In praise of supply management

The problem with his opinion, however, is that supply management – where the domestic supply of dairy, eggs and poultry is matched with domestic demand – is empirically a very sensible system. It benefits consumers and producers, and reflects Canadian food sovereignty and security requirements.

Bernier has pointed to Australia as a model we should follow. Australia completely deregulated eggs in the late 1980s followed by dairy in 2001. While Bernier thinks the result has been highly successful, the reality is that deregulation has produced a number of shortcomings.

The domestic dairy market in Australia has been shattered. Many local producers could not remain competitive in a landscape where deregulation knocked the stuffing out of them. This was made worse because the supermarkets, Coles and Woolworths, took advantage of this new context to sell milk for $1 Australian per litre (about $0.99 Canadian – the Canadian and Australian dollars are just about equal in value), below the domestic production price point for many producers (I pay $4.29 for a four-litre bag in Ontario by the way).

In every state, dairy farmers are now a shadow of what they once were with the industry occupying a niche segment in some. Producers are on the ropes. The Australian federal government recently committed itself to an $555 million support package for dairy farmers, the result of industry destabilization. As one successful producer from the state of Victoria recently told me “We will hope for the best and hang on for dear life”.

As for the Australian egg industry, its ongoing saga is akin to an unfolding Greek tragedy. The Australian Egg Corp. Ltd. (AECL), which represents 400 commercial egg farmers, spent three years defending itself as a result of a harsh investigation by the Australian Competition and Consumer Commission because of an egg oversupply crisis and an alleged attempt to drive up egg prices to ensure farmers’ survival. Testimony during the federal court case showed that some stakeholders in the egg industry were concerned that it could only avert a catastrophe by culling birds. This simply could not happen in Canada.

In neither the dairy nor egg industries is Bernier’s acclamation of the Australian example valid. It has not been “a successful example of reform.”

Do Canadians pay more for supply-managed commodities, as he asserts? The data show that prices for milk in deregulated New Zealand are higher than those in Canada, even as global prices plummet. Egg prices in deregulated Australia are also higher than what we pay in Canada; a dozen costs between $4.50 and $5.50.

Perhaps he means by comparison with the U.S.? If so, prices tend to be about 35 per cent higher in Canada than in the U.S. across the board for a myriad of reasons. U.S. milk and eggs are less expensive there because of very cheap Hispanic labour, and various subsidy programs operated by the U.S. government. It’s an apples-to-oranges situation.

Bernier also suggests that gutting the supply-managed system would lower prices. But B doesn’t necessarily follow from A. As shown above, in deregulated Australia and New Zealand, the price for eggs and milk are higher than in Canada.

Further, decimating supply management would clear the way for American dairy and egg products, or agribusiness, to move in and take its place. A percentage of that new U.S. milk would contain growth hormone (which is illegal under Canada’s supply-managed system) that some U.S. dairy farmers use to increase milk production.

Finally, can it be the case, as Bernier insists, that the existence of supply-managed sectors restricts growth in the farming industry and prevents job creation in this sector? Absolutely not.

In 2012, Canada was the world’s fifth-largest exporter of agricultural products, even ahead of Australia. Canadians do this even though we have comparably much less arable land, where we rank 33rd worldwide. Clearly, supply management does not restrict Canada’s access to others’ markets at all.

There are no longer-term rewards for getting rid of supply management, as Bernier seems to believe. He is wrong on every count as is demonstrated by even a passing idea of the real situation in Australia and even the U.S. Canadian prices of milk and eggs are the same or lower than in deregulated Australia. However, Canada’s system also benefits both consumers and producers, a critical factor.

To my mind, the data demonstrate that we should enhance supply management, not work to kill it.

Bruce Muirhead, Ph.D, is associate vice president of external research and a professor of history at the University of Waterloo, where he holds the Egg Farmers of Canada chair in public policy.

Published in the National Post – Tuesday July 12, 2016

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