Blog – Dairy Sector – Canada – November 2021
Dairy sector continues to face many challenges due cost of feed and other related input costs.
Dairy prices have not risen as much as other prices.
Liberals continue to fail address issues like the impact of the carbon tax on agriculture out and food production.
1. Rising feed prices - https://www.thebeefsite.com/news/57977/canadian-farmers-face-serious-feed-shortages/
2. Oatly - https://ca.news.yahoo.com/oatly-ads-banned-making-misleading-000100110.html
3. Fertilizer - https://www.thedailyscoop.com/news/retail-industry/how-todays-fertilizer-prices-could-reshape-industry
4. Butter production - https://www.foodbusinessnews.net/articles/20477-butter-prices-soar-to-multi-year-highs
5. Higher input costs - https://www.newsbug.info/iroquois_countys_times-republic/news/agriculture/farmers-dealing-with-dramatically-higher-input-costs/article_e5f4b953-424e-5735-bf47-3e8f5cc8c8a6.html
6. Drought - https://www.reuters.com/world/americas/canadian-farmers-face-cattle-feed-shortage-due-drought-transport-strains-2022-01-25/
7. Potato - https://www.thestar.com/news/world/2022/01/25/is-canada-fighting-a-trade-war-against-its-own-potato-farmers.html
8. Cybersecurity - https://www.canadiancattlemen.ca/daily/farm-cybersecurity-campaign-seeks-farmer-input/
9. Food exports - https://www.spglobal.com/platts/en/market-insights/latest-news/agriculture/012422-canadas-common-wheat-exports-rise-63-on-week-durum-wheat-shipments-fall
10. AG and China - https://ipolitics.ca/2022/01/21/chinese-ambassador-pitches-improved-trade-to-western-canada/
11. Food security - https://globalnews.ca/news/8532207/canada-grocery-stores-food-supply-prices/
2. PAUL YOUNG - BIO
• CPA, CGA
• Academia (PF1, FA4, FN2, MU1. and MS2)
• SME – Risk Management
• SME – Close, Consolidate and Reporting
• SME – Public Policy
• SME – Emerging Technology
• SME – Business Process Change
• SME – Financial Solutions
• SME – Macro/Micro Indicators
• SME – Supply Chain Management
• SME – Data, AI, Security, and Platform
• SME – Internal Controls and Auditing
Contact information email: Paul_Young_CGA@hotmail.com
LinkedIn: https://www.linkedin.com/in/paul-young-055632b/
SlideShare - https://www.slideshare.net/paulyoungcga
Twitter: https://twitter.com/paulyoungcpa
Youtube - https://www.youtube.com/user/youngercga1968/videos
3. AGENDA
• Dairy Market – Canada
• Subsidies/support for Dairy Production
• Milk Production (World)
• USCMA / Freeland
• Issues at hand
4. INTRODUCTION
• High production and low demand for milk related products
• Farmers in some jurisdiction are losing money and looking for government support
• Farm incomes struggled in 2018 –” The realized net farm income of agricultural producers fell 45.1% in 2018 to $3.9 billion, the
largest percentage decrease since 2006. This followed a 2.8% decline in 2017. ” https://www150.statcan.gc.ca/n1/daily-
quotidien/190528/dq190528a-eng.htm
• Attacks have begun on Canada as part of tearing down the supply management system
• New Trade deals (CETA and TPP) along with renegotiated NAFTA (USCMA)
• Systemic issues are not being resolved
• Capital recovery
• Production quotas not being established
• Opening new markets for milk exports
• Inefficient/small farms
• Government subsidies and bail outs are in place in many countries
5. DAIRY MARKET / CANADA
Government of Canada - https://www.dairyinfo.gc.ca/index_e.php?s1=cdi-ilc&s2=aag-ail
8. DAIRY MARKET / CANADA
Government of Canada -
https://www.dairyinfo.gc.ca/index_e.php?s1=cdi-ilc&s2=aag-ail
9. SIZE OF HERD
Source – Government of Canada -
http://aimis-simia-cdic-
ccil.agr.gc.ca/rp/index-
eng.cfm?action=pR&r=219&pdctc=
10. TOP DAIRY PRODUCING COMPANIES
Source - http://www.dairyinfo.gc.ca/pdf/emp_dpm_e.pdf
• Dairy Farmers of America contributed
to Republican Party election Campaign
-
https://www.opensecrets.org/pacs/pac
2pac.php?cycle=2018&cmte=C0000138
8
• USA Subsidies to Dairy “The
calculations include government
expenditures outside of dairy
programs, such as subsidized irrigation
water, nutrition programs and
government loan programs. For
example, the benefits of state and local
irrigation programs are estimated at
$2.1 billion.”
