Until recently, we had been boasting about unmatched growth of milk production in Canada, thanks to consumers’ renewed taste for milk fat. After years of suffering through low-fat diet trends, wholesome foods like dairy were back.
Despite this growth in volume, dairy processing has seen negative GDP growth in recent years. The dairy processing industry is actually the only food processing industry in Canada that has exhibited negative GDP growth in the period 2013-2020.
This is due to the instability created by CETA in 2016, and added to by CPTPP and CUSMA which were signed in quick succession. These agreements undermined the stability that the supply management system once provided and disincentivised the kind of investments that had propelled the industry’s growth in the earlier part of the decade.
In fact, CETA, CPTPP and CUSMA concessions combined amount to almost 10% of Canada’s dairy market. This will result in $300 million in annual losses for the dairy processing industry in a few year’s time, but the effects are already being felt. Processors are having difficulty competing and are seeing their products displaced by imported products. For small and medium-sized processors that might not have a wide range of product lines that can balance losses in some areas, the impacts of trade can be catastrophic.
Further, by the government’s own admission, loss of market share at home cannot be made up through new markets elsewhere; Canadian dairy processors are currently not positioned to be competitive in export markets.
The upcoming Federal Budget is focused on measures that will help to kick start the Canadian economy. While the impetus may be lessening the impacts of trade, we believe that a compensation program for dairy processors perfectly aligns with the government’s budget goals. This type of program could support investments and innovation within the dairy processing industry, as well as improve the ability of Canadian dairy processors of all sizes to face the new market realities.
Compensation for dairy processors today would not only be an investment in the future of Canada’s dairy sector, it would be a signal that the government supports Canadian jobs, local agricultural production, and believes in a healthy supply management system. It would ensure that the Canadian-made products that Canadians want will continue to be made here at home.