The WTO’s steamroller goes on and on. Farmers are increasingly wondering about and concerned with the supply management system to which they are connected. The Coopérateur agricole begins a series of news stories on the directions taken elsewhere around the world in terms of quota systems. We believe that we can never be too informed and that these different perspectives can be useful to agricultural businesses and provide a little food for thought. However, the points of views expressed by the various contributors do not represent the views of the Coopérateur agricole or La Coop fédérée. Read about Canada’s position in the next edition.

Switzerland chooses to reject dairy quota system as of May 1st 2009. “Canada sounded the alarm. The increasing level of debt of Canada’s farmers to purchase quota is a road that leads to nowhere. When the value of a quota is worth more than the land, the buildings and the animals, then you’re endangering the dairy industry’s competitiveness”, states recently retired Eduard Hofer, former Vice Director of the Swiss Federal Office for Agriculture.

Considered to be the father of dairy quotas, first introduced to this small country in 1977, Mr. Hofer about-faced and campaigned for its abolition stating a crucial reason. In his opinion, “the artificial cost of quotas is detrimental to transferring farms to the next generation”.

The value of the Swiss dairy quota has already reached a value of nearly $233 million early in the millennium. Mr. Hofer adds: “the State has always maintained that the dairy quota system could, one day, be discarded, without any form of indemnity.”
Eduard Hofer, ex-vice-directeur de l’Office fédéral suisse de l’agriculture

When questioned about the pertinence of quotas, Christoph Grosjean-Sommer, spokesperson for the Fédération des producteurs suisses de lait (FPSL), says that “each country seeks to improve its production system. Ideally, there wouldn’t be any price placed on quotas. The big question is in terms of quota transactions: who gets the money? In Switzerland, we would pay those who had sold their farms or who wanted to expand. Should we have instituted a fund to promote dairy products or fund some sort of assistance for young farmers? That’s what the government is supposed to do.”

The Swiss’ step by step discarding of the dairy quota system is a deliberate and thoughtful move that is part of an agricultural policy supported by the people of this tiny realm. The 7 million inhabitants voted in favour of this policy by a proportion of 77.6% during the June 9, 1996 referendum.

Thanks to this historic vote, the champion of raclette chose a multifunctional and sustainable agriculture that is GMO-free and adapted to market demands. The agricultural world has been entrusted with four important missions, now part of the Constitution: 1) supply safety for the population; 2) conservation of natural resources; 3) maintaining the landscape; 4) diversify land occupation, from plains to Alps.

The transfer of guaranteed prices covering production costs to a system of direct payments to farmers who can produce proof of ecological benefits is at the heart of this new policy. “The previous plan was costing the State a fortune since it would guarantee prices that promoted overproduction while production costs kept rising, and this doesn’t even include ecological damage”, states Mr. Hofer. Passing this new social contract “required political courage. Here, the State makes decisions that sometimes go against the farmers’ will”, adds Mr. Hofer. 

This new “green” agricultural policy costs the Swiss treasury about $4 billion per year and it also depends on greater market freedom. The goal: produce more eco-friendly milk so as to send Gruyere, Emmental and other specialty and fresh cheeses off to conquer the European Union (EU), a potential market of 450 million consumers whose appetite has been increasing consistently by 2 to 3% per year. 

Switzerland intends to transform its already world-renowned cheeses into a spearhead for its exports to balance the agricultural trade scale, which is currently in the red. In 2002, the tiny dairy kingdom signed a bilateral agreement on cheese with the EU, eliminating any commercial interference over a transitional period of 5 years. And since 2007, not even the Alps have been able to slow down business. Swiss exports of cheese have grown tenfold with more than 56,000 tons while cheese imports are five times greater with 39,629 tons. The Swiss are pleased with these additional imports since their yearly per capita consumption has also increased, from 2.3 to 20.7 kg between 2001 and 2007, asserts the 2008 report produced by the Swiss Federal Office for Agriculture

However, the offset of this new social contract combined with greater market freedom, which includes making concessions to the WTO, is that Swiss producers have had to cut milk prices, when previously accustomed to $1 per kilo. “The existence of all 27,000 dairy farmers is threatened”, explains Peter Gfeller, president of FPSL, in a recent press release. The price of milk, currently negotiated between producers and processors is the subject of bitter negotiations between FPSL and the country’s four large dairy industrialists. “The challenge is to bring together the 30 or 40 Swiss farmer organizations and create a white OPEC so as to achieve greater transparency in terms of the price structure dictated by four individuals”, explains Christoph Grosjean-Sommer.

