A report from the Conference Board of Canada painting Canada’s supply-managed dairy sector as a drag on the country’s economic competitiveness ignores managed markets’ benefits in reducing price volatility, according to the national dairy farmers’ body.
The Ottawa-based Conference Board, a non-profit research organization serving the private and public sectors, last week released a report showing supply management “largely meets its stated goal of improving producer incomes.”
However, the system also “prevents milk producers from capitalizing on opportunities in global markets, while thwarting Canada’s international trade objectives, and reducing competitiveness and innovation,” the board’s chief economist Glen Hodgson said in a release.
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The report said supply management discourages the dairy industry from addressing long-term challenges such as declining milk consumption per capita, instead relying on price increases or new regulations.
Globally, the report says, dairy demand is expected to continue its long-term growth, especially among the middle classes in China and India, where Canada’s higher-price system will limit its competitiveness.
From a global trade perspective, the report said, Canada’s continued defense of supply management in trade talks compromises its ability to secure market access for its other agricultural products, among other goods or services.
As well, the report said, if Canada were to fully or partly liberalize its dairy policies, its milk producers would be left ill-prepared for a more competitive environment, as supply management provides “weak” incentives to be more competitive or efficient.
Moreover, the report said, supply management distributes its benefits unfairly, forcing buyers of dairy products to “effectively subsidize dairy producers” while also making it more difficult for farmers to enter the dairy sector. Under the current quota system, the report said, “it costs about $28,000 just to buy the right to sell the milk of roughly one cow.”
In a separate release, the Dairy Farmers of Canada retorted that while the Conference Board “provides a good historical perspective on supply management” it ignores “the fact that the stability of supply management in Canada, like the relative robustness of our regulated banking system, has actually helped our industry weather the recent international storm of wild price fluctuations.”
“Rehashes propaganda”
The board’s report “unfortunately provides no new argument, but rehashes arguments and propaganda made by anti-supply management ideologues before,” the DFC said.
The report also “ignores the fact that without regulations protecting the smaller player or provider of raw material in any chain supply, the primary producer is left holding the small end of the stick, because ‘perfect competition’ exists only in theory,” the DFC added.
As examples, the DFC cite the U.S. and Europe, where “governments are currently inquiring on the disparity between producer and consumer prices due to concentration power in the processing and retailing sector of the chain.
“Moreover, both announced multi-million dollar subsidy package to their dairy farmers in October. Is that competitiveness and consumer benefit? We don’t think so.”
The efficiency and competitiveness of Canadian farmers has “continually improved” over the supply management years, the DFC said. “At the same time, they respond to consumer demands about food safety, animal care, environmental sustainability and more.”
The Conference Board emphasized that its report “does not study the politics of supporting a rural lifestyle or health and phytosanitary concerns.”
Quebec’s provincial Agriculture Minister Claude Bechard, representing a province where supply-managed commodities represent about 40 per cent of farm cash receipts, worth nearly $2.7 billion, on Tuesday also criticized the Conference Board report as not fairly representing managed markets’ “positive elements,” such as providing price stability without dipping into the public treasury.
