A Snapshot of the Canadian Dairy Industry

According to the Agriculture and Agri-Food Canada's Canadian Dairy Industry Profile, the dairy industry is the third largest sector of the Canadian agri-food economy after grains and red meat. In 2001, total net farm cash receipts from the dairy sector generated a little over $4 billion. During the same period, dairy products shipped from approximately 281 federally inspected processing plants were valued at close to $10 billion, accounting for 13.7% of all processing sales in the food and beverage industry in Canada. Moreover, there are nearly 26,000 people working on dairy farms and almost 20,500 other workers are employed at the primary processing level.

The fluid market, table milk and cream accounts for about 40 percent of the milk produced, and the remaining 60 percent is manufactured into products such as butter, cheese, ice cream and yogurt. The domestic market is primarily supplied by Canadian milk production, except for a fixed volume of cheese imports and small amounts of other products. As of August 2001, Ontario holds 31.3% of the National Market Sharing Quota.

The number of dairy farms has fallen significantly over the past 30 years, the national dairy herd has declined by half, while the total milk production remained level.

What is a typical Canadian Dairy Farm?

According to Statistics Canada and Canadian Dairy Commission it is family-owned with a herd of about 59 cows with owners in their mid-forties generating an average of about $216,091 per year in milk and cattle sales.

In 2001, dairy cows on official milk recording programs produced an average of 9,242 kilograms of milk, which compares favourably with cows from other countries. This has been increasing steadily. Overall milk production increased by almost 100% percent in the last 40 years.

Canadian Dairy Processing Industry:

The Canadian Dairy Processing Industry has also seen significant changes as well as rationalization over the past decades. In 1965, there were 1,413 plants in Canada. In 2001, the number of processing plants was 292. Including 219 industrial milk plants and 56 fluid milk plants (some plants processing both fluid and industrial milk). Company mergers and acquisitions are largely responsible for the decline in the number of companies and processing plants. In the rationalization of the Canadian Dairy industry, the large companies left an important market segment vacant. This segment includes market niches for ultra-specialized cheeses. Smaller cheesemaking establishments occupy these niches. There are approximately 160 smaller milk processing plants registered at the federal level. These establishments supply mainly local and regional markets.

Challenges and Opportunities:

According to Agriculture and Agri-Food Canada, product development, packaging innovation and improving processing methods are seen as critical elements in increasing sales and reducing production costs. Product development is driven by health, price, quality and taste considerations. North American consumers want low-fat products with "rich taste". In Canada, baby boomers, because of their large numbers, have an enormous impact on consumer trends. They expect food they eat to have certain health benefits. The influx of immigrants has exceeded natural population growth for the last ten years or more. With the growing ethnic diversity, there is an increase in the variety of food products in demand. The demand for ready-to-eat and high value-added foods has risen as a result of the growing number of one-person households, smaller families and the increased presence of women in the work force.

New market niches being explored include organic products, soy-based products and functional foods. Products from sheep and goat's milk are also in greater demand with the growing ethnic diversity. Dairy products are the leading segment of the organic foods industry and the one experiencing the fastest growth. Demand for dairy ingredients by further processors shows promise. i.e. mozzarella for fresh and frozen pizza.

Consumer needs are changing and the industry must be quick to adjust to demand. With dairy producers and processors working together to provide products that will be in demand, they will remain competitive in the market place.

The above information is excerpts from Agriculture and Agri-Food Canada's "Canadian Statistics of the Dairy Industry". For a complete copy of the report visit: http://www.dairyinfo.gc.ca/pdf/publication_2008.pdf