https://www.realagriculture.com/2018
/02/u-s-dairy-subsidies-equal-73-
percent-of-producer-returns-says-new-
report/
• Canada’s government needs to look at
ways to softening the blow when the
tariffs removed including similar
policies of the USA, i.e. tax write-off,
price support, transitioning funding
11. DAIRY MARKET / CANADA
Government of Canada - http://www.dairyinfo.gc.ca/index_e.php?s1=dff-fcil&s2=imp-exp&s3=bal
North America ($474.7 million), the European
Union ($226.5 million) and Oceania ($93.3
million), together these regions accounted for
88.4% in value of total imports, a 1.6% drop
from 2014. The United States ($474.6 million),
New Zealand ($83.6 million), France ($62.3
million), Italy ($56.3 million), and Switzerland
($46.2 million) were the top country suppliers.
Imports
Exports
North America ($114 million), Asia ($36.2
million) and Africa ($24.2 million), together
represented almost 82.7% in value of total
exports. The United States ($104.2 million),
Egypt ($20.1 million), China (9.9 million),
Mexico ($9.4 million) and Saudi Arabia ($7.3
million) were the top destination countries.
15. DAIRY INDUSTRY COMPARISON
Country Government
Canada • Quota System/Supply Management
• No subsidies
United States • Crop insurance
• Subsidies removed, but bail outs have
happen
New Zealand • No subsidies
• Cooperative to export milk
Australia • Government provides subsidies and
other support
16. TPP AND DAIRY
• The market access provisions in the text are unchanged from the first agreement, which gave TPP countries (including the U.S.) access to the
following share of the domestic market:
• 3.25 percent for dairy
• 2.3 percent for eggs
• 2.1 percent for chicken
• 2 percent for turkey, and
• 1.5 percent for broiler hatching eggs.
• Supply managed producer groups are questioning why Canada agreed to the same terms when the largest economy in the original deal —
the U.S. — is no longer a member.
• “Although the loss of the U.S. represents a loss of approximately 60 percent of the original TPP market GDP, the original concessions to our
domestic dairy market remain,” notes Dairy Farmers of Canada, in a news release calling Tuesday “a somber day for the 221,000 Canadians
that depend on the dairy sector for their livelihood.”
In 2015, after agreeing to the original TPP with the U.S., the Conservative government immediately announced a $4.3 billion set of programs for
the dairy and poultry industries to offset market share lost to imports under TPP and CETA. This money was never approved by the Treasury
Board as the Conservatives lost the federal election two weeks later. (The Liberals have since rolled out a $350 million package for the dairy
sector to soften the impact from CETA.)
Source - https://www.realagriculture.com/2018/01/new-tpp-deal-without-the-u-s-same-concessions-for-canadas-supply-managed-sectors/
17. DONALD TRUMP / CANADA DAIRY INDUSTRY
• In a fiery speech to factory workers in Wisconsin on Tuesday, Trump vowed to "stand up for our dairy
farmers" in the state. The president also called Canada's dairy system a "one-sided deal," saying the
North American Free Trade Agreement rules between Canada and the U.S. were "a complete and total
disaster" overall.
