cheese, yogurt, ice cream and milk powders. In 2013, the fluid milk market accounted for 35 percent of total milk produced in Canada, and the industrial milk market 60 percent. On farm use is estimated to account for approximately 4 to 5 percent of total milk produced.

The CMSMC sets the MSQ based on the recommendations of the Canadian Dairy Commission (CDC). The CDC monitors the trends in Canadian dairy requirements (demand) and makes recommendations on the necessary adjustments to reflect changes in demand for milk for industrial dairy products.

For dairy year 2013-2014 (August 1, 2014 – July 31, 2014), milk production in butterfat equivalent has fallen below the dairy industry requirements. This drop in production was preceded by several years where production overshot domestic requirements of butterfat. The higher-than average percentage of butterfat in the milk was due to the availability of high quality forage and good weather conditions. In dairy year 2013-2014, butter-fat content returned to more average levels. 

Due to the supply management system in place, significant changes in milk production from year to year due to changing international market conditions do not occur. In 2015, milk production is forecast to increase slightly from 2014 estimated levels to 8.535 million metric tons (MMT) in order to maintain butter stocks and meet demand. Based on 9 months of production data of milk produced for the fluid milk market and for the industrial milk market, the 2014 estimate for milk production (including on farm feed use) is 8.409 million metric tons (MMT). This is marginally below 2013 levels (0.5 percent). 

Trade: 

The fluid milk access level is set at 64,500 metric tons (MT), however there is no commercial quota available for fluid milk, as it is assumed to be filled through cross border shopping. Milk imports enter Canada under personal use exemptions (General Import Permit No. 1 - Dairy Products for Personal Use) or through the imports for re-export program (IREP) and therefore are limited. Cream, unlike fluid milk, has a small commercial quota, which is determined on a dairy year (August-July) basis rather than an annual calendar year (CY) basis. The cream access level is 394 MT. Cream imports continue to increase due to the increased usage of the Import for Re-Export Program. 

Milk imports in 2015 are expected to remain at 2014 levels of 48 TMT. Trade numbers on milk coming into Canada as part of cross border shopping are not reliable as it is not tracked very closely. Despite a weaker Canadian dollar expected for the next eighteen months, the volume of milk purchased through cross border shopping is not expected to change due to ingrained shopping habits as well as the attractiveness of US milk prices compared to Canadian prices despite the difference in exchange rates. Due to market proximity and the perishable nature of fluid milk and cream, the United States is the primary source for imports of milk and cream into Canada. 

Milk exports from Canada are very small, in part due to export subsidy limitations, but for the most part due to the structure of the supply management system and provincial regulations which limits the ability of milk producers to transport the milk across the border. Milk exports in 2015 are forecast to remain at the same levels as expected for 2014: 4 TMT. 

Consumption: 

The Canadian dairy sector functions under a supply management system, based on planned domestic production, administered pricing and dairy product import controls. Due to these factors, as well as fact that there are not significant changes in GDP or population growth to drive demand for dairy products means that milk production levels have stayed relatively stable over time. Statistics released in September of 2014 puts Canada’s growth rate at 1.2 percent. The overall population growth rate has shown little variation in 30 years, ranging between 0.8 percent and 1.2 percent. The statistics also reveal that much of this growth occurs through immigration, which does not necessarily translate into increased demand for dairy products. In addition, the popularity of milk substitutes from other product groups (almond milk, soy milk, margarines etc.) has meant increased competition. 

BUTTER: 

Production: 

Post forecasts a production increase in 2015 to meet the steady demand and maintain stock levels. Based on 9 months of production data and the fact that according to the Canadian Dairy Commission, for most of 2014 butterfat production has fallen short of industry requirements, Post’s estimate for butter production in 2014 is 85 TMT, 10 percent lower than 2013 levels. 

