The Dairy Direct Payment Program (DDPP), which issued $1.75 billion over four payments from 2019 to 2023 to compensate for the Canada-European Union (CETA) and Trans-Pacific Partnership (CPTPP) trade pacts, this year begins to roll out $1.2 billion over 2023 to 2029 to compensate for the Canada-U.S.-Mexico Agreement (CUSMA).

The plan for CUSMA compensation for supply-managed sectors was first laid out in broad strokes last November.

One significant difference announced Tuesday for this segment of the DDPP is that dairy producers must hold a valid dairy quota licence registered with a provincial milk marketing board or agency on Aug. 31 to be eligible for a payment in a given year.

Previous DDPP program years had used an Oct. 31 calculation date. The government noted Tuesday that this change has been made “in consultation with industry.”

Since the calculation date affects the opening of the program registration period, setting the date earlier in the year “will ensure producers have more time to sign up before the deadline and may receive their payment sooner.”

The registration period for the fifth payment is expected to open this fall of 2023. Eligible producers must register before March 31, 2024, the government said.

Those producers can expect letters from Agriculture and Agri-Food Canada in the fall with registration details. Payments would follow once a producer completes the registration, AAFC said Tuesday.

Setting the new quota reference date for the DDPP will ensure producers “have the necessary information further in advance to be able to plan and evaluate their farm situation,” federal Agriculture Minister Marie-Claude Bibeau said in Tuesday’s release.

Sustainability research

Bibeau on Tuesday also announced an unrelated funding envelope of over $7.5 million for Dairy Farmers of Canada (DFC) from the federal AgriScience Program – Clusters Component.

AgriScience — a federally funded program under the Sustainable Canadian Agricultural Partnership (S-CAP) — will back DFC for research into “solutions to improve the environmental and economic sustainability, and resilience of the Canadian dairy industry.”

To that end, the government said, DFC is to develop and implement plans to reduce greenhouse gas (GHG) emissions and sequester carbon, and to improve the health and welfare of cows and the quality of milk produced.

Outcomes in the former area are expected to help the industry hit DFC’s previously stated goal of reaching net-zero GHG emissions from dairy production by 2050. Research in the latter areas, meanwhile, will include antimicrobial use and antimicrobial resistance in dairy cattle, genetic improvements in cattle, and “eco-efficient” dairy processing.

DFC president Pierre Lampron said in a separate release that the funding is “essential to enable strong, robust and evidenced-based research material that ultimately helps dairy farmers increase the efficiency of their farms.” — Glacier FarmMedia Network

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Federal Agriculture Minister Marie-Claude Bibeau on Saturday announced $1.405 billion in compensation, as pledged in August last year to dairy farmers on an eight-year timeline, will instead flow as three years’ worth of direct payments.

That’s on top of the $345 million already paid out to dairy farms last December and January and a previously announced $250 million on-farm investment program.

Bibeau on Saturday also announced $691 million for a 10-year run of programs for supply-managed Canadian chicken, turkey, egg and broiler hatching egg producers.

Citing “sector demands,” the government said its feather-sector programs will go to “drive innovation and growth for farmers.”

The programs are to be designed “in consultation with sector representatives and launched as soon as possible,” the government said.

“Today’s announcement of a substantial compensation package for our dairy, poultry and egg farmers shows our support for a strong supply management sector for many generations to come,” Bibeau said in a release.

For dairy farmers, the new schedule calls for cash payments of $468 million in 2020-21, $469 million in 2021-22 and $468 million in 2022-23, to be issued “on the basis of their milk quota.”

The government gave the example of an owner of an 80-cow dairy farm, who would see a direct payment of about $38,000 in each of those years.

For affected sectors, Saturday’s announcement is meant to make good on long-pledged compensation for market access concessions Ottawa made to foreign exports in negotiating two major trade pacts.

Specifically, Saturday’s announcements cover the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) including Canada and 10 Asia-Pacific nations. The pacts took initial effect in September 2017 and late December 2018 respectively.

