Research teams disagree on cost of supply management

The United States and Canada forged a last-gasp deal on Sunday to salvage a three-country, $1.2 trillion open-trade zone agreement with Mexico that had been about to collapse after nearly a quarter century. 


Not only are they satisfied that Canadian dairy, eggs and poultry prices were higher than those in the U.S. in 2015, they believe they have shown they still are higher today.

That’s the bottom-line response from a team of analysts from the University of Manitoba to criticism from a team of Laval university professors to their 2015 study of the impact of supply management on Canadian consumer prices.

A May 2018 comparison of grocery prices in stores near each other on both sides of the border reveals “substantial premiums on SM products in Canada,” writes University of Manitoba researchers Ryan Cardwell, Chad Lawley and Di Xiang.

Those include milk that is 37 percent more expensive, chicken cuts that are 65-88 percent more expensive and eggs that are 45-125 percent more expensive, depending on location.

However, in their criticism of the Cardwell 2015 study, the Laval team says too many factors were at play to solely blame SM for perceived premiums.

“Differences in prices may be caused by other particularities between the Canadian and American markets,” says the response authored by Maurice Doyon, Stephane Bergeron and Lota Tamini.

Moreover, a Laval analysis of cross-border prices showed that there are some non-SM food products that sell for higher prices in Canada than the U.S.

“Many of these products are produced in Canada and traded freely between Canada and the United States, yet at the retail level significant price premiums are observed,” wrote Doyon and team.

Plus, the way the Cardwell study was conducted did not represent long-term reasonable assumptions, Doyon said.

“Using a 25-year historical average (of Canada-U.S. currency exchange rates), we find that most product premiums are greatly reduced.”

The Laval team also criticizes other elements of the Cardwell team’s methods and analysis, including an allegation of “research bias” and “misleading and unwarranted” rhetoric. Cardwell, Lawley and Xiang respond by highlighting the Laval authors’ funding by the Egg Farmers of Canada, whereas the Manitoba researchers were not funded by any external sources.

This academic dispute rises in heat far above the usually dulled-down tone of most agricultural economics discussions, perhaps revealing the intensity of feelings the SM issue raises in Canada.

Cardwell, Lawley and Xiang’s original study noted the impact that higher prices have upon the poor in Canada, explaining why this was an important issue for discussion in Canada. Higher grocery prices hit the poor harder than they hit the wealthy.

Doyon’s criticism notes in its introduction the many media references that Cardwell, Lawley and Xiang’s study received.

Details of the NAFTA deal: what happens to agriculture?

The United States and Canada forged a last-gasp deal on Sunday to salvage a three-country, $1.2 trillion open-trade zone agreement with Mexico that had been about to collapse after nearly a quarter century.

Here are some of the details in the agreement, which will change its name from NAFTA to the United States-Mexico-Canada Agreement (USMCA) and must be ratified by each country’s legislature before it takes effect:

Wheat grading

Canada and the United States agreed that wheat imported from the other country would not be treated less favorably than similar domestic wheat. U.S. farmers have complained that their wheat automatically receives the lowest price under Canada’s grading system.

Dairy

Canada agreed to provide U.S. dairy farmers access to about 3.5 percent of its approximately $16 billion annual domestic dairy market, Canadian sources said, adding that the Canadian government was prepared to offer compensation to dairy farmers hurt by the deal.

Under the agreement, Canada has agreed to eliminate its Class 6 and Class 7 milk categories and associated pricing schedules for skim milk, skim milk proteins and other components and ultrafiltered milk, within six months after the USMCA goes into force.

U.S. farmers said those schedules had effectively pushed them out of the Canadian dairy market.

The agreement will increase U.S. access to Canada’s dairy market beyond Trans-Pacific Partnership levels, a senior Trump administration official said.

Chicken and eggs

The United States gets tariff-free access to Canada for 57,000 tonnes of chicken by year six of the deal, growing 1 percent for an additional 10 years.

Canada gives the United States access for 10 million dozen eggs and egg-equivalent products in year one, growing 1 percent for 10 more years.

Source: Reuters

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