Trade: 

Total butter imports are comprised of three HS codes: 0405.10.00 for butter, 0405.90.00 for fats and oils derived from milk, and HS 0405.20.00 (zero TRQ access) for dairy spreads, which contain butter. Similar to cream imports, the butter import access level is determined based on the dairy year, rather than the calendar year. The access quota is set at 3,274 MT and applies only to the butter and fats and oils from milk. Nearly two thirds of the TRQ is allocated to New Zealand (2,000 MT).

More than half of the butter imports into Canada enter under the import for re-export program (IREP), the demand for which often fluctuates with the Canadian exchange rate. With a weaker Canadian dollar forecast for the next eighteen months, there is likely to be a decrease in IREP usage. Imports of butter are forecast to decrease to 8 TMT in 2015 from 2014 forecast levels of 10 TMT tons. The 2014 estimate of 10 TMT is based on 9 months of trade data and the fact that with Canadian butterfat content below industry requirements, increased imports were needed to meet the industry demand. 

Due to its proximity to the Canadian market and the popularity of the import for re-export program, US butter imports (040510) account for between 25 percent and 59 percent of butter imports into Canada. 

Canadian exports of butter are limited by its export subsidies commitments for butter of 3.5 TMT or $11.025 million (which ever limit is hit first). However, in 2015, butter exports will be limited by lower than average supplies due to low carry-in stocks. Exports of butter for 2015 are forecast to reach 2 TMT, the same level estimate for 2014 levels. Exports of butter for 2014 are based on 9 months of trade data and lower than average supplies due to the fact that production of butterfat has not kept up with industry requirements. 

Consumption: 

Butter consumption has been growing slowly over time, but is forecast to decrease to 96.0 TMT, a marginal decrease from estimate 2014 consumption levels of 96.6 TMT. This forecasted decrease is attributed to a weaker Canadian dollar which is likely to result in lower butter consumption as other goods become more expensive. Butter is still considered a luxury good by many and therefore increases in food costs (fruits and vegetables, meat etc) and well as other non-food goods have a detrimental effect on butter sales. Domestic consumption for 2014 is estimated based on nine months of trade and production and consumption data, and the fact that butter sales, which are traditionally high around the holidays, may be lower due to the impact of the weaker dollar on consumer goods. 

Stocks: 

Stocks are forecast to remain level in 2015 as increased production will be off-set by the low carry-in stocks and steady demand. Stocks in 2014 are estimated to fall be drawn down to 7 TMT due to low supplies resulting from production of butterfat falling below targets. 

CHEESE: 

Production: 

Cheese production has been slowly increasing over time in response to consumer demand. Most of this increase has been driven by an increase demand for specialty cheeses, and an increase in usage of cheddar cheese in further processed products (convenience foods). In 2015, cheese production is forecast to reach 390 TMT, a slightly increase from 2014 estimated levels of 389 TMT. The increase in production in 2014 and 2015 is also being driven by a need to maintain stocks which were drawn down significantly in 2013 when demand significantly outstripped supplies. 

Trade: 

The commercial quota on cheese is 20,411,866 kilograms. Most cheese enters Canada either through the import quota system, which is filled every year, or through the import for re-export program which goes into further processed products which are then exported. The European Union has country-specific access to 66 percent of the global quota, the rest of the quota is non-EU cheese which is mostly filled by the United States. Due to the tariff quota system, imports remain relatively stable and are forecast to reach 23.5 TMT in 2015, and 23.8 TMT in 2014. The forecast decrease in 2015 is due to a minor decrease in IREP usage resulting from a decrease in the value of the Canadian dollar. Nevertheless, IREP usage is expected to remain strong as historically, cheese trade under IREP is not as effected by the exchange rate as other products. Exports for Canadian cheese containing processed products will likely increase and off-set the negative impacts of the weaker Canadian dollar on IREP cheese imports. 

