OTTAWA, May 1 /CNW Telbec/ - The Dairy Processors Association of Canada
(DPAC/ATLC), representing dairy processors from coast to coast, has serious
concerns for the future of the Canadian dairy industry as a result of a
regulatory initiative announced by Agriculture Minister Strahl on February 7,
2007 and therefore asks the Government to halt the process immediately.
The Minister's regulatory initiative is based on a proposal supported by
the organization representing Canadian milk producers, the Dairy Farmers of
Canada (DFC). The proposed regulations would force dairy processors to
purchase more raw full fat milk to produce cheese by limiting or prohibiting
the use of ingredients made from milk. These ingredients include whey protein,
skim milk powder, milk protein and whey protein concentrates. The purchase of
the additional raw milk will increase production costs.
DPAC/ATLC's Chairman Nash Lakha, President and CEO of Parmalat Canada,
expressed his concern on behalf of the Canadian dairy processing industry that
the initiative would "result in higher prices to Canadian consumers and make
it impossible for Canadian dairy processors, at a time when the cost of
Canadian industrial milk to Canadian processors is already one of the highest
in the world, to develop new products to meet consumer demands."
Mr. Lakha went on to say that the "restrictions could result in more than
$1/2 billion in increased direct costs to consumers at retail and in the
restaurant and foodservice sector and impact another $3/4 - 1 billion in value
of traded food products. They also put Canada at risk of breaching its
international trade obligations."
The proposed regulatory changes will not only impact Canadian cheese and
cheese processors. They will impact imported cheese as well as other food
products containing cheese, both Canadian-made and imported. The Canadian
restaurant and foodservice business also will feel the effects of this
initiative. As the cost of cheese and products containing cheese rise, the
operators of restaurants will have to choose between raising prices to their
customers or using less cheese and cheese products.
All of these costs eventually impact the Canadian consumer and the
overall economy. DPAC/ATLC has conducted amongst its members an assessment of
the impact of the proposed regulatory changes. This assessment has been shared
with the Federal Government and includes the following estimated annual costs:- $250 million increase in cheese costs to Canadian consumers at the
retail level.
- $300 million increase in cheese costs in the restaurant and food
service sector.
- $50 million increase to Canadian food processors using cheese as an
ingredient in other products.
- $750,000,000 to $1 billion in traded food products containing cheese
(NAFTA alone).
- $100 million in cheese imports.
Many other issues have been identified, including environmental issues. It
is calculated that reformulation of cheese based on the proposed new standards
would result in an additional 300 million litres of whey annually. Strict
environmental rules make disposition of liquid whey for which there are few
customers almost impossible and increases processors' costs substantially.
DPAC/ATLC has received no response to the industry's concerns from the
Minister or the Canadian Food Inspection Agency (CFIA).
An overriding concern of DPAC/ATLC members is the lack of official reason
given by the Government for the proposed new regulations for cheese. To date,
the purpose of this regulatory initiative has not been stated by the Minister.
Canadian cheese processors have not requested these regulatory changes nor has
the Government identified any health or safety issues for the proposed
regulations.
The situation surrounding the proposals has been compounded by the fact
that standard regulatory process has not been followed by the Canadian
Government. There has been no consultation with retailers, the restaurant and
food service industry, food manufacturers, Canadian consumers or provincial
and foreign governments, all of whom will be seriously concerned with this
initiative.
"The Government is being very secretive about this and is rushing to
prepare these regulations and announce them by June without any consultations,
and we are very concerned with what could result" said Mr. Lakha. "No other
country in the world has regulations and restrictions like these that add
costs to consumers", he added.
"We ask Minister Strahl to make good on his commitment made to DPAC/ATLC
in January that Canada's new Government would not proceed with changes to
dairy product regulations without the support of Canadian dairy processors."
said Mr. Lakha.
Backgrounder (attached)
BACKGROUNDER
on
Minister Strahl's February 7th Announcement:
"that he would be asking the Canadian Food Inspection Agency (CFIA)
to launch a regulatory process related to compositional standards
for cheese."
DPAC/ATLC
---------
- Dairy Processors Association of Canada / Association des
Transformateurs Laitiers du Canada (DPAC/ATLC) is Canada's national
industry association representing the public policy and regulatory
interests of the Canadian dairy processing industry.
- The dairy processing industry employs 26,000 people in Canada and
accounts for $11 billion dollars in sales on an annual basis. Last
year dairy processors in Canada produced approximately 350,000 tonnes
of cheese.
- DPAC/ATLC has completed an Impact Analysis (available on DPAC/ATLC's
website at www.dpac-atlc.ca - Regulatory and Policy Issues -
Submissions) based on information it has gathered over the past two
months from its members, Government and other sources.
Regulatory Process
------------------
- DPAC/ATLC and its members are seriously disturbed about the lack of
transparency and consultation. The purpose of the regulatory changes
has not been made public and CFIA has not released any written or
official information which makes a mockery of a supposedly scientific
and transparent regulatory process.
