Parliamentary Research Branch

PRB 98-1E

THE IMPACT OF rbST
ON THE DAIRY INDUSTRY

Prepared by:
Frédéric Forge
Science and Technology Division
October 1998

In September 1994, Agriculture and Agri-Food Canada set up a task force on rbST, made up of representatives of industry, producers, consumers, and government. The task force examined the potential impact of this product on the dairy industry in Canada in its May 1995 report entitled Review of the Potential Impact of Recombinant Bovine Somatotropin (rbST) in Canada.

In this report, the task force considered the costs and benefits of adopting rbST for the dairy industry as a whole, for the supply management system, for dairy farms and for the dairy processing industry. It also studied the impact of rbST on the genome and on the genetic evaluation of dairy cattle in Canada. The following paragraphs are based on this report.

According to the task force report, the use of rbST would have only a relatively modest impact on the production calculations used to determine the target price for milk, unless its use became widespread among producers. Similarly, the value of production quotas would change very little in the long term.

A dual marketing system in which a distinction was made between rbST-free milk and undifferentiated milk(1) would be very expensive in Canada. The differentiation of these products would involve a complete reorganization of the Canadian supply management system and substantial costs for the dairy processing industry.

According to the task force report, prices would fall, regardless of whether milk consumption remained unchanged or whether a negative reaction by consumers led to a decline in sales. Consumers would benefit if all the savings achieved were passed on to them. If there were a 3% decline in sales, the profitability of the industry would decline by 2.4% on average; however, net revenues from dairy operations would be maintained.

Since rbST is a management tool, it is unlikely that its use will become very widespread. Farm management is a more important factor in profitability than the use of rbST. Unlike the construction of a building, for example, the use of this product does not require any major additional investment. However, there would be certain additional costs in the administration of this product, for example the cost of additional feed. It would be up to each farmer to make the choice on the basis of his or her own economic calculations.

According to studies, the influence of this product on the number of dairy operations in Canada would be minimal and its use would be cost-effective for most commercial dairy operations. The quality of the dairy operation, rather than its size, would determine the increase in dairy production.

Scientists who have assessed the impact of rbST on the genetic assessment of dairy cattle have concluded that approval of the product must not be dependent on its impact on animal genetics. However, they have made 15 recommendations designed to reduce the impact of the product on genetic upgrading programs; in particular, they recommend continuation of the research into the relationship between rbST and animal genetics.

(1) "Undifferentiated milk" would be milk from cows that might or might not have received rbST.