Cheese exports are partially limited by export subsidy commitment levels of 9 TMT tons and outlays of $16 million. In 2015, cheese exports are forecast to remain at levels similar to year 2014 levels of 10 TMT. Year 2014 cheese exports estimated are based on 9 months of trade data. A weaker Canadian dollar is expected to help support Canadian cheese exports. 

Consumption: 

Cheese consumption in Canada has been growing slowly but steadily. In 2015, cheese consumption levels are forecast to remain close to 2014 estimated levels of 403 TMT. The 2014 estimated levels of 403 TMT, which are based on 9 months of supply and demand data, represent a 2 percent decrease from 2013 levels. This decrease is anticipated due to the weaker Canadian dollar which may curb Canadian’s expenditure on cheese if it is viewed as a luxury good and not a staple good. 

Stocks: 

Cheese stocks in 2015 are forecast to be drawn up slightly in response to increased production. Cheese stocks in 2014 are expected to remain level. 

SKIM MILK POWDER: 

Production: 

Skim milk powder production in 2015 is forecast to rise to 80 TMT in response to increased butter production. Skim milk powder production in 2014, based on 9 months of production data, is expected to reach 77 TMT. This represents a 4.5 percent increase over 2013 levels. This increase is the result of a return to more average (lower) levels of butterfat in the milk. 

Trade:

Skim milk powder comes into Canada under the import for re-export program and volumes vary between 3 and 5 TMT per year. Skim milk imports in 2015 are forecast to be 3 TMT which are average levels. Nine months of trade data for 2014 suggests that skim milk powder imports may reach 4.6 TMT in 2014 which suggests a strong demand from the processing sector. 

Skim milk powder exports are partially limited by annual export subsidy commitment levels of 45 TMT, and outlays of $31 million. The fact that there is a higher demand for butterfat that skim milk powder in Canada has led to a structural surplus which results in Canada trying to maximize skim milk powder exports while respecting its export subsidies commitments. The high domestic price for skim milk powder means that Canada hits the financial limit before it hits the volume limit. A weaker Canadian dollar in 2014 and 2015 will support increased exports. Post forecasts that skim milk powder exports in 2015 will be close to those estimated for 2014 at 14 TMT. 

Consumption: 

The use of skim milk powder in the Greek yogurt which has proven very popular with Canadian consumers has helped maintain a steady demand for skim milk powder. Domestic consumption of the skim milk powder is forecast to reach 70 TMT, similar to estimated levels for 2014. 

Stocks: 

The higher butterfat content in the milk the past several years has help reduce stocks. In 2015, stocks are anticipated to be drawn down marginally as a result in a slight decrease in imports and strong exports. In 2014, nine months of trade data shows strong exports helping offset increased production resulting in a small decrease in stocks.

TRADE 

Import Controls: 

Quantitative restrictions in ten categories of dairy products were converted to TRQs to support supply management of industrial milk under the Canadian Dairy Commission Act and as a result of the agreement at the World Trade Organization (WTO) in 1994. Canada undertook an Article XXVIII action in 2008 to create a new TRQ for milk protein substances in chapter 35. Due to the North American Free Trade Agreement, the TRQ cannot be applied against U.S. trade. 

Export Limitations: 

The 2002 ruling by the World Trade Organization (WTO) capped subsidized exports of dairy products from Canada. As a result, given the high domestic price for dairy products in Canada, exports opportunities for the Canadian dairy industry are limited and results in a negative trade balance. Export subsidies for butter, skim milk powder, cheese and “other milk products” are subject to caps of 3.5 TMT ($11.0 million), 45 TMT ($31.2 million), 9.1 TMT ($16.2 million), and 30.3 TMT ($22.5 million), respectively. The most recent notification by Canada for export subsidies was made in September of 2014 for marketing year 2011/2012 and reported subsidized exports totaling 9.3 TMT (31.2 million dollars) for skim milk powder, 4.8 TMT ($14.4 million) for cheese, and 22.5 TMT ($6.8 million) for other milk products. Canada reported no subsidized exports of butter. The dairy division of Agriculture Canada calculates that for 2013, the dairy trade balance remained at a deficit of over $470 million ($C490 million), an 11 percent increase over the previous year’s level. Dairy imports in 2013 were valued at $794 million, an increase of 7 percent over 2012.

