Thank you, Mr. Chair. It's my turn to thank you for this invitation.
Unlike my colleagues, I will not read out a presentation. I have submitted a document to you where I give an overview of the foundation of the Canadian agricultural policy for the dairy sector. That presentation has been partially covered by my colleague Caroline Emond, who explained how supply management works and why it is still relevant in 2016, even though it was implemented some 40 years ago now.
The other part of my presentation basically talks about the history of the problem and explains it. I fully agree with the explanations provided by the three previous witnesses. I will try to briefly explain what the tangible and quantified impacts of that practice are.
Any surpluses of non-fat solids are the responsibility of producers. There are responsibilities in the management of this system. The government is in charge of border management, and producers are responsible for production control. We bear the costs of any surpluses.
It is normal for us to have a surplus of non-fat solids in Canada, as all other countries also have surpluses. The U.S. has surpluses of non-fat dairy solids, as do the Europeans. It should be noted that, over the course of the last two years, the surpluses have greatly increased owing to importing and the shift related to the use of diafiltered milk, among other things.
For example, in 2010, the tariff line for those products was 13,200 tonnes. In 2011, the quantity was similar—13,150 tonnes. In 2012, there was a slight increase to 15,000 tonnes. In 2013, the quantity was 16,000 tonnes, and starting in 2014, there was a surge, with the quantity going up to 20,700 tonnes. According the data for the first three quarters of 2015, we estimate that we will have reached 32,000 tonnes at the end of 2015. That is a dramatic rise. If we establish the equivalent of that importing in skim milk powder, we estimate that it will correspond to 50,000 tonnes of that product.
What is the impact of all that on the producers' daily lives? The structural surplus, year after year, has been about 60,000 tonnes in recent years. We expect to reach from 90,000 tonnes to 100,000 tonnes this year, mainly owing to the importing of diafiltered milk.
When these components penetrate into our markets, they displace Canadian non-fat solids. That creates a shortfall for Canadian producers. As the market is saturated, instead of enhancing the value of those solids by using them in cheese and yogourt—for which we obtain about $5 per kilogram, as Dominique explained—we become responsible for surpluses. Instead of using those non-fat solids in value-added products, we have to use them in animal feed. The price is about $1 per kilogram in those cases. The shortfall for producers is about $4 per kilogram. If we apply that unit loss to the displaced quantities, for an equivalent of 50,000 tonnes of skim milk powder, the shortfall for Canadian dairy producers is about $200 million.
Our component sales are another sign of that shift. Beginning with the year when cheese standards were established in Canada, we have noted a fairly stable relationship between the quantities of fat sold in cheese categories and the quantities of non-fat solids sold. For example, starting in 2007-2008, for each kilogram of fat sold for cheese, 2.3 kilograms of non-fat solids were sold. That relationship remained practically stable until 2012-2013, when it started collapsing.
Instead of selling 2.3 kilograms of Canadian non-fat solids for each kilogram of fat sold, we sold 2.15 kilograms in 2012-2013. We came back to 2.19 kilograms in 2013-2014 and, in 2014-2015, we are at 2.11 kilograms. So the drop off has been sustained for Canadian producers.
If we were to transpose those effects to an average farm in Quebec, it would represent about 6,000 hectolitres—so 600,000 litres of milk, to use more familiar units. If we take the loss I was referring to earlier, which amounts to about $2.5 per hectolitre, the loss in net income for an average farm is nearly $15,000. The costs related to the milk production necessary to meet 100% of needs in terms of fats are still there, but the loss is net because the gross price drops, while the producers have the same expenses to deal with. That value represents a very large part of the cost of life and of the part families use for surviving. So it is clear that the discontent expressed by producers in your ridings stems directly from this situation because it represents concrete factors for them on a daily basis. These are basically the things I wanted to talk to you about.
Moreover, last year was especially difficult for producers. In addition to the diafiltered milk phenomenon, I would like to point out that, despite its supply management, Canada is a country that is much more open in terms of its markets than the Europeans or the Americans are. In their case, 1% to 3% of their consumption is probably imported, while that figure is already close to 8% in Canada. About 12% of Canadian dairy fat is also sold at prices based on world price references, and nearly 25% of our non-fat solids are already at that level. Last year, those world prices were extremely low because of the markets' high volatility. This meant that, when it came to their income, our producers, in addition to having to contend with the highly negative effects of diafiltered milk, saw their prices crumble by a total of nearly $5 per hectolitre. If I add that to the effects I talked about earlier, there was a loss of $25,000 to $30,000 per farm last year. When you hear dairy producers in a bad mood who want to bang on office doors, it's because they are very upset and worried about the current situation.
My colleagues did a good job of explaining the problem involving diafiltered milk earlier. There are some solutions, which are essentially political. So we trust that you will solidify the support your parties have already expressed very clearly toward our marketing system, and we are counting on you to continue giving us a hand and finding solutions to these issues.
Thank you.