The Provincial Government is committed to continuing to build core farming and agrifoods capacity in central Labrador after a consultant�s report concluded that establishing a dairy production and processing operation in the region, as evaluated in the report, is not feasible at this time.

"While it is unfortunate that a dairy operation does not appear to be economically viable at this point in the development of central Labrador�s agricultural industry, the report provides us with important knowledge to continue building the farming sector in the region," said the Honourable Kathy Dunderdale, Minister of Natural Resources and Minister Responsible for the Forestry and Agrifoods Agency. "This does not preclude potential industry investors from coming forward with viable business proposals. If that happens, we would certainly consider assisting them through our funding programs."

The Provincial Government commissioned the study at the request of the Lake Melville Agricultural Association, which participated in the development of the terms of reference. Its purpose was to explore the feasibility of a dairy production and processing operation to supply milk to Labrador and, potentially, Nunavut. The study, conducted by Central Consulting Services Incorporated of Gander, concluded that creating and operating dairy production and distribution in the Lake Melville area, as evaluated in the report, is not sustainable given the significant financial losses it would generate.

The proposal envisioned clearing sufficient land to grow forage, purchasing a herd of cattle, erecting modern barns and a milking parlour, and establishing a milk-production facility with a marketing network. Phasing the proposed project in over six years would require a capital investment of approximately $6.2 million and working capital of $2.1 million, for a total project cost of $8.3 million.

"The report concludes that the proposed operation would generate losses of approximately $6 million after 13 years of operating," Minister Dunderdale said. "Given the large negative return identified and the consultant�s conclusion that the project is not viable, it would be difficult to justify allocating financial resources. Existing funding programs for agricultural development within the department would do little to mitigate or offset the large losses that are predicted in the baseline analysis. At this time, it is our belief that there are many other projects where government funding would be more effectively spent to further develop the agricultural industry in Labrador."

Evaluating the feasibility of the supply-managed commodities, such as milk, was identified in the 2003 Northern Agrifoods Development Strategy. The Provincial Government commissioned the study as part of its commitment to work with the local industry to investigate sustainable agricultural economic opportunities in Labrador. In the past two years, nearly $850,000 has been invested in Labrador under provincial and federal/provincial agriculture initiatives.

"We believe in Labrador�s emerging agriculture sector and will continue to work with farmers in the area to better establish core agrifoods farming operations through land development, crop research, education and training, marketing and promotion, business development and program delivery," the minister said. "Once we establish a solid foundation for sustainable industry growth in the region, farmers will be better able to expand to the next level and support larger-scale operations, such as dairy farming, in the longer term."

A copy of the study, which was funded by the provincial and federal governments under the Agricultural Policy Framework, is available on the Forestry and Agrifoods Agency�s website at: //www.nr.gov.nl.ca/agric/

Media contact:
Tracy Barron
Director of Communications
Department of Natural Resources
709-729-5282, 690-8241
tracybarron@gov.nl.ca

2008 06 10                                                   9:30 a.m.