Thank you, Mr. Chairman. Thank you for the invitation to appear.
I will try to be brief. You have a presentation. I will just highlight some of the key slides.
I want to start by saying I've titled this, “To be profitable is to be competitive”. I know that Larry Martin has appeared in front of this committee, and he defined the potential to have profitable gain as being a measurement of competitiveness.
I will bring you to slide 4 on page 2. I think too often we tend to believe that price is the only thing that drives competitiveness. I want to give a comparison of where Canada and other countries position themselves versus what we see in the world market, in particular with regard to trade. The slide shows the comparative cost of production of average farms in 44 countries--dairy farms, of course. You can see where Canada is. As a Nordic country we tend to be, as with other Nordic countries, in a fairly high cost range.
What I've put here is two world prices, the world price of November 2007 and the world price of February 2009. The thing to remember here is that I've converted butter and skim milk powder prices, so these prices reflect commodity prices of processed products on the world market and therefore would also include the processing costs, where the bar codes do not. You can see that while you have many of the exporting countries in between those, most of the countries that export are not competitive in the sense of a straight price standpoint. In my definition, they're exporting, but they're not making a profit at it--or their income is generated outside of the marketplace, which is the other issue.
Moving now to page 6, slide 11, I want to point out that while in the late 1990s and early 2000, we in Canada, farmers in particular, felt that the world market was very volatile, with high peaks and valleys, we had seen nothing until 2007-08, when the price was almost tripled and then brought back to its lowest level within less than 12 months. That created different situations in different countries.
Most of the dairy industry around the world is in crisis--in Europe, in the United States, just about everywhere except in Canada. That's a point I would like to make later on.
Let's look at the U.S. price, on slide 12, page 6. I put in the U.S. price from 2000 to the current price. You can see that very few businesses can survive with the fluctuations that we've seen in farmers' prices in the United States, or in Europe, for that matter. You cannot have in one year $21 of return per hundredweight and within two years drop down to $9 per hundredweight. Europe is going through the same thing. A lot of the farmers in the last 12 months have seen their returns drop by up to 50%, and there were rallies and protests earlier this week in Germany, in Brussels, and so on. So the volatility of prices in the world makes it extremely difficult to refer to competitiveness.
I'll bring you to slide 16 on page 8. I want to point out that while we're talking about trade and price volatility of world markets and so on, many people believe that the WTO is the solution to all of these crises. The reality, Mr. Chairman, is that the WTO is not really going to give the long-term solution.
This slide shows the European agricultural support. I would suggest to you that the current WTO agreement that's on the table, the current draft, will permit this to continue. All they did, really, is increase their financial contribution to the agricultural sector. They just changed the colour. They changed the name of it. They called it rural development. They called it decoupled. They called it whatever you want.
The reality is that yes, they will not have “export subsidies”, which are the red bars—these will disappear—but their farmers will still continue to rely on the financial contribution of the government to produce.
The leader of the COPA for farms was doing a protest yesterday and was quoted—and I don't think I included this in my presentation—as saying that European farmers anywhere in Europe are not profitable any more. They're in crisis and they want even more money from the government. Europe reintroduced export subsidies of $1.5 billion to the dairy industry in January. The U.S. last week announced the reintroduction of export subsidies and the reactivation of their dairy export program, which had been terminated as a government intervention. This is the situation we're in.
I want to turn to page 10, slide 19, if I may, on the benefits of supply management. In this cost comparison that was done by the International Farm Comparison Network, it is interesting to look at the farmers' share of the consumer dollar. What our farmers receive in Canada has been above 60% of the consumer dollar, and we've been extremely stable compared with any other country. That stability is part of the reason that an industry can be profitable long term—and not just for the farmers, but the processors, distributors, and retailers. What's interesting in this analysis is that while everybody has tried to gain or aim at 60%, any time it gets close in a less regulated industry, you see a downturn, and when it gets too low, you see an upturn. No other country has been able to achieve either the stability or the percentage of share of the consumer dollar that the dairy industry has.
I'm on page 11, slide 22. While consumption was going down because of the high price in 2007, and while production was down because of the low price of late 2008 and 2009, and while, as I said, the rest of the world in the dairy industry is in crisis, we have been able to have an increase in price at the producer level this year. Because of that stability I was referring to, we've also been able to increase the retail market of our products. We've achieved a 1.5% increase in milk in the last 12 months, which is difficult in this country with an aging population, a 5% increase in cream sales, and a 2.6% increase in cheese sales across the country. We're very pleased with this.
Every time we talk about price increase at the farm level, people say the consumers are not getting a good deal. I'll bring you to page 12, slide 23 and would note that the fact of that stability has permitted just as good a deal for the consumers as it has for the other sectors of the industry.
I will conclude with my two last slides in French, Mr. Chairman.
I would like to wrap this up. We now move to slide 27, page 14.
This shows the link between supply management and the stability it brings, as well as the long-term profitability, not just for producers, but for all sectors of the industry. Stable and fair prices for farmers, just like stable and reasonable prices for consumers, are essential for continued market growth, providing a stable supply for processors and low costs for the government. In fact, the market can be expected to produce a profit.
The stability brings with a number of benefits, whether in the environment, in the safety and quality of the products, and in all the mechanisms that can be put into place, because our producers have the means to follow new procedures.
In conclusion, Mr. Chair, competitiveness is measured by profitability. Every sector of the industry must be profitable—not just one sector, every sector—if an industry is to be considered competitive.
Thank you very much.