FPSL income protection strategy proposes that the State increase direct payments by $300 per cow because “production and labour costs will always be higher than in the rest of Europe”, continues Mr. Grosjean-Sommer. FPSL recommended that its members lower their cost of production on average by 15%, generated mostly by economy of scale, but also through increased productivity, sharing the use of machinery and suppressing the quota leasing. The quarter of all quota values can be assigned to leasing. “By removing the dairy quota, the purpose of entering into leasing agreements is voided. Farmers who leased their quota can either take it back or get out of dairy production. The goal is to stop the flow of money between active dairy producers”, declares Mr. Hofer.    

Swiss farmers also intend to increase their dairy production by 10% by 2015, through focused labelling of their products with “Suisse Garantie” (Guaranteed Swiss) and others. The State will maintain its financial aid for processed dairy products, specifically cheese, until 2012 and will also finance R&D programs. The object is to conquer domestic and European markets with innovative and non-traditional products “if we can make chewing gum out of milk, we will”, jokes Mr. Hofer.

Approximately 1,500 dairy operations disappear from the Swiss landscape every year, while some 500 young producers take up the torch. Mr. Grosjean-Sommer estimates the number of farms, averaging 20 heads and 20 hectares, will someday stabilize at around 15,000. “In Switzerland, we are asking ourselves how we can best optimize the system. Should we have one cow that yields 12,000 kg to 14,000 kg of milk grazing in the plains or two cows yielding 5,000 kg foraging in the mountains? Our dilemma is that we are getting one direct payment per cow and there is a ceiling on the overall amount of direct payments. Bottom line: in the end consumers will decide the size of family farms and their locations.”

To find out more:
Organisation for Economic Co-operation and Development (OECD)
Economic Survey of Canada 2008: :


Swiss Federal Office for Agriculture (OFAG):
Fédération des producteurs suisses de lait:


Les chiffres clés de la filière laitière:
Fédération nationale des producteurs de lait:

United States

Wisconsin Milk Marketing Board :
Dairy Business Innovation Center :
Wisconsin Cheese Makers Association :
University of Wisconsin :

France, just like the other 26 members of the European Union, is preparing to say goodbye to dairy quotas in 2015. Initiated in 1984 by the European Union and France and inspired by Canada as a result of a meeting held in Ottawa between Canadian liberal Eugene Whelan and French socialist Michel Rocard, both former ministers of Agriculture, the European dairy quota system sought to stop the expansion of dairy production and return it to a more manageable level of domestic consumption while also getting rid of subsidies to export massive dairy product surpluses. “Unlike other countries, from the start we decided that we would not trade on our quotas to avoid the extra debt burden placed on our operations and allow the industry’s competitiveness to plummet. In fact, this is why Europe rejected dairy quotas”, explains Thierry Roquefeuil, dairy farmer and administrator with the Fédération nationale des producteurs de lait (FNPL).
Thierry Roquefeuil

France, which now counts some 90,000 dairy operations, has chosen a land-related system of quota administration management per department, “which sets milk production objectives for each region and allows for the next generation to take over. “This system has been known to drift off course because, occasionally, land with quota had greater value than land without. However, “nowadays, milk attracts the highest number of young farmers out of all other productions”, states Mr. Roquefeuil who manages a herd of 50 lactating cows in the south-west region of the country. The number of dairy businesses is falling at a rate of 3% to 4% per year, half of which are revived by young farmers while the other half is reserved for expansion.

Since the reform of the Politique agricole commune (common agricultural policy) introduced in 2003, French dairy farmers receive direct payments on the basis of eco-conditions. France, Europe’s very own dairy udder, has been collecting the lion’s share of Brussels’ aid, roughly some 10 billion Euros each year, all types of production included. However, France is an exporter and Europe exports 10% of its dairy production. Excluded by WTO, French dairy farmers and processors can no longer count on the European Commission’s management and aid to liquidate their inventory. They must all agree on the yo-yoing price of milk powder, butter and cheese throughout the international market, which, even if these products represent a mere 7% of the world’s dairy production, has a serious and defining impact. “The current price of milk is at 33 Euros per hectolitre in France and could drop to 29 Euros by the end of 2009”, believes Mr. Roquefeuil.

As is the case with Swiss farmers, French producers also dream of a white OPEC to negotiate a better price with dairy processors. “The French dream is to be Canadian! Dairy farmers are the masters of their production and distribute their milk to industry. This is something we did not know how to do in 1984 when quotas were implemented”, states Mr. Roquefeuil. This is a dream that dairy farmers believe is beyond reach due to the diversity of parties involved in negotiating a single base price – large industrial groups, cooperatives – different territories and appellations d’origine contrôlée (registered appellations of origin) or any other type of labels.

