Canada s s Dairy Industry Position for the future Presented by Pierre Doyle, P.Ag. AAFC- Animal Industry Division Dairy Section Collaborators: Aamir Asgarali and Olivier Beaulieu-Charbonneau Goal For This Presentation To answer the question: How is the Canadian dairy industry positioning itself to assure long term viability? to be efficient? to adapt to changes? to react to opportunity? FOR THE FUTURE?
Outline What is our industry doing in this changing economic environment? Profitability and Competitiveness Demand and Market Growth Consumer Preferences Trade Profitability and Competition: THE FARM (1) Farms have progressively been reducing in numbers and expanding. Rate of expansion differs by region. Effort to reduce costs and improve efficiency. Western farms expanding much faster. More quota is available in the West More activity on quota exchanges
Profitability and Competition: THE FARM (2) Average Number of Cows per Farm by Region 1975 2010 Drive to expand farms since 1990: Reduce costs higher efficiency Stability of supply management also limits expansion Western expansion aided by the availability of quota Source: Statistics Canada Profitability and Competition: Genetics on THE FARM (3) National Dairy Herd is Productive and Competitive Huge strides in cow productivity Genetic selection continues to improve through: Technological Advancements (genomics) Use Of Younger Sires Reducing SNF:BF Ratio Sources: Canadian Dairy Commission, Statistic Canada
Profitability and Competition: PROCESSING (1) General trend to concentrate production in Ontario and Quebec Concentration and consolidation limited by the distribution of plant industrial quota Ownership of plant industrial quota varies by province (owned by enterprise or marketing board) Growth is limited in Canada Very few acquisitions in the last 10 years Significant expansion into the international market Profitability and Competition: PROCESSING (2) CANADA: Registered Dairy Establishments 482 459 463 463 459 453 452 444 445 2001 2002 2003 2004 2005 2006 2007 2008 2009 490 480 470 460 450 440 430 420 Registered Dairy Plants Western Region ON & QC Region Maritime Region 140 120 100 80 60 40 20 2001 Western 2003 2005 Year 2007 2009 330 320 310 300 290 280 2001 2003 Eastern 2005 Year 2007 2009 60 50 40 30 20 10 2001 2003 Maritimes 2005 2007 Year 2009 Source: CFIA and Provincial Milk Boards
Profitability and Competition: PROCESSING (3) Canadian Acquisitions AGROPUR PARMALAT SAPUTO 3 large processors ~ 80% of the milk Very few Canadian acquisitions in the last 10 years (vs. many more from 1990 2000). Recent acquisitions have not provided the opportunity for consolidation activities. Depends on provincial policies on plant industrial quotas. Sources: AAFC-AID, Dairy Section, Saputo, Agropur Profitability and Competition: PROCESSING (4) US and International Acquisitions AGROPUR SAPUTO The potential for growth in Canada is limited. Large international expansion taking place. Large investments in the market for ingredients > market opportunity? International investment means Canadian processors are increasingly active in the export market. Sources: AAFC-AID, Dairy Section, Agropur, Saputo
Demand and Market Share: MILK UTILIZATION (BF) Source: Canadian Dairy Commission Demand and Market Share: MILK UTILIZATION (VOLUME) Source: Canadian Dairy Commission
Demand and Market Growth Population but production per capita Population growth = Immigration + Children Not consuming as much dairy otherwise production per capita would be relatively stable AND Overall production would increase. Therefore, the dairy industry has had small success in expanding market share. Demand and Market Growth: PRODUCTION PER CAPITA Source: Canadian Dairy Commission
Demand and Market Growth: CONSUMPTION PER CAPITA Per Capita Consumption Index = = FORECAST Consumption of Yogurt is increasing due to: Low Fat Diets Probiotics Good Taste/ Many Flavours Healthy Snacking Source: AAFC-Research and Analysis Directorate Consumer Preferences Consumers continue to place more emphasis on their diets Demand continues to grow for: Organic products Health and Wellness products Industry must continue to supply dairy as a nutritious health and wellness product
Consumer Preferences: ORGANIC PRODUCTION Production of Certified Organic Milk and Number of Producer Farms in Canada Source: Provincial Milk Marketing Boards Trade: MARKET FOR INGREDIENTS (1) Strong import demand for protein substances: MPC and MPI. MPC TRQ always filled and IREP demand remains strong MPI TRQ in place since October 2008 Very strong import demand in 2009 and 2010 Imports starting under IREP MARKET OPPORTUNITY?
Trade: MARKET FOR INGREDIENTS (2) Canada does not produce a reliable and adequate supply of high end dairy protein ingredients. Canadian processors have invested abroad into the market for ingredients. Source: Statistics Canada, Department of Foreign Affairs and International Trade Position for the Future Near saturated domestic market; need to maintain and expand market share. (To assure long term viability ) Continued pressure to reduce costs in order to remain profitable and competitive. (To be efficient (To be efficient ) Need to adapt and capitalize on changing consumer demands and eating habits. (To adapt to change ) Demand for higher value milk protein ingredients to supply a growing market for ingredients. (To react to opportunities )
More information is available at the Canadian Dairy Information Centre www.dairyinfo.gc.ca