Ottawa reiterated Saturday it “remains committed to engaging the sector on full and fair compensation” for the Canada-U.S.-Mexico Agreement (CUSMA) — the successor deal to the North American Free Trade Agreement (NAFTA) — as well as compensation to processors of supply managed products.

Once they’re fully phased in, dairy concessions made under CETA, CPTPP and CUSMA, along with Canada’s World Trade Organization (WTO) commitments, are estimated to be worth about 10 per cent of Canada’s current milk output alone, the government said.

(Dairy Farmers of Canada (DFC) separately estimates that by 2024, 18 per cent of domestic dairy production will have been “outsourced to foreign producers who will supply milk for imported dairy products that wind up on Canadian store shelves.”)

The government on Saturday also reiterated its post-CUSMA pledge “that there will be no more concessions on supply management in future trade negotiations,” including the recently agreed-upon transitional trade deal with the United Kingdom and future U.K. trade talks.

‘Time to deliver’

Representatives of the affected sectors lined up Saturday to hail the government’s latest pledges on compensation and programming.

Dairy farmers’ objective “is to be better prepared to face the intensification of competition from imported dairy products made from milk produced elsewhere” due to trade pact concessions, DFC president Pierre Lampron said in a separate release Saturday.

On-farm investments to that effect “can only come with a level of certainty as it relates to the promised compensation,” he said. “Reducing the timelines for the scheduled payments is recognition by the government of the importance of the foreign competition we face, this is why today’s announcement is so significant.”

Egg Farmers of Canada, Chicken Farmers of Canada (CFC), Turkey Farmers of Canada and Canadian Hatching Egg Producers, in a separate joint release, said the pledge of new programs “is a step in the right direction towards supporting farmers as they make ongoing improvements to their operations and enhance the long-term efficiency and sustainability of their farms.”

Canadian poultry and egg farmers “stand to suffer losses of billions in net operating income” from concessions made in the CPTPP alone, the groups said.

Saturday’s announcement, they said, draws on recommendations made in April last year by a poultry sector working group which had assessed the impact of the various trade deals in question.

“Farmers have waited a long time to see action on this file, and we believe that this is a step in the right direction,” CFC chair Benoit Fontaine said in the government’s release.

The feather groups said their farmers have also suffered “significant market losses” due to CUSMA and “look forward to working with government officials to assess CUSMA support measures.”

The federal opposition Conservatives’ agriculture critic Lianne Rood, in a separate release Saturday, described Bibeau’s announcements as more promises on which the Liberals have yet to pay up. The feather sector programs aren’t yet in place, she said, and dairy “farmers are, still, waiting for ‘Year 2’ payments.”

Further, she said, “we still have nothing on the table about (CUSMA). It is past time to deliver on promises made to supply-managed farmers.” — Glacier FarmMedia Network

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Under the proposals, the Commission will grant aid for private storage of milk powder, butter and cheese as well as beef, sheep and goat meat for a minimum of two to three months and a maximum of five to six months.

Milk, flower and potato producers would be allowed to take collective measures to stabilize their markets, such as through planned production, relaxing normal EU competition law for up to six months.

Existing market support programs for wine, fruits and vegetables and for beekeepers would be applied more flexibly to allow funds to be re-oriented toward crisis management.

EU Agriculture Commissioner Janusz Wojciechowski said the proposals were designed to stabilize markets and were considered the most appropriate way to support prices and production.

The Commission said it hoped to adopt the measures by the end of April after EU governments vote on them.

The French dairy sector welcomed the measures, while the German farmers’ association said the Commission had taken the right decision in the current market conditions.

European farming association Copa Cogeca says the closure of restaurants and hotels meant producers were losing the market for higher priced products, such as more expensive cuts of meat, with a devastating impact on returns for several sectors.

Potato producers were also suffering because there were no restaurants to sell fries.

