Case: Canadian Dairy Market

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Free Trade?
• Despite policy reforms enacted as a result of the
Uruguay Round Agreement on Agriculture, global dairy
markets remain among the most protected agricultural
sectors.
• Dairy trade is characterized by “megatariffs” (tariffs
usually over 100 percent), tariff-rate quotas (tariff rate
depends on the volume of imports), and export
subsidies.
• A USDA study found that, in most regions, tariffs on
dairy products are well above the average agricultural
tariff and among the highest of all commodities (Gibson
et al., 2001).
• In addition, many countries provide trade distorting
income and price support to the dairy sector.
• As a result, much of the world trade in dairy products is
driven more by policy intervention than by market
factors.
What form?
• Support to dairy producers makes up a large share of
some countries'aggregate domestic support for all
commodities (on average, since 1995, 100 percent for
Australia, 84 percent for Canada, 55 percent for the
United States, and 12 percent for the EU).
• In the United States, income support for dairy producers
includes direct payments and, in the recent past, ad hoc
disaster assistance.
• Price support measures include government purchase
programs (U.S.), intervention purchasing and storage
(EU), and supply management through production or
marketing quotas (EU and Canada).
Dairy Support Policies
Source: http://www.ers.usda.gov/publications/ERR16/ERR16.pdf
COWS MILK: SUMMARY FOR SELECTED COUNTRIES
1,000 Head
Milk Cow Numbers
2001
2002
2003
North America
Canada
Mexico
United States
Sub-total
1,091
6,800
9,103
16,994
1,084
6,800
9,139
17,023
1,065
6,800
9,083
16,948
1,055
6,800
9,012
16,867
1,066
6,850
9,041
16,957
1,049
6,875
9,120
17,044
South America
Argentina
Brazil
Sub-total
2,450
15,900
18,350
2,150
15,600
17,750
2,000
15,300
17,300
2,000
15,200
17,200
2,100
15,100
17,200
2,150
15,050
17,200
European Union - 25 1/
25,747
25,140
24,456
23,963
23,533
22,677
1,564
1,550
1,684
1,694
1,587
1,650
Former Soviet Union
Russia
Ukraine
Sub-total
12,500
4,958
17,458
12,200
4,918
17,118
11,700
4,715
16,415
11,200
4,313
15,513
10,400
3,950
14,350
9,770
3,910
13,680
South Asia
India
35,900
36,000
36,500
37,000
38,000
38,600
2,848
971
3,819
3,420
966
4,386
4,466
964
5,430
5,466
936
6,402
6,700
910
7,610
8,100
910
9,010
Eastern Europe
Romania
Asia
China
Japan
Sub-total
2004 (p) 2005
(f) 2006
Number of Milk Cows
•
Source: http://www.fas.usda.gov/dlp/circular/2006/0607Dairy/milkcows.xls
Year 2004
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
a
s
e
n
a
o
ia
ia
zil
na
Ind Bra Ru ss State exic Ch in krai ngenti anad Japa
M
U Ar
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ited
Un
COWS MILK : SUMMARY FOR SELECTED COUNTRIES
MT/Head
Fluid Milk Production Per Cow
2001
2002
2003
2004 (p) 2005
North America
Canada
Mexico
United States
7.43
1.40
8.24
7.35
1.41
8.44
7.26
1.44
8.51
7.49
1.45
8.60
7.31
1.44
8.88
South America
Argentina
Brazil
3.88
1.40
3.95
1.45
3.98
1.49
4.63
1.53
4.69
1.59
European Union - 25 1/
5.05
5.21
5.39
5.45
5.61
Eastern Europe
Romania
3.32
3.32
3.21
3.38
3.47
Former Soviet Union
Russia
Ukraine
2.64
2.66
2.75
2.82
2.82
2.84
2.86
3.20
3.08
3.49
South Asia
India
1.01
1.01
1.00
1.01
1.01
Asia
China
Japan
3.60
8.55
3.80
8.68
3.91
8.71
4.14
8.90
4.18
9.10
Oceania
Australia 2/
New Zealand 3/
4.76
3.70
4.90
3.71
5.19
3.73
5.10
3.83
5.11
3.65
NONFAT DRY MILK EXPORTS: SUMMARY FOR SELECTED COUNTRIES
1,000 Metric Tons
2001
2002
2003
46
0
96
142
49
0
126
175
36
0
141
177
16
0
231
247
6
0
300
306
18
0
0
18
22
3
0
25
14
3
0
17
18
2
0
20
22
3
0
25
284
267
339
283
197
15
71
86
20
43
63
25
51
76
20
63
83
15
65
80
North Africa
Algeria
Egypt
Sub-total
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Asia
China
India
0
8
0
10
1
23
2
10
2
15
North America
Canada
Mexico
United States 1/
Sub-total
South America
Argentina
Brazil
Chile
Sub-total
European Union - 25 2/
Former Soviet Union
Russia
Ukraine
Sub-total
2004 (p) 2005
BUTTER EXPORTS: SUMMARY FOR SELECTED COUNTRIES
1,000 Metric Tons
2001
2002
2003
North America
Canada
Mexico
United States
Sub-total
16
0
0
16
17
0
3
20
12
0
10
22
17
0
8
25
20
0
8
28
South America
Brazil
3
0
2
1
1
196
222
307
354
340
0
0
0
0
0
3
53
56
5
15
20
5
18
23
5
42
47
5
30
35
North Africa
Algeria
Egypt
Sub-total
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Asia
India
Japan
2
0
3
0
2
0
2
0
10
0
European Union - 25
Eastern Europe
Romania
Former Soviet Union
Russia
Ukraine
Sub-total
2004 (p) 2005
COWS MILK : SUMMARY FOR SELECTED COUNTRIES
1,000 Metric Tons
Fluid Milk Consumption
2001
2002
2003
North America
Canada
Mexico
United States
Sub-total
2,909
4,075
26,850
33,834
2,884
4,080
27,002
33,966
2,810
4,352
27,173
34,335
2,835
4,349
27,289
34,473
2,846
4,266
27,365
34,477
South America
Argentina
Brazil
Sub-total
2,350
12,390
14,740
1,990
12,295
14,285
2,050
12,391
14,441
1,800
12,743
14,543
1,900
13,175
15,075
European Union - 25 1/
36,385
34,471
34,633
34,234
34,027
3,500
3,460
3,662
3,840
3,700
Former Soviet Union
Russia
Ukraine
Sub-total
14,140
3,200
17,340
14,350
3,300
17,650
13,350
3,450
16,800
12,900
5,112
18,012
12,850
4,320
17,170
South Asia
India
33,300
33,500
34,000
35,500
38,500
4,463
4,941
5,678
5,002
7,661
5,035
10,315
4,955
13,000
4,775
Eastern Europe
Romania
Asia
China
Japan
2004 (p) 2005
Some facts about Dairy
• Production of dairy products generally moves in
the same direction as milk production in each
country, with some exceptions.
