(Reuters) - Canadian farmers will get squeezed between new trade deals that allow more dairy imports to enter the country and slow-growing domestic consumption, the chief executive of Saputo Inc (SAP.TO) said on Thursday.
The Trans-Pacific Partnership trade deal is expected to open access for New Zealand, the United States and other countries to 3.5 percent of the Canadian market, said Chief Executive Lino Saputo Jr. of Saputo, one of Canada’s largest dairies.
That will be on top of roughly equal new access negotiated by the European Union, Saputo said on a conference call.
“Somewhere along the line, there’s going to be less milk produced in Canada,” Lino Saputo Jr. said. “So it’s going to be a hit to dairy farmers.”
Canada’s dairy industry operates under a system of supply, price and import controls.
The former Canadian government, which negotiated the deal which seeks to cut tariffs and taxes on commerce in 40 percent of the world’s economy, has estimated new TPP dairy market access would amount to 3.25 percent.
The actual market access Canada gives up under TPP depends on butterfat content in imported products, said Isabelle Bouchard, spokeswoman for Dairy Farmers of Canada (DFC) lobby group. DFC estimates market access will actually range between 3.4 and 4 percent, she said.
Canada’s previous Conservative government, defeated last month in an election, promised C$4.3 billion in compensation for farmers.
The new Liberal government, which won a majority of seats in Parliament, has not yet said if it will support TPP, but Bouchard said DFC has heard from Liberal legislators who support the compensation.
Lino Saputo said his company, which also has operations in TPP countries Australia and the United States, will find ways to make the deal work for it, even though the government “kept (Saputo) in the dark” during negotiations.
The company said on Thursday its second-quarter earnings were down from the same period a year earlier on lower prices for cheese and butter.
The Montreal-based company’s brands include Dairyland milk and Armstrong cheese.
For its fiscal second quarter, net income fell to C$148.6 million, or 37 Canadian cents a share, from C$155.7 million, or 39 Canadian cents, a year earlier. Adjusted for one-time items, earnings were 38 cents per share.
Revenue during the quarter, which ended Sept. 30, rose 3 percent to C$2.79 billion.
Analysts were expecting Saputo to earn 37 Canadian cents per share on revenue of C$2.74 billion, according to Thomson Reuters I/B/E/S.
Saputo’s shares rose 0.5 percent to C$31.87 in Toronto.
By Rod Nickel in Winnipeg, Manitoba; Editing by Alan Crosby