Supply management — what’s the big concern?

By , , and in Ask an Agro/Opinions

We should all be aware of where our food comes from and how it arrives at its destination. The  Canadian dairy, poultry and egg industries are regulated by a system called supply management that places limits — or quotas — on agricultural production to align it with consumer demand.

The intent of this system is to provide a constant supply of product to processors and to set a stable price for producers and consumers. Supply management has been a talking point among Canadians since before recent trade deals like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the United States-Mexico-Canada Agreement.

Little is still known about how USMCA will affect Canadians, but a knowledge of the pros and cons of supply management may help consumers to weigh in on the issue.

Supply management was implemented first in the Canadian dairy industry in the 1960s after technological improvements led to oversupply and volatile prices. Canadian demand is limited by our population, and so are supply quotas. Limited quotas help promote smaller farms, higher animal-welfare standards and less waste.

Canadian farms have significantly fewer cows than our American counterparts, largely because American dairy farms are heavily subsidized, and can increase in size without having to purchase quotas.

American farmers also use a growth hormone called recombinant bovine somatotropin to increase milk production in their cattle, making that milk less expensive to produce. Health Canada has determined that this particular hormone does not pose a health risk to humans, but it can be detrimental to the cows’ well-being, and it is therefore not legal to use in Canada.

A cow grazes in a field.

In most regions, the price that Canadians pay for milk sits at the global average. American’s do produce milk that is rBST-free, like ours, but pay more for it. On the other hand, the milk containing growth hormone is cheaper, but it is unclear whether it will be allowed for sale in Canada.

Why should we care about supply management? Elevated food prices in Canada can be attributed to this system, which can impact many Canadian consumers. By some estimates, Canadian families pay between $339 and $554 more per year for these products. However, it is very difficult to accurately assess the cost of supply management to consumers because of the many factors that influence grocery-store prices.

Another criticism of supply management is that quotas are very expensive, which makes it difficult to start a farm in supply-managed sectors. Quotas prevent farmers from producing more than Canadians will consume, and prospective farmers need to buy the right to produce for this limited market. The amount that Canadian supply-managed farmers can produce is further reduced by new trade deals that let foreign products into the country.

Canada has opened a small portion of our supply-managed markets to incentivize international trade deals important for our export-independent industries, like lumber, beef and automaking. USMCA and CPTPP have recently increased the open portion of our dairy market by almost 7 per cent. The effect of this is that more of what Canadian consumers buy will originate from elsewhere in the world — these trade deals have had a similar effect on our poultry industry.

When our markets open to foreign imports under these new trade deals, the corresponding decrease in Canadian production and associated job loss could cost Canada’s economy $1.3 billion of GDP from the dairy industry alone. As a result, the industry has begun encouraging people to look for the “100 per cent Canadian” blue cow marker on its products in the hope that Canadians will choose local dairy.

Competition is widely recognized as a means to keep prices down and help industries innovate, and consumers have the right to shop for numerous options. But unless we want farms to rely on government subsidies and move towards less stringent
animal-health laws to lower their costs of production, it will be difficult for our industries to compete with larger-scale farms like those in the United States.

These trade agreements will affect a great deal more than the price of our products, and consumers should keep this in mind when evaluating their new options at the store and when weighing in on new policy.

Miriam ter Borgh, James Prium, Luke Jorgensen, Ashly Dyck

Photo: Ella Wright / Supplied