Universities propose 20-year fix-it plan for Canada’s dairy sector

Canada’s dairy industry is in dire need of an overhaul, according to a new report.

Dalhousie University and the University of Guelph say the dairy industry needs reforms, particularly to help dairy processors be more innovative and competitive in the face of new free-trade agreements and the rise of dairy alternatives. The universities developed a 20-year roadmap, titled “Supply Management 2.0,” to modernize supply management and increase competitiveness in the market.

“The reason we’re releasing this now is because of the number of headwinds the dairy sector is facing,” says Sylvain Charlebois, a director of the Agri-Food Analytics Lab at Dalhousie University and co-author of the report. “First, there is the dairy alternatives phenomenon and grocers are carrying way more dairy alternatives—sales are up 230% this year alone.”

Secondly are the trade agreements: Comprehensive Economic and Trade Agreement (CETA); Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and Canada–United States–Mexico Agreement (CUSMA).

“Grocers are allowed to bring in dairy products from abroad and those products are cheaper and perhaps even more attractive because some of the cheeses coming from Europe are pretty darned good,” says Charlebois. “So that brings more competition.”

In the middle of it all are Canadian dairy processors. “They’re the ones really struggling and without a strong dairy processing sector, it becomes very challenging to support our dairy producers,” says Charlebois. “We’re not really questioning the quota system, we’re just questioning the competitiveness of the sector.”

There are four main steps in the roadmap, which is summarized here:

1-Create a voluntary program for dairy farmers to exit the industry. Some farmers will have to exit the industry to make room for new foreign competitors. The federal government should initiate a voluntary quota buyback program of equal value to the concessions made to foreign competition in recent trade deals. Only the most competitive farmers will remain, giving a direct boost to Canada’s ability to compete with these new foreign suppliers.

2-Make significant changes to the Canadian Dairy Commission. CDC must become more transparent and accountable, including being more transparent with its pricing strategy and reevaluating how the price is set altogether, as well as being more accountable to the Canadian public as a Crown corporation.

3-Remove interprovincial trade barriers on dairy products and create an innovation fund for the sector. Removal of interprovincial trade barriers is essential to promoting artisanal dairy products. Because this market is much smaller than for general dairy, it is vital that producers can access consumers across the country. This measure would be coupled with the creation of an innovation fund to entice dairy farmers to innovate and develop new products and markets.

4-Initiate a 20-year plan to reduce general tariffs, develop an exporting strategy, create a Canadian brand and provide incentive for innovation: A progressive reduction of tariffs is desirable over a 20-year period, but tariffs should not be eliminated outright. Canada also needs a strategy to export milk and dairy products. Canada has a valuable brand image. The industry should endorse its brand and begin developing new and innovative Canadian dairy products for export.

In an email to Canadian Grocer, a spokesperson from CDC said: “At this time, the CDC has no comments about this report.”

The full report can be downloaded here.