By Anita Mark
With NAFTA talks now starting most people do not know enough about Canada’s supply management system in the dairy industry, compared to the US dairy industry, to understand what is at stake for the future if Canada bows to pressures from south of the border.
It is the very fact that the US does not have a supply management system like Canada’s excellent one that their dairy farmers suffer at the mercy of their unregulated system and regularly go through boom and bust cycles.
Canada is one of the few, if not the only, country in the world that had the foresight to regulate the production of milk. We used to have oversupply too and learned that regulating the industry was better than costly, long-term storage facilities paid for by Canadian taxpayers. In 1973, farmers, after joint consultation with the government, agreed that their next three years of production would henceforth determine what they would be allowed to ship on a yearly basis – called their quota. That way our dairy farmers would stand on their own two feet with assurance and dignity, and processors could count on a guaranteed supply. In other words, this was the way to manage the supply.
Supply-management was born. If a farmer produced more than his allowable quota, he would receive almost nothing for that milk; quite the incentive for complying and only producing what was needed for the Canadian market.
Here’s how the vicious circle works with our neighbour to the south: when the price of milk drops in the US from over-supply, dairy farmers continue to produce more milk in order to survive, and avoid bankruptcy. However many dairy farms do fail, thereby causing a shortage of milk. In a shortage the price rises. When the price rises again, they still produce extra milk in order to pay off the additional debt incurred when the price was low. This unregulated supply and demand market causes great havoc to dairy farmers in America, as referenced by President Trump’s comments about Wisconsin’s dairy industry a few days ago. What has not been mentioned in any news reports, and only adds to the oversupply of milk, is that almost 50% of all American dairy farmers’ incomes are derived from hidden subsidies. Canadian dairy farmers do not receive subsidies.
Hence, Canada’s superior supply-management system, designed to fend off this very problem, ensures that Canadian farmers have stability and a reliable paycheque - the envy of most, if not all, American milk producers. It’s not a bed of roses, though, as Canadian farmers all face economic challenges due to the ever-rising costs of production. In order to succeed, farms have had to grow bigger and bigger – which is why we see so few family farms nowadays.
Americans are not the only ones with a lot of milk to get rid of. New Zealand and Australia are in this game too, with small populations and low-cost over-production. Like America, neither has a supply management system, so they want to palm off their cheap, lower-quality surpluses to Canada. With Canada’s current high standards, these countries’ milk would not qualify to be sold here.
So President Trump wants access to Canadian dairy markets as a means to solve America’s short-sighted mismanagement problem: what in fact is their own doing. The only ones who benefit in the US are the speculators in a free market.
In Canada both farmers and consumers have hugely benefited from the vision of a supply management system, with stability for farmers and an assured supply of high-quality milk for families.
So, Canada, please don’t give in at the trade talks. Mr. Trump, keep your hands off our dairy
August 17, 2017