While trade of dairy products under the TRQ lines is often the focus of dairy trade analysis with Canada, it is important not to underestimate the trade in dairy ingredients under lines that are not covered by TRQs. In 2013, the volume of imports of dairy products covered by TRQs into Canada reached nearly 96.0 TMT. The U.S. share of that trade was 76 percent and is valued at $176 million. In comparison, total dairy imports under lines not covered under TRQs reached nearly 90 TMT, with the US share accounting for 72 percent and valued at $245.3 million.

POLICY 

UF85 Milk: 

As mentioned previously, the TRQ created in 2008 under chapter 35 for milk protein substances milk is currently not applicable against U.S. exports to Canada. The supplemental note in chapter 35 states that “milk protein substances with a milk protein content of 85 percent or more by weight, calculated on the dry matter, are classified in tariff item number 3504.00.11 or 3504.00.12. Milk protein substances with a milk protein content of less than 85 percent by weight, calculated on the dry matter, are classified in Chapter 4 (subheading 0404.90)”. The quota limit for the rest of the world in 10,000 tons and the over quota tariff is set at 270 percent. 

There is a strong lobby push by the Canadian Dairy Farmers to change this supplemental note to reflect their belief that milk protein substances with a milk protein content of 85 percent protein or more is diafiltered milk, which would be prohibited in the Canadian compositional standards for cheese. Such a change would severely impact U.S. export of ultrafiltered milk 85 to Canada. Advancements in manufacturing technology that reduce cost and increase flexibility in manufacturing has led to a growing demand for U.S. UF85. The value of trade under 3504.00.11 and 3504.00.12 was nearly 129 million in 2013, with US trade at 78 million. In 2014, the value of trade had already surpassed 2013 levels by the end of October when it reached 142 million $US, with US trade accounting for 84 million dollars.

Pizza Toppings Kits:

The impact of Canada adding a supplemental note to chapter 16 in late 2013 which creates an additional tariff for products that contain cheese can be demonstrated clearly in the year-to-date trade data (January – October) of 2014. Trade in pizza toppings kits were cut off as the 245.5 percent tariff applied to the cheese portion of the product made continued exports to Canada economically prohibitive. Year to date trade data (January to October) suggests that trade under 1601.00.90.99 and 1601.00.90.90, which are the lines that pizza topping kits came into Canada under, will fall 60 below year 2013 levels. Almost all trade under this line is from the US. This is estimated to represent a loss of close to $30 million in trade. The Canadian government action was taken without consultations with its trading partners and maintains that this trade action was taken as a measure to address an issue of circumvention. The US government has raised the legitimacy of this allegation in several forums in 2014 including at the World Customs Organization, the WTO Committee on Agriculture and the Consultative Committee on Agriculture.

Comprehensive Economic Trade Agreement (CETA): 

In late September 2014, the Comprehensive Economic Trade Agreement was signed by Canada and the European Union and the draft consolidated text has been made public. The EU has been granted concessions on dairy that will allow the EU even greater cheese access into the Canadian market (expanding of the cheese quota and elimination of in-quota tariffs). The preferential quota access is being expanded to nearly 32 TMT from 13.5 TMT, and the over-quota tariff on the milk protein substances (35.04.00.12) is being eliminated completely. The amount of additional EU cheese access will increase over a six year period, from 2,667 MT in year one to 16,000 MT by year six. The EU has also been granted additional cheese access for “industrial cheese” which is defined in the text as “cheese used as ingredients for further food processing (secondary manufacturing) imported in bulk (not for retail sale)”. According to the draft text, the quota for industrial cheese the first year will be 483 MT, and will graduate up to 1,700 MT by year six. In addition to expanded quota, Canada has agreed to give the EU an additional 800 MT of cheese quota, to be taken out of the current global quota of 20,412 MT. The justification for this is to account for the EU enlargement and is a tariff administration procedure. Should the CETA be ratified, the EU share of the global quota will be 70% of the global quota. Non-EU cheese will fall to 6,140 MT from 6,940 MT. Details on how the quota will be administered (who will get the economic rent) are still under discussion.

