The bloated, corrupt, and dangerous lobby that’s been running Canada for nearly fifty years.
Chris
Mar 5, 2020
Supply management, a system seldomly challenged by policymakers, became more prominently highlighted during Canada’s 2019 federal election. Most Canadians have little-to-no clue what supply management is, as was determined by a 2017 Angus Reid study, Ahead of NAFTA renegotiation, Canadians’ opinions mixed on supply management.
Pertaining to this study, an Angus Reid Executive Director stated that “among those who say they know a lot about it (4 percent), one in three say beef and pork are included; they aren’t.”
What is supply management and what products are included? Why is it referred to as a “cartel”, and why is butter so damn expensive?
Canada’s dairy, egg, and poultry (chicken and turkey) industries are run under a system called, “supply management.” Supply management are government-run boards that decide who gets to produce goods and how much they can produce. Those boards buy those goods for a set price and ensure the goods are distributed to secondary processors, supermarkets, restaurants, and convenience stores.
The system began in the early 1970s under Prime Minister Pierre Trudeau as a result of Canada’s agriculture sector experiencing overproduction in the 1960s, from technological advances resulting in low, unstable prices and disputes between farmers and processors.
The system is meant to keep prices of dairy, eggs, and poultry artificially high through three pillars which all must exist for the system to be maintained:
1) Control of production, based on what Canadians are expected to consume
2) Price-fixing, by bureaucratic agencies instructing processors what they must pay farmers for each category of product
3) Import control and strict tariffs, to prevent competition
The tariffs applied to these foreign products are very aggressive and include a 150% tariff on turkey and eggs, a 250% tariff on chicken, yogurt, and cheese, and a 300% tariff on butter. This protects the high-priced domestic items meaning Canadians are imposed with an increased grocery bill burden which affects the poorest Canadians households, and households with children the most, equating to an additional 2.3 percent tax on income, on average.
A Secondstreet.org analysis compared milk prices in 15 stores across Canada with 15 stores across the US and found that milk in Canada is on average 29% more expensive. But it’s not just Canadian consumers feeling a bit lactose intolerant. The dairy industry is increasingly centralizing into larger and larger corporations as the cost of buying into the market rises beyond what an average farmer can afford.
Supply management forces dairy producers to buy quotas that grant permission to produce a set amount. The cost of the rights to milk just one cow has been reported as a minimum of $20,000. This hinders new farmers from entering the market as they need massive loans just for the quotas to produce, let alone for capital or equipment. Since the inception of supply management, the number of dairy farmers in Canada is down 90 percent (from 113,000 dairy farms in 1971 to shy of 11,000 in 2017 and continues to shrink by the hundreds every year).
Supply management further hurts farmers who aren’t allowed to produce more than their quota or export their products, a factor that affects supply and demand. It disadvantages other sectors like hospitality (restaurants) who pay these higher prices, diminishing their own margins. Finally, protecting supply management in trade talks with other markets restricts the potential development of other Canadian businesses affecting job creation in those sectors.
The Control of the Dairy Cartel with the Government
The word, “cartel” seems dramatic or calculated since it is often used to describe coordinated drug organizations. However, the term is an economic concept referring to a system, not a group of people. Farmers are not criminals, but this system is favourable to a small group of producers with enough money to afford buying into it.
The Competition Bureau of Canada defines a cartel as “an agreement that businesses form to control production or marketing arrangements and not compete with one another.” They go on to say this can include restricting outputs, allocating markets, or rigging bids for goods and services. This, again, harms other businesses and consumers by artificially inflating prices, restricting choice, or reducing product quality or service.
The Bureau refers to this practice as a “conspiracy” and one which is illegal, punishable by a fine up to $25 million and/or imprisonment up to fourteen years. That is, of course, unless it is controlled or established by the government. When significant players in Canada’s bread industry attempted similar practices, it was a national scandal requiring Loblaws to attempt to reimburse Canadians for taking advantage of them.
This cartel consists of the Dairy Farmers of Canada, Egg Farmers of Canada, Chicken Farmers of Canada, Turkey Farmers of Canada, and Canadian Hatching Egg Producers, a collection of farmers that make up only 10 percent of farms in Canada. Similar to teachers’ unions, these groups are responsible for the bad rap of dairy farmers even though many modest dairy, egg, and poultry farmers are disadvantaged by the very system intended to protect them.
The dairy lobby has large union bureaucracy and massive budgets used to influence public opinion and pressure politicians. The Canadian dairy industry is worth approximately $16USD billion annually (according to an article by RealAgriculture, October 2018). The National Post reported that for decades, the Dairy Farmers of Canada has been one of the most powerful lobby groups in Ottawa, and former Finance Minister, Joe Oliver compared the lobby to the gun lobby in the US. It is suggested that Dairy Farmers of Canada have $80-$100 million per year to spend on lobbying politicians.