So far, the European Commission has said farmers would be given longer to apply for direct payments, while the disbursement process could be accelerated, and relaxed state aid rules would allow up to 100,000 euros (C$154,100) per farm.

Some 17 billion euros in unspent rural development policy funds could also be diverted to farmers, Wojciechowski previously said.

— Reporting for Reuters by Philip Blenkinsop in Brussels.

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The compensation follows promises by the Trudeau government — and the Harper government before it — that dairy farmers would be compensated in some form for the loss of market.

Why it matters: The program will put $1.75 billion into the hands of dairy farmers over the next eight years, money that’s expected to help them adapt to changing market conditions.

The program is worth $1.75 billion and will compensate farmers for the close to five per cent of the dairy market given up in the Comprehensive Progressive Trans-Pacific Partnership (CPTPP) deal and the CETA trade deal between Canada and Europe.

A previous program, designed to aid farmers with technology adoption to help adapt to the CETA trade agreement with Europe, was heavily criticized because the only farmers who got funding were those with a current technology project underway, had the connections to get the applications in quickly and who had a bit of luck.

Many farmers looking for funds from that $250 million program did not get them. About 3,300 dairy farmers got funds from the program.

The new program aims to fund every farm, with payments expected to flow through the Canadian Dairy Commission and to be issued “in proportion to (farmers’) quota held.”

The payments to be made in the first year are budgeted to take up $345 million from the $1.75 billion funding envelope.

Federal Agriculture Minister Marie-Claude Bibeau made the announcement Friday at a Compton, Que. dairy farm.

“As promised, the compensation is deployed fully and fairly to allow everyone to make the best decisions based on the new market realities and their respective situations,” she said.

Dairy farmers will be compensated depending on the size of their farm.

Farmers who milk 80 cows, for example, will receive a direct payment of $28,000 in the first year, for a total first year payment of $345 million.

The federal government said it “will continue to work with the Dairy Farmers of Canada to determine terms and conditions for future years.”

DFC said Friday’s pledge lines up with the recommendations of the working group of dairy farmer, processor and government representatives following the recent signing of the Canada-U.S.-Mexico (CUSMA) trade agreement.

“There is no doubt that conceding part of our domestic dairy market has had a major impact on the livelihoods of dairy producers,” DFC president Pierre Lampron said in a separate release Friday.

“While we are grateful for today’s announcement, we would have preferred no concessions to our domestic dairy production,” he said.

Prime Minister Justin Trudeau “has made another commitment: no further concessions would be made to our domestic dairy market in future trade negotiations,” Lampron added. “Our expectation is that he will keep that commitment as well.”

Bibeau on Friday “also reiterated the government’s commitment to the other supply-managed sectors,” the government said in its release.

Federal Conservative agriculture critic Luc Berthold on Friday described the Liberal government’s plan as “a cheque for the elections for milk producers, nothing for egg and poultry producers, and no firm commitment for direct compensation after 2019.”

The government, he said on Twitter, has “waited four years to deliver to producers a plan that the Conservatives announced four years ago… and waited until the eve of the election to make the announcement.”

— John Greig is editor of Farmtario.

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The U.S. Department of Agriculture is still finalizing the plan, which is likely to prioritize hog and soybean farmers, the products most affected by the trade dispute between China and the United States.

The world’s two largest economies have been embroiled in a 10-month trade war that has cost billions, roiled global supply chains and rattled financial markets. American farmers, who helped carry President Donald Trump to his surprise 2016 election win, have been among the hardest hit.

USDA in 2018 pledged up to $12 billion in aid to farmers to help offset their crop losses and has to date paid $8.52 billion (all figures US$). Trump has said the next round of aid could reach $15 billion.

The United States hiked tariffs on $200 billion worth of Chinese goods last Friday, escalating the trade dispute as the latest round of talks in Washington to resolve it ended with no progress. Beijing responded with retaliatory tariffs, and the escalation may not be over.

Earlier this week soybean prices fell to their lowest in a decade, while benchmark cotton futures dropped to a three-year low.

