Conference board’s supply management reform ill conceived

Scrapping the current system would require government to subsidize both 
domestic production and exports

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The Conference Board of Canada embraces the mantra that “all growth is good.”

Its plan to change supply management for growth is a prescription for weakening, if not eliminating, the three pillars of supply management for dairy production in Canada — production controls, import tariffs and farmers’ cost-of-production pricing — in order to produce more milk, lower its price and increase exports.

The board claims to be an independent think-tank, but advocates for policies that promote corporate interests at the expense of the values and aspirations of Canadian people.

In the 1960s, dairy processors were using erratic milk-hauling practices to depress farm gate prices paid to farmers. Farmers were faced with delivering milk at whatever price they could get or lose it all. In 1969, a new system had the government regulate farm gate prices based on farmers’ cost of production in return for farmers producing a constant flow of high-quality milk along with a system of discipline (quotas) to prevent overproduction.

Canada’s dairy supply management operates smoothly, efficiently, and sustainably without government subsidies in contrast to other Canadian agricultural sectors where AgriStability payments are often needed to support farm incomes and overcome depressed commodity prices.

The conference board now promotes increasing dairy production beyond Canadian needs in order to export.

There is definitely capacity in Canada to produce a lot more milk. But what kind of export markets could we pursue, what kind of programs would be required to obtain those markets, and what net benefits would there be for various players in the system?

Only a small portion of the world’s milk production crosses borders because it is a bulky perishable product. Most exports depend on subsidies, often obscured as indirect production supports to comply with trade agreements.

American dairy farmers receive U.S. Farm Bill-related payments that nearly double their milk cheques. European subsidies provide dairy farmers a base income, allowing them to survive on lower farm gate prices. The exception is New Zealand, a major dairy exporter with little or no subsidies. With the world’s lowest production cost (no winters) it can sell at the world’s lowest farm gate prices.

Dismantling dairy supply management would be costly for Canadian taxpayers. To compete internationally we would have to match the massive U.S. and European subsidies. Dairy farmers in Canada would receive lower prices for milk, be subjected to less transparent pricing and require government bail-out programs to keep operating.

The conference board suggests an export-oriented dairy system with lower farm gate prices would result in lower prices for consumers. In reality, retailers charge what the market will bear — New Zealand consumers pay among the highest prices for dairy in spite of their farmers’ low cost of production.

Canadians value dairy supply management, as they enjoy a steady supply of high-quality products for a reasonable price. Supply management regulates production in each region of our vast geography, providing milk where consumers need it. An unregulated dairy market would centralize production, processing and distribution, requiring consumers in distant areas to pay more due to transportation and storage costs.

Dismantling dairy supply management would help companies affiliated with the conference board, such as food processors and retailers, and those industries that have their eyes on massive concessions at the trade deal table. Their gain would be a huge loss for Canadian citizens and Canadian dairy farmers.

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