Schoepp: Big picture ignored in supply management debate

Critics focus on milk powder, but the real issue is about creating 
valued-added products while protecting farm families


Reading Time: 4 minutes

Canadians produce over 700 kinds of cheese. It makes me smile to think of all the small processors and farmers who delight in cheese making.

Cheese also contributes $69 million in exports every year. Sounds like a good-news story and as Canadians we tend to focus on what we know — and we know cheese and we know exports as we currently trade with 42 other countries.

But when it comes to cheese and dairy products, the whole of the story is a little more complicated. Historically, we go back to 1966 and the creation of the Canadian Dairy Commission and the resulting implementation of supply management in the 1970s. Both were created to stop the wild swings in prices and thus a formula based on demand and supply was developed. Marketing boards established in each province took the responsibility of execution and that was the foundation for a two-tiered system that we have today.

Canada has export limits allowed under the World Trade Organization (WTO) for dairy, and yet does export $4.6 million in milk each year and $207 million in speciality products such as yogurt. Along with the trade in cheese, it would seem a healthy portfolio.

• More with Brenda Schoepp on the Alberta Farmer: Rethinking single-trait selection

But the rest of the story lies in milk powder and this is where Canada lags. Because Canadian dairy is seen as subsidized by the WTO and may sell above the world price, the easiest exported product — milk powder — does not get the play it deserves. To drive this point home the trade balance in dairy for the year 2014 was a deficit of $414,126,000, which means that Canada imported more than it exported in dairy. This was largely milk protein. Imports of U.S. milk proteins have increased by 300 per cent since 2010 and these imports at times have actually created a surplus on the Canadian side.

Supply management opponents are focusing on milk powder. An increase in sales of milk powder to nations that are hungry for it, such as China, creates huge opportunities. Bringing the price down via the open market would also help in Canadian processing. Canadian-based dairy processors currently add value out of country. Saputo has more foreign processing plants than domestic ones, and Agropur established its cheese and milk ingredient plants in Wisconsin and Minnesota.

The supply-managed sector, particularly dairy, also carries significant debt as farmers continue to improve facilities and pay astronomical prices for quota. Although income is basically guaranteed, the dairy industry is in a constant state of upgrade.

In Canada, 98 per cent of farms are family farms and dairy is no different. The average dairy farm in Canada is 77 head and they dot the countryside near exceptional feed sources. The majority of the industry is in Quebec at nearly 45 per cent and Ontario at 32 per cent followed by Alberta (6.8 per cent) and B.C. (6.3 per cent). With the balance of power in the East both from a farmer and a voter perspective, it is unlikely that one province will side up to radical changes. Any change must be carefully constructed.

At the emotional heart of the issue is the family farm and — if supply management is phased out — how to compensate and protect equity for the farmers. Or put another way, will the taxpayer be interested in another deal with farmers? This is not easy. Marketing boards are a jurisdiction that is shared and a national decision must be a shared perspective.

Representatives of dairy farmers don’t want more imports but that view may be rather short sighted, as imports are not at the core of the debate. It is the ability to add value domestically and to export. A coinciding equity shift needs to simultaneously occur. Families need protection if there is change, while processors need to access inputs that are not above the world price so they can create products and jobs in Canada.

All this circles around a trade table where we are not sure at what rate other jurisdictions subsidize dairy. Farmer support in China, the country that cries the loudest for Canadian milk powder, was US$165 billion in 2012. How much of that was for the Chinese dairy industry, directly or indirectly, is unknown.

To be fair, dairy is just one piece in the puzzle. Supply managed collectively accounts for 18 per cent of all Canadian farm cash receipts. We can add to this other commodities and industries that are also watching Canada’s growing agri-food trade deficit with concern.

This is not an attack on the dairy industry, but an attempt to spark a larger discussion that goes well beyond cheese and crackers to a processed food trade deficit that was last reported at $6.8 billion and growing. Food processing is vital to Canada and the agri-food industry contributes 6.7 per cent to national GDP and employs one in eight persons. Food processing is the No. 1 manufacturing business in Canada.

Canada is about trade and as the world’s fifth-largest food exporter on a per capita basis, we need food commodities value added at home so we have a product of greater worth with which to trade.

Preferential access does start with great trade agreements. Just as important is the communities in which we live and the farmers who keep us there. Perhaps a balanced discussion will lead us to create a comprehensive food policy and action plan that encompasses an enabling environment for all and focuses on our competitive advantages — not our competitive differences.

We are a nation with one of the most trusted food sources in the world. Surely we can build on that.

 

About the author

AF Columnist

Brenda Schoepp

Brenda Schoepp works as an international mentor and motivational speaker. She can be contacted through her website at www.brendaschoepp.com. All rights reserved.

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