What kind of premium would consumers pay, if they knew all the ingredients in their Italian pasta was 100% from Italy?
This question is drastically impacted the price of durum in Canada and the way it is traded.
The brand that is associated with Italian food could impact the price consumers are willing to pay if Italy institutes their proposed “Made in Italy” label, which assures all ingredients were grown in Italy and not imported.
Over 1 million tonnes of durum is imported from Canada by Italy every year in order to meet consumer demand.
The “Made in Italy” label is clearly meant to increase Italian wheat production and therefore hurt Canadian durum exports. And it is.
Italy has practically not bought any Canadian durum at all this year. If we indeed had the Italian market, Canadian durum prices will likely be sitting closer to $8.50 – $9.50 CAD / bushel, instead of the $7 – $8 we’re currently at. Thus, this is a significant issue.
This trend of transparency, branding, demand for local products, if it stretches beyond just Italy and into other sectors, could drastically change the way the import/export market functions on a global scale. The “Made in Italy” label could be the beginning of a trend that will weaken global trade relations.
In the short-term, the impact is fairly intense for Canadian durum prices. A month ago, we suggested that it’s time for the Canadian government and producer organizations get in the mix and start pushing back more aggressively on Italy. Specifically, it’s time to take Italy to the WTO court.
Food Labels Reveal the Value in a Name
Italy is the land of decadent pasta, transcendent cheeses, and the invention of pizza in the minds of many consumers. The country’s rich culinary history carries market cachet comparable to the most successful brands in the world. People associate “Swiss” with watches, “German” with autos, and “Italian” with food in much the same way.
There’s also an important trade value associated with this level of branding. It can be seen in Prosciutto di Parma, Asiago cheese, and France’s ownership of “champagne.” Consumers are willing to pay a premium for perceived quality. That’s why Italy introduced its plan to create a “Made in Italy” label to the European Commission in May. If approved, the label would state both the ingredients’ country of origin and the product’s processing location.
Italian officials state that the move is a way to protect farmers and increase transparency for consumers. Importantly, they also perceive a financial benefit for such a label. However, Canadian wheat exporters have raised concerns that the labeling would lead to lower prices for their sales to Italy. The plan has also drawn criticism from Italian producers on just how such a designation would work. A ‘Made in Italy’ label may be more controversial than Italy bargained for.