- The new Government of Canada Regulatory Policy published April 1, 2007
states: "Departments and agencies are responsible for identifying
interested and affected parties and for providing them with
opportunities to take part in open, meaningful and balanced
consultations at all stages of the regulatory process."
- A revised and updated set of regulations for cheese and all other dairy
products (Version 9 of the Dairy Product Regulations) to modernize
Canadian regulations supported by CFIA, dairy processors, importers and
other stakeholders (except dairy producers) has been waiting since 2003
and now is further delayed as a result of Minister Strahl's initiative.
Dairy Farmers of Canada (DFC) Objectives
----------------------------------------
- The regulatory proposal supported by DFC stems in large part from the
loss of the WTO ruling that mandated that Canada could no longer export
skim milk powder.
- Since September 2003 and the WTO loss, a major focus of DFC has been to
demand that the Government radically alter its basis for Canada's dairy
product regulations in order to maximize processors' purchases of raw
full-fat milk, ignoring cheese making requirements and modern dairy
technology.
Modern Cheese-making and Dairy Technology
-----------------------------------------
- Processors have developed technology so that whey protein can be added
back to their cheese vats... That increases their yields, or amount of
cheese made, from every hectoliter of milk they process.
- The use of whey protein is facilitating the production of low-fat
cheese. The use of whey protein is a contributing factor to the growth
of light cheese and consequently leading to less butterfat consumption.
- The use of whey protein is having a similar effect on yogurt production
by improving the quality and sales growth of low fat yogurt.
CFIA's Proposed Regulatory Changes for Cheese
---------------------------------------------
- Based on verbal information provided by CFIA over the past two months
DPAC/ATLC understands that:
1. The new regulations will impact all standardized cheese other than
processed cheese.
2. The regulations will establish a new standard for cheese based on
the source of dairy protein used by processors in the
manufacturing of these cheeses.
3. More specifically, CFIA will put into regulation ratios that limit
the use of whey protein and other natural dairy ingredients (skim
milk powder, milk protein and whey protein concentrates).
4. The regulations for cheese under the Food and Drugs Act will be
revised to allow the use of the ingredients referenced in those
ratios.
5. CFIA will apply and enforce this new regulatory standard for
cheese to both domestically produced and imported cheese and
further processed food products containing cheese - both Canadian-
made and imported.
Health / Consumer Issues
------------------------
- These proposed revisions to the cheese standards will impact the
ability to produce affordable and high quality regular cheese and low
fat cheese, develop new products and meet increasing consumer demand
for low fat dairy products.
- It is estimated that the costs associated with reformulation would
increase the cost of cheese at retail to the consumer 10-15% per year.
Environmental Issues
--------------------
- It is calculated that reformulation of cheese based on the proposed new
standards would result in an additional 300 million litres of whey
annually for which there are few customers. Environmental rules
effectively make disposition almost impossible and very costly.
Trade Issues
------------
- There are reliable estimates that at least 30% of cheeses imported into
Canada ($100,000,000 annual value) would not comply with these proposed
standards. These proposed new cheese standards will further isolate
the Canadian cheese and food industry from world markets. Other
regulatory regimes permit the uninhibited use of modern milk
ingredients in cheese making.
- If these new cheese standards are promulgated, it would be highly
probable that Canada's trading partners will challenge the imposition
of what are essentially new non-tariff trade barriers through NAFTA and
the WTO.
Economic Issues
---------------
- Changes such as those being proposed for cheese that freeze or reverse
technological innovations will make the industry less competitive and
result in decreased investment.
- The proposed regulatory change would exacerbate the difficulty of
industry growth in the dairy sector at a time when the new Agriculture
Policy Framework encourages new uses and innovations in all agriculture
and food sectors.
Other Impacts
-------------
- Some imported cheeses will not meet these new standards resulting in
bizarre situations like cheddar originating in County Cheddar in the
U.K. that could not be labelled a "cheddar" in Canada because it might
not meet the proposed protein source cheddar standard for cheese.
- Canada's dairy processors already face raw milk costs that are one of
the highest in the world. Even higher costs as a result of these new
restrictions will drive the food service and further processing food
industries to purchase analogs (vegetable based alternatives).
- The new regulations will impact manufactured foods containing cheese as
an ingredient (either made in Canada or imported). Estimates of the
value of these traded products (on a NAFTA basis alone) are
$750,000,000 - $1,000,000,000 annually and could be much higher.
- The new proposed regulations will have an impact on consumer price and
demand, lower consumption and ultimately further reduce milk production
across the country.
Dairy Processors Association of Canada /
Association des Transformateurs Laitiers du Canada
April 2007
For further information: Don Jarvis, President and CEO, Dairy Processors
Association of Canada, (613) 232-7242, Fax: 613-235-5866
