It is difficult to gauge the exact worth of dairy quotas in Canada, but it’s easy to conclude the market value is enormous, at least on paper.
With quota prices soaring to historic highs across Canada during the past year – more than $31,000 to buy quota for the equivalent of one cow’s production in Nova Scotia – the numbers are staggering.
Internally, some Agriculture Canada officials have estimated the value of Canadian dairy quota at $20 billion.
A December 2000 Statistics Canada survey suggested farmer estimates exceed $14 billion.
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Skeptics say the high sale values occur because only two percent of quota is sold annually. There is demand but supply is limited.
“You have to keep in mind that the quota value is based on very little quota selling each year,” said Agriculture Canada quota expert Leo Curtin.
Industry observers suggest a mass sell-off of quota or a move toward liberalized cross-border trade would quickly drive the value of quota down. Even a hint that government support is waning for supply management could quickly erode prices and value.
“That value is based on a basic faith that the border will remain closed to a certain extent,” says Canadian Dairy Commission economist Nelson Coyle.
“It is not an asset value that would hold up if farmers had less faith in that political commitment. If everybody wanted to or had to sell, that value would not be $20 billion. It would be closer to zero.”
