This pertains to the new dairy policy without which none of us could live.
The objectives of our Canadian dairy policy are twofold. The policy is designed to provide
dairy farmers operating economic units with an adequate income, while at the same time assuring the Canadian consumer a constant supply of the highest quality dairy products at stable prices which will ensure optimum consumption.
Because of its geography and climate Canada is a relatively high cost dairy producing country. Except for certain specialty products, such as mature Cheddar cheese, we cannot hope to be a significant competitor on world markets with dairy products from countries with lower production costs arising from milder climates. Because of our climatic disadvantages in dairy production it would be unrealistic to provide a level of support on all milk produced that could result in surplus production and a possible return to a costly accumulation of stocks.
A further objective of a national dairy policy must therefore be to maintain a reasonable balance between production and disappearance of milk and dairy products, account being taken of export possibilities and of imports. To this end it is proposed that government supports will apply only to domestic utilization as related to a base period. The policy will also recognize the interest of Canada's trading partners in the Canadian market for dairy products, and will permit imports to share in future market growth.
Last year Canada imported a record 17 million pounds of cheese. This was more than balanced by Canada's growing cheese exports of over 30 million pounds.
As an efficient exporter of agricultural products like cheese and wheat, Canada has a vital interest in obtaining better access to foreign markets, and in its own policies must therefore recognize the corresponding interest of other efficient agricultural exporting countries in being able to compete for a share of the future growth of the Canadian market.
To attain these objectives, and as part of the government's long range dairy policy, legislation to establish a Canadian dairy commission will be introduced at the earliest possible opportunity. This commission, working in co-operation with the provinces, would have responsibility for the over-all relationship between governments and the dairy industry.
The interim policy, to come into effect on May 1 for an 11 month period pending the establishment of the Canadian dairy commission, will follow the principles of the long range policy. The interim policy is being put into effect on May 1 for 11 months in order
to facilitate a widely supported change In the dairy support year to align it more closely to the milk production cycle. Starting next year the dairy year will begin on April 1 instead of May 1.
Two separate and distinct programs will be instituted. The first will provide for a basic support through a deficiency payment plan, coupled with direct subsidy and export assistance. The other will comprise a direct supplementary payment to producers. The over-all effect is intended to be a national average price for manufacturing milk used domestically and based on 1964-65 production of $3.50 per hundredweight.
The agricultural stabilization board will be authorized to provide an effective support level of 64 cents per pound for creamery butter, basis Montreal and Toronto. This level will be maintained, as it was last year, by authorizing payments to producers equivalent to the difference between the support level of 64 cents and the board's buying and selling prices. As at present, these payments will first be made by the processing plants to the producers. The plants will then be reimbursed by the board. This action, along with export assistance, is expected to maintain an average factory price to producers of manufacturing milk of between $3.10 and $3.20 per hundredweight.
At the same time the board will determine actual prices paid to producers, by processors, for manufacturing milk and will be authorized to make a deficiency payment direct to producers, equivalent to the amount by which the national average price for manufacturing milk falls below a prescribed support level of $3.30 per hundredweight. In other words, the goal of the deficiency payment plan will be a national average of $3.30 per hundredweight for manufacturing milk.
In accordance with the over-all policy, this price guarantee of $3.30 is to be extended only to that portion of manufactured milk used domestically. Accordingly the amount of any deficiency payment will be reduced by the cost of export assistance. This will mean that if manufacturing milk production and domestic use are in balance producers will, on the average, receive the full $3.30 per hundredweight. Should production exceed domestic use, the effective support level would in fact be reduced by the difference between the domestic price and the export price as determined by the cost of moving the surplus into export.
For example, if it were found that a national average deficiency payment of 15 cents per
hundred pounds was to be paid under this plan, and it the deductible cost of exporting surplus production amounted to 5 cents a hundred, the actual deficiency payment would be 10 cents per hundred. This follows the principle inherent in the long range plan under the proposed Canadian dairy commission that government supports should apply only to domestic utilization of Canadian production as determined by a base period.
Surplus milk produced by fluid milk shippers contributes to our total dairy stocks and hence to any amount that might need to be exported. Therefore any deduction of export costs from the deficiency payment fund would not include the cost of exporting surpluses arising from the fluid milk industry. The cost of export subsidies chargeable against the deficiency payments will be reduced by the percentage of the total supply of manufacturing milk which is represented by that produced as a by-product of the fluid milk industry.
In order to provide comparable assistance to cream shippers, any deficiency payment to shippers of manufacturing milk will also be made to cream shippers on an equivalent basis.
During the coming dairy year, pending establishment of the Canadian dairy commission there will be a supplementary payment to producers. It will approximate, in total, the difference between the $3.30 support level and $3.50 per hundred of milk, based on 1964-65 production of manufacturing milk.
Producers who during the base period marketed less than 10,000 pounds of milk or an equivalent amount of cream will not be eligible for the payment. Since that is less than the production of two very average cows or one good cow, the government does not believe they can rightly be considered dairy farmers.
In order to ensure a relatively higher level of assistance to our many eligible smaller farmers, this payment will be at a rate per hundred pounds that decreases as production rises. For eligible producers, that is, those marketing at least 10,000 pounds of milk last year, the rate of payment will be 25 cents per hundredweight for the first 47,999 pounds of milk marketed. It will be 20 cents per hundredweight for the amount between 48,000 and 95,999 pounds, and 10 cents per hundredweight for all milk marketed in excess of 95,999 pounds.
Thus a producer who in 1964-65 marketed 50,000 pounds of milk will receive a lump sum payment of $124. A producer who mar-
keted 100,000 pounds of milk will receive $220, and a producer who marketed 200,000 pounds of milk will receive $320. The estimated average payment per producer across Canada is slightly over $100. Payments will be made to cream shippers on the same scale, assuming an average fat test of 3.5 per cent. As in the past, producers who normally participate in the fluid milk market will not be eligible for direct subsidy payments nor will they be eligible for the supplementary payment.
The application of the program to major dairy pool areas will be consistent with the interpretation of manufacturing milk which has been used as a basis for the support program for the past two years.
In the interests of our producers I think I should remind them that under the new program it is as important as ever for them to negotiate the best possible price for their milk from the processing plants. The deficiency payment will be based, as all are, on a national average price obtained by dividing total returns to all eligible producers by the total number of eligible producers. Those producers who make good deals with the processing plants will lose none of the benefit of their own private enterprise. If, for example, the deficiency payment came to 15 cents per hundred pounds, the producer who averages $3.20 per hundred from his plant will average a total return of $3.35 per hundred. On the other hand, the producer selling to the plant for only, say, $3.10 per hundred would gross $3.25.
Complete details of the program are being developed by the agricultural stabilization board and will be made known to producers and the trade at an appropriate time.
Subtopic: ANNOUNCEMENT OF NEW DAIRY POLICY