One industry source briefed on the plan said it was likely to feature a purchasing and direct payments program through USDA’s Commodity Credit Corporation, a Depression-era program created to support farm income, rather than going through Congress to approve the funds.

“This package seems to be driven much more by what’s going in with China,” one of the sources said. “Therefore you might see the payment rates or the percentage rate that each commodity could get quite a bit different,” he said.

USDA did not respond to requests for comment.

‘Fast-track’

While the White House had discussions about another round of aid, no plan was in the works at USDA until last week when Trump announced the second package, one of the sources said, adding that soybean and pork producers were likely to be prioritized.

Kirk Leeds, CEO of the Iowa Soybean Association, said USDA had contacted it and other farm groups for suggestions on a new package last week.

“The program they had before made a lot of sense,” Leeds said. “My anticipation is it’ll look very similar to the payments that we had before.”

The Trump administration wants any trade deal with China to include purchases of more than $1.2 trillion worth of American products, including agricultural commodities and industrial goods.

The countries appeared on track for an agreement before relations soured earlier this month. Sources said Beijing had backtracked on a series of commitments, prompting the United States to implement a previously delayed hike in tariffs on $200 billion worth of Chinese goods.

The “dynamic changed suddenly,” a second source said, noting USDA officials were racing to put something together.

Prolonged economic pain across the American farm belt could complicate Trump’s re-election efforts. Farmers have been key supporters of the president, even as his actions on U.S. trade policy have sunk key crop prices.

One of the sources said an announcement was likely to come next week.

Ted McKinney, USDA’s undersecretary for trade, told a gathering of the National Association of Farm Broadcasting on Tuesday the new package would be ready in days, “not weeks or months,” industry publication Agri-Pulse reported.

–– Reporting for Reuters by Humeyra Pamuk and Chris Prentice; additional reporting by Tom Polansek.

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The Agriculture Bill, primarily covering England, will provide the basis for policy in a sector which for decades has been controlled by the European Union.

“After nearly 50 years of being tied to burdensome and outdated EU rules, we have the opportunity to deliver a Green Brexit,” Britain’s farming and environment minister Michael Gove said in a statement.

The bill includes a seven-year transition period to allow farmers time to adjust as direct support payments linked to the amount of land they farm to be phased out.

Under the EU’s Common Agricultural Policy, British farmers receive about three billion pounds (C$5.1 billion) a year in public funds.

“The bill allows us to reward farmers who protect our environment, leaving the countryside in a cleaner, greener and healthier state for future generations,” Gove said.

“Critically, we will also provide the smooth and gradual transition that farmers and land managers need to plan ahead.”

Farmers will see a reduction in payments during the transition period with the biggest cuts for those receiving the most funds.

Direct payments will eventually be replaced by a new environmental land management system which will be developed and trialed with farmers.

“Under the new system, farmers and land managers who provide the greatest environmental benefits will secure the largest rewards,” the minister said.

Under the devolution of agricultural policy in the United Kingdom, Scotland will not take powers from the bill.

However, the Welsh government will have powers under the bill to pursue its own reforms and provisions of the bill will extend to Northern Ireland until it can creates its own legislation.

Britain’s decision in 2016 to leave the EU becomes effective in March 2019.

— Reporting for Reuters by Nigel Hunt.

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The bulk of the payments, $3.6 billion, would be made to soybean farmers (all figures US$). That amounts to $1.65 per bushel multiplied by 50 per cent of expected production, Undersecretary for Farm Production and Conservation Bill Northey said on a conference call.

China has traditionally bought about 60 per cent of U.S. soybean exports. But it has been largely out of the market since implementing tariffs on U.S. imports in retaliation for the Trump administration’s tariffs on Chinese goods.

“An announcement about further payments will be made in the coming months if warranted,” Agriculture Secretary Sonny Perdue said.

