Frequently Asked Questions
1. What is the Special Milk Class Permit Program?
The Special Milk Class Permit Program (SMCPP) allows dairy processors to access milk components such as milk protein, milk fat and other milk solids from provincial milk boards/agencies, at discounted prices. Special Milk Class priced components translate into competitively priced dairy ingredients for food product manufacturers.
Dairy products such as cheese, butter and skim milk powder purchased/sold under the SMCPP provide eligible distributors and dairy ingredient users with the means to compete on a level playing field in the market place.
The Canadian Dairy Commission (CDC) administers the SMCPP on behalf of the Canadian dairy industry and issues Special Milk Class Permits to eligible companies. The CDC monitors and controls the activities and performance requirements of dairy ingredient distributors and further processors participating in the Program.
2. What are the special milk classes?
The special milk classes are categories in which certain further processed products have been deemed to qualify for special milk class pricing. They are as follows:
|Cheese used by further processors in finished food products
||Dairy products (other than cheese) used by further processors in finished food products
||Dairy products (other than cheese) used by further processors in confectionery products
3. How and when are special class prices calculated?
Special Milk Class pricing for Classes 5(a) and 5(b) are calculated each month based on US milk and dairy product prices (for Classes 3 and 4) announced by the United States Department of Agriculture (USDA). The CDC converts those component prices from US to CAN dollars and from lbs to kilos.
Special Milk Class 5(c) pricing is determined based on a pricing formula that was agreed upon in consultation with the confectionery industry and the Canadian Milk Supply Management Committee (CMSMC).
Special Milk Class prices are announced on the 15th of each month and appear on the home page of this web site and in the monthly online publication Ingredients Mag Express.
4. What products are eligible under the SMCPP?
To be eligible under this Program, further processors must prove that the finished products which they manufacture are not protected by tariff rate quotas (TRQ) controls. The finished product must be intended for sale to retailers, wholesalers and/or to restaurants. The use and/or resale of Special Milk Class priced dairy ingredients for any other purpose is strictly prohibited.
A product formulation which has the potential to displace the sale of an existing dairy product in the marketplace shall not be deemed to qualify under the Special Milk Class Permit Program.
A company applying for a Distributor’s Permit must prove, to the satisfaction of the CDC, that it is selling eligible dairy products to further processors in possession of a valid Special Milk Class Permit.
5. How can I find out more about dairy pricing trends in the U.S.?
The Special Milk Class pricing for classes 5(a) and 5(b) is constructed based on a formula which takes into account prices established by the United States Department of Agriculture (USDA) for their milk classes 3 and 4. Accordingly, when U.S. prices go up or down our Special Milk Class prices follow.
Further processors can get a glimpse of the changes in American dairy pricing by referring to the commodity futures market on the Chicago Mercantile Exchange (CME). Once on the CME Web site, click on “Commodity Products” and choose butter, cheese or skim milk powder. Please note, prices are in US$/CWT.
Another site which should interest Special Milk Class permit holders is the United States Department of Agriculture (USDA) Web site. Visit the Marketing Orders page and click on “Price Announcements” (found in menu on the right of the page) to view information used by the CDC to determine the pricing for Special Milk Classes 5(a) and 5(b).
The fact that Special Class 5(a) and 5(b) pricing is predicated on ever changing U.S. pricing is a good reason for Special Milk Class permit holders to look in on these two Web sites every once in a while.
For more information on Special Milk Class Pricing, visit the the September 2010 issue of the Experts Forum.