Scrapping supply management would be disastrous

Canada's Finance Minister Bill Morneau takes part in a news conference in Ottawa, Canada, December 7, 2015. The new Canadian government's planned tax hike on the rich will bring in less money than forecast and will not cover the cost of a promised middle-class tax cut, according to an official release on Monday. A government document said the tax hike would bring in C$2.01 billion ($1.49 billion), while the cost of the tax cut would be C$3.44 billion ($2.55 billion). (Chris Wattie/Reuters)

The latest is from Finance Minister Bill Morneau’s advisory panel, whose criticism of supply management is not accurate. Generally, the critic’s line links the ability to participate in the global market with being “free” to make one’s own choices. Over the medium term, that is always disastrous in agriculture.

I was recently in Australian states Queensland and Victoria interviewing dairy farmers following dairy deregulation in 2001. Their numbers have plummeted to 6,000 from about 13,000, and the volume of milk they produce is down to 9 billion litres from about 12 billion. Dairy exports have similarly declined.

The situation in Australia has deteriorated to where the federal government has been forced to pony up $555 million AUD as a subsidy, as much-heralded export markets failed to materialize. Hundreds of farmers are leaving the sector and prospects continue to look bleak.

These are the “freed” farmers critics want Canada to emulate. And Australia is the favourite example they use. Many lamented the power the new regulators, the supermarkets, have over them and pricing, and the fact their children would not be taking over the family farm.

Many told me that dairy farming without any protection or support is not sustainable. Theirs is an industry in steep decline.

A similar situation exists in free-market New Zealand, where I interviewed dairy farmers in January 2016. They control about 32 per cent of cross-border trade in milk products, making them almost entirely dependent on the export market. Many of them wonder how they will make ends meet, as global dairy prices on which they are dependent for their livelihood, are expected to remain depressed.

They dropped in 2016 to $3.90 US per kg of milk solids — the break-even point for the average New Zealand dairy farmer is $5.65 US/kg of milk solids. Though some rebound is forecast for 2017, many will not make the break-even point.

Debt per average farm has hit $7 million NZD, which has helped drive many to the wall. Big farmer-owned co-operative, Fonterra, is providing no-interest loans based on volume of milk production, but it is a finger in the dike. To top it off, dairy prices for consumers in New Zealand are more expensive than in Canada.

Is that the future we want for Canadian dairy? Exports, much touted by critics, don’t amount to much. Only between seven and nine per cent of total global production is traded internationally, a relatively small amount. The European Union, New Zealand and the U.S. control about 80 per cent of that 7-9 per cent, so where would we fit in? Whose market share would Canadians take?

In a non-supply managed environment, government would be forced to subsidize dairy farmers to the tune of billions of dollars annually as Washington does.

Getting rid of supply management would also destroy the family farm, encourage rural depopulation and depress rural wealth as many farmers would be forced out of business, as has happened in Australia, New Zealand and the U.S. The resulting wage farmers would be worse off, with negative implications for Canadian milk.

A mere three per cent of large U.S. dairies produce more than 50 per cent of that country’s milk. The number of U.S. dairy operations with 2,000 or more cows has grown faster than those of any other size.

It is go big or go home with nasty side-effects. One has been the creation of mountains of manure. A federal subsidy of $4 billion US per year helps with manure remediation alone. That ignores the ongoing government subsidies that U.S. dairy attracts.

Is that what we want in Canada? That could be the result without supply management where government provides no subsidy whatsoever.

We should celebrate our supply-managed farmers, and the food sovereignty, security and stability they represent. Our farmers are custodians of the countryside where they live and provide Canadians with well-priced, high-value, safe and nutritious food.
Source: EdMontonJournal


One Comment;

  1. Jackie Schmidts said:

    Well now, the facts are the Canadian consumer pays more for their milk than they should have to. The fact is Canada is helping to keep in business farms which really can’t compete in the marketplace or really deserve to be in business any longer. The only thing Canada is doing is creating an artificial supply and demand system for their milk production which will eventually be crushed under it’s own weight of government and tax payer support. It can’t last indefinitely and sooner or later you’ll have to face that fact. Better to cut the cord now, allow real supply and demand to take control. Do it now rather than later when it will be much more harsh. How will new dairy farmers take over when they can’t afford to purchase the quota? Eventually the dairy production industry will die on the vine or be fully funded by the taxpayer. That is no way to run a major industry.



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