Has chicken industry lost out?

There may be a simpler way to help Canada’s poultry and dairy farmers adjust to trade, says an economist from the University of California Davis: get rid of supply management and allow farmers to export chicken and dairy products to the world. | File photo

In late October the federal government created a couple of working groups with the goal of helping Canadian dairy and poultry farmers adjust to the U.S.-Mexico-Canada Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

There may be a simpler way to help Canada’s poultry and dairy farmers adjust to trade, says an economist from the University of California Davis: get rid of supply management and allow farmers to export chicken and dairy products to the world.

“We are holding back innovation and gains from trade in order to shore up the status quo,” said Colin Carter, distinguished professor of agricultural economics at UC Davis.

In 2016, Carter and Pierre Merel, also of UC Davis, wrote a paper called the Hidden Costs of Supply Management in a Small Market, which was published in the Canadian Journal of Economics.

In the paper, they argued that supply management is hurting Canada’s dairy and chicken industries because producers and processors cannot export to a world hungry for chicken meat and dairy products.

“After decades of taxing Canadian consumers through artificially high domestic prices, certain prominent supply management programs in Canada may be close to harming Canadian producers themselves,” they wrote.

”That is, the long-run opportunity costs of these programs could be on the rise as they prevent Canadian producers from serving a growing world demand for high-value processed animal products.”

The UC Davis economists cited an agricultural outlook for 2015-24 from the Organization for Economic Co-operation and Development and the United Nations’ Food and Agriculture Organization. In the report, the OECD and FAO said:

  • Demand for chicken is expected to increase by 27 percent in 2023 from 2014.
  • In the same period, global demand for milk products will likely increase by 30 percent.

Losing out on that demand growth, mostly in emerging economies, is damaging because Canada has a number of advantages when it comes to animal agriculture, Carter and Merel said:

  • Canada has a large supply of relatively cheap feedgrain.
  • Canada’s cold climate helps control animal disease.
  • Canadian farmers and scientists are experts in managing animal facilities.
  • Canada has an abundance of relatively cheap land, which “could be turned into centres of industrial animal production.”

That’s why Western Canada has three major pork processing plants and is a substantial player in the global pork trade.

Using those same advantages, Western Canada could dramatically boost broiler chicken production in the region — if supply management was eliminated.

“I would expect that proximity to feedgrains would be a big plus for location in Western Canada. Feed accounts for a very large share of the costs of production,” said Carter, who grew up on a grain farm in Alberta and was an assistant professor at the University of Manitoba before joining UC Davis.

In their paper, Carter and Merel make the same point four or five times: when academics, industry reps and politicians talk about supply management, there’s too much discussion around imports and how those imports hurt Canadian producers.

Instead, more attention should be paid to exports and the lost opportunity for producers.

“Growing export opportunities in dairy and poultry products, which currently represent a largely untapped source of economic surplus for Canada, should be seen as a catalyst for SM (supply management) reform,” they wrote.

“Our model suggests that Canadian producers could collectively be better off under trade liberalization compared to SM, especially for the broiler chicken industry.”

The Western Producer contacted the Chicken Farmers of Canada for comment, but it did not respond by press time.

In an Oct. 1 news release, following the announcement of the USMCA deal, the Chicken Farmers of Canada emphasized that imports are a threat to Canadian farmers.

“When more access is given, production decreases in Canada,” said chair Benoit Fontaine.

“This results in lost jobs, lost production and … not to mention the reduction in the contribution to Canada’s economy.”

Defenders of supply management have said that Canada can’t compete with the U.S. in the dairy or chicken industries because of illegal immigrants and lower labour costs in the U.S.

Carter doesn’t buy that argument. Labour is a factor in production and processing of animal proteins, but it’s not a deal breaker.

“If labour were the driving force, you would expect the broiler industry to have grown in places like Mexico. As far as I know, Mexico is quite an important importer of broiler chicken from the U.S.”

Chicken production by the numbers:

  • In 2017 Canada produced $2.5 billion worth of chicken products.
  • Canada produced 1.2 billion kilograms of chicken (eviscerated weight) in 2017. Of that, 60.7 percent came from farms in Quebec and Ontario.
  • In 2017 the United States produced US$30.2 billion in broiler chickens.
  • Georgia is the No. 1 state for chicken, producing a value of US$4.4 billion in 2017.

Sources: Agriculture Canada and the U.S. Department of Agriculture

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