The truth about supply management: We’re lucky to have it
Darleen Sichley, an Oregon dairy farmer, asked the relevant question in Hoard’s Dairyman: “Is it time for supply management?”
Canadian are so lucky.
Excerpts from Maxime Bernier’s book, which was to be published on Nov. 1 but has now been postponed indefinitely, have focused one chapter, at least, on his hostility to supply management, the Canadian agricultural system that matches domestic demand with domestic supply through the use of quotas and tariffs. Apparently, Chapter 5 resurrects every hoary argument about a system that provides Canadians with a quality product at a good price while allowing farmers to make a reasonable income in the sectors in which it operates — dairy, eggs and poultry.
Bernier has noted that he is “a conservative who believes in free markets and freedom and we must have a real free market.” To that end, he is also enamoured of the Australian dairy system which deregulated in 2001, pushing those farmers to sink or swim on their own. Unfortunately, most have sunk.
Those who believe in free markets are deluding themselves. There is no such thing as a free market, a fact that Australian dairy producers have discovered to their detriment. There, the two supermarket chains, Coles and Woolworths, have become the new regulators, with terrible consequences for farmers as both supermarkets look to strengthen their bottom lines at producer expense.
Representative of farmer sentiment was a remark from one of about 35 dairy farmers I interviewed in Australia when apprised of yet another price cut for their product: “We will wait and see and hold on for dear life.” That does not constitute a business plan. Another Australian dairy farmer told me that he expected his countrymen to be starving in 20 years, the result of horrible agricultural policy decisions made by government.
And what about the U.S., the country that Canadians like to compare themselves with? On the dairy front it, too, is confronting its poor policy choices. That plays itself out in the NAFTA renegotiation. As an American dairy farmer told DTN/Progressive Farmer, “There’s too much milk … The supply is way over demand and milk is a product you have to sell.”
Despite a paucity of markets, U.S. dairy production has increased about two per cent per year over the past half-decade. The situation is now so bad that they are spreading milk on fields or dumping it in lagoons.
Darleen Sichley, an Oregon dairy farmer, asked the relevant question in Hoard’s Dairyman: “Is it time for supply management?” Clearly, dairy farmers are suffering financially to the detriment of the U.S. industry.
As well, to the limit of their ability, U.S. dairy farmers are sending heavily subsidized exports to markets around the world, undercutting nonsubsidized competitors such as Australia and New Zealand. This is still not nearly enough to soak up the surplus.
The fundamental contradiction of U.S. dairy policy is that it supports prices, but not supply. And it is surprised when the latter swamps markets.
This is the real reason the U.S. wants access to Canada’s dairy market. It has way too much of the stuff, has to sell it or get rid of it, and we just happen to be close by to make the sale of a heavy, bulky and not-easily transportable product viable.
If that did happen, would U.S. milk sell more cheaply in Canada than our domestic product does? Unlikely. U.S. Bureau of Labor Statistics point out that American milk in seven out of the eight regions it tracks is more expensive than in Canada when normalized for exchange rate differences.
Another report supports this statement. The Export Action Group has highlighted that, “With respect to specific dairy products, Nielsen data also show that Canadians currently enjoy lower retail prices for most items compared to their American neighbours, contrary to the longstanding claim that dairy is cheaper in the U.S.”
That is true for butter, for nongrowth hormone U.S. milk, for mozzarella cheese and for yogurt, all products that are measured by Nielsen.
Incredibly, this is the case even though American farmers use cheap, undocumented Hispanic labour. As a Texas A&M study pointed out in 2015, without this labour, one out of every six dairy farms would have to close in the United States. We do not have that in Canada.
Clearly, by every objective indicator, dairy supply management serves Canadian consumers and farmers well. Rather than criticizing it, we should support it. After all, the system also represents the best of Canadian food security and sovereignty.