Canadas farm gate milk price drops 1 % as Europe ends quota system, increases milk supply
By Sylvain Charlebois
For the first time in 22 years, the Canadian Dairy Commission has decided to reduce the price of milk at the farm gate by 1 per cent. Price reductions will commence in February. Under its supply management regime established in 1966, the commissions mandate has been to set the price of milk per hectolitre for dairy farmers owning production quotas. The new decision to reduce prices, according to commissioners, is to stimulate domestic demand for milk per capita which has been decreasing for decades in Canada. As surprising as this decision may be, such a move from the commission is evidence that the dairy sector is fully aware of systemic pressures on supply management.
Big changes are coming. If ratified, the Comprehensive Economic and Trade Agreement would allow over 17,000 tons of cheese into our country. Currently in Europe, milk is cheap, and getting cheaper. In April, Europe ends its quota system, and many producers have started to flood the market with much more milk. There is an abundance of supply which has depressed milk prices at farmgate and retail. Prices have gone down by more than 40 per cent in some regions, which makes European cheese more competitive against our own. In addition to having concealed subsidies, European cheeses have a significant competitive advantage.
As such, the commission is giving a chance for our dairy sector to compete, domestically and globally. Here, restaurant owners and processors alike applaud the decision, and why wouldnt they? This will make them more competitive, allowing them to increase margins, innovate and recapitalize some of their infrastructure.
Most importantly, this move from the commission is indicative that it can adapt to change, at least to a certain degree. Even if many have criticized the virtues of supply management for years, we should render to Caesar what is owed to him. Price reductions at the farm gate have been uncommon in Canada due to the commissions lopsided cost assessment scheme. This is an audacious decision, but it should not stop there. More should be done to promote excellence and productivity in the dairy sector instead of using averages as a price setting benchmark for an entire sector.
Indeed, the commission operates obscurely, away from any media attention. In fact, more than 90 per cent of Canadians are not even aware of the commissions role, let alone its existence, and yet, its influence on our lives is real. Consumers will likely be affected by this. This could very well impact the price of dairy products Canadian consumers buy regularly, like cheese and yogurt. Even restaurants could potentially pass on their savings to consumers when serving pizzas and lasagna, but whether or not processors and restaurants will pass on their savings to consumers remains to be seen.
As for our own artisan cheesemakers who are about to face tougher competition from abroad, they are still waiting for the Harper government to provide any details on support programs. Even if Ottawa has been indefinite on this issue, the commissions decision is likely the help they need, at least part of it. It will certainly be welcome news and may ease the burden of increased competition.
Dr. Sylvain Charlebois is a professor of food distribution and policy in the College of Business and Economics at the University of Guelph. He is a visiting professor at the University of Innsbruck, Austria, until December 2015.