The epitome of elitism, during the 2015 Trans-Pacific Partnership discussions in Maui, Hawaii, multiple representatives from Dairy Farmers of Canada including then-president, Wally Smith, joined the Canadian delegation in the effort to ensure Canada didn’t sacrifice their golden egg. Across the political spectrum, parties have defended supply management and made contentions on the dairy cartel’s behalf.
In response to Canada alienating all other countries in the Trans-Pacific Partnership during trade discussions, former Prime Minister and Conservative Leader Stephen Harper said, “Our goal is to secure the best deal for Canadians, something which we can sell to the Canadian people.”
If there are 11,000 dairy farms and 15.4 million Canadian households (Stats Canada, 2016 census), then the government is protecting 0.07 percent of Canadians on the backs of the rest of the country.
In 2014, Ottawa negotiated for a pot of money to compensate farmers for every dollar of lost revenue as a result of the Canada-European Union Trade Agreement, but the farmers said it wasn’t enough. This was also during Harper’s leadership.
In 2016, Trudeau announced $350 million in cash to buy new equipment and to update technology in order to stay competitive. Isn’t the whole strategy behind supply management is that it eliminates competition?
In 2019, these supply-managed sectors were promised $3.9 billion compensation for the outcome of the Canadian-European Union Trade Agreement and the Trans-Pacific Partnership. And last month, four Conservative MPs including Randy Hoback and Colin Carrie sent a letter to Deputy PM Chrystia Freeland demanding additional compensation within 90 days of USMCA going into law.
The USMCA is the updated NAFTA (North American Free Trade Agreement) which was instigated by Canadian farmers importing milk protein from the US, duty-free, until farmers figured a way to make it themselves and imports dropped (worth approximately $130 million). Canada has risked many other sectors in order to stand firm on supply management and has offended many countries involved in this agreement and Trans-Pacific Partnership including Japan, Australia, New Zealand, Mexico, and the US.
It has been common practice for the government to protect supply management in trade deals even risking its own inclusion in these trade deals, to save the dairy industry at the gamble of other agriculture, natural resource industries, and consumer’s income purchase power.
Yes, 3.25 percent of the Canadian market has been opened to Trans-Pacific Partnership countries and another 3.59 percent has been opened to American dairy for which Canada has been provided with advantages for many other Canadian sectors and consumers. The billions of dollars sent in “relief” for dairy farmers comes off the backs of Canadians, after they’ve already been gauged at the market.
In addition to Liberals and Conservatives hiding their milk mustaches, the NDP has pledged to “protect supply management and stand up against unfair tariffs.” So who is standing up for the other 99.93 percent made up of low-income households, families, and modest farmers trying to make a living too?
Maxime Bernier (former Conservative MP in Beauce since 2006, and more recently the leader of the People’s Party of Canada) admits he was visited by the dairy lobby twice per year to inform him of issues threatening supply management.
Refer back to the map of dairy farms above, where are the majority of farms located? Quebec and Ontario are the two most vote-rich provinces and also happen to be the primary home for dairy farms. Because dairy is an Ontario, and largely Quebec interest, it gets protected by politicians who want to be elected or re-elected to office. That, or the fear of being slimed with a jug of milk as was what happened in the 1970s when the Government of Canada slashed prices and dairy farmers stormed Parliament Hill, assaulting the then Minister of Agriculture.
Maxime Bernier is neither corrupt nor afraid, evident upon his stance against supply management stating, “it’s the total opposite of a free market, and a conservative party should not be supporting it.” Half of the 2017 Conservative caucus seemed to agree with Bernier, but ultimately he was narrowly defeated by Andrew Scheer for the leadership position of the party in a vote result of 50.95 percent to 49.05.
This isn’t the Dairy Farmers of Canada’s first rodeo though. A Financial Post source says as many as 3,000 votes that went to Scheer (mostly in Ontario and Quebec) were a result of an organized campaign, including an uncovered Facebook group, that urged farmers to temporarily join the Conservative Party then cast votes against Bernier.
In his victory speech, Scheer joked, “I certainly don’t owe my leadership victory to anybody…” stopping mid-way through his sentence to swig from a carton of milk.
This same image was also found in the ‘Social Media Strategy’ section of a binder found on the floor at the Conservative convention. The binder included instructions on how to target and approach Conservatives at the convention and which MPs were on a “watch list” for their criticism of supply management, a list where Bernier held the top spot.
Another section of the abandoned DFC binder included a section called ‘Safety Net’ explaining how Scheer had assured the lobby that supply management would not enter the electoral platform regardless of outcome at the convention. Moreover, Scheer promised the Dairy Farmers of Canada, at an annual meeting in Saskatoon, that he would overhaul the “dairy-averse” Canadian food guide.
