Can Alberta dairy and poultry production expand?

The Canadian government has signed on to a new trade deal and as expected the federal government are predicting vast new markets.

The Canadian government has signed on to a new trade deal called the Trans Pacific Partnership (TPP) and as expected the federal government and producer organizations supporting the deal are predicting vast new markets for Canadian farm exports. That grandiose supposition is a bit baffling because it presumes that there are untapped markets just waiting to be served by Canadian suppliers. That’s almost never the case as those same markets are usually already being served by either domestic producers in those countries or our competitors. Neither of whom intend to give up their market share to Canada without a fight.

The reality of trade deals is that participants only concede the opportunity to compete for market share – which in many cases involves only a limited share. What it means is that those industry booster claims of $100 million in new sales is more theory and hope – in actuality even with hard fought competition, sales may only be $10 million. Interestingly, sometimes trade deals don’t increase or decrease exports – it’s the value of the exporter’s currency that plays a bigger role. There is nothing like a 25 per cent drop in the value of a loonie to help expedite exports.

The TPP, if it is eventually ratified, will see tariff reductions and increased access for Canadian beef, pork, oilseeds and cereals. But the deal will do the same for such ag exports from the USA, Australia, New Zealand and other partners. So rather than new found opportunities, the TPP only puts the partners on an equal trade footing regarding tariffs and import quotas. That’s fair enough and the market will rule.

For Canada to get reduced tariffs and more access to some TPP markets, it had to give up more market share to dairy and poultry imports. That, along with concessions in the EU treaty, will be a serious blow to Canadian production as cheap imports will flood in to serve the commodity product. That would be commercial cheeses for pizza and fast food chains and chicken for the same chains. The dairy producers most affected are in Quebec and Ontario where most cheese and butter production occurs. One assumes that dairy production will decrease the most in those areas as producers in western Canada serve mainly the fluid milk market. But that may not be the case if the past history of the supply management (SM) system is any indication. When SM was established over 40 years ago, provincial production was grandfathered which entrenched traditional market shares for dairy and poultry production from other provinces. It was only marginally based on provincial self-sufficiency levels. The point being if eastern cheese producers and processors had 30 per cent of the Alberta market, they more or less maintained that share regardless of consumption and population changes. That more or less thwarted significant dairy and poultry production expansion in western Canada – but that’s the dark side of SM. It’s something Alberta producers and their government should try to address particularly in light of the impending TPP deal.

To be fair, SM producer groups and their provincial governments in the west have fought to have their market shares increased based on provincial self-sufficiency, consumption and population increases. But often they had to resort to brinkmanship by threatening to quit SM just to get some incremental increase in quota share from the dominant central provinces. The concern now is that with pressure to reduce SM production, the pain may be spread across the country rather than in the provinces that produce most of the affected products like butter and commercial cheese.

From an Alberta perspective, perhaps the time has come to demand that the national SM agreement be adjusted to reflect the new trade reality. Perhaps most of the compensation money being offered by the federal government should be directed to buying out the quotas of mostly eastern producers, particularly those producing for the commercial cheese market. Another consideration in a readjustment process should be the reality that dairy production has limited hope for expansion in southern Ontario, southern Quebec and the BC Fraser Valley due to environmental pressure and urban expansion. Alberta has dairy production growth potential in southern Alberta with the land base, the water resources and extensive expertise in operating large scale livestock operations. Supply Management is a proven system of dairy and poultry production and marketing, but it is facing new challenges from trade agreements. I would suggest the time is opportune to revamp the national SM agreement that will address production and marketing realities and expansion opportunities in provinces like Alberta.

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