By Connor Lynch
KINGSTON — Kingston’s infant formula plant may have to scale back because of the new United States-Mexico-Canada trade deal, said Montreal Economic Institute economist Alexander Moreau.
Construction has started on the $225-million Chinese-owned plant at Kingston, partially funded by Ontario taxpayers through government grant and loan programs. Feihe International was planning to produce infant formula to ship back to China. In total, the province, under the Wynne government, agreed to spend $4.4 million on the project, saying it will provide 277 jobs.
The plant expects to source 75 million litres of goat’s milk annually by 2024, which has been greeted in some cases by cautious optimism and in others by outright skepticism by dairy goat farmers. It would require significant scaling up of the industry since Ontario only produced 45 million litres of goat’s milk in 2016.
The plant was negotiated when Class 7 milk provided an incentive to buy Canadian milk ingredients and there were no limits on exports. But trade rules changed with the signing of the United States-Mexico-Canada agreement last month. The deal killed Class 7 milk and put export limits on infant formula and other milk product exports, the two lynchpins of Feihe’s business model.
According to CBC News, the plant was expected to ship as much as 60,000 tonnes of infant formula once production was fully underway. That would exceed the year-two cap of 40,000 tonnes under the USMCA.
Federal ag minister Laurence MacAuley’s office reached out to the CBC last month to inform them that Feihe planned to split its production 50/50 between cow and goat’s milk. The USMCA has no provisions on products made from goat’s milk, letting the 30,000 tonnes of cow’s milk formula fit under the trade limit.
Moreau said that the major issue for the plant’s viability as a business is what happens with Class 7 milk. As the only exporter in the infant formula business, the existence of Class 7 milk was a big draw for the company. It’s what “makes the business competitive. If we lose the ability to afford them a lower price, maybe the project won’t go forward or won’t be as big as planned.”
Kingston politicians were quick to assure people that the project was going ahead. CEO of the Kingston Economic Development Corporation told the Kingston Whig-Standard on Oct. 12 that “At this point there is no impact to their plans.” Mayor Bryan Paterson noted: “We have heard very clearly from Feihe that they are going ahead.”
