Dairy farmers are milking Canadian consumers

Lawrence Solomon
National Post
January 16, 2001

Canadian dairy products, thanks to our ingenious system of milk marketing boards, are among the best bargains available — if you’re an American corporation. Americans and others who operate in international markets, can buy Canadian cheese and other Canadian milk products at free- market prices or less. That’s because Canada’s milk marketing system — a byzantine complex of quotas and other controls — overcharges Canadians for milk and milk products whenever it can, and then uses the profits to subsidize both dairy farmers and exporters.

Next to foreigners, the best price for Canadian milk products goes to Canadian restaurants and other Canadian businesses who pay, for example, 30% more than the free- market price for the same Canadian cheese that foreigners obtain. This, too, is by design. Canadian companies can obtain Canadian cheese at the free-market price, but only if, for example, they want to export a cheese product to the United States for American consumption.

Canada’s dairy industry reserves the highest price of all — about twice the free-market price — for the men, women and children in the average Canadian household. Canadian householders can afford to pay a dollar or two extra when they pick up milk at the supermarket, our dairy farmers say, because milk represents a small part of the household’s total food budget.

The government and the dairy industry are both sheepish about sticking it to the Canadian consumer in order to boost the dairy farmer’s profits. But they can’t force Americans or other foreigners to pay inflated prices for our milk, and they don’t want government coffers — through an identifiable, easy-to-attack tax — to pick up the tab. That leaves the entire burden of supporting the Canadian dairy farmer on the Canadian consumer.

So far, the Canadian consumer has suffered in silence, partly because the dairy taxes are hidden from sight and partly because Canadians sympathize with the plight of the poor farmer. But Canadian consumers are nevertheless voting with their pocketbooks — by abandoning milk for less costly alternatives.

According to StatsCan, Canadians now drink about 10% less milk than we did a decade ago. Meanwhile, our consumption of soft drinks has soared by 17%. Dairy Farmers of Canada, a lobby group, deplores the fact that Canadians now consume more pop than milk, especially since children are paying for this trend with their health. In particular, according to the University of Saskatchewan’s Paediatric Bone Accrual Study, girls between the ages of eight and 18 — the critical period during which they build bone at sites especially susceptible to osteoporotic fracture later in life — are endangered.

The distorted market for milk products not only harms our health, it harms the Canadian economy and intrudes in other ways on how we live our lives. To take one small example, the dairy industry lets U.S.-based manufacturers of frozen pizza, such as DiGiorno, buy Canadian cheese at world prices, and international trade rules let Canadian frozen pizza manufacturers, like McCain’s, also buy Canadian cheese at the world price. But our elaborate dairy industry rules deny pizza parlours and other restaurants that serve pizza the right to buy cheese at world prices, forcing them to pay 30% more for their mozzarella than their frozen food competition. As a result, although Canadians have been eating out more, sales of restaurant-made pizza have been flat. Frozen pizza sales in Canada, meanwhile, have soared — particularly of U.S. pizza imports, whose sales are up 87%. The Canadian Restaurant and Food Services Association, on behalf of all restaurants — pizza accounts for over 10% of all restaurant sales — is today in federal court, hoping to force the Canadian Dairy Commission to give restaurants access to free-market prices for cheese, yogourt and ice cream, other dairy products in which restaurants have lost market share.

A win for the restaurant association won’t much benefit affluent Canadians, for whom the money saved represents a trifling amount. But for those families on a tight budget, for whom a meal out at a pizza parlour is a big treat, a win for the restaurant association could be the difference between eating in or eating out. A win for the restaurants would also allow more restaurants to offer milk to children, instead of soda pop, as their free drink on kids’ meals.

Unfortunately, a restaurant win won’t help the great majority of families with their bigger food worry: the cost of groceries. Despite the dairy lobby’s claims, dairy products represent a large component of the grocery bill, second only to meat — StatsCan reports dairy products and eggs represent 16% of the grocery bill, more than fruits, at 11%, or vegetables, at 9%. On February 1, when the latest round of dairy industry increases is imposed on Canadian consumers — 3.8%, bringing to 13.8% the increases since 1997 — the burden on Canadians of carrying the dairy industry will rise further.

Overcharging the average Canadian household — worth about $250,000 when all that it has in the world is added up — to support the dairy farmer – whose farm alone is worth an average of about $1-million, and that’s after the farm’s debt has been paid — is grossly unfair, apart from making no economic sense.

“It’s not delivery. It’s DiGiorno,” goes the punch line in Kraft’s highly successful frozen pizza U.S. ad campaign. In Canada, where the product sells under a different name, Kraft declares, “It’s not delivery. It’s Delissio.” Frozen pizza sales grew by an impressive 50% since 1995 in the United States; in Canada, frozen pizza growth, at 74%, is half again as large. It’s not delivery. It’s not Delissio. It’s the milk marketing board.

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