Canadian Dairy Commission / Commission canadienne du lait

Supply Management

Milk Pools

For dairy producers, pooling agreements are a good tool to manage the financial risks associated with the evolution of the domestic market. In its role as a national industry facilitator, the Canadian Dairy Commission administers these pooling agreements on behalf of the dairy industry.

Comprehensive Agreement on Special Class Pooling

Under the Special Milk Class Permit Program implemented in August 1995, industrial milk is classified and made available for use in dairy products and products containing dairy ingredients at prices which are competitive and which vary according to its end use. Thanks to the Comprehensive Agreement on Special Class Pooling, producers from all provincial signatories to the National Milk Marketing Plan share revenues from the sale of milk to processors for special class purposes.

Since August 1, 2001, when Newfoundland-Labrador joined the National Milk Marketing Plan and the national dairy system all Canadian provinces are members of the Comprehensive Agreement on Special Class Pooling.

Agreement on All Milk Pooling

Six provinces took the revenue sharing approach contained in the Special Milk Class Pricing and Pooling system a step further. In August 1996, the Agreement on All Milk Pooling provided dairy producers from Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island dairy with a means for pooling revenues from all milk sales (fluid and industrial), transportation costs, and skim-off. The agreement also provides for several harmonization elements, including multiple component prices, a daily quota system and quota exchange, and the end-use pricing of components. On February 1st, 2003, Manitoba, unable to sustain the costs of belonging to both the Agreement on All Milk Pooling and the Western Milk Pooling Agreement, and abandoning its hope that a national milk pool would be established, amicably withdrew from the Agreement on All Milk Pooling.

The CDC chairs the Supervisory Body of the pool, administers the pooling agreement, does the pooling calculations and provides technical expertise and secretariat services to the pool.

The main accomplishment of the All Milk Pool for the 2004-2005 dairy year was to reach an agreement on the pricing and on the sharing of revenues from fluid milk. According to this five-year agreement, fluid milk prices will be adjusted according to the CDC’s support prices announcement for the first two years. For the following three years, prices will be determined by a formula that takes into account the consumer price index, cash costs of producing milk, and personal disposable income. This agreement was effective February 1^st, 2005 . At the same time, provinces agreed to increase the contributions for the promotion of fluid milk and to implement a tank sealing program.February 1^st, 2005 . At the same time, provinces agreed to increase the contributions for the promotion of fluid milk and to implement a tank sealing program.

The panel requested by Nova Scotia to rule on the creation of a quota exchange mechanism between provinces handed down its ruling in September 2004. The panel indicated that the pool’s Supervisory Body needed to establish a quota exchange mechanism as well as its rules. Negotiations have since taken place between provinces but the quota exchange is still not in place.

The committee in charge of negotiating Newfoundland and Labrador 's entry into the All Milk Pool presented a draft agreement to the Supervisory Body in July 2005. Discussions will continue during the next dairy year.

During the year, provinces undertook a major review of the All Milk Pooling Agreement, which dates back to 1996. They asked Mr. Gilles Prégent, lawyer and former Chairman of the CDC, to draft a document that would accurately reflect the current operations of the pool. This mandate will continue in the next year.

Since January 2005, the members of the All Milk Pool are trying to iron out the problems associated with the implementation of the Harmonized Transportation Cost Model. These discussions will carry on during the next year.

Western Milk Pooling Agreement

In March 1997, the four Western provinces implemented an all milk pooling system. The CDC chairs the Western Milk Pool (WMP) Coordinating Committee, administers the pooling agreement, does the pooling calculations and provides technical expertise and secretariat services to the pool.

During the year, the WMP provinces worked on the implementation of a milk truck sealing program. Work also continued on the promotion of dairy products, particularly cream. The provinces established new milk classes to encourage innovation in the area of fluid milk products and processed dairy products. The WMP also set up a sub-committee to discuss fluid milk pricing issues.

Finally, the WMP Research Committee played an important role in the development of the CDC's Dairy Marketing Program. Ideas discussed at this committee resulted in CDC hiring two Innovation Champions who now travel Canada from coast to coast.

Pools in Numbers 2004-2005

	Fluid milk produced (million hl)	Industrial milk produced (million hl)	Blend price to producer * ($/hl)
All Milk Pool	21.8	40.7	64.08
Western Milk Pool	9.4	9.2	63.69

*In-quota milk at 3,6 kg butterfat per hl Top of page Printer Friendly