THE BLOG

Supply Management Must Not Be Sacrificed for New Zealand and the U.S.

03/02/2015 02:57 EST | Updated 05/02/2015 05:59 EDT

Supply management, a sensible regulated system where domestic supply is governed by domestic demand, is under attack from critics who are uninformed about its usefulness and effectiveness for producers, processors and consumers. In short, they suggest it must be sacrificed on the altar of the Trans Pacific Partnership negotiations if Canada wants to be inside that grouping which, they all assume, would benefit the country. While that assumption is debatable, what is not is that to lose supply management would be a disaster for Canadian agriculture and Canadian consumers.

Why? Contrary to the assertions of those who don't understand how supply management works, it is very competitive in terms of pricing the items it covers. Statistics Canada's consumer price index for October 2014 pointed out that eggs and chicken, (both supply-managed commodities), are a bargain when compared with those regulated by market forces. Beef prices, for example, rose by 23.1 per cent and pork was up 18.1 per cent year over year, while chicken increased by only 5.1 per cent. The price of eggs actually went down in the CPI, from $3.24 to $3.22 per dozen. As well, beef and pork prices are forecast by the Organization for Economic Cooperation and Development to continue rising until at least 2020. Similarly, in countries without supply management, chicken and turkey prices are expected to go up significantly, much to the detriment of consumers.

And what about the possibility of exports of Canadian milk products, chicken, eggs and turkey to an increasingly hungry world, another claim critics make to disparage supply management, which matches domestic demand with domestic supply? If we could only export dairy or eggs, they say, things would be so much better. That is questionable, to say the least, given that agricultural commodities are just that -- commodities -- with their ups and downs. While the downs in, say, oil can be ridden out by big producers through various means, that luxury is not allowed for relatively small farmers on a global scale. Animals must continue to be fed, hired hands may not be laid off or fired because of the downturn as the animals must receive continuing care, and that list goes on.

Nor will those markets always be in play. Although global demand for calories is going up, it is not necessarily the case that global hunger will be satisfied through imports as countries aim for that same self-sufficiency that Canada has through its supply management model. Dairy to China is a good example. Milk product exports to China have, by and large, simply dried up, at least in the volume needed to support farmers in exporting countries. There is too much supply that is not managed in today's world. When combined with a Chinese drive for greater self-sufficiency in dairy products (they are already 80% of the way there), and China's reduction in milk powder imports from 160,000 metric tons in January 2014 to about 26,000 in September, disaster was visited upon those farmers, especially those from New Zealand (NZ), dependent on this trade.

NZ's Fonterra, the largest dairy cooperative in the world and dependent on exports, has slashed the amount it pays its members per kilogram (kg) of milk solid from last year's NZ$8.40 to this year's NZ$4.70.

Moreover, there is great concern in Wellington that dairy farmer debt is unsustainable, currently totaling NZ$32 billion. The NZ media focused on four dairy farmer suicides in December 2014, the result, they speculated, on the terrible times being experienced presently. The New Zealand Herald headline read: "Four Deaths in December as Rural Sector Feels Financial Pressure." The article also noted the 14 farmer suicides that had happened for a similar reason over the past six months. By comparison with this system, or that of deregulated Australia where dairy farmers are experiencing tremendous hardship due to insufficient remuneration offered for their product by supermarkets, or the system operative in England, France or Germany where dairy farmers can't even cover the cost of production because those countries' practice favours big and powerful processors and supermarkets over the family farmer, supply management meets the objectives of all sectors of society, from the producer to the processor, to the supermarket and to the consumer.

Importantly, it is fair for all those who participate in it, including consumers.

Further, supply management allows family farms to endure in a way that they cannot in the US. There, the trend also creates environmental issues with farms hitting 30,000 cows or the average size of egg-laying farms is more than 620,000 hens. The average Canadian flock size is about 20,000, which is much more manageable, safe and environmentally friendly than those in the United States. Do we want farms of more than 600,000 laying hens in one place in Canada? I don't think so.

Food is a vital commodity, and food security and sovereignty is increasingly important today. It is essential that farmers are provided with a living wage to allow them to produce products that are among the best in the world for freshness and quality at a reasonable price. This could be put in jeopardy if agriculture, and therefore supply management, is included on the agendas of trade negotiations. It is no coincidence that signatories to previous accords, including the EU and the US, have not implemented all agricultural concessions to which they agreed. They have found they simply cannot make these concessions and expect certain sectors like dairy and eggs to survive. Moreover, expert academic literature on the subject of trade agreements and agriculture has now shifted from unequivocally supporting the inclusion of food in those negotiations, to questioning whether agriculture is even suitable for those exercises. Increasingly, the consensus suggests it is not.

Supply management makes so much sense in the sectors in which it operates. It is cost effective, while enforcing a consistent set of rules to promote the highest standards for food safety and farming practices, unlike the situation in so much of the rest of the industrialized world. Canadians deserve to keep it.

Supply management should not be given up because of demands by Americans or New Zealanders to flood our market with their eggs or milk at a price that will likely be more expensive than that which we now pay, but which will be far less satisfying for Canadians. It makes no sense to take an excellent system and break it for their benefit.