Who drinks the most milk - Canadians or Americans?

Sunday, April 3, 2011

Depending on how economists do the math, fluid milk consumption may be higher or lower on either side of the border. But on each side, consumption is declining

by DON STONEMAN

Milk consumption per capita is declining in Canada. Critics often blame the supply management system, charging that high milk prices are responsible.

A look at consumption levels on both sides of the Canada-U.S. border, however, points to declining consumption on both sides. Depending on who, and how it is counted, fluid milk consumption may actually be higher on the Canadian side.

According to figures from Dairy Farmers of Ontario published last fall, Ontario residents consumed 88.7 litres of fluid milk per capita in 2000 and 84.4 litres in 2009 (based on populations of 11.69 million and 13.06 million respectively. (Nationally, the 2009 figure is 81.92 litres, down from 87.04 in 2001 and 102 litres in 1981.)

According to numbers presented at a recent dairy forum in Florida, American consumers drank 22.52 gallons of milk each in 2000. Consumption fell over a decade to 20.6 gallons in 2009, according to a study commissioned by the Milk Processor Education Program (Milk PEP).  Using a factor of 3.79 litres to the U.S. gallon, Americans drank 85.25 litres in 2000 and 77.98 litres in 2009.

Looks like Ontario consumption is ahead of the United States, right? That's not what the Americans say.

A report developed for the International Dairy Foods Association by Informa Economics last September, says Canadian milk consumption is lower and links that to supply management.

A graph entitled "Fluid milk per capita consumption, pounds/year," cites U.S. consumption in 2009 as about 205 pounds per year, and Canadian consumption as 195 pounds, citing the Canadian Dairy Commission as a source. Consumption per capita across 15 European Union countries was marked as an average of just under 180 pounds.

In an email, Informa senior dairy analyst Nate Donnay doesn't disagree with Better Farming's gallons to litres conversion. However, he says the difference between the two estimates of consumption comes from volume to weight conversions.

Donnay writes: "The (U.S. Department of Agriculture) reports U.S. consumption of fluid milk in pounds, and since we were eventually going to combine fluid, cheese and butter consumption into a single measure of consumption, we needed to put everything onto equivalent units, so we converted litres to pounds, assuming one gallon of milk is 8.6 pounds.

"Our calculations are done consistently across all three countries (sic), so any change in the method won't do much to change relative rankings and trends," he adds, "depending on what you assume for conversion factors and butterfat content."

Therese Beaulieu, spokesperson for Dairy Farmers of Canada (DFC) says she doesn't have the expertise to confirm that the Informa numbers using pounds of milk were accurate. DFC economist Steve Couture was not immediately available to check the numbers either.

Beaulieu notes that Agriculture and Agri-Food Canada and Statistics Canada use two different numbers in their conversions, depending on whether skim milk or whole milk is measured. "I think we can safely say that U.S. and Canada consumption of fluid milk is quite similar," Beaulieu writes.

Beaulieu believes the Informa study was developed with a particular intent – to deprecate supply management, a stance which has recently been supported by the National Milk Producers Federation, a U.S. producer group.

The Informa study was commissioned by International Dairy Foods Association (IDFA), which claims to represent 220 dairy processors producing 85 per cent of the milk, cultured products, cheese and frozen desserts produced in the United States. "We oppose (supply management) in all its forms and permutations," said IDFA president and CEO Connie Tipton in a Washington conference last June. "Supply management will destroy our dairy industry's opportunity for the future. It is intended to limit growth and increase prices. And both of these will have dire consequences." 

The IDFA wants to expand exports. Mexico is its largest customer, taking 25 per cent of exported American dairy products, worth more than $936 million. Surprisingly, the IDFA identifies Canada as the second largest export market for American dairy products, accounting for almost 10 per cent of total exports in 2008. That makes exports to Canada worth something like US$374 million.

The Informa study says: "Canadian imports, as a per cent of domestic milk production, reached 24 per cent in 2009, compared to the United States where imports were only three per cent of production."

"I am very surprised that . . . they can still pretend that Canada is a closed shop and they are not," writes DFC's Beaulieu in response. She points out that there are imports of dairy ingredients or derivatives that are not covered under Tariff Rate Quota, or are classified as other food preparations, the most infamous being butteroil sugar blends used as an ice cream mix before that door was shut early in the last decade.

In Canada, critics of supply management blame the high farm price for milk (nearly 92 cents per litre for full fat milk destined for fluid plants and considerably less for milk that will be manufactured into cheese yogurt and other foods) for declining consumption.

However, the Informa study's charts point to parallel declines in consumption in Canada, the United States and in Europe.

The fact is that the supply-managed dairy industry in Canada and its "free market" counterpart in the United States share a common marketing challenge. Per capita fluid milk consumption is going down and dairy promotion organizations think consumers aren't drinking enough of their product.

Dairy industries on both sides of the Canada-U.S. border put major dollars into promotion. Canadian producers want to sell more milk. American producers want more for their milk.

According to a 2004 U.S. Department of Agriculture report to Congress on milk promotion, "generic advertising by dairy farmers and milk producers had an effect on the farm milk price and milk marketings. The simulation results indicate that the all-milk price would have been $1.10 per hundredweight lower without generic advertising" provided under the dairy and fluid programs between 1999 and 2003.

Ontario dairy farmers contribute $1.30 per hectolitre (100 litres) on all milk sold towards promotion costs. Last year, Ontario producers sent DFC about $34 million to spend on promotion. In addition, Dairy Farmers of Ontario (DFO) has hired an ethnic marketing specialist to develop new markets. That ethnic specialist is now being shared with groups in other provinces.

Fluid milk consumption is somewhat higher in Ontario than in other provinces. DFO spokesperson Bill Mitchell says there may be problems related to how milk is priced in stores. There are just two fluid pool prices for Canadian farmers; Ontario and provinces to the east, and Manitoba and other western provinces. The prices for fluid milk are different, but closer than they used to be, Mitchell says.

The big difference is on the retail side. Some provinces don't regulate retail prices and some do. "There are very different levels of concentration in retail ownership."

Beaulieu suggests that a changing cultural mix in Canada is altering dairy consumption habits. Half of immigrants come from Asia, where dairy isn't as widely consumed, and Asian descendants are expected to make up 27 per cent of Canada's population by 2017.

Another factor is an aging population. On top of that, some Canadians are simply switching to yogurt on their cereal in the morning instead of milk, she adds. BF