From the Editor’s Desk: September/October 2008

As autumn dawns on the nearing
horizon, bored youngsters have returned to their classrooms,
revitalized by the aroma of new erasers and starched pristine clothes.
Somewhere under the surface, behind the traditional school pizza
lunches lurks something sinister – industrial mathematics.

As autumn dawns on the nearing horizon, bored youngsters have returned to their classrooms, revitalized by the aroma of new erasers and starched pristine clothes. Somewhere under the surface, behind the traditional school pizza lunches lurks something sinister – industrial mathematics.

While the charges and beneficiaries of our weekly morning pizza deliveries attempt the simplest of equations, the dairy industry has laid forth a new quiz for all: declining consumption patterns, added to an aging population, subtracting technological improvements in the manufacturing process, divided by the current economic state equals delivery surcharges and unscheduled cheese price hikes.

Now, if I really understood math, I wouldn’t be pondering the conceptual impact an unplanned two per cent price hike had on the foodservice industry. That said, even the stellar Ontario public school system education afforded to this editor still underscores that something in this mathematic equation stinks worse than old Limburger.

The increase in prices on Sept. 1 suggests that there is a greater need for some social education for the dairy industry. Of course, they lay the blame on the Canadian Food Inspection Agency, and the new compositional standards for cheese. The CFIA, in turn, will cite the World Trade Organization and pressures on Canada to alter its supply-management method of farming.

Ne’er a pair so devious.

Canadian dairy prices already rank among the highest in the world. Consumption, however, puts Canada tenth in the top 15 developed nations for litres/person, drinking less than half of what global leader, Finland, consumes per person. The International Dairy Federation statistics don’t even put Canada on the map for cheese consumption.

Offshore markets, such as China and India, can’t produce enough domestic dairy products to meet demand – giving reason to explore export value over this declining domestic market.

Logical?

Not so, say those directly involved in the industrial milk business. The composition standards are a benefit to the consumer, because the consumer can rest assured that when the product says cheddar, it is cheddar … well, according to the CFIA.

Ron Reaman, vice-president of federal issues for the Canadian Restaurant and Foodservice Association, has expressed great frustration over the lack of “partnership” from the Canadian Dairy Commission, the processors and frozen food manufacturers. For years the CRFA has lobbied the dairy powers to see the bigger picture. Year after year, they have been discounted, disrespected and set aside like a moldy block of cheddar.

The unscheduled price hike is partly designed to offer support to the dairy farmers, whose costs of production have increased – an argument that does not sit well with the CRFA. Production technology and processing improvements have made the milk business more profitable than ever before, with consumer dairy prices soaring 55 per cent in the past 13 years, while processing costs have hit the bottom line for only a two per cent difference.

And it’s not like they’re suffering. One manufacturer just reported major profit gains for the first quarter of 2008, and still managed to suggest the new standards will hurt business.

As Reaman issues in this month’s feature on dairy prices – if this was oil, it would be a cartel.