In addition to the increased market access to cheese, Canada accepted over a hundred Geographical Indications (GIs). The impact on the Canadian dairy industry is that use of names covered by a geographical indication will have restrictions imposed on them. Most generic cheese names currently in use in Canada will continued to be used as they are now (example brie, gouda). However, there are some names such as Asiago and feta that are currently produced and marketed in Canada that will be affected. Canadian manufacturers currently using the names will have a grandfathered right to use the name without any qualifiers, however any new Canadian producers of the cheese will have to use qualifiers such as “style” or “kind”. 

There are several elements of the CETA that have could negatively impact on U.S. cheese exports to Canada. The decrease of the non-EU reserve by 800 tons will reduce US access to the Canadian market. In 2013, trade data shows that cheese imports from the U.S. into Canada were equivalent to 25 percent of the global quota (5,167 MT) and nearly 75 percent of the non-EU reserve. Total cheese imports into Canada from the US in 2013, including IREP were 8,490 MT. 

The access the EU has been given for “industrial cheese” will directly compete with cheese that the United States exports to Canada under the import for re-export program. U.S. exports of UF85 milk may also face additional competition from the EU once the tariff rate quota on 3504.00.12 is no longer applicable against EU exports to Canada. 

The impact of geographical indications is still unknown although Canada has given assurances that it will remain in compliance with all its trade partners. 

Both countries have begun proceedings with legal checks and translations in hopes that it could be wrapped up in the first half of 2015. The ability to meet this deadline is uncertain as there may be some issue with whether or not EU trade deals that have investment provisions, as CETA does, can be simply approved by EU institutions or if they require ratification by each of the 28 states. If the latter is the case, ratification of the CETA may be much further off. 

Domestic Dairy Policies/Strategies: 

The trend in dairy products manufacturing is shifting from traditional methods to using new technologies that use dairy ingredients to reduce costs while encouraging product innovation. This shift in manufacturing trends has led to problems for the Canadian dairy farmers who find that current import controls do not cover some of the dairy ingredients that are now in demand. A growing structural surplus of skim milk powder is the costly result. For this reason, Canadian milk producers are trying to reposition themselves as dairy ingredient suppliers and have put forth several strategies that would render them more competitive with imports not covered by TRQs. In very general terms, the strategies focus on trying to recapture the ingredients market by providing a certain percentage of the milk for a price competitive with the United States’ price, and providing the balance of the milk at domestic prices if a contract is signed that only Canadian-origin dairy ingredients would be used in the production of the dairy products. Using only Canadian dairy ingredients would also give processors the ability to use the “little blue cow” license. The Little Blue Cow is a marketing brand that the Dairy Farmers of Canada have built up and that has gained considerable consumer recognition in Canada. There are significant challenges to getting processors, and all provincial marketing boards, to accept such a model. However, if successful, this model could have significant detrimental effects on the competitiveness of U.S. product into Canada. A proposal has been put forth at the Canadian Supply Management Committee (CSMC) by the milk marketing board of Ontario to apply such a type of program to cheese manufacturing, but there has been, as yet, no consensus from the other provinces, nor from the manufacturing industry. This type of model however proved quite successful in cutting off imports of butter oil sugar blends from New Zealand for use in ice-cream. A 100 percent dairy ingredients program was made available to Canadian ice-cream manufacturers.

Trans Pacific Partnership: 

There is nothing to report on Trans Pacific Partnership negotiations at this time with regards to movement from Canada on opening its supply managed industries.