The aid package, announced at $12 billion in July, will also include payments for sorghum of 86 cents per bushel multiplied by 50 per cent of production, one cent per bushel of corn, 14 cents per bushel of wheat, and six cents per pound of cotton.

Payments for hog farmers will be $8 per pig multiplied by 50 per cent of Aug. 1 production, while dairy farmers will receive 12 cents per hundredweight of production, Northey said.

Sign-up for the program will begin on Sept. 4, to coincide with the 2018 harvest, and end in January. Farmers will need to present production evidence to collect payments and payments are capped at $125,000 per person.

The program will also include $1.2 billion in purchases of commodities, including pork and dairy products, to be spread out over several months, Undersecretary for Marketing and Regulatory Programs Greg Ibach said.

“The specific commodities to be purchased are those that have been impacted by the unfair tariffs that have been imposed by other nations,” he said.

The program will also include some $200 million for a trade promotion program to develop new markets.

The package has been seen as a temporary boost to farmers as the U.S. and China negotiate trade issues. It has divided Republicans, some of whom favour free trade and were troubled by what they viewed as the kind of welfare programs their party has traditionally opposed. It has also faced skepticism from some farmers, a key Trump constituency.

“Short-term aid does not create long-term market stability,” said Doug Schroeder, Illinois Soybean Growers vice-chairman, in a statement after the announcement. “Producers need trade, not aid.”

–– Reporting for Reuters by Michael Hirtzer, Caroline Stauffer and P.J. Huffstutter in Chicago.

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The program will include direct payments for farmers, and those who grow soybeans are expected to be the biggest beneficiaries, according to the U.S. Department of Agriculture.

The payments will allow farmers to keep crops in storage, as opposed to selling them to merchants and processors, said Dan Cekander, a grain market analyst and president of DC Analysis. This can provide underlying support for prices, he said.

China has targeted U.S. agricultural exports with tariffs in retaliation to those imposed by U.S. President Donald Trump, because voters in farm states helped propel him into office in the 2016 election.

The aid package is the biggest direct compensation for farmers over such retaliatory tariffs, said Scott Irwin, agricultural economist for the University of Illinois.

“Twelve billion dollars, the vast majority of it sent to farmers mainly in the Midwest in the form of direct payments, is a shock-and-awe response to the hit that farmers have taken in the trade war,” he said (all figures US$).

The most actively traded soybean contract rose 1.2 per cent to $8.73-1/4 a bushel at the Chicago Board of Trade and reached its highest price since July 10.

USDA said the aid package would be a short-term solution to trade fights. It will also include trade promotion and food purchases.

The program signals that trade tensions will drag on, which may weigh on crop prices over the longer term, said Brian Hoops, president of broker Midwest Market Solutions in Missouri.

“If they’re willing to do that, there’s no quick resolution coming,” Hoops said.

Beijing imposed a duty on imports of U.S. soybeans on July 6, after threatening to do so for weeks. Chinese buyers shifted purchases to Brazil from the U.S. because of the tensions. This pressured U.S. soy prices and increased sales to other countries, such as Pakistan.

Demand from importers and domestic processors helped support soy prices on Tuesday, said Arlan Suderman, chief commodities economist for brokerage INTL FCStone.

“Right now all non-China business for soybeans is coming to the United States,” he said.

In other CBOT markets, corn futures slumped after USDA reported better-than-expected U.S. crop conditions on Monday.

Corn slid 1.4 per cent to $3.66 a bushel, and wheat dipped 0.7 per cent to $5.10-1/4 a bushel.

— Tom Polansek reports on agriculture and commodities for Reuters from Chicago; additional reporting by Michael Hirtzer and Karl Plume in Chicago, Michael Hogan in Hamburg and Naveen Thukral in Singapore.

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The questions come amid growing trade tensions between the U.S. and its top export markets. Earlier on Thursday, the Trump administration outraged allies by moving ahead with tariffs on aluminum and steel imports from Canada, Mexico and the European Union.