If the end to all dairy quotas is set to happen in 2015, “it will not be the end of learning all about supply and demand.” The FNPL has no intention of meeting the French objective of increasing dairy production by 5% by 2013 if the market is unable to absorb that production. “Otherwise, the price of milk powder will drop and that’s the price that determines whether or not a farmer stays in business”, declares Mr. Roquefeuil.

Farmers in the land of 1,000 cheeses are expecting a quick reorganization of the dairy industry as production volumes have been negotiated between producers and businesses on a contractual basis since 2003. “Businesses who offer products that correspond to the market will be able to pay a decent price for milk. However, those who are exposed to more significant variations will have a tougher time of it”, concludes Mr. Roquefeuil. 

In a completely deregulated business environment, Wisconsin has been able to carve a leadership position for itself in the specialty cheese-making industry in the U.S and abroad.

Québec dairy farmers know all about this Midwestern state. Every year, the city of Madison is home to the world’s most prestigious dairy cattle expo: the World Dairy Expo. The event’s organizers are just as familiar with our “Belle province”. Our world-class breeders are frequent award winners at this highly renowned fair.

However, Québec and Wisconsin have much more in common than a passion for expos. Both represent large dairy basins. The development of specialty cheeses is showing strong growth in both regions and cheese consumption per capita is also rising consistently, year after year.

Nonetheless, there are some significant differences that distinguish each industry. Wisconsin’s dairy industry is free from a cost pricing model and from quotas, which limit farm production; it is also free from contractual agreements that assign a specific milk volume to processing plants and from rules that prevent the export of dairy products.

With Canadian expansion being limited, dairy processors have naturally re-focused their attention to this market. Saputo and Agropur have joined these ranks. Back in January of 2008, the large dairy cooperative acquired Tegra Food, a family-run business from Wisconsin resulting from the merger of three of the oldest cheese-making companies in the state. Trega Food owns three plants in Wisconsin and employs some 300 workers. They make cheddar, feta, mozzarella, provolone and various dairy ingredients. Sales for the company, which processes 650 million litres of milk each year, are around $300 million US.

“Supply management doesn’t allow us to expand or to export our products, explains Renée-Claude Boivin, spokesperson for Agropur. In a restricted and mature local market, where three players (Agropur, Saputo and Parmalat) share 75% of dairy processing in equal proportions, we have no other choice but to explore and set up shop outside Canada. Furthermore, with the Competition Act, we could never be the only Canadian processor. The company is therefore keeping its options open and is attentive to any and all possible business opportunities that can solidify our presence within the Canadian market and allow us to pursue our expansion abroad.”

Dean Strauss & Patrick Geoghegan.
According to the WMMB, Wisconsin is the leading cheese-maker in the United States with 25% of all cheese production.

“When the Pronovost Commission asked me to suggest an American state where a mission could be undertaken to learn about new orientations for agriculture, I immediately suggested Wisconsin, states Guy Debailleul, researcher and teacher at Université Laval. Not only because the importance of its dairy production allows us to make a parallel with Québec, but also because we tend to harbour clichés about this type of production, considered traditional and inert. Yet quite the opposite is true; it has proven to be filled with innovation. The Dairy State has implemented a structure and programs that encourage the development of added value products, as well as incentives that don’t work in Québec where “industrial size” farms are increasingly the norm and will be in the long term if the system doesn’t show a little flexibility, a serious handicap for our dairy industry.”

Christened America’s Dairyland, Wisconsin, the nation’s second dairy basin after California, with nearly 11 billion kilos of milk produced in 2007, has long had the moniker of being a “commodities maker”. Many perceived Wisconsin as being the producer of massive quantities of dairy ingredients and cheese. However, several influential individuals of this state were determined to change this perception. They achieved their goal with great success, because in the shadow of the large processing plants are several cheese-makers who create and prepare a multitude of specialty and artisanal products. What’s more is that consumers can’t get enough! The total number of products is a whopping 600 cheese varieties. It is an industry in full bloom supported by 150 years of experience. (See box).

In 2008, Wisconsin’s 13,500 dairy farmers have received, on average, $19 US for 100 pounds of milk ($41.80 US /hectolitre). The price is based, among other things, on the price of cheese on the Chicago stock market. “Price varies according to supply and demand for the various components of milk and the yield provided, explains Robert Cropp, Dairy Marketing and Policy Specialist at the University of Wisconsin. So essentially, the market dictates its evolution. Processing plants are extremely competitive in wanting to ensure their milk supplies.”

