CRFA speaks out on the impact of rising dairy prices

(Nov. 24/09)

The following letter was published in the National Post on Nov. 23, 2009:

Our dairy producers are pricing their product right off the menu

Re: Can't We All Drink From The Same Cow?; Free Trade Is Great -- Except To Dairy Marketers, Terence Corcoran, Nov. 19.

Those of us in the restaurant business couldn't agree more with Terence Corcoran on Canada's antiquated supply management system. It is reprehensible for the federal government to continue to support a monopoly that grossly overcharges consumers, stifles innovation and prevents Canada from negotiating a free trade deal that would benefit the vast majority of farmers in this country.

To make matters worse, dairy producers are ignoring the rules of their own game. Since 1994, the price of industrial milk has jumped by nearly 60%, or twice the rate of inflation. But the cost to produce the milk increased by just 5% over the same time period. When the cost of production goes up, dairy prices go up. When the cost of production goes down, dairy prices go ... you guessed it ... up.

In addition to holding consumers and other agricultural sectors hostage, dairy producers have restaurateurs in a stranglehold all their own.

Our members are forced to pay among the highest prices in the world for cheese to make fresh pizzas. Meanwhile, frozen pizza manufacturers are permitted to buy the same Canadian cheese for a 30% discount. This deep discount allows Canadian frozen pizza makers to compete with imports made with reasonably priced cheese. The dairy industry refuses to offer the same price to our industry. They maintain that we don't compete with frozen pizza. But anyone who's seen a commercial for frozen pizza ("just like delivery") knows that simply isn't the case. We are competing head-to-head with a growing array of frozen pizza options, but restaurateurs can't get fair pricing for the costliest ingredient on a pizza.

I've heard some restaurateurs refer to Canadian mozzarella as white gold. Many have found ways to cut back on dairy purchases, and are reluctant to promote dairy products. With profit margins at the average restaurant running at just 4% after labour, food and other bills are paid, these business owners have little choice. They can't absorb spiralling price increases, and in the highly competitive food business they can't pass them along to their customers. The result is that Canadian dairy producers are pricing their product right off the menu.

The most frustrating part of all this is that restaurateurs want to work with the dairy industry to grow the market for high quality Canadian dairy products. We purchase nearly $2.5-billion worth of their products every year. But until we see more reasonable dairy prices and a level playing field, many restaurateurs will continue to say "less cheese please."

The Canadian Dairy Commission has an opportunity to start correcting the problem when it determines dairy prices for 2010. Here's hoping they seize it.

Garth Whyte, president and CEO, Canadian Restaurant and Foodservices Association, Toronto.