Thank you, Mr. Chairman.
Thank you, first of all, for inviting us here today to make a presentation.
My name is Ron Maynard. I'm a dairy producer from Prince Edward Island. I farm there in partnership with my cousins and we milk 150 cows. I've been involved in the dairy organizations for a number of years, and the file I'm mainly responsible for at Dairy Farmers of Canada is the environment and animal welfare and the research that goes along with that.
Today we'll talk about the Canadian dairy sector. The Canadian dairy industry, farming and processing together, is the second-biggest food sector in Canada. Dairy is one of the top two sectors of seven out of ten provinces. In addition to being jobs sustainers, we also contribute $3 billion in tax revenue to the three levels of government.
Canadian dairy farmers are efficient. From the introduction of supply management until 2008, according to USDA statistics, yield increases in Canada, at 138%, have been higher than in the U.S., at 110%; the U.K., at 81%; and much greater than New Zealand, at 35%. Farm size and efficiency have continued to increase under supply management. Canada has had comparable rates of decline in farm numbers to the U.S. in the nineties. Moreover, when compared with the decline in farm numbers on a longer period, the rate of decrease is very comparable. From 1970 to 2009 farm numbers decreased 90% in both Canada and the U.S.
Since the introduction of supply management in 1971, average herd size has increased from about 20 cows to 76. Shipments per farm have increased by 600% from 1976 to 2010. The productivity gains in Canadian dairy producers are comparable to if not better than any of the producers in the rest of the world.
Canadian dairy genetics are sought after worldwide and are frequent topics during the agriculture ministers trade missions. The government and the dairy sector continue to invest to maintain our world-class genetics.
It is essential that farmers supply milk to meet Canadians' demand for milk and milk products. This is the first pillar of supply management. The steady supply of quality milk to meet consumers' demand for milk and dairy products has the benefit of stabilizing prices from farm to fork. Farmers collectively negotiate prices for milk. Prices are regulated. By being able to negotiate collectively, farmers are better able to cover the cost of producing milk, including labour and investments. Farmers are thus empowered to deal as equals with the small number of large processors that buy their milk. Clearly these three pillars are interlinked. If a single pillar is compromised, then the entire system is affected.
Canada is a high-cost producing country. We have to deal with five months of winter and seasonality, similar to the climate of other Nordic countries, even with our highly efficient dairy herds. Seasonality of the dairy production has been practically eliminated. In 1960 we produced twice as much milk in the summer as we did in the winter. That has now been stabilized and levelled out. This contributes to processor plants' efficiency, because plants can run at 100% year-long, day in and day out--and that's efficiency.
Stable, predictable prices for the whole supply chain are effective against volatility in world markets. Where other governments are dispensing subsidies, a direct transfer from taxpayers to the farmers--in the U.S., $5 billion--in Canada we charge the consumer the true, actual cost to produce the milk. This volatility has led to discussions over the last couple of years in the U.S., where they are looking at developing a supply management system to assist their farmers.
Dairy is known as one of the most volatile agricultural commodities. The severe shifts in price in recent years are a testament to that and reinforce the need for high tariffs, because the world markets are so inefficient in balancing supply with demand. High volatility requires higher tariffs, but Canada still allows more access to our dairy market than the U.S. or the EU.
Yes, we are seeing more expensive prices in Canada right now, but in the last decade Canada has had a 40% advantage, and no one was talking about that. We were in supply management then as well, and that didn't get the credit for the price advantages.
So what do stable prices get us? Stable prices are a benefit throughout the chain. If the price is stable and there's no volatility transferred to the retailer, once again we see stability in the share of the dairy chain and a greater share returned to the farmer than our fellow farmers receive in other countries. All stakeholders benefit from stability in the Canadian industry.
At the height of global food prices, we can see the range of price increases for dairy products: 14% to 15% in Europe; 10% to 12% in the U.S; and 2% in Canada. Other countries are coping with this through subsidies. The government in Canada has had no desire to see our farmers have to compete against the treasuries of other countries.
What supply management means is that the dairy farmers get a fair price for their milk from the market. Processors get a stable supply of high-quality milk throughout the year. Despite the higher prices paid to farmers, processors earn adequate profit, and consumers pay reasonable prices for dairy products.
Canadians spend about 10% to 12% of their disposable income on food. Dairy products constitute about 15% of this spending on food. There are no financial contributions by government to supplement the farm producers' income, so Canadian consumers pay only once for the true value of the product. Production discipline limits surplus production that could otherwise distort world markets.
Moving to the Growing Forward 2 recommendations, we have made a number of recommendations to AAFC during the Growing Forward 2 consultations that have taken place thus far.
DFC places a major priority on research. We are committed to the next phase of the dairy cluster and are prepared to commit $5 million in the one-to-three industry-to-government ratio to fund the next cluster.
We are also looking at ways to continue to help and encourage farmers to reduce on-farm costs by installing, for example, digesters or wind power. Our former president, Jacques Laforge, as some of you may know, has installed a digester on his farm. I have a windmill on my farm, and we have solar panels, which are quite common for heating the water we use for our cleaning.
There needs to be a long-term industry and government commitment to animal welfare, animal health, traceability, research, food safety, and biosecurity. Dairy producers are seeking collaboration with government to empower industry with the regulatory environment and policy instruments that will help facilitate and foster an environment of stability and predictability. These are imperative to the Canadian dairy industry's pursuit of opportunities for growth and an effective response to current and future consumer demands.
As more and more Canadian consumers voice their interest in being more aware of their food, they expect government to keep them safe, so there is a continued need for effective and enforced national regulation standards. We need to improve the resources given to the border inspectors to help them do their jobs, as it's getting increasingly complex. Border controls are important for all goods. We need a border surveillance system that inspects and verifies.
In conclusion, our definition of competitiveness is that it should be measured by the ability of an industry to provide sustainable profitability in every sector of the industry, including at the farm.
Thank you for your time.