How Should Farm Performance Be Measured?

06/06/2013 11:35 EDT | Updated 08/06/2013 05:12 EDT

Studies, like the recent one by the Organization for Economic Cooperation and Development, that attempt to undermine the value of supply management to Canadian agriculture must be examined carefully.

These studies compare Canada to other nations and often state that we are lagging behind. In the case of the OECD study, it claims Canadian dairy farmers have a "particularly low" economic performance. The methodology that is used for these comparators is flawed in many respects. It defines "economic performance" as a comparative to "global competitiveness," uses tools that the OECD itself has claimed to be inadequate (e.g. Producer Support Estimate calculation) and lacks consistency in the data utilized (e.g. all farms in Canada compared with only larger farms in EU).

Canadians would also find it puzzling that the OECD would not include investment by farms in modern technology as indicator of performance. Here again, dairy farms in Canada are leading the pack in investing in robotics and other technology that make farms more efficient.

In the end, it is interesting that Germany, Belgium and Australia are held up as areas where farmers are identified as performing better from an economic standpoint. But that makes one wonder why dairy farmers in Germany, Belgium and Australia have taken to the streets to protest a system based on world prices that has made it increasingly difficult for them to cover their costs?

We don't see that in Canada. Supply management not only ensures consumers can access high quality dairy products, but it also ensures efficient farmers -- not all of them! -- can receive a fair price for the milk they produce based on their costs.

Now, it is true that the cost of production of milk in Canada -- and across the northern hemisphere -- is higher than in some other nations. It's obvious that if Canada had 10 months of warm weather and green pasture each year, dairy farmers would be able to produce milk at lower costs. But we don't. Our dairy farmers have to manage the costs of housing and feeding cows over the long Canadian winter, a concern that is non-existent in a place like New Zealand.

While the OECD may decry the existence of our supply management system, its methodology does a poor job at capturing the government support provided to farmers in other countries such as the United States and the European Union. The definition of a subsidy is strictly defined by the World Trade Organization, but that definition does not reflect all of the public funds a government may hand over.

So when we see that farm subsidies in the EU and US are falling, it may be technically true, even though government spending on farm programs is increasing. These subsidies are simply being replaced by other sources of government funding. In the case of the EU, farmers can tap into so-called "decoupled" payments. These monies have little to do with actual farming and how much a farm may produce, but are a bonus of sorts farmers can earn if they preserve the rural landscape and keep their farm neat and tidy. According to the WTO definition, this is not a farm subsidy. But if it looks like a cow and moos like a cow, and the cheque is deposited in the same bank account...

Whether it goes by the name of subsidy or not, government funding is crucial to the long-term viability of farms in the US and the EU.

Canadian dairy farms are not only viable -- for many generations -- but are important contributors to the Canadian economy. And because of supply management, we can do it without tax dollars from government to support farm income. Few other nations can make that same claim.