DAILY NEWS Mar 3, 2014 2:28 PM - 0 comments

Export growth hinges on reform in dairy supply management: Conference Board of Canada

TEXT SIZE bigger text smaller text
2014-03-03

OTTAWA, Ont.--Reform to Canada's outdated dairy supply management policy must be accompanied by a push to expand into global markets with rapidly-growing demand, according to The Conference Board of Canada's second release of findings from its analysis of dairy supply management.

"Dairy supply management is an old solution to an old problem. When the current system came into effect, international trade in dairy products was very limited. Today, countries such as China are growing markets thirsting for quality dairy products. We're not in a position to take full advantage because our system is now outdated," said Michael Bloom, Vice-President, Industry and Business Strategy.

HIGHLIGHTS

• Global demand for dairy products is forecast to grow by double-digit percentages over the next decade.

• Operators with herd sizes of around 200 head are internationally competitive but, because of supply management, most of Canada’s herds are too small to be competitive.

• A farm with 200 head is about the same size as a typical Tim Horton's franchise in terms of revenue.

The Conference Board report, Canada's Reforming Dairy Supply Management: The Case for Growth, argues that a win-win reform package needs to be accompanied by a new vision for industry growth. Since dairy consumption in Canada is stagnant, export markets are key to industry growth. 

Global trade in dairy products was valued at about US$33 billion in 2010, about five times greater than in 1961. Demand is expected to grow by double-digit percentages annually over the next decade in commodities such as butter (21 per cent annual growth), cheese (11 per cent) and whole milk powder (13 per cent), said the report. 

In addition, countries such as China are looking for foreign-supplied milk powder out of concern that their domestic milk is unsafe. And current global trade flows suggest that dairy products could be shipped relatively cheaply from Canada to Asia.

Canada was a net importer of dairy products in 2012 and exported just $27 million, making it a marginal player in dairy trade compared to peer countries such as New Zealand (US$9.4 billion in net exports), Australia (US$2.3 billion), and the United States (US$2 billion), respectively. However, large exporting nations are struggling to keep up with demand, opening opportunities for Canadian producers.

Canada's current share of the world market in traded dairy products is microscopic: 0.02 per cent in whole milk skim powder, 0.29 per cent in cheese, and 0.01 per cent in butter. In contrast, Canada has about 10 per cent of global trade in oilseeds and almost 14 per cent of the market in wheat.

The analysis outlines three scenarios:

• status quo -- Canada remains a marginal dairy exporter

• moderate growth -- Canada's production would grow by 6 billion litres to 14 billion litres

• aggressive growth -- Canada would produce about 12 billion more litres annually to 20 billion litres by 2022.

Under the aggressive growth scenario, the number of dairy farms would actually increase by 2.1 per cent over 10 years and industry employment would grow by about 14 per cent. Yet, Canada's export volumes would still be half that of New Zealand.

The full report with recommended reforms will be published Thursday, March 6.



Horizontal ruler
Horizontal Ruler

Post A Comment

Disclaimer
Note: By submitting your comments you acknowledge that Canadian Shipper has the right to reproduce, broadcast and publicize those comments or any part thereof in any manner whatsoever. Please note that due to the volume of e-mails we receive, not all comments will be published and those that are published will not be edited. However, all will be carefully read, considered and appreciated.

Your Name (this will appear with your post) *

Email Address (will not be published) *

Comments *



* mandatory fields