| | Labour costs are a concern, but are outweighed by attractively priced feed grains, for a positive overall picture.
Alberta’s 641 dairy producers received some good news at Alberta Milk’s Annual General Meeting this past November. This agricultural sector, which in 2007 generated $427 million in farm gate income and $2.5 billion in economic activity, has a cost structure that’s broadly competitive with other western North American jurisdictions.
Comparatively lower feed costs offset the higher labour costs in Alberta.
The news came through a study, Cost Competitiveness Analysis of the Alberta Dairy Supply Chain, funded by the Agricultural Policy Framework and conducted by independent agrifood think tank, The George Morris Centre.
“The main purpose of the study was to determine how cost competitive dairy farming and dairy processing are in Alberta today,” says Richard Heikkila, Senior Economic Analyst with Alberta Agriculture and Rural Development, who managed the research project.
Study author Dr. Al Mussell, Senior Research Associate with the George Morris Centre, created ‘models’ for 250-cow and 500-cow dairies and two processing facilities, inputting known cost and price data from competing regions.
Feed costs a key advantage
In a jurisdiction such as Alberta, where good-paying resource industry jobs are often available, it comes as no surprise that labour costs for Alberta dairy and processing operations are relatively high. That’s exactly what the study found.
“Offsetting this, our feed costs are the main relative advantage,” says Heikkila. “The report also found that livestock costs tend to be lower than other jurisdictions. A third strength was the costs associated with dairy processing, which again are relatively competitive.”
To Mussell, the findings of the study indicate that dairy farming and processing in Alberta enjoy a competitive cost base, a key ingredient for possible future growth.
“When you focus on the fundamentals, Alberta looks good compared to other places in western North America,” says Mussell. “Some days it might not feel like this, but Alberta truly is one of the lower cost places to grow and purchase feed grains.”
With labour costs forming a significant line-item for dairy farmers and processors, should Alberta be worried about the province’s higher worker costs? Mussell thinks not.
“The thing is, you can invest to mitigate the impact of labour shortages,” he says. “You can't invest to fix expensive feed. Alberta dairy producers can come out of this research feeling positive.”
The executive summary of Cost Competitiveness Analysis of the Alberta Dairy Supply Chain is available online. Go to the Dairy section of www.agriculture.alberta.ca and follow the prompts. You can reach Richard Heikkila at 780-422-4088 (dial 310-0000 for toll free) or by email richard.heikkila@gov.ab.ca.
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