As Stephen Harper’s government angles to join the Trans-Pacific Partnership (TPP), a trade group within the Asia-Pacific region, the country has come under fire for its supply management programs. The scrutiny has some producers worried.
Canada’s policy on supply management in the dairy and poultry industries is seen as a stumbling block to entering the TPP. The Conservative government has said that though they are willing to negotiate with the TPP they will defend the supply management system, just as other free trade agreements signed by Canada were created without canceling the program.
The trade talks have the controversial supply management system in the spotlight, pitting the farmers who benefit against other farmers – see the Canadian Wheat Board issues – and consumers, who pay higher prices for products such as milk, cheese and chicken.
According to Neil Currie general manager at the Ontario Federation of Agriculture, supply management is a quota system built to protect farmers from fluctuating changes in prices for their poultry and dairy products. It also places up to 300-per-cent tariffs on imported poultry and diary products (depending on the product) while completely keeping out foreign producers.
The Canadian government realized in the late 1960s that without production regulation, the Canadian market would have a surplus of agricultural products, which would, in turn, trigger a sharp decline in producer prices. That led to the creation of supply management.
The system controls domestic production and imports for five specific commodities – eggs, milk, chicken, turkey and broiler-hatching eggs – with supports saying it benefits customers, processors, governments and taxpayers while giving a voice to farmers in the marketplace, said Currie.
“There are three elements to supply management. One is production discipline or the ability to only produce what the marketplace domestically is looking for. The second is the ability to price the product based on a cost of production formula, and in exchange for those first two the government has tariffs that are set high, for eggs it is at 163 per cent,” said Harry Pelissero, general manager at Egg Farmers of Ontario.
With supply management, consumers get good value for their money and a reliable supply of quality food at reasonable prices. Farmers work together to adjust what they grow and make with what customers need and want and they receive their returns from the marketplace, he argued.
“Supply management is a good thing for both farmers and consumers,” said Pelissero.
“Comparing the systems in Canada versus the United States we see that Canada has a system that is transparent in the sense that we know what it costs to produce a litre of milk or a dozen eggs whereas in the States they have support payments through taxpayer’s subsidization. So it may appear to be cheaper at the supermarket in the U.S. but in fact consumers are paying twice, once at the check out and once through their tax dollars.”
Canadian farmers receive no government subsidies or taxpayer dollars.
Pelissero said groups like the Canadian Restaurant and Foodservice Association would have consumers believe that the price they pay for eggs or milk in grocery stores will drop only if supply management boards are dismantled.
“They are complaining that if they could get the products cheaper it would translate into lower costs for consumers but we lowered the price of eggs three or four years ago and saw no drop at the grocery store and just recently we raised the price of eggs by a nickel based on the cost of production and most of the retail outlets took a dime, so it is bit of a farce.”
Supply management brings stability to the Canadian market, supporters maintain. Before the system was applied and the price of eggs or milk increased, farmers simply increased supplies but when prices dropped, some farmers lost money and even went bankrupt and then less supply drove the prices up again and the cycle would repeat itself.
The management system was established in the 1970s with dairy being one of the first commodities to operate a national supply management system, it is managed by the Canadian Dairy Commission.
Local dairy farmer Ralph Martin, owner of Ontowa Farms located east of Elmira, says he fully stands behind the supply management system.
“I know we have to live within the regulations but it works very well for farmers as it helps us to forward plan because we know the numbers we have to work with and that is not the case in many jurisdictions,” he said, adding there are issues to work out and supply management has changed a lot since it was established and it should continue to change to meet the demands.
Martin says there is a lot of history behind the supply management system and before the system farmers would have individual quotas with their local dairies and the closer you were to the larger centers or cities the richer the farmers were because they had the fluid contracts.
“Farmers from Waterloo or Oxford County heading east to Toronto where the privileged farmers and the outlining areas did not have lucrative contracts,” said Martin. “Then when the milk act established the milk marketing board all the milk went through a central desk and then out to the dairies; the individual quotas or contracts were now gone because everyone fell under the one organization and it brought equity to the whole industry.”
With supply management, farmers don’t want to supply a lot because they don’t want to be dumping products in Canada or onto other countries’ markets at below costs of production as it doesn’t do them any good and it doesn’t do the industry any good, said Martin.
“Costs may be a little high but if people want to be hard on that they should turn their fingers back on themselves and look to see how they are contributing to the costs, we live in Canada and we look after each other here and that is why we have a good standard of living.
If supply management were dismantled the little town would be out of business and those who shop across the border are just shooting themselves in the foot.”