Opinion: Scrapping supply management would be disastrous

Unthinking and ideological criticism of Canada’s system of supply management — covering regulated marketing in dairy, eggs and poultry and which matches domestic consumption with domestic supply — continues.

The latest is from Finance Minister Bill Morneau’s advisory panel, whose criticism of supply management is not accurate. Generally, the critic’s line links the ability to participate in the global market with being “free” to make one’s own choices. Over the medium term, that is always disastrous in agriculture.

I was recently in Australian states Queensland and Victoria interviewing dairy farmers following dairy deregulation in 2001. Their numbers have plummeted to 6,000 from about 13,000, and the volume of milk they produce is down to 9 billion litres from about 12 billion. Dairy exports have similarly declined.

The situation in Australia has deteriorated to where the federal government has been forced to pony up $555 million AUD as a subsidy, as much-heralded export markets failed to materialize. Hundreds of farmers are leaving the sector and prospects continue to look bleak.

These are the “freed” farmers critics want Canada to emulate. And Australia is the favourite example they use. Many lamented the power the new regulators, the supermarkets, have over them and pricing, and the fact their children would not be taking over the family farm.

Many told me that dairy farming without any protection or support is not sustainable. Theirs is an industry in steep decline.

A similar situation exists in free-market New Zealand, where I interviewed dairy farmers in January 2016. They control about 32 per cent of cross-border trade in milk products, making them almost entirely dependent on the export market. Many of them wonder how they will make ends meet, as global dairy prices on which they are dependent for their livelihood, are expected to remain depressed.

They dropped in 2016 to $3.90 US per kg of milk solids — the break-even point for the average New Zealand dairy farmer is $5.65 US/kg of milk solids. Though some rebound is forecast for 2017, many will not make the break-even point.

Debt per average farm has hit $7 million NZD, which has helped drive many to the wall. Big farmer-owned co-operative, Fonterra, is providing no-interest loans based on volume of milk production, but it is a finger in the dike. To top it off, dairy prices for consumers in New Zealand are more expensive than in Canada.

Is that the future we want for Canadian dairy? Exports, much touted by critics, don’t amount to much. Only between seven and nine per cent of total global production is traded internationally, a relatively small amount. The European Union, New Zealand and the U.S. control about 80 per cent of that 7-9 per cent, so where would we fit in? Whose market share would Canadians take?

In a non-supply managed environment, government would be forced to subsidize dairy farmers to the tune of billions of dollars annually as Washington does.

Getting rid of supply management would also destroy the family farm, encourage rural depopulation and depress rural wealth as many farmers would be forced out of business, as has happened in Australia, New Zealand and the U.S. The resulting wage farmers would be worse off, with negative implications for Canadian milk.

A mere three per cent of large U.S. dairies produce more than 50 per cent of that country’s milk. The number of U.S. dairy operations with 2,000 or more cows has grown faster than those of any other size.

It is go big or go home with nasty side-effects. One has been the creation of mountains of manure. A federal subsidy of $4 billion US per year helps with manure remediation alone. That ignores the ongoing government subsidies that U.S. dairy attracts.

Is that what we want in Canada? That could be the result without supply management where government provides no subsidy whatsoever.

We should celebrate our supply-managed farmers, and the food sovereignty, security and stability they represent. Our farmers are custodians of the countryside where they live and provide Canadians with well-priced, high-value, safe and nutritious food.

Bruce Muirhead is associate vice-president, external research, professor of history and Egg Farmers of Canada Chair in Public Policy at the University of Waterloo.

Source: http://edmontonjournal.com/opinion/columnists/opinion-scrapping-supply-management-would-be-disastrous