What’s the truth on supply management?

February 26th, 2014

Our critics like to pretend it’s a barrier to trade or that it stifles export opportunities and that it is an outdated model.

That’s what they claim. But what is the truth? Let’s look at the numbers and real market experiences.

Predictability and Stability

Canadians consumers benefit from stable prices.

Our critics point to New Zealand, the USA and Europe as models for Canada.

But in the States, the price of milk is headed towards a “record high”, and New Zealand the price of milk fluctuates wildly and rose almost 9 per cent last year.

Even in France, record retail prices for dairy are reported in the respected trade publication AgraEurope.

Prices in Canada on milk and dairy products have followed the Consumer Price Index in Canada over the last 30 years.

Price

Our critics claim Canadians pay more for milk and dairy products.

The truth? Canadian milk stands the comparison with other countries.

On average, the weighted retail price of milk is between 1.48$ a litre in Canada, while in the US, consumers pay about $1.04 a litre, in China $2.03, in Australia $1.47$, in New Zealand $1.50.

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Farmers do not set retail prices. The supply management system regulates the price at the farm level, not at the retail level. Players in the value chain – processors and distributors – decide on the margin they need for their business. Moreover, Canada as a whole is one of the three countries in the world where consumers spend the least amount of their income on food.

Economic Importance

Our critics claim ending supply management would benefit Canada.

The truth? Canada isn’t just urban centres. It is vast with rural, agricultural communities scattered across Canada. Canadian farmers serve as an economic engine in these communities and beyond. Dairy farming is first or second in economic impact in seven out of 10 provinces. Farmers reinvest in their farm operations, supporting many other local businesses both upstream and downstream, such as machinery, feed suppliers, milk transportation, nutritionists, veterinarians, as well as their employees and dairy processing plants.

All of this is done without using a single tax dollar. Canadian dairy farmers receive no direct income support from governments, unlike farmers in the US and Europe. The International Farm Comparison Network shows that government subsidies can effectively double the income of dairy farmers in some European countries.

The loss of supply management would mean the loss of the economic base in rural communities and self reliant dairy farms able to get their returns from the marketplace.

Embrace Equitable Trade

Dairy farmers support free and equitable trade.

Some claim other countries are more “free traders” than Canada, because of supply management. The numbers don’t tell the same story.

Canada already imports, tariff-free, over 6% of the market for dairy products and more than 7.5% for poultry. In contrast, the US gives only 2.75% access to their market. Canada imports ten times more cheese from the EU than the EU imports from Canada – that is before the CETA deal, which doubled access to the Canadian cheese market. Meanwhile, the EU still offers much less of their market to Canadian beef and pork – it’s in the order of about 1%.

These countries also heavily subsidize their dairy farmers, meaning trade is anything but “free” or open.

Click image to enlarge

We are open to an honest dialogue about supply management, but one that is based on facts.

Canada’s system works for farmers, processors, industry stakeholders, government and ultimately, for Canadian consumers.

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