Supply Management: Canada’s Success Story

By Ron Bonnett, Canadian Federation of Agriculture President

There has been a flurry of negative press recently against supply management with many making claims the Canadian dairy and poultry industries overcharge consumers and interfere with international trade negotiations.

Representing 200,000 farmers across Canada, many of whom are a part of supply managed industries, the CFA feels it is important to offer up the farmers’ position on the issue.

Myth: Canadians pay higher prices because of supply management

Fact: This is simply not true. There are about four retail chains dominating 85% of the Canadian market place. Retail prices are set by retailers, not by farmers. Farmers are the first step in a long series of transactions that are required to get a product from the farm gate, to processors, to further processors, to distributors and finally to a point and place where Canadian consumers can buy it. Countless studies have shown that the farmers’ share represents a small fraction of the final price Canadians pay for their food. With supply management, farmers are able to get a return equivalent to their cost of production. Furthermore, Canadians pay about 10% of their disposable income on food, which is among the cheapest level worldwide.

Myth: Free Trade will benefit these farmers and unleash their potential

Fact: Never mentioned by the critics, all these farm sectors operated under free markets before supply management and were much worse off. The supply management system matches production with Canadian demand, avoiding surplus and shortages, which are very inefficient for any industry. Stability allows efficient farms to remain in business. Considering the current global food supply challenge, this is an extremely important consideration. With supply management, farmers can earn a fair return for their product from the marketplace and are in a better position to adapt quickly to changes in the marketplace and invest in the latest technologies.

Myth: Supply management is an archaic, out-of-date system meant to keep production low

Fact: In a free market environment, producers respond to market signals. When prices are high, producers will tend to plant or produce more of a commodity to take advantage of price. Inevitably, prices start to decrease as production outstrips demand, causing what every farmer knows is the boom and bust cycle of commodity pricing. Supply management has evened out this cycle by making sure that production levels meet consumer demand and are not propelled by price. Production levels that meet demand promote stability, not only for farmers and Canadian consumers, but the entire market chain.

Myth: Canada is losing out in trade negotiations

Fact: Canada has successfully concluded a myriad of free trade agreements while maintaining supply management. All countries have their own offensive and defensive interests, and successful trade deals are those which recognize and respect all of these interests.

Over the years, Canada’s supply management model has provided a stable environment within which the dairy and poultry industries have been able to meet the challenges of changing domestic markets and international trade rules, allowing the industry to be a consistent job provider and contributor to the economy. The dairy and poultry industries sustain 300,000 jobs, contribute $24.5 billion to Canada’s GDP and pay $4.8 billion in taxes.

It is paradoxical that anyone would criticize a successful agricultural system that offers farmers a fair return for their product, processors a reliable supply of product, and Canadians with a consistent wide choice of high- quality and safe foods at reasonable prices, especially at a time when society is looking to agriculture to ensure food security – in Canada and abroad. Supply management is a smart business move for our country. It’s a risk management measure that is most needed now in midst of high global market volatility.

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