This is a situation smaller producers are finding difficult due to the recent increase in the cost of most inputs they use. “The number of farms is decreasing by a rate of one each day, specifies Patrick Geoghegan of the Wisconsin Milk Marketing Board. The result: the average farm, which has about 90 cows, is growing. Older farmers are leaving dairy farming behind. The young generation is investing and expanding. They are taking advantage of economy of scale and hiring staff to improve their quality of life.” Some maximize dairy production for each cow. Others turn to the use of intensive pasturing to reduce the cost of feed and are willing to sacrifice production. Still,
others are focusing on adding value to their milk, either by processing directly on the farm or through small cheese-making facilities.”We have all kinds of businesses, from the small family farm to huge operations, stated Mr. Geoghegan. Each one contributes to the strength of our industry.”

With the price of milk at nearly half that in Canada, shouldn’t we want to implement a quota system? “The idea of initiating some type of supply management has already been put forward a few times throughout the years, declares Robert Cropp. Especially in the early 80s when we experienced a surplus of milk that dragged down prices. But the concept never attracted a lot of takers apart from the smaller farmers and older producers.” “We are avid promoters of free enterprise, states Dean Strauss, president of the Professional Dairy Producers Association and owner of a herd of 685 dairy cows. In the early 90s, when we founded the association, Wisconsin was losing a lot of dairy farmers because their businesses weren’t competitive enough. Our association, which brings together all kinds of operations – small and large – including some beyond America’s borders, established an education program and provides solutions to be successful and become increasingly competitive. Our managers are increasingly focused on the business aspect of dairy production. If we want to expand, we just do. We’re negotiating milk prices on the stock exchange in the form of futures. We’re establishing price contracts with processors. It’s a management style that I enjoy. I am my own boss.”

Would Wisconsin’s dairy and cheese production have experienced such growth had it been submitted to the same kind of regulations as the Québec industry? “Probably not, says Robert Cropp. Higher prices for dairy farmers would mean more expensive raw material for processors and that translates into higher retail prices for cheeses, which would then result in limited consumption.“

The threat of removing tariff barriers and supply management hangs heavy. What would happen to the dairy industry in Québec and in Canada? “Canada would have to restructure its dairy industry, and it would be capable of doing just that, declares Mr. Cropp. But in the short term, the market would undoubtedly be flooded with foreign products. Canada is already America’s second export market for dairy products. We’re exporting cheese and dairy ingredients.”

A Dairy Makeover

A study conducted by the University of Wisconsin in 2005 concluded that in order to encourage specialty and artisanal cheese production, they needed to reinforce the industry’s image and improve business support. The study’s recommendations resulted in the creation of the Dairy Business Innovation Center (DBIC), a non-profit organization funded by the federal government. The DBIC consists of experts working to improve business profitability, outline business plans, investment profiles and fill-out grant applications as well as develop product marketing strategies. These services are offered free of charge to farmers.

Joan Kimball, Agro-Food Associate, Québec delegation Chicago and member of the Board of Directors of the American Cheese Society, wants to lend a hand to Québec cheese shops by focusing on what’s being done in Wisconsin. “There have been some significant investments in education, research and in new and older cheese-making methods, she says. Farmers and cheese-makers are working hand in hand. Furthermore, in collaboration with the University of Wisconsin, a Master Cheesemaker Program has been developed, the only one of its kind in the United States. We’re now talking about artisan master cheese-makers.”

In terms of the Wisconsin Milk Marketing Board, they’re also working on product ‘branding’. “For every 100 pounds of milk sold on the farm we get 15 cents, explains Patrick Geoghegan. From this amount, five cents are paid to the National Dairy Board. The remaining ten cents generates some $24 million every year and is used, most notably, to promote dairy product consumption.”

“Cheese artisans depend on the production method, history, branding and labelling to capture the consumer’s imagination, says John Umhoefer, Executive Director of the Wisconsin Cheese Makers Association. Their efforts have even inspired traditional cheese-makers, such as cooperatives, to produce these new exotic flavoured cheeses.”

In addition to Wisconsin’s 130 large-scale traditional cheese making plants, there are some 1,200 licensed cheese-makers and 50 artisans with the title of Master Cheese-Maker. “In 2008, specialty cheese-making experienced a 3% growth compared with 2007 and dairy product exports climbed by 130%”, states Patrick Geoghegan.

Sources :
Swiss Federal Office for Agriculture, Évaluation des données sur la production de lait 2006-2007; Les chiffres clés de la filière laitière,; Agéco, FPLQ, MAPAQ, PATLQ, Statistics Canada, Dairy Statistics Highlights 2008 ; USDA; Valacta; Wisconsin Milk Marketing Board; Wisconsin Agricultural Statistic Service



Copyright © 2014 La Coop fédérée | Tous droits réservés