An International Comparison of September, 2010 Milk Supply Control Programs and Their Impacts Prepared for International Dairy Foods Association Dairy Group Informa Economics, Inc. 3464 Washington Dr. Eagan, MN 55122 USA Tel 651 ▪ 925 ▪ 1060 Fax 651 ▪ 925 ▪ 1061 www.informaecon.com This page intentionally left blank © 2001 Sparks Companies, Inc. An International Comparison of Milk Supply Control Programs and Their Impacts Table of Contents Executive Summary.......................................................................................................... 3 At a Glance ................................................................................................................................................ 3 Attempts to Limit Supply............................................................................................................................ 4 The Number of Dairy Farms is Falling Everywhere .................................................................................5 Farm Gate Milk Prices Fell in All Countries in 2008/2009 ...................................................................... 7 Milk Price Volatility Has Increased .......................................................................................................... 8 Supply Control Raises Consumer Prices ................................................................................................... 8 Supply Control Limits Consumption Growth........................................................................................... 10 Supply Control Encourages Imports........................................................................................................ 11 Supply Control Limits Export Growth ..................................................................................................... 11 Supply Control Hurts Industry Investment and Competitiveness ............................................................ 13 I. Impact of Supply Control at the Farm Level............................................................ 14 Farm-gate Milk Prices............................................................................................................................. 14 New Zealand....................................................................................................................................... 15 Canada ................................................................................................................................................ 16 EU....................................................................................................................................................... 17 US ....................................................................................................................................................... 18 Milk Price Volatility ................................................................................................................................ 18 Farmer Use of Risk Management Tools .................................................................................................. 20 Number, Size, and Growth of Dairy Farms ............................................................................................. 21 Number of Dairy Farms ...................................................................................................................... 21 Size of Dairy Farms ............................................................................................................................ 22 Production per Cow ............................................................................................................................ 23 Milk Production per Farm................................................................................................................... 25 United States....................................................................................................................................... 26 EU-15.................................................................................................................................................. 27 Canada ................................................................................................................................................ 28 New Zealand....................................................................................................................................... 29 Dairy Farm “Multiplier Effect” on Local Economies............................................................................. 29 II. Impact of Supply Control on the Consumer ........................................................... 31 Consumer Prices...................................................................................................................................... 31 United States....................................................................................................................................... 33 Canada ................................................................................................................................................ 34 Per-capita Dairy Consumption................................................................................................................ 36 Fluid Milk ........................................................................................................................................... 37 Cheese................................................................................................................................................. 38 Butter .................................................................................................................................................. 39 1 Imitation and Substitute Products............................................................................................................ 39 Margarine Consumption ..................................................................................................................... 40 III. Impact on International Trade ............................................................................... 41 Canada .................................................................................................................................................... 44 United States............................................................................................................................................ 45 EU-15 ...................................................................................................................................................... 46 Australia .................................................................................................................................................. 47 New Zealand............................................................................................................................................ 48 Tariffs ...................................................................................................................................................... 49 IV. Impact on Processors and Industry Investment.................................................... 50 Competitiveness....................................................................................................................................... 50 Canada .................................................................................................................................................... 51 EU............................................................................................................................................................ 52 Investment from other regions ................................................................................................................. 53 V. Impact on Governments and Taxpayers.................................................................. 54 Transfers from Government/Taxpayers ................................................................................................... 54 Transfers from Consumers ...................................................................................................................... 56 VI. History and Current Structure of Milk Supply Control Programs..................... 57 Canada .................................................................................................................................................... 57 Current Structure................................................................................................................................. 59 Canadian Dairy Commission (CDC) .................................................................................................. 60 Canadian Milk Supply Management Committee................................................................................ 61 Provincial Milk Marketing Boards and Agencies............................................................................... 61 Milk Quota System and Its Operation................................................................................................. 62 European Union ...................................................................................................................................... 64 First Attempt at Supply Control – Co-Responsibility Levy................................................................ 65 Introduction of Quota.........................................................................................................................