Canada’s questions also point to more potential trouble brewing at the World Trade Organization, where the U.S. has vetoed new judges for disputes. Analysts say Canada is seeking clarity on what steps the White House might take to protect farmers whose support helped Donald Trump win the 2016 U.S. presidential election.

The U.S. Department of Agriculture, the White House and Canadian officials could not immediately be reached for comment.

Canada submitted the request to the WTO’s agriculture committee, where negotiators meet several times a year to examine each other’s farm support programs and challenge eye-catching spending by their rivals.

Canada’s written question asked the United States to explain the U.S. Bipartisan Budget Act of 2018, in which Congress lifted certain restrictions on the U.S. Agriculture Secretary’s authority to use Commodity Credit Corporation (CCC) funds.

The CCC has broad authority to make loans and direct payments to U.S. growers when prices for corn, soybeans, wheat and other agricultural goods are low. The White House is looking at ways to use CCC funds to offset farm income losses in a trade war with China or others, according to media reports.

“Canada understands that the CCC can borrow up to $30 billion from the Treasury Department at any one time to stabilize farm income such as assisting farmers through loans, purchases, payments and other operations,” Canada said.

“Could the U.S. please provide the reasoning for lifting restrictions on the USDA’s authority to use CCC funds, and name the programs that will be eligible for these new funds?”

Canada also wants to know if Washington can use CCC funds to buy domestic surpluses, such as dairy products, or corn and soybeans.

Canada’s formal request for information does not necessarily imply a dispute is brewing. But WTO committee questions are often a sign of friction. If no satisfactory answer is supplied, pressure for a negotiated solution — and the risk of a full-blown dispute — is likely to rise.

— Reporting for Reuters by P.J. Huffstutter in Chicago and Tom Miles in Geneva.

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Dairy Farmers of Canada has had Grey, Clark, Shih and Associates regularly study the effect of U.S. government policy on dairy farms in that country.

The latest version of the project was released at the Dairy Farmers of Canada policy conference held last week in Ottawa.

It showed U.S. dairy farmers benefit from the equivalent of US$12.06 per hundredweight or C$35.02 per hectolitre. That’s close to 70 per cent of what farmers are paid now for their milk.

Peter Clark, a long-time trade consultant and lawyer with the firm, said at the conference that the U.S. is gradually moving more of its programs toward risk management.

“The U.S. has become aware of the WTO inconsistency of many of their programs,” said Clark. “They’re shifting from direct and countercyclical payments and other issues to various types of insurance programs.”

Clark’s 500-page report is a detailed analysis of many programs, and notes a certain amount of the funds for those programs is allocated to the potential use of those programs by dairy farmers, not actual use.

The programs include: domestic support, export subsidies, conservation programs, crop and livestock gross margin, risk management programs, disaster relief assistance programs, loan programs, crop insurance, livestock support as well as renewable fuels incentives and subsidies and irrigation programs.

Nick Thurler, a Dairy Farmers of Ontario board member from eastern Ontario, said that he knows numerous dairy farmers across the border in New York.

“I know if I told them they got $12 per hundredweight subsidy, I know what the answer would be,” he said.

Clark said he’s heard from people who say they know U.S. farmers who get no direct subsidies, but he points out that the subsidies are mostly indirect and farmers in the western U.S. have much greater benefit due to irrigation.

Alfalfa and forages are the biggest users of irrigation water, mostly to feed dairy cattle — hence the massive amount of money that goes into irrigation systems, he said.

“We look at what is available” to dairy farmers, said Clark. That’s typical of trade evaluations done by other countries as well, he added.

Clark’s study also included the impact of nutrition programs in the U.S. on dairy products.

“Some argue it should be seen as welfare and we shouldn’t be allocating it in this analysis,” he said, but he includes it as the original program was created as a way to deal with excess agriculture production.

U.S. Trade Representative Robert Lighthizer’s lawyers, Clark noted, have reports that list 160 subsidies on Canadian steel.

“When it comes to trade, you have to be precise.”

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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