The centre’s third in a series of reports on the dairy
industry is particularly critical of provincial measures to ration milk among
processing companies.
It says barriers to inter-provincial trade combined with
rigid allocation policies makes it difficult for processors to adjust to the
exciting innovations occurring in global markets where new products and
technology are expanding markets.
Canadian processors are limited in their ambitions to
develop larger facilities that could finance high-cost adoption of new
technologies and their difficulty in obtaining more milk at a provincial level
makes them hesitant to try making new products that would require a lot of milk
under existing marketing categories.
Only relatively small volumes are available to test-market
new products.
Another issue is provincial caps on quota prices which
limits farmers’ opportunities to buy quota to take advantage of economies and
technologies that depend on greater production.
Another major issue is slow growth in sales. Fluid milk
sales have only increased from 27.93 million kilograms (measured in butterfat
content) in 1998-99 to 29.13 million kilograms in 2011-12, indicating
population has increased by more than fluid milk sales. This is “exceptionally
slow growth,” says the George Morris Centre report.
Cheese, butter and skim milk powder sales are all relatively
flat; yogourt has “shown steady growth”.
While Canada protects the dairy industry with tariffs of,
for example, 245 per cent for cheese, 313 per cent for butter and 295 per cent
for whole milk, imports increased by 50 per cent between 2004 and 2009.
Exports are capped by trade rules at 91 million kilograms.
Canada’s tariffs enable farmers to price milk to reflect
production costs and a return on their labour and investments, and that amounts
to a government “subsidy” of half the price dairy farmers are paid for milk,
according to analyses by the OECD (Organization for Economic Cooperation and
Development).
That is by far the greatest degree of support for any
Canadian farm commodity; it is also at risk of declining, perhaps sharply, as a
result of trading negotiations underway with the European Community, the United
States and Pacific nations involved in the Trans-Pacific Partnership talks and
others.
The “imminent threat of imports” means Canadians ought to be
implementing innovations and technologies that will improve their competitive
position.
The George Morris Centre says the leaders of Canada’s dairy
industry are well aware of the issues, but so far they have only managed to
implement “marginal changes”.
The system can take more shocks that the leaders seem to
appreciate, the report says, reminding them that there was an 18 per cent
decrease in market-sharing quota in 1976.
The authors of the report are Al Mussell, Bob Seguin and
Janalee Sweetland.
