## Thursday 21 June 2012

### Dairy Puzzle

Dairy products are cheaper in New Zealand than in Canada, where the dairy cartel keeps prices high.

But the Dairy Farmers of Canada VP Ron Versteeg points me to an interesting puzzle: FAO stats showing NZ consumption of some dairy products is lower than that in Canada.

Here's an FAO table showing NZ and Canadian consumption. Or, at least, I'd expect that this has to be per capita consumption rather than production given that total NZ production is higher than total Canadian given relative herd sizes.

I threw these into Excel and plotted the series as ratios: in each case, the line shows New Zealand per capita consumption as a multiple or fraction of Canada's. You might need Java enabled for the graph to work.

We consume a lot more butter than do the Canadians, and more whole milk, but a lot less cream.

Here's the aggregate consumption data for 2007, the last year for which there's data.

 Country Item Consumption (kg/capita/yr) Canada Butter, Ghee 2.51 New Zealand Butter, Ghee 9.33 Canada Cheese 12.73 New Zealand Cheese 4.92 Canada Cream 8.85 New Zealand Cream 0.17 Canada Milk - Excluding Butter 206.83 New Zealand Milk - Excluding Butter 103.79 Canada Milk, Whole 35.45 New Zealand Milk, Whole 54.22 Canada Whey 7.38 New Zealand Whey n/a

A few puzzles:
• Cheese here costs about NZ\$9/kg including 15% GST - that's about Cdn\$6.30. And, honestly, standard cheap cheese here tastes better than the somewhat rubbery stuff with the chemically orange food colouring I remember from back home. But NZ cheese consumption is very low relative to Canada's.
• Differences in standard fluid milk prices don't seem huge. Ron says his local supermarket supplies at \$4.47 Cdn for 4 litres, or NZ\$1.42/l; we pay NZ\$4.49 for 3 litres, or \$1.50/l, though the dairy on my drive home sells it for \$1.35/l. Price differences seem small. But NZ drinks a lot more milk than Canada.
• The totals in the FAO table don't match the components; the difference would have to be stuff like ice cream that's not included. But if it's right, then Kiwis are consuming about half as much dairy product as are Canadians despite that dairy products here, compared to other food items, are relatively cheap.
Any candidate hypotheses?

1. We are poor.

1. But look at whole milk consumption. And, dairy here seems cheaper as compared to substitute goods.

2. For the cream thing, do Canadians use that "half'n'half" stuff that people in the US pollute their coffee with? Someone drinking that would be drinking cream every day, which would be unusual here.

1. Yes. That's likely part of the explanation of differences in that category. Here we get flat whites with frothed milk instead.

3. Climate? Dairy food generally being a high calorie food and thus more in demand in colder climates?

But then I imagine houses are much warmer in Canada than here so that kind of wrecks that theory.

4. Doesn't explain milk. Also, we can eat ice cream for a longer part of the year, though our summers don't get quite as hot as theirs do.

1. You're right. That theory doesn't fit at all.

Maybe ethnic make-ups? I assume some ethnic groups would have different dietary history etc.

5. FAO statistics are very rough and it wouldn't be surprising that some of the assumptions used in the calculations (I think they are similar to these don't hold in one of the countries.

1. Now that's useful. I don't know the FAO data at all.

2. If I go into Household Expenditure Survey data, avg weekly household expenditure on dairy and eggs was \$11.70. Say \$2 of that is eggs. You've got enough then for about 4 litres of milk and 500g of cheese with rough guessing of 2007 prices. Assume a household of 4 and sum it up over a year, and the numbers aren't far out from FAO: 52 litres milk and 6.5kg cheese.

6. Two possible explanations.

1. Cultural. I know, how annoying economists find "black box" cultural explanations -- but in my experience, the North American diet, on the whole (which I believe is largely consistent btw US and Canada), is more dairy-based than the NZ diet, despite dairying being such an important part of NZ agriculture. Americans add cheese (or "cheese" if we're being purists) to everything. And they drink milk -- in NZ, no-one (except maybe children) drinks a glass of milk. But Americans do, sometimes even with dinner.

2. Demography. In recent decades, NZ and Canada have both had large-scale immigration that has changed their ethnic compositions. But the composition has been different: almost 10% of New Zealanders are now of "Asian" ethnicity -- mostly from East Asian societies with very high levels of lactose intolerance and (unsurprisingly) no culinary history of the use of dairy. By contrast, a relatively higher proportion of immigrants to Canada are of European, South Asian, Middle Eastern or African origin -- societies with low levels of lactose intolerance an a cultural affinity for dairy.

1. Demographics could be part of it, but "cheese culture" is part of what has to he explained, no? And while the cheese gap seems large, it is small relative to total dairy. I'm wondering more about data quality.

7. Assuming Canada is like the USA (where I am)...

I was going to propose the cheese theory kiwi dave stated, as there is so much cheese in food here (USA), and the cream in coffee James points out.

I'm not sure Kiwi's drink less milk than Americans, but then I've not changed my milk drink habit when I moved here, and I don't tend to hang out in other people's kitchens. Milk feels cheaper here.

8. Going by the respective fridge space apportioned to butter and cheese in NZ supermarkets, it seems implausable that NZers eat twice as much butter as cheese. I don't believe the cream statistic either - almost impossibly low for NZ.

9. Why do they colour cheese? We were in Canada last year and thought it looked so bad we didn't buy it.

10. I don't know. I'd grown up with bright orange cheese as normal; was surprised to find it isn't normally that way. It also oozed a very odd oil when making grilled cheese sandwiches - something it doesn't do here.