Canadians shouldn’t bet on lower dairy prices under new trade deal: experts

Click to play video: 'What’s happening with dairy in the new USMCA trade agreement?'
What’s happening with dairy in the new USMCA trade agreement?
WATCH: What's happening with dairy in the new USMCA trade agreement? – Oct 1, 2018

There is a chance dairy prices at Canadian grocery stores could drop once the renegotiated trade pact between Canada, the U.S. and Mexico comes into effect — but experts aren’t exactly betting on big savings.

Under the new agreement, the U.S. has access to the dairy market in Canada.

Here’s what Prime Minister Justin Trudeau had to say about the deal:

READ MORE: Canadian dairy farmers slam new trade agreement, say it will have ‘dramatic impact’

Canada has agreed to provide U.S. dairy farmers access to about 3.5 per cent of its approximately $16-billion annual domestic dairy market.

Dan Ciuriak, a fellow-in-residence with the C.D. Howe Institute research institute, explained to Global News that it’s unclear whether increased imports of milk will impact grocery store prices.

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“This is more a case of industrial milk getting a greater market share in Canada,” he said. “It probably would go into the processing industry more than to wholesale. It’s unclear what would be the impact on prices.”

WATCH: Foreign Affairs Minister Freeland outlines what USMCA means for Canada

Click to play video: 'Foreign Affairs Minister Freeland outlines what USMCA means for Canada'
Foreign Affairs Minister Freeland outlines what USMCA means for Canada

Ciuriak highlighted one case where prices could fall. He explained Canada still has a supply-management system, which means prices are set based on the least efficient farms. If there is increased competition, the least efficient farms could go out of business.

“Then the government reduces the price to a bunch of the more efficient farms, then we would see a decline in prices at the retail sector,” he explained, noting that the decline would not necessarily be significant.

Another expert echoed similar sentiments, saying prices will not change dramatically.

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Douglas Porter, chief economist at the Bank of Montreal, said that the trade deal changes “may have a small impact” on dairy prices, notably cheese.

“I wouldn’t overplay the impact,” Porter said. “Recall that the quota increases will be phased in over a six-year period. As well, note that dairy prices have already dipped slightly in the past year, according to the official CPI from StatsCan.”

READ MORE: Read the full text of the new United States, Mexico and Canada Agreement

However, University of British Columbia professor Marie-Claude Fortin noted Canadians may see more options on store shelves.

“I think what we may see are brands that we have never seen before or rarely seen, such as goats’ yogurt,” Fortin said.

The new rules are eliciting strong emotions on both sides of the border.

Eric Meyer, who is the president of Chicago-based company Highground Dairy, explained that for U.S. farmers the changes are definitely good news.

“Nothing but good news here for the U.S. dairy industry,” Meyer said, explaining that Canada has dropped its Class 7 pricing system.

While these are wins for U.S. farmers, they are not necessarily huge changes, one University of Ottawa professor said.

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“What’s happening on dairy is that there will be a small amount, a tiny amount, of expanded market access for U.S. milk into Canada, but that could have been expected at the beginning of the negotiations,” Debra Steger said.

WATCH: Politicians react to the new Canada, U.S. and Mexico trade deal

Opening up the dairy market to competition is something Canadian farmers have been outspoken against.

On Monday, the Dairy Farmers of Canada reiterated its dissent in a statement.

READ MORE: Where negotiators conceded and where they stood firm on USMCA 

“Once again, dairy farmers again paid the price to conclude an international trade agreement,” the statement read.

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The organization, which represents roughly 12,000 dairy farms in Canada, said consumers should also be concerned about the new loosened rules.

It said they could mean lower quality products for Canadians.

WATCH: Federal compensation a ‘clear commitment’ for Canadian farmers affected by USMCA

Click to play video: 'Federal compensation a ‘clear commitment’ for Canadian farmers affected by USMCA'
Federal compensation a ‘clear commitment’ for Canadian farmers affected by USMCA

“For consumers, each concession replaces Canadian dairy products, products made with great care by Canadians, using extremely high-quality Canadian milk with no artificial growth hormones,” the statement read.

“The USMCA agreement is opening the gate even further by letting foreign products, made according to standards inferior to our own, onto the shelves of our grocery stores.”

Meanwhile, Foreign Affairs Minister Chrystia Freeland promised at a press conference Monday that Canadian dairy farmers will be compensated for any market share lost.

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Freeland insisted that supply management remains intact in Canada — the market has just been slightly opened up.

— With files from Reuters, Global News reporters Rebecca Joseph and Erica Alini, CKNW reporter Emily Lazatin

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