OTTAWA-Caresse Ley

Canadian dairy farmers have jumped the gun on railroading the new Canada-European Union trade agreement.

An analysis of import and export data for the dairy industry as a whole and the smaller cheese industry shows that, at worst, dairy farmers would lose control of about four per cent of the Canadian cheese market.

As it stands, Canada produces about 400,000 metric tonnes of cheese per year on average, according to data from the Canadian Dairy Information Centre (CDIC), run by the Government of Canada. About 120,000 metric tonnes is produced in the speciality cheese market. This accounts for a little over a quarter of Canada’s cheese market, and it is in this sector where dairy farmers have feared the most competition.

Under the new Comprehensive Economic and Trade Agreement (CETA), the E.U. would be allowed to import into Canada an additional 16,000 metric tonnes of cheese per year. If Canadian dairy farmers lost business, tonne for tonne, this would only represent about four per cent of the total cheese market being closed off to them.

Below: Metric tonnes of cheese imported to Canada by country in 2012. Source: Industry Canada

If the dairy farmers’ predictions come true and the E.U. farmers use their new market share to penetrate the speciality cheese market only, this would represent about a 13 per cent loss of market share for those products. These are the worst case scenarios possible, said Aamir Asgarali, a sector specialist for Agriculture and Agri-Food Canada, who focuses on developments in the dairy industry. In other words, the domestic market would remain significant.

The Canadian dairy market was worth about $13.5 billion in 2012. Cheese exports accounted for about $207 million of that, according to Industry Canada.

The problem in Canada is that most farmers are, effectively, small business owners; 13 per cent of market share is not a small number to them. But four per cent needn’t frighten them just yet. Farmers are assuming that for every tonne of cheese that is imported, “a tonne of Canadian-made cheese will be displaced. This does not account for (annual) market growth,” said Asgarali.

What’s unique is that this isn’t a classic case of local entrepreneur versus big business; Beaulieu explained that the farm sizes are relatively the same in Canada and the E.U.. Yet, the E.U. farmers stand to gain more from CETA.

Export data for cheese from Canada to other countries in 2012 can be found by clicking here.

Countries including Italy, France, Switzerland and several others already count themselves as part of Canada’s top 10 trading partners – Canada imported about 13,600 metric tonnes of cheese last year from the E.U., according to the CDIC. This accounts for about half of Canada’s total cheese imports in 2012. E.U. dairy farmers have a clearly-established grip on part of the cheese market here in Canada, or at least a substantial part of what is imported, which should allow them to transition more easily into exporting more cheese to Canada.

Canadian dairy farmers have no such presence in the E.U..

“We don’t have an established place in that market,” said Asgarali. “But that’s not because we can’t. It’s just because no effort has been put into developing a market there.”

“It’s an uphill battle,” said Therese Beaulieu of Dairy Farmers of Canada on establishing a demand for Canadian cheese in Europe. Currently, the United States is the biggest receiver of Canadian cheese exports, followed by Saudi Arabia and several countries in Asia.

“That’s where the growth is,” said Beaulieu of Asia. She explained that those countries do not have the land resources to develop their own farms, so there is demand for Canadian cheese and dairy products to fill that gap.

Penetrating the E.U. market will prove difficult, said Beaulieu, a sentiment that was echoed by Asgarali. Both said the cost of cheese production in Canada is much higher, which will make it difficult to compete with the Europeans in their own backyard.

So while Canadian farmers may not lose as much on Canadian soil as was initially anticipated, it is unlikely they will benefit from the deal internationally, at least in the short term.

ADDITIONAL LINKS

Click here to read a report from 2011 on the Canadian dairy industry.

Click here to read more on why the Dairy Farmers of Canada want to stop CETA.

Click here to search for trade data on your own.