Trump’s milk shake puts dairy in­dus­try on no­tice

De­fend­ing the sta­tus quo was the wrong strat­egy

The Hamilton Spectator - - COMMENT - SYL­VAIN CHARLEBOIS

Sup­ply man­age­ment is of­fi­cially on Don­ald Trump’s radar and Cana­dian dairy farm­ers are hold­ing their breath. For years, farm­ers have de­fended the five-decade-old sys­tem as per­fect for this na­tion. They’re about to find out that the world has changed since the 1960s.

Our sup­ply man­age­ment sys­tem, known glob­ally as Canada’s milk car­tel, faces in­evitable change. Decades of de­fend­ing the sta­tus quo was the wrong strat­egy.

It would have been fas­ci­nat­ing to be in the room when U.S. Pres­i­dent Trump got his first brief­ing on the Cana­dian dairy in­dus­try. Any­one who has at­tempted to ex­plain sup­ply man­age­ment to Amer­i­cans is aware of the gen­eral re­ac­tion of dis­be­lief.

Sup­ply man­age­ment is about en­sur­ing we pro­duce what Cana­di­ans need for dairy, poul­try and eggs. Dairy, with 80 per cent of agri­cul­tural cash re­ceipts within sup­ply man­age­ment, at­tracts most of the at­ten­tion.

Such a pro­gram could be ex­pected in an emerg­ing mar­ket or a highly or­ga­nized econ­omy. No one would ex­pect sup­ply man­age­ment in a de­vel­oped econ­omy like Canada’s. Since Europe elim­i­nated quo­tas last year, Canada is the only de­vel­oped econ­omy in the world with such a scheme.

Quo­tas are given to farm­ers so they can pro­duce the com­modi­ties needed, and ex­tremely high tar­iffs are im­posed on im­ported prod­ucts that could com­pro­mise our del­i­cate sup­ply and de­mand equi­lib­rium.

Our mar­ket­ing boards are seen as pro­tect­ing farm­ers. Dairy farm­ers around the world are of­ten ex­posed to dra­matic milk price fluc­tu­a­tions and must adapt quickly. Sup­ply man­age­ment gives our dairy farm­ers pre­dictable rev­enues.

But main­tain­ing the sys­tem for more than five decades has come at a tremen­dous cost.

Our dairy in­dus­try is highly in­ef­fi­cient. Stud­ies re­peat­edly point to how costly milk pro­duc­tion is in Canada com­pared with other in­dus­tri­al­ized economies. Switzer­land is the only place where pro­duc­tion is more ex­pen­sive.

High farm gate milk prices don’t al­low­ing our dairy pro­ces­sors and restau­rant own­ers to be­come more com­pet­i­tive. En­tire food chains have been held back for years.

Also, dairy sup­ply man­age­ment has led to a sense of in­sti­tu­tion­al­ized en­ti­tle­ment.

Dairy farm­ers have be­come great cost man­agers — it’s the only way to earn more. As a re­sult of sup­ply man­age­ment, dairy farm­ers are bu­reau­crats, not en­trepreneurs. They work for the state, not for the econ­omy.

The Dairy Farm­ers of Canada have spent hun­dreds of mil­lions of dol­lars over the years pro­mot­ing milk to Cana­di­ans. But con­sump­tion of fluid milk per capita has dropped for al­most three decades.

A grow­ing num­ber of en­tre­pre­neur­ial dairy farm­ers want to act dif­fer­ently but they’re dragged down by the medi­ocre class.

As Canada stood still, the world changed. For years, calls for changes to sup­ply man­age­ment were ig­nored — af­ter all, the milk quo­tas are worth more than $30 bil­lion. So our sys­tem has a lot of fis­cal bag­gage. And U.S. dairy farms are much more com­pet­i­tive than ours.

So quickly get­ting rid of sup­ply man­age­ment would lead to a com­plete collapse of Canada’s dairy in­dus­try.

Canada needs a plan to main­tain some do­mes­tic pro­duc­tion ca­pac­ity to sup­port our pro­ces­sors, who are re­spon­si­ble for adding value and in­no­va­tion.

Un­for­tu­nately, the world eco­nomic cli­mate — led by the Trump ad­min­is­tra­tion and Brexit — is forc­ing the is­sue. We’re about to see an en­tire in­dus­try filled with ded­i­cated work­ers on alert.

So in­stead of es­tab­lish­ing a vi­sion for Canada’s dairy sec­tor and own­ing its des­tiny, we’re about to see dra­matic changes on some­one else’s terms.

Jobs in ru­ral Canada and fu­ture gen­er­a­tions of farm­ers are at stake.

But don’t blame the farm­ers — they were sim­ply pro­tect­ing their as­sets.

Troy Me­dia colum­nist Syl­vain Charlebois is dean of the fac­ulty of man­age­ment and a pro­fes­sor in the fac­ulty of agri­cul­ture at Dal­housie Univer­sity, and author of “Food Safety, Risk Intelligence and Bench­mark­ing,” pub­lished by Wi­ley-Black­well (2017). Dis­trib­uted by Troy Me­dia

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