• For example, while U.S. production of raw milk,
butter, nonfat dry milk, whole dry milk, and other
dairy products declines, cheese output expands
slightly because the value of milk in cheese
production is higher than its value in the
production of other dairy products.
Questions to think about
• Support to dairy producers makes up a large share of
some countries' aggregate domestic support for all
commodities
• How might the removal of such support affect countries'
relative competitiveness in international dairy markets?
• Would
• consumers worldwide pay more or less for milk and dairy
products?
• And how
• would the Canadian dairy industry fare in a more
liberalized environment?
http://atlas.nrcan.gc.ca/site/english/maps/economic/agriculture/agriculture1996/dairycattlebycd1996?mapsize=750+666&scale=41953025.267029&mapxy=431453.9620327102+
1853443.1629672893&mode=zoomin&layers=&hidetextbox=&urlappend=%26map_scalebar_imagecolor%3D255+255+255
• Map derived from Census
http://atlas.nrcan.gc.ca/site/english/maps/economic/agriculture/agriculture1996/dairycattlebycd1996
Canadian Dairy industry
• In 2005, dairy production generated total net farm receipts of $4.8
billion. The dairy industry ranks fourth in the Canadian agricultural
sector following grains, red meats and horticulture.
• About 81% of Canadian dairy farms are located in Ontario and
Quebec, 13% in the Western provinces and 6% in the Atlantic
Provinces .
• The Canadian dairy cattle population totalled 1,546,300 head of
which there were approximately 1,048,600 dairy cows in Canada as
at January 1, 2006 . The typical Canadian dairy farm has 66 cows.
• Nearly 38,000 people work on dairy farms and almost 26,000 others
work in primary processing.
• The Canadian dairy sector functions under a supply management
system, based on planned domestic production, administered
pricing and dairy product import controls
Canada: Processing of dairy
products
• The fluid milk market (table milk and fresh cream)
represents 38% of milk production or 28.3 million
hectolitres, while the market for manufactured dairy
products such as butter, cheese, yogurt and ice cream
accounts for 62% of production or 46.5 million hectolitres
of milk.
• The dairy processing sector is relatively concentrated.
Today, 15% of Canadian plants are owned by the three
largest processors in the country, (Saputo, Agropur,
Parmalat) and they process approximately 70% of the
milk produced in Canada.
• More than 450 fine and traditional cheeses, including
goat, ewe and raw milk, are produced in various regions
of the country.
Canada: Associations and organizations
related to dairy production
• Government and various partners in industry work in close
cooperation to coordinate the movement of milk from the farm to the
consumer.
• The Dairy Farmers of Canada (DFC), the Dairy Processors
Association of Canada (DPAC), the Canadian Dairy Commission
(CDC), provincial marketing boards and Agriculture and Agri-Food
Canada (AAFC) work as partners to ensure a strong and dynamic
Canadian dairy industry.
• The CDC supports the industry by implementing national policies for
dairy production, by assessing changes in demand for milk and dairy
products and production of milk, and by coordinating the pooling of
milk revenue and the market-sharing systems.
• CFIA is responsible for setting standards for dairy products, for
inspecting plants, and for regulating packaging and labelling. CFIA
also enforces veterinary health programs and ensures the safety of
dairy products.
Canada: International trade
• Canadian milk and dairy products are known around the world for
there superior quality. In 2005 Canada exported mainly cheeses
(27.1%) followed by dairy spreads (18.0%) and ice cream (16.0%).
The major markets for dairy products exports are the United States ,
(48.1%) and the European Union (12.9%), in particular the United
Kingdom (12.1%).
• Canadian dairy exports in 2005 amounted to $242.6 million while
imports totalled $597.6 million.
• In 2005, Canada imported mostly specialty cheeses (29.2%), casein
and its derivatives (18.3%), butter and fats and oils derived from milk
(11.6%) and whole milk powder (10.6%). Our major suppliers of
dairy products are the EU-25, (38.6%), New Zealand (23.9%) and
the United States (22.8%).
• Source: http://www.dairyinfo.gc.ca/_english/cdi/cdi_1_e.htm
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