Canadians hoping their weekly grocery staples like milk and eggs may soon cost less thanks to a new trade deal that opens up Canada’s dairy industry may be out of luck. Experts say the trilateral agreement between Canada, the U.S. and Mexico is unlikely to bring prices down, but could leave shoppers with more choices in the dairy aisle.
The U.S.-Mexico-Canada Agreement announced Sunday night will grant an expanded 3.6 per cent market access to the domestic dairy market and eliminate two milk price classes, including the controversial Class 7.
U.S. President Donald Trump had long criticized Canada’s supply management system for undercutting American exports and hurting U.S. farmers.
Canada implemented supply management in the dairy industry in the 1970s, which sets quotas on production based on anticipated demand. The government decides how much farmers are paid for their production and blocks out foreign production with high tariffs.
Prior to the new deal, experts said Trump did not necessarily want to dismantle supply management, but rather was more angered by milk classifications like Class 7. These will be eliminated under the new deal.
“I don’t see a big, immediate impact on retail pricing,” said Al Mussell, founder of Agri-Good Economic Systems Inc., an agriculture and food research organization.
The standard four-litre jug of milk is a loss leader for most grocers that sell it below the price needed to make a profit, he said. Additionally, a high proportion of cheese and butter is on promotion at any given time, he said.
The new deal’s elimination of Class 7 milk — ultra-filtered or diafiltered milk that is essentially a protein-heavy concentrate used to make cheese and other dairy products — is the biggest news item, said Sylvain Charlebois, a Dalhousie University professor who is the lead author on an annual food price report, estimating how much grocery and restaurant prices will rise or fall over the coming year.
In 2016, Canada created the Class 7 pricing agreement that has essentially restricted U.S. exports of the product. It allows Canadian dairy processors to buy domestic milk at cheaper world market prices instead of higher prices controlled by the national supply management system.
Eliminating that class would allow processors to become more competitive and potentially give grocers room to bring down prices, Charlebois said.
“It doesn’t necessarily mean that consumers will reap the rewards or that the sector will pass on savings to consumers,” he said.