Supply management accused of refusing to make changes

OTTAWA — As a university professor, Bruno Larue is used to handing out grades.

Larue, an agricultural economist at Laval University, normally gives them out to students, but on occasion he also rates organizations and institutions.

In the case of Canada’s supply management system, Larue gives it an A+ — for preserving its structure and demonizing the idea of change.

“It’s mostly (about) defending the current status and then coming up with arguments if we don’t have (it), we’re gone,” he said.

“That’s the sort of talk we hear. Not, we can be better.”

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Larue didn’t give Canada’s supply management system a grade for progress and change, but his comments suggest it would be a D minus.

“It (supply management) hasn’t changed very much over time,” Larue said during a debate on supply management at the Canadian Agri-Food Policy Conference held Jan. 25-26 in Ottawa.

“I don’t see much discussion about change.”

Larue took the con side of the debate and his colleague at Laval University, Maurice Doyon, argued for Canada’s production and marketing system for dairy, eggs and poultry.

Larue said he is troubled by the stagnation in supply management because he thinks there are obvious ways to improve the system.

One such way is eliminating rules that allow production quota to be bought and sold only within the same province.

“We should get rid of those provincial borders … so quota can move between Ontario, Quebec, Nova Scotia and New Brunswick,” he said.

“And there could be one (quota region) for Western Canada. Then you’d have more activity on the (quota) exchange.”

He said a more flexible approach to quota is required because dairy herds on Canadian farms should be larger so producers can capture efficiencies and reduce costs.

To make his point, Larue provided data from other parts of the world:

Herd sizes in Australia, New Zealand, Denmark, California and Wisconsin range from 200 to much more than 1,000 cows per farm.

The average herd size in Eastern Canada is 65 and 126 in the West.

Dairy farms are slowly getting larger in Canada, but the restrictive rules around quota deter expansion, Larue said.

“You (a farmer) could not think that you could double in size quickly, so why would you invest in new buildings and milking robots under these conditions?” he said.

“The system essentially traps the farmers.”

Doyon agreed that provincial borders for buying and selling quota don’t make economic sense.

However, he disagreed with the idea that supply management is frozen in time.

He pointed out the P5 agreement in which the dairy industries in Nova Scotia, Prince Edward Island, New Brunswick, Quebec and Ontario have common rules.

“Within the P5 we have one price, we have quota rules that are uniform…. Those were significant changes.”

There may be weaknesses in the current system but that doesn’t mean it should be destroyed, Doyon added.

Milk, in particular, isn’t like other ag commodities, where producers can quickly respond to market signals. If there’s an excess of wheat, for instance, prices drop and growers respond by seeding less wheat.

Dairy farmers have larger sunk costs, and it’s more difficult for them to cut production when prices fall, so the oversupply persists and prices remain low for a longer time, he said.

Even though he argued the pro side, Doyon thinks the current system should evolve into something leaner.

“We have to demonstrate to the world and to Canadian consumers … that the industry is doing everything that it can to be efficient as possible.”

Larue also wants supply management to evolve but he’s pessimistic that anything will happen.

Canadian politicians rarely speak out against supply management because it rarely pays off.

Maxime Bernier, an MP from Quebec, promised to phase out supply management during the 2017 Conservative leadership race.

Bernier finished a close second to Andrew Scheer, and his opposition to supply management may have been the difference.

“I don’t think there will be a lot of politicians who (will) try to imitate (that),” Larue said.

Contact robert.arnason@producer.com

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