Maxime Bernier started the People’s Party of Canada, which addressed in its platform the need to abolish the supply management system, a value he had been forced to suppress as a Conservative MP. He was defeated in his riding of Beauce, in the 2019 federal election by fourth-generation dairy farmer, Richard Lehoux, after Bernier had won the riding in 2006, 2008, 2011, and 2015.
Lehoux is described as an “agricultural entrepreneur” according to the Conservative Party website. But it is also worth noting that Beauce has the third highest number of dairy farms with 465 in the riding. Being the only party leader with strong opinions against supply management, and having been defeated by two milk duds makes it hard to deny the power the dairy cartel has over Canada.
Have Your Milk and Drink It Too
How can we provide a stable and growing industry to our dairy farmers while promoting free trade and consumer protection? The Conference Board of Canada estimated a “buy out” of the supply management system would cost between $3.6 billion and $4.7 billion. Since this is literally what Canadians are on the hook for in compensation for the last three trade deals, why are we still burdened with the cartel tax of higher prices at the market?
Included in the People’s Party of Canada platform is a plan for affordable dairy, poultry and eggs:
Phase out the system over a number of years to allow farmers to adapt
Compensate them for the lost value of their quotas
Provide an economic system where dairy, egg, and poultry farmers thrive and sell their products internationally, and Canadians save hundreds of dollars (multiplied by millions of homes, totaling billions of dollars per year)
Bernier adds that this would bring 133,000 to 189,000 Canadians above the poverty line according to a Montreal Economic Institute study he references in chapter five of his unpublished book (link at the end of the article). He adds that this would be a means to gain better access to foreign markets for our beef, pork, grain, and other products.
One argument put forward by pro-supply management lobbies is that it ensures Canadians consume domestic products which are supposedly of higher quality. The Government of Canada’s Food and Drug Regulations prohibits the importation of food or drug for sale that would violate the Food and Drug Act. The idea that Canadians will be infiltrated with “American hormone-riddled milk” is ludicrous because an open market means consumer choice.
Consumers will demand higher quality, choice, and lower prices and those who can offer that will succeed, those who can’t, won’t; that’s how the free market works. Additionally, consumers can choose to pay more for a domestic product the same way we choose to pay a little more for product from a local farmer or market.
Contributor Writer at Secondstreet.org wrote in a Red Deer Advocate opinion column, “the economic purpose of free trade is to put labour and capital to their relatively most productive uses in order to achieve a higher output at lower costs.”
Going back to the Angus Reid study, while only 4 percent of Canadians know what supply management actually is, 1 in 3 Canadians say they would pay current prices to uphold the system they don’t fully understand. Still, 1 in 3 of the pro-supply management Canadians surveyed said they’d choose the cheaper price if it were available.
Free markets promote quality product, efficient delivery, and competitive prices. The supply management system of the dairy, egg, and poultry industries is bloated, corrupt, and dangerous to the economic well-being of the rest of Canada. Less government intervention will pave the way to economic prosperity, for those who want to come by it honestly.
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Global News: The battle for Maxime Bernier’s riding
Real Agriculture: Signed Sealed Delivered A Breakdown of USMCA within Agriculture
Government of Canada: Food and Drug Regulations
Vice: Politicians Sure Like To Suck at the Teat of Big Dairy
Real Agriculture: Canadian dairy groups disappointed with Canada-EU cheese import allocation
The Globe and Mail: Canadian dairy stalling Trans Pacific Partnership Deal
The Western Producer: Dairy farmers call TPP signing a ‘somber’ day
People’s Party of Canada: Supply Management- Making Dairy, Poultry, and Eggs More Affordable
Maxime Bernier’s chapter on Supply Management
Canadian Dairy Information Centre, Number of Farms, Dairy Cows and Heifers
Angus Reid Institute, “Supply Management: Most Canadians say scrapping system should be on the table during NAFTA talks,” August 2, 2017.
Martha Hall Findlay, with assistance from Margarita Gres, “Supply Management: Problems, Politics - and Possibilities,” The School of Public Policy, University of Calgary, June 2012
Financial Post: Bernier didn’t lose the leadership, it was stolen by dairy-lobby fake Conservatives
CBC News: People’s Party of Canada leader Maxime Bernier defeated in Quebec riding of Beauce
Red Deer Advocate: We should be getting more dairy and eggs at lower prices
National Post: The dairy lobby briefing binder found on the floor of the Conservative convention
CTV News: Tories call on government to compensate dairy farmers ‘left behind’ in new NAFTA
Global News: Dairy farmers, supply-managed sectors to get $3.9B in compensation for CETA, CPTPP – but not NAFTA
iPolitics: new trade deal opens up Canada’s dairy market, kills Class 7
Dairy Farmers of Ontario: Milk Class Table