Supply management | Conference Board of Canada says changes will be needed to access foreign markets and increase milk volumes
Canada’s influential business-friendly think-tank, the Conference Board of Canada, has weighed in on the politically sensitive supply management debate, predicting changes are inevitable.
As it released a George Morris Centre report Aug. 23 on the 1970s origins of dairy supply management, the conference board noted that Canada’s protectionist and regulated supply management systems for dairy, poultry and eggs are under pressure from international and domestic critics.
“What is clear is that Canada’s long-standing policy will need to change, whether marginally, dramatically or somewhere in between, in response to domestic and international pressures,” the board said when releasing the report.
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Understanding its origins “will help inform decision-makers in making changes to dairy policy that take into account the realities of today’s industry, the domestic and international contexts and Canada’s large trade and public policy interests.”
The George Morris Centre report noted that dairy supply management came out of a legitimate milk industry crisis fueled by processor concentration, competition from margarine and other butter substitutes and a lack of individual farmer understanding of or power in the market.
In the 1960s, governments being pressured for farm aid and to reduce dairy supply and price disruptions, chose to establish price, production and import controls.
The result was marketing boards with an overview of the domestic market and a plan to regulate the market.
“The control of milk surpluses and market access/equity and increased producer returns at manageable public cost have been the goals of supply management in Canada,” said the report.
“This was born out of a different situation of chronic surplus and low returns, and the system has developed effectively to achieve these goals.”
However, George Morris Centre analysts say the system has gone too far and become too rigid during the past 40 years. The dairy industry has been largely stagnant compared to other countries.
“This success has come at a cost,” it said. “Canada’s competitor country dairy industries have seen significant milk market growth while in aggregate, Canada has seen no growth in overall milk volumes despite large increases in both population and income.”
The centre argued that the increasingly bureaucratic system to maintain price levels and control quota values has come at the cost of export markets and a fragmented national market between provinces.
“Much of Canada’s milk supply management regulation goes beyond the necessary, creating unintended costs and burdens to the operation of the system,” said the report.
“The challenge for the Canadian dairy industry and policy makers is to retain the elements of supply management that maintain its functions and purposes while allowing changes in other elements, without being trapped by the system’s history.”
The conference board said the need to reform supply management has been sharpened as Canada joins the Pacific Rim free trade talks through the Pan-Pacific Partnership and negotiates free trade with the European Union while facing greater demands for increased foreign access to Canada’s domestic dairy market.
“Pressure to abandon the long-standing protection of dairy, as well as poultry and egg, sectors from international competition has intensified” because of trade negotiations, said the board.
The report is the latest in a long list of calls during the past year for changes to supply management, or even its dismantlement over time.
Dairy Farmers of Canada and the Canadian Federation of Agriculture have been counter-attacking, arguing that supply management is a sound policy that provides farmer stability and does not cost consumers.
The conference board is expected to produce more critical reports in a series on the system.
