International Market Opportunities Being Lost

GUELPH, Ont. – BUSINESS – Canada’s agriculture marketing boards are showing signs of obsolescence, forcing commodity groups to consider desperate measures.

For decades, farmers have tried to counter the power of the select few corporations that control the industry by setting up marketing boards to regulate milk, poultry, maple syrup and wheat farming.

Certainly, given the economic conditions of the last century, forming marketing boards made perfect sense. The Canadian Wheat Board, the supply management system and the most recent maple syrup cartel were designed to sell agricultural commodities throughout Canada and to the world. They were also intended to protect farmers from cutthroat purchasers downstream and, most importantly, from market failures.

And they did their job – until recently.

Among Canada’s 120 marketing boards, the signs of strain are showing. Two in particular face catastrophic conditions: maple syrup and dairy.

Let’s start with maple syrup.

Ontario and the United States report a record harvest this year. This “sap tsunami” has meant millions of litres of maple syrup are ready to be sold throughout the world and producers are enthusiastic.

Quebec, too, has an abundant crop this year – the April weather was ideal for maple syrup production. Yet in Quebec, where a marketing board was set up a few years ago, the sentiment is quite different.

This year’s maple syrup harvest is expected to exceed 150 million pounds, which would break the old record by more than 30 per cent. Normally these numbers would bring joy to the industry. Instead, many are worried that a significant surplus will end up on the black market, and that would deflate quota-produced syrup prices.

The aim of the maple syrup board is to artificially inflate prices at the farmgate, no matter what happens. In the current quota-based regime, excess inventories end up being sold outside the system. That leaves the Quebec federation responsible scrambling to address the issue.

The situation in the dairy industry is even more critical. Farmers have quotas to produce milk, based on domestic demand. As well, Canada has excessive tariffs on imports as we essentially produce what we need.

In recent years, however, the market has changed. Today’s consumers want more products with higher butterfat content, such as butter and yogurt. At the same time, however, they are drinking less milk and that has created a shortage of butterfat in Canada.

So dairy processors have to look outside the system for butterfat to respond to the growing demand. They now import more than $200 million a year in U.S. high-protein milk ingredients, also known as diafiltered milk. And it may get worse.

The rising demand for butterfat has created excessive increases in Canadian farmgate prices. Recent price increases in Canada are almost three times as high as the world average. So dairy processors have little or no chance to compete unless they have access to inexpensive ingredients.

The dairy and maple syrup situations are the result of a very narrow-minded view of world markets. Even though marketing boards try to convince Canadians that they adapt quickly to market swings, they simply do not. Measures are often taken in desperation.

Why?

Because marketing boards are simply not hardwired to deal with massive production and market condition changes. Today’s consumers want everything from organic to locally-grown – in essence, plenty of value-added features.

And many farmers remain set in their ways, despite the valuable university research available to them. Today’s conditions mean farmers must cope with systemic shifts generated by climate change, abrupt macro-economic shifts and market demand fluctuations.

Marketing boards, faced with these dramatic changes in the world marketplace, are slowly failing farmers and the Canadian public.

Canada has developed an acutely myopic view of agricultural markets as the result of its use of marketing boards and now several commodity sectors are in crisis.

Many of the boards that served the Canadian agricultural economy for decades are now passed their due dates.

Each commodity deserves its own strategies and approaches, based on demand.

More broadly, it’s time for a more proactive Canadian plan to develop markets around the world. And in the face of recent international trade deals involving Canada, this needs to happen quickly, before commodity groups take further desperate measures.

Dr. Sylvain Charlebois is a Professor at the Food Institute at the University of Guelph. 

© 2016 Distributed by Troy Media

The views, opinions and positions expressed by all columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of NetNewsLedger.com.