Farmgate | Farmgate: Digging into Canadian’s higher costs

Several months ago, I was asked why dairy products in Canada were among the highest in the world (11 out of 106).

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The writer also mentioned Canada is amongst the highest for cellphone service and airline tickets. Not being an expert, I have done some research— so here goes.Just about everything we buy, no matter what it is, must be transported either in its raw form or as a finished product and therefore relies on fuel of one type or another, so we can blame high prices on transportation.Gasoline has an average of 35.1 cents per litre added by the two governments. The feds add 10 cents per litre, the provinces add 10.81 cents per litre, carbon tax is another 10.25 per litre and HST adds another 13 per cent. The next time you fill up, deduct 35.1 cents per litre and ask yourself if you could live with that!

Diesel has an average of 30.8 cents per litre added. The feds add four cents per litre, the provinces add 11.34 cents per litre, carbon tax is 12.33 cents per litre, then add on the HST. Diesel should be cheaper than gasoline at the pumps, right?

Then factor in supply and demand. Diesel is cheaper than gasoline to manufacture, but the same three Canadian refineries which produce diesel also provide home heating oil to Canadians during our cold months. Diesel and heating oil are basically the same thing, so one must compete against the other during half the year!Airplane tickets are higher in Canada due to five facts, the experts say. Add in fuel costs and you have six. The lack of competition within the Canadian industry, the fact ultra low-cost carriers are only just starting here, operating costs are high in Canada, taxes and fees are high here (thank your governments again), and Canada has few international agreements.In regard to Canada’s mobile data services (1 GB), we rank 209^th out of 228 countries. Those living in North America, Africa, and western Europe pay the highest for their services while India pays the lowest. For the first two it sounds like a problem compounded by large distances to be covered with few inhabitants. Cities get great service while those in rural areas are lucky to get one bar (us vs. Cornwall) so more towers are constantly being built and maintained which adds to costs.

Now for milk. Fluid milk is not something that can be transported very far without refrigeration, so our closest competitor is the U.S. The odds of ever seeing fluid milk in Canadian stores (other than the cartons which don’t require refrigeration) would be phenomenal.The No. 1 reason given for the price difference (and by an American study) is that, in Canada, the growth hormone BST (Bovine Somatropin) cannot be used here at all. In the U.S., it is optional.BST is injected in dairy cows, starting after they have calved, every 14 days for eight months. The jabs will cheaply and immediately increase milk production by 10 to 20 per cent. In Canada, dairy farmers have to rely on feed programs, supplements, and genetics to increase a cow’s output.

For the past many years quota doesn’t play anywhere near as big a cost as it used to as there has been extremely little quota available. It seems those currently in the dairy business intend to stay so are not selling quota. A very few are downsizing in an attempt to pay off old debts and operate a tighter ship.Usually, the amount of quota available each month to those wishing to buy it is 0.10 to 0.20 of a kilogram of butterfat (at a cost of $2,400 to $4,800).Want to get big fast? The only option is to buy out another farmer which would cost several millions!

Which again brings us to transportation costs. Transport is needed from the farms to the plant (which the farm pays) and, after processing, to the wholesaler and customer, refrigerated all the way over long distances.

Also, as most dairy supplies and farm equipment originate in the U.S. and are paid in Canadian dollars, with an exchange rate of about 74 per cent, it takes a lot more in Canadian currency.

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