First, I want to thank you for giving me the opportunity to provide some information to this committee.
I would like to approach processing capacity in the dairy industry from a slightly different angle, namely that of innovation and research, which support the capacity for innovation.
As you know, the majority of the industrial matrix, as far as dairy processing in Quebec in particular is concerned, is composed of small and medium-sized enterprises. However, to support research and innovation, these businesses can only rely on limited financial capacity and human resources.
This innovation is essential to processing capacity. To ensure the survival of companies, a constant effort is made to meet market demand, adapt to standards, and increase processes and competitiveness. Climate change and its environmental impacts also require companies to constantly adapt their processes.
In terms of societal concerns, the news this week showed just how important everything is in the dairy sector. This even includes animal feed. Consumer demand for more natural products and views on animal welfare mean that companies have to adapt to a constantly changing environment. They must adapt both their products and processes to be able to produce in this environment. Currently, it is industry suppliers, engineering companies, that support innovation in small and medium enterprises, particularly with equipment, but this does not necessarily meet all needs.
I would like to introduce you to our organization. Novalait is living proof that the Quebec dairy sector is particularly innovative. Twenty-five years ago, in 1995, dairy producers and processors decided to create a fund to invest in research. They not only created it, they created it together. In other sectors of the agri-food industry, particularly beef, which my colleagues are familiar with, samples taken from carcasses are used for research. This is also the case in the dairy sector, where producers and processors have come together to invest in research.
In the case of Novalait, all Quebec farms and all companies that process milk, from artisanal cheese dairies to multinationals, contribute to the research funding. Novalait solicits the expertise of researchers to develop knowledge and solutions to solve problems associated with the production and processing of milk. Since its creation, Novalait has invested $11 million in research, in more than 125 projects, for a total value of almost $55 million. This amount has been invested by producers and processors.
We often hear that in the agri-food sector, we are less innovative or we invest less in research than in other OECD countries, but it is important for you to know that this capacity for innovation is really present in the dairy sector in Quebec.
When Novalait was created in 1995, the dairy industry was facing two major challenges: diversification of dairy products and a significant decrease in fat consumption. Twenty-five years later, we can say that extraordinary progress has been made in the variety of dairy products offered. And just as people were afraid to consume milk fat 25 years ago, today's markets are hungry for milk fat in the form of cream or butter. This is a positive development for our sector.
On the other hand, we realize, not only in Quebec or Canada, but worldwide, that milk is made up of a certain percentage of proteins, fat and other solids. We try to match this composition as much as possible to market demand, but there is an imbalance. We meet 100% of Canada's butterfat requirements, but at the same time there are surpluses of protein and other solids, including sugars from fat. This means that every time we process milk, there is a coproduct, which is skim milk, made up of permeates from the concentration of milk. It is a coproduct that we must be able to add value to.
This problem exists in the United States and Europe, but Canada's situation is unique because of the free trade agreements and international agreements it has entered into. The ability of dairy processors to add value on world markets to their coproducts, i.e. skim milk powder or permeates, is limited. The Dairy Processors Association of Canada also mentioned this to you at a previous meeting.
At Novalait, we are looking for solutions to solve this problem. We are working on milk composition and trying to manage the cows' diet so that it can be aligned as much as possible with the needs of the industry, but this has its limits.
We also work with processors to better control processes to reduce the structural surplus imbalance of non-fat solids and find ways to add value to these products. We are currently looking for solutions.
What is important to understand here is that any increase in dairy processing capacity will result in an increase in coproducts, which we must be able to add value to. This is an issue that needs to be addressed in order to increase milk processing capacity in Canada. We have solutions to address this problem. We are concerned about the future. We want to emphasize here that research and innovation are among the priorities for the future.
Thank you.