Changing milk rules a really cheesy move

OTTAWA — Canada’s dairy farmers have changed the rules they use to classify milk that goes into making mozzarella cheese.

And that could result in cheaper fresh-made pizzas for consumers across the country.

The new milk class, to take effect June 1, is expected to result in lower costs for Canadian-made mozzarella for restaurants that prepare and cook pizzas on site.

The move could also slow or halt the erosion of domestic cheese sales to pizza restaurants.

The battle to cut the cost of mozzarella for pizza restaurants has been fought for nearly 15 years, ever since frozen pizza makers — including frozenfood giant McCain — won an exemption from Ottawa that allowed them to buy cheese at the cheaper world market price.

“There’s been an inequity with frozen pizza versus fresh pizza with the exact same mozza cheese, and we’ve been pushing and pushing and pushing (for changes),” said Garth Whyte, president of the Canadian Restaurant and Foodservices Association. “This is a major first step on dealing with this issue, and will be significant savings to our members who sell pizza.”

It remains to be seen whether dairy processors will pass the savings from the new “3d” classification on to restaurant owners.

A number of restaurant chains recently began circumventing hefty cheese tariffs by importing their mozzarella by way of pizza topping kits.

The Canada Border Services Agency last year designated the boxed cheese-and-pepperoni combinations as a food preparation, rather than simply cheese, meaning they could be imported duty-free.

That sent dairy farmers into panic mode, with the Dairy Farmers of Ontario telling delegates at a regional meeting last fall that the designation was having a “negative impact on domestic mozzarella sales and could have an even greater impact going forward.”

The case is currently before the Canadian International Trade Tribunal and is seen as a serious threat to Canada’s farm supply management system. The CBSA decision allowed importers to bring boxes of the pizza topping, consisting of about 20 per cent pepperoni and 80 per cent cheese, into the country duty-free rather than being hit with the 245.5-percent tariff that is charged on cheese from outside Canada.

While the restaurant association sees the newly created mozzarella milk class as an issue completely separate from the pizza “kit” designation, one industry analyst said the two are part of a looming pattern that could end up eroding Canada’s lucrative milk-quota system.

“It looks as though the farmers have hoisted the white flag,” said James McIlroy, an international trade consultant based in Toronto, who called the mozzarella move the thin edge of a wedge that will only drive down prices for other milk products.

“This is going to go on and on,” said McIlroy.

“There’s going to be more and more foreign processed products coming into Canada, using foreign dairy products, which are going to cause problems for our processed cheese industry.”

But there will likely always be a price gap between Canadian products and those coming in from bigger markets, particularly the United States, says Agriculture Minister Gerry Ritz.

“At the end of the day I can get a hotel room in the same chain cheaper in the U.S., I can get a steak dinner (for less), it just goes on and on and on,” said Ritz.

“It comes down to economies of scale.”

Ritz applauded the new mozzarella milk class as a good public relations move for Canada’s dairy farmers and expressed hope that it would result in more consumption of Canadian-made cheese.