The Canadian Dairy Industry:

Transcription

1 The Canadian Dairy Industry: A Small Player on the Sidelines of the Big League Canadian Agri- Food Policy Conference January 2014 Gilles Froment Canadian Dairy Commission DM #272069

2 Presentation Outline World dairy situation Production and consumption Trade Prices Where does Canada fit in the global picture Lessons learned and some observations Changes being made to adapt the Canadian dairy industry in a supply management environment 2

3 Milk production Source: IDF World Dairy Situation

4 Consumption steady increase Source: IDF World Dairy Situation

5 Source: IDF World Dairy Situation Consumption 3 fastest growing regions

6 World dairy leaders Company Country Annual growth 2011/12 1 Lactalis FR % 2 Nestlé CH % 3 Fonterra NZ % 4 Danone FR % 5 FrieslandCampina NL % 6 DFA US % 7 Dean Foods US % 8 Arla Foods DK % 9 Meiji Dairies JP % 10 Morinaga Milk Industry JP % 11 Saputo CA % 12 Yili CN % 13 Müller DE Lala MX Mengniu CN % 16 DMK DE % 17 Sodiaal FR % 18 Bongrain FR % 19 Land O'Lakes US % 20 Glanbia IE % 21 Kraft Foods US % 22 Agropur CA % 23 Schreiber US Bel FR % 25 Tine NO % Source: IDF World Dairy Situation

7 World trade % of dairy production traded Top-10 destinations for international dairy trade Annual growth (x mln tonnes milk equivalents) /12 (%) China (incl. Hong Kong and Macao) % Russia % Mexico % Algeria 2.9-9% Japan 2.3-2% Venezuela % Indonesia % Saudi Arabia % Philippines 1.5-9% United Arab Emirats % Source: IDF World Dairy Situation

8 World trade Source: IDF World Dairy Situation

9 Canadian Dairy Product Trade Balance Steady decline Million $ Source: Canadian Dairy Information Centre, AAFC 9

10 World Cow Milk Production (2012) Source: IDF World Dairy Situation

11 Number of Dairy Farms ( ) Germany: - 34% France: - 36% United States: - 33% Canada: - 32% Source: CIDC, Hoard s Dairyman and ICAR 11

12 Producer Milk Prices (2012) Source: IDF World Dairy Situation

13 Evolution of Farm Prices Canada and the US $90.00 $80.00 $70.00 $CA per hl $60.00 $50.00 $40.00 $30.00 $20.00 Feb-98 Feb-99 Feb-00 Feb-01 Feb-02 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 DM# Canada Target Price Highest of Class lll and Class lv Prices in the US (converted to CA $ per HL) 13

14 Producers Share of Consumer Dollar Source: International Farm Cost Comparison (IFCN) 14

15 Producers Share of Consumer Dollar 1% fluid milk price Ontario: $3.88/4L at mass merchandizer Producer share: 83% Minimum regulated fluid milk price in Quebec: $5.82/4L Producer share: 55% Retail price of a litre of milk in Canada is similar to that in the EU, China, NZ and many parts of the US 15

16 Retail Prices - Cheddar Can $/kg Canada and the US Source: Canada (AC Nielsen) and USA (University of Wisconsin- NASS) 16

17 What can we learn from the evolving dairy policy environments in the U.S. and EU? Based on past experience - not a whole lot Example of dairy reforms in Australia, New Zealand, United Kingdom and the United States Are dairy farmers better or worse off? Are the consumers really benefiting from the reforms? Have they realized the expected market growth? Price have been increasingly volatile. 17

18 Some observations World dairy production is growing at a rate of about 2.5% per annum Consumption is growing at a similar rate this will continue Relatively low inventories and perishability of the product make markets vulnerable to high price fluctuations. Supply response is not always good due to high input costs (weather conditions and feed). Less government dollars to support dairy production 18

19 Some observations The new Farm Bill in the US? The end of the quota system in Europe by 2015 Impact on World milk production and prices? Environmental issues (EU, Oceania, US) Increased demand for dairy products should help to maintain relatively high prices in coming years but volatility will likely continue 19

20 Some observations High budget expenditure for the milk sector EU - 3,5 billion on average US approx. $4 billion per year ($40 billion in the last decade) These subsidies contribute to depressed Pw Trade agreements WTO and CETA TPP? T- TIP? Producing milk in Northern hemisphere is more costly than in the Southern hemisphere 20

21 How is the Canadian Dairy Industry Adapting? Strong support for supply management that bring stability and predictability in the marketplace Our governments are not prepared to provide deficiency payment to the dairy industry and farmers do not want these payments either 21

22 How is the Canadian Dairy Industry Adapting? The core elements of supply management will continue Balancing supply and demand Producer price that reflects cost of production Border control Increased focus on additional flexibility to grow the market 22

23 How is the Canadian Dairy Industry Adapting? Efforts to increase flexibility and market growth 1% permanent growth allowance for added flexibility in supply Dairy Innovation Program Skim Milk Redirection Program Mozzarella market and fresh pizza - Class 3(d) More flexible allocation policies (yogurt and fine cheeses) On- going development of market of SNF Reduce structural surplus Opportunity to add value and increase returns to producers without increasing price to consumers 23

24 Thank you 24