Agriculture Committee on Nov. 7th, 2013

[The Chair, Conservative, Bev Shipley]

Time's up.

I'm going to go to the next speaker, and that would be Mr. Easter, for five minutes, please.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

I think the real question here, regardless of the theories, is this. In the deal, has the Canadian dairy sector been treated fairly? You can make an argument that the market will grow. There's no question about that. But the other side of the coin is the so-called unfettered access to the European community, and I think you mentioned a couple of things on that, Wally.

One is the geographical indicators, which will block certain cheese, as I understand it—and you can expand on that. There is the CAP and the decoupled payments paid to their farmers, which means their farmers are highly subsidized and are allowed to export their highly subsidized product into market. We, who are not subsidized a dollar from the Canadian government, are really not, in effect, allowed to export into their market.

Could you expand on that, just so we see the balance in terms of what the government has negotiated here?

[Richard Doyle]

The European CAP is $80 billion. That's what most of the uncoupled payments are, paid to the farmers in Europe. This is not just dairy; this is the overall agricultural sector receiving that. But do the math. Even on a prorated basis, that's a significantly bigger investment than this country provides to agriculture.

The reality about this—I agree with Margaret—is that there are some very specialized high-value market niches that can have access to the EU. But we have access now. We have access for 4,000 tonnes of cheddar, aged cheddar, 18 months old, into the U.K., which we're not filling. The question is why we are not filling this. This is a market niche. This is a high-value cheese. This is a fine cheese, as far as we're concerned, because the processors, to fulfill it, require milk at $28 a hectolitre. Quite frankly, not a single producer in this country, based on our cost of production across the country, could actually recover their cash costs—no return on investment and no return on labour. They would not even recover their cash costs, not a single one of them.

[Wayne Easter, Liberal, Malpeque, PE]

So the unfettered access is basically a myth.

[Richard Doyle]

As I said, there could be some very high-value market niches that can probably get there, but we would be talking about extremely small volume. For the rest of it, we're not in a competitive environment that provides for it.

[Wayne Easter, Liberal, Malpeque, PE]

In your remarks, Wally—you repeated it a couple of times—you seemed to emphasize the $30 million dedicated to markets for domestic Canadian cheese. What was the point you were trying to make there? I didn't catch the point. Is that money not going to be there to market Canadian cheese? Our industry is going up, increasing, in part because of advertising and in part of because of high-quality products at reasonable prices. What was your reason for emphasizing it?

[Wally Smith]

Mr. Easter, my point was that over the last decade we have invested heavily, as dairy farmers across the country, into developing and growing this category of the cheese market, and we have been successful. By giving that access to the European Union, not only are you costing the farmers directly on their income, and having to reduce production, but you are also taking away the investment that's been made to grow that specialty market.

[Wayne Easter, Liberal, Malpeque, PE]

I follow you now.

The other point is that you indicated that this additional access—and it's partly what the NDP asked earlier—would really mean about 2.25% of farm quota, which is the entire milk production in Nova Scotia.

So the Europeans gain access. If our market doesn't expand, then producers right across Canada lose 2.25% of quota. But there is also another impact, is there not? I think where the biggest problem is going to be is probably in the fine cheese market in Quebec—elsewhere as well, but more so Quebec.

One thing is the farm quota and the production loss to farmers. What's the impact on the business side in jobs created in small cheese operations and business?

[Wally Smith]

It's speculative. We anticipate a negative outcome.

I think, as Richard pointed out, we won't grow the fine cheese segment in the cheese category as quickly as these imports will come in and flood the market. Then what's going to happen? Is that going to cascade into the different categories of cheese within the sector, or does that mean they're limited—if they can't sell it, they can't export it into our market? Is there going to be a trickle-down effect? Is it going to cascade and increasingly impact the cheese market, or are they going to be limited by the number of sales in that particular category?

We're speculating, and we know there's going to be a negative impact.

[The Chair, Conservative, Bev Shipley]

We're out of time on that. We can come back.

Mr. Preston.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Thank you. Thank you all for coming today.

First of all, Ms. Morris, you said in your opening comments that artisanal cheese and yogourt products have been two of the key areas that have been growing in the last 10 years.

To the Canadian Dairy Council, what else have we been trying to grow? Those are two pretty good ones. I'm going to tell you artisanal cheeses have become a bit of a favourite of mine, not that I eat...

Obviously this isn't done without cause or reason. You've suggested we've put some time and effort behind growing fine cheeses. I know the changes to the yogourt market have been substantial, and they're really growing. What else are we looking at? What else have we been pushing?

[Richard Doyle]

The farmers invest all together. In DFC we have $80 million in marketing and nutrition, but overall the farmers invest $110 million across the country on generic advertising, school milk programs, and nutrition programs. We have been focusing primarily on cheese and fluid milk—there is some yogourt and butter in some of the provinces as well—so on most of the dairy products and primarily the role that dairy products play in good nutrition.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

My eating cheese is good for me. Fantastic.

I think Mr. Lemieux mentioned the growth in the cheese industry. You mentioned that the artisanal cheeses have been growing quite well but that industrial cheese has not. Can you give me the answer to that? What would we call mozzarella and other things like that? Is that industrial cheese?

[Richard Doyle]

Yes, that would be industrial cheese. Everything that is non-retail, and that has been very flat. So that would be further processed products for the restaurants, the pizza cheese, etc.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

There's been no stopping the growth of the pizza companies or meals eaten outside the home. How is it that industrial cheese has not kept up? Maybe I'm asking the wrong person; I should ask the restaurateur instead.

[Richard Doyle]

Imports of different kits and blends that we've been opposing have taken part of that market.

Margaret referred to the financial difficulty the country went into. We saw a major drop in the restaurant sector, which affected the fine cheese as well as the industrial cheese. Therefore, this is a bit slow. It is starting to pick up a little, but it will be a while before that can be rectified.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Certainly.

Ms. Morris, the artisanal cheese business and companies like yours and a couple of others that I love to shop at have really grabbed on, and said you can be better than the world on this. I think the Canadian wine industry has shown some similar things. A number of Canadian industries have said we can compete with the best. We don't have to compete with them. We are the best; they have to compete with us.

What made you decide to go that route?

[Margaret Peters Morris]

It's the only way to succeed in the industry. You have to make the best product.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

You have been in the industry for...?

[Margaret Peters Morris]

For five years.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Since you entered it, how many more companies similar to your own—or at least those trying to reach the same heights as yours—have you seen grow and do that also?

[Margaret Peters Morris]

There are always at least six or eight coming on board every year, maybe more. I don't know everybody in B.C. that is coming on, mostly in the east, but there are always new players. There are also some that are going out of business.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Of course. That's the nature of business, including those that purchase your product.

You mentioned that you even get to judge your cheese qualities. First of all, where do I get the application for that job? Trust me, I'm qualified.

But that's good. The countries with the experts tend to be the ones with the best. So thank you. It's good that we're doing that.

Back to the others. You said the protection afforded by the EU on geographical indicators should be available within this country and that effective enforcement and something else would make this work. What are you asking for there?

[Richard Doyle]

One of the difficulties we've had over the marketing in this country with the products in what we call a standard of identity—which is a regulation that declares what cheddar is—and all the cheese we have is that what you see on the market is cheddar “style”, or cheese “product”, or cream cheese “product”. So people add something—

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

A qualifier.