Dairy farmers across Canada no doubt heaved a sigh of relief during the weekend with Andrew Scheer edging out Maxime Bernier as leader of the federal Conservatives.
Ending supply management was a key plank in Bernier’s campaign. He argued that it costs consumers across the country to the benefit of a relatively few farmers. Scheer supports supply management, as do most federal politicians of all political stripes.
According to political pundits, many dairy farmers bought Conservative memberships just so they could vote against Bernier. This was particularly true in Bernier’s home province of Quebec where a lot of small dairy farms operate.
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Relatively few of these farmers would be Conservative party supporters, but they took advantage of the political process to try and influence the party leadership.
With Scheer’s razor-thin win over Bernier in the preferential ballot, it’s possible that they actually tipped the balance.
Farmers are a tiny percentage of the overall population and agriculture is not the country’s biggest economic driver. Despite this, farmers can punch well above their weight when united and vocal.
Just look at the recently announced grain transportation legislation. Farm groups, commodity organizations and the grain shippers were all making the same recommendations with well-reasoned arguments and the federal government responded.
In the case of supply management, a battle has been won, but the war continues. It’s useful for their cause to have the leader of the official opposition, a potential prime minister, as an avowed supply management supporter.
However, the immediate threat comes from the impending renegotiation of the North American Free Trade Agreement. With President Donald Trump singling out Canadian dairy policy as something that needs to be fixed, it’s difficult to believe that supply management will survive unscathed.
At a minimum, American access will be increased. Depending upon the level of American dairy imports, the entire supply management system may need to be revamped or scrapped altogether.
Then the issue becomes one of compensation. Should dairy farmers receive government payments for their loss in quota value?
While it varies across the country, the dairy quota for just one milking cow is in the range of $30,000. Quota value makes up a huge chunk of net farm value.
A well-established dairy farm with little or no debt could withstand a significant drop in quota values. Not so for highly leverage operations. It’s akin to a farmland seeing a rapid depreciation in value. The balance sheet quickly tilts.
If the rules around imports change and quota values are adversely affected, are dairy farmers owed government compensation and if so, how should this be structured? Many billions of dollars could be involved.
These are discussions we could well be having in the months ahead.
Supply management has faced many perceived and some real threats over the decades. Its toughest test is just around the corner.
