Another foundation of Canada’s supply-management system is about to be challenged.
This spring, the National Farm Products Council will issue new cost-of-production guidelines that may challenge the theology that supply-managed pricing includes a guaranteed profit in return for limits on production.
Cynthia Currie, chair of the Council, says the 1998 version of an appropriate cost-of-production calculation for poultry and egg sectors will differ from the last version, developed in the early 1990s and rejected by farm sectors.
This cost of production calculation will be designed with competitiveness against cheaper imports in mind. Profit may not be an underpinning.
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“It will be up to producers and processors to decide how they can become more competitive,” Currie said. “I’m not the expert on whether the price should be at, or below, or above COP.”
When supply management was created, cost of production pricing that included a profit was a cornerstone.
Agencies and marketing boards often use cost-of-production guide-lines to set or negotiate prices with processors or retailers.
But the guidelines have also been a target for critics over the years who argued that the cost of production guidelines in a monopoly was a licence to print money.
Currie said she expects the new guidelines to contain pricing proposals lower than the last version.
“A bloated COP serves no one well,” she said.
“We have to recognize that there have been productivity gains during the past few years and we can’t ignore those so hopefully this will be a COP we can all stand behind.”
It will not be an iron-clad rule, enforceable in the provinces, but marketing boards and agencies will be expected to follow the new guidelines if they want to avoid criticism.
“If they don’t follow our guidelines, then we will not be supportive of what that agency has done and we will not be shy to say that,” said Currie. “We cannot disallow a price but we can undermine the credibility of it.”
She said the cost-of-production formula is an important and visible tool that marketing boards use.
