Canada has an agricultural policy called the Market Sharing Quota, which sets a national yearly milk production target. It's part of their broader framework for controlling supplies of dairy, poultry, and eggs, and the intention is to keep prices of these products stable, avoiding random periods of overproduction (lower prices, bad for producers) and underproduction (higher prices, bad for consumers).
The Canadian Dairy Commission sets national dairy policies such as the quota, and according to their Vision, Mandate and Values page the purpose of the Commission is:
Provide efficient producers of milk and cream with the opportunity to obtain a fair return for their labour and investment.
Provide consumers of dairy products with a continuous and adequate supply of dairy products of high quality.
And from their What we do page:
Since the introduction of supply management in the dairy sector, the Commission has administered support prices and the national marketing quota. Each year, the Commission sets the support price for butter and skim milk powder after consulting industry members. These prices provide a benchmark and are used by provincial marketing boards to set the price of milk in each province. The Commission also continuously monitors national production and demand and recommends necessary adjustments to the national milk production target.
Although the Dairy Commission allots a portion of the Market Sharing Quota to each province, it's up to each province to decide how to handle their quota allotment. Through the Dairy Direct Payment Program dairy farmers are paid automatically for their in-quota products, based on the target prices the government sets, but are not paid for excess products.
For Ontario specifically, Dairy Farmers of Ontario is a regulatory body that, among other things, handles splitting Ontario's quota among farmers. DFO's Quota and Milk Transportation Policies document from February 1, 2023 details how they handle the quota, and what happens if it is exceeded.
There's a lot of stuff in that policies document, but the gist is:
- Ontario farmers can only market milk through DFO
- DFO determines how to split the quota, and may allow above-quota production depending on the market situation
- Farmers can exceed their quota, but not by much and only if DFO approves
- If a farmer exceeds their quota by a lot, they a fine based on the volume exceeded as well as other potential penalties
Some of the relevant policies from the document:
- General Licensing and Quota Requirements
(a) Quota is the property of Dairy Farmers of Ontario (DFO). It is fixed and allotted to producers on such
basis as DFO considers proper and is subject to the terms and conditions of DFO’s quota policies.
(g) No person to whom a quota has not been fixed and allotted for the marketing of milk or whose quota has
been cancelled shall market any milk.
- The Right to Adjust Quota
If necessary, DFO will adjust the quota held by all producers on an equal percentage basis to meet Ontario’s share of the national and/or P5 market requirements
- Maximum Quota Levels
(a) Producers are required to obtain approval from DFO before they can exceed 150 kg of quota and again
before they can exceed each subsequent 100 kg level (i.e. 250, 350 etc.).
- Overproduction Credits
Overproduction credits allow producers to occasionally ship slightly above their monthly quota at domestic
prices, with the intent that overproduction credits will be paid back by under-quota production in future
months, subject to limitations the Board may place on credit use.
- Over-Quota Milk
(b) For milk marketed above 100 per cent of a producer’s quota and available credit and incentive days, or
above such level as determined appropriate by the Board, the producer will receive an over quota penalty
of $20 per hectolitre (hl) and will be subject to the normal deductions.