Dairy supply management benefits farmers and consumers, new report says

Canadian consumers don’t pay more for milk and dairy products than shoppers in the United States and other dairy producing counties, says a report by a new export advisory firm.

“Our research shows that Canadian milk and other dairy retail prices are currently on par with those in other countries,” said a report released by Export Action Global, founded by Adam Taylor, who was an adviser to former Conservative trade minister Ed Fast.

Milk “is, in fact, cheaper in Canada than in Australia, New Zealand and the U.S. – a few global powerhouse dairy producers,” the report said. “Additionally, Canadians pay significantly less than Americans for products such as butter, yogurt and cheese despite several U.S. production cost advantages and the general recognition that the Canadian farm price is higher than south of the border.”

The Canadian regulated dairy and poultry systems are regularly criticized by economists and the U.S. has demanded their phase out as part of a new NAFTA trade deal. Australia and New Zealand also oppose them and pushed for increased access to the Canadian dairy market as part of the CPTPP trade deal.

Taylor said the report was “Not commissioned but did reach out to some folks in government and elsewhere to ensure we had most recent data.”

The report said, “As a firm founded to help Canadian businesses take advantage of the myriad of opportunities in global markets thanks to Canada’s pursuit of a modern 21st century trade agenda, it may be paradoxical to some that Export Action Global would defend Canada’s system of supply management.

“Yet the data show that this domestic focus has actually created the very stability and predictability for farmers and consumers alike that is lacking in export-focused dairy systems. Therefore we conclude there is a valid and evidence-tested argument in favour of supply management and the net benefits it delivers to farmers, consumers and across the dairy sector value chain.”

The difference between Canada’s regulated sector and other countries’ dairy systems is “virtually all of these jurisdictions swapped regulation for new and larger subsidies. Now, bureaucracies manage a myriad of subsidy programs under which consumers pay for their products once at the retail level and again through their tax dollars.”

The report said, “Detractors of supply management claim the system prevents Canadian farmers from taking advantage of export opportunities, conflicts with trade liberalization and free market principles, and punishes consumers with higher prices and limited choice.”

The findings of the 44-page report are evidence-based and data-driven. The overall objective is to ensure that as the debate about supply management continues, it is grounded in facts and data that can be verified independently.

“Despite the global trend toward deregulation in many major dairy-producing markets, it is difficult to argue that both consumers and producers have benefited,” the report said.

“In Australia, farmers’ revenue rose briefly from higher farmgate prices, yet over the longer-term consumers have not seen lower prices compared to other jurisdictions. In the European Union, the dairy sector continues to operate within a highly protected market enforced through Tariff Rate Quotas (TRQs) and receives massive subsidies.

“The one exception is New Zealand, where there is evidence that farmers have benefited due to the Fonterra Co-Operative’s quasi-monopoly that redistributes a portion of its revenues back to farmers,” the report said. “Additionally, most consumer prices in New Zealand are either in line or lower than prices found in other countries. However, with respect to fluid milk prices, the data show that prices are higher in New Zealand than in Canada.

“Because deregulation has not lived up to its promise of greater profits and eligibility across the entire value chain, many jurisdictions – especially in the United States and Europe – have been forced to further intervene in the market to introduce additional financial support in times of need. In fact, both the EU and U.S. maintain costly agricultural programs that are financially and administratively burdensome to taxpayers, farmers, processors and retailers.

“Additionally, taxpayers are forced to pay for their products twice – once at the retail level and once through their taxes,” the report said.

“There is little doubt that deregulation has encouraged more production and contributed to global oversupply which has in turn resulted in severe price volatility, it said. “While unpredictable market forces of a globally traded commodity are hardly unique to the dairy industry, these results confirm the findings of this report: a regulated system such as the one found in Canada better navigates the instability inherent in less regulated systems.”

Alex Binkley is a freelance journalist and writes for domestic and international publications about agriculture, food and transportation issues. He’s also the author of two science fiction novels with more in the works.