Donald Trump – CBC News – April 19, 2017
Note:
Dairy Producers are lobbying Trump to include Canada’s supply management system as part of NAFTA.
18. TRANSITION FUNDING AND ISSUES
Trade Deal CPC LPC
CETA Deal was not ratified until after the
2015 election
$350M
TPP Deal was not ratified until after the
2015 Election
Under the agreement, the other 10
nations will have market access that
equals 3.25 percent of Canada’s
annual milk production.
If dairy imports from TPP countries
reach that level, it would represent a
$246 million hit, annually, for
Canada’s dairy industry.
USMCA NAFTA re-negotiated (Trump era) That’s likely to happen in a couple of
ways. First, the deal is reported to
grant US dairy producers access to
3.59% of Canada’s dairy market
All Deals $4.3B (over 10 years) $4.3B (Over 10 years)
19. MILK PRODUCTION
Source - https://www.worldatlas.com/articles/top-cows-milk-producing-countries-in-the-world.html or https://www.dairyglobal.net/Market-trends/Articles/2019/1/2030-
Less-dairy-farms-and-new-players-378776E/ https://www.thebullvine.com/news/china-and-africa-to-lead-growth-in-global-dairy-consumption/
20. BLOG – DAIRY
• “It appears that now Ms. Freeland will make concessions on dairy. I said many times you need to be at the table or you
will have a forced with a deal. Trudeau has no choice but to sign the deal as his government will have little wiggle room to
make changes to new trade agreement. “
• https://www.theglobeandmail.com/business/article-canada-ready-to-give-way-on-dairy-for-nafta-deal/
• https://www.newswire.ca/news-releases/canadas-dairy-supply-management-system-has-stood-the-test-of-time-remains-relevant-and-
resolutely-modern-670130113.html
• https://www.intheblack.com/articles/2018/08/01/dairy-industry-peter-skene
•
• https://www.washingtonpost.com/business/2018/09/01/holy-cow-how-canadian-dairy-pricing-soured-nafta-
negotiations/?utm_term=.d325e9b7a6e7
•
22. ISSUES AT HAND
• Many countries have protectionism policies to support various industries in their countries.
• Issues facing AG Sector - https://www.slideshare.net/paulyoungcga/2019-election-farm-and-agricultural-sector-canada-may-2019
• Canada imports milk from countries like United States
• WTO needs a new mandate , i.e. fair-trade practices - https://www.slideshare.net/paulyoungcga/2019-election-global-trade-barriers-and-protection-wto-canada-
september-2019
• Countries like New Zealand and Australia export much of their milk production. Canada exports little in terms of milk production.
• Canada can learn from the Australia model – “After deregulation of the industry in 2000, prices for fresh milk fell and producers are now able to interpret
global price signals and adjust their investment and planned output based on real-world demand, rather than face the inefficiencies, rigidity, and
perverse incentives associated with government control.”Source - https://www.fraserinstitute.org/studies/phasing-out-supply-management-lessons-from-
australias-dairy-industry
• USA provides compensation to farmers through price supports and subsidies - https://www.realagriculture.com/2018/02/u-s-dairy-subsidies-equal-73-
percent-of-producer-returns-says-new-report/
• Small business tax change / Canada – Dairy Farmers “Restrictions on income splitting, tax rules for passive income, succession planning”
• https://www.bdo.ca/en-ca/insights/industries/agriculture/how-the-proposed-tax-changes-will-impact-canadian-farmers/
• Subsidies can mean different things to different people
• Quota system which sets limits and price. Consumers paid to support the market through higher consumer prices
• Free-market system which means you pay what you get through commodity exchanges. Government can provide direct subsidies and/or other
methods like crop insurance to support dairy production
• Transitioning to a free-market system would require transitional moneys. New Zealand offer transitioned money as part of adjusting their milk production
system