Supply Management

The Canadian dairy industry operates within a supply management system, whereby the supply of raw milk from dairy farmers is controlled in order to match the domestic market needs of dairy processors. The system was introduced in the early 1970's and is applicable to industrial milk only (i.e. milk used in the manufacture of yogourt, ice cream, cheeses, butter, powders). Each dairy farmer in Canada has a production quota (Market Sharing Quota) that has been established through the National Milk Marketing Plan, which is an agreement between the federal and provincial governments providing for the provincial shares of MSQ. The national plan has been signed by the government and dairy farmer organization in each of the ten provinces.

The Canadian Dairy Commission (CDC), a crown corporation, provides leadership and coordination with the provinces for the supply management system in the country. The Canadian Milk Supply Management Committee (CMSMC) administers the national plan and is comprised of producer, government and processor members in each province. The CMSMC develops national policy for the dairy industry and is chaired by the CDC. It reviews production, economic and marketing factors at its regularly scheduled meetings to determine if supply and demand are being met.

Supply management not only controls the domestic production allowed within the country but also limits the amount of imported dairy products through tariff rate quotas permitted by the World Trade Organization agreement on international trade. The third aspect of supply management is the price setting authority of provincially mandated marketing agencies and the federal government support for the target price.

There are three pooling agreements that have been negotiated and agreed to in order to accommodate the changing markets within Canada. The Special Class Pooling agreement provides for the pooling of market returns from the special classes is shared by all dairy farmers across the country. The All Milk Pool (P5) is administered by a Supervisory Body and covers the provinces of Ontario, Quebec, PEI, New Brunswick and Nova Scotia. This agreement not only pools dairy farmer returns from the special classes but also for the returns in the fluid milk and industrial milk markets. The Western Milk Pool includes the provinces of BC, Alberta, Saskatchewan and Manitoba in much the same way as the P5 does.

In Ontario, the Farm Products Marketing Commission of the Ministry of Agriculture, Food and Rural Affairs, oversees the entire dairy industry. It and Dairy Farmers of Ontario, the organization representing the interests of dairy producers, are the signatories to the national and regional pooling agreements.