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Supply management is in the spotlight again. What will this mean for the dairy, chicken, egg & turkey farmers?

With the recent articles in Canadian Business and Globe and Mail, are the supply management groups the next to be under review? What are the issues and what needs to be changed? What will this mean for these Ontario and Quebec's farmers?

 

Here is the article from today's Globe and Mail:

 


All farmers are equal – but some are more equal than others

OTTAWA

From Monday's Globe and Mail

Last updated Monday, Oct. 24, 2011 8:22AM EDT

Lead image

Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board Gerry Ritz responds to a question during Question Period in the House of Commons in Ottawa, Thursday Oct. 20, 2011. THE CANADIAN PRESS/Adrian Wyld (THE CANADIAN PRESS)

Agriculture Minister Gerry Ritz says he’s all about putting “farmers first.”

At first blush, this sounds like a pretty reasonable motto for an ag minister raised on a Saskatchewan farm. Who doesn’t like farmers, after all? They do tough, essential work that feeds us all.

The catch is that “farmers first” often implies “consumers last.” And what Mr. Ritz really means is that some farmers come first, but not all farmers.

As the Harper government pushes ahead with long-promised legislation to overhaul the Canadian Wheat Board, Ottawa’s incoherent and intellectually dishonest farm policy is now on full display.

The government is stripping the wheat board of its grain-marketing monopoly on the grounds that farmers deserve free and open markets, like their brethren in potatoes, cattle, fruits and vegetables. Mr. Ritz insists farmers should choose how they market their products so they can “attract investment, encourage innovation and create value-added jobs.”

But that doesn’t apply to dairy, egg, chicken and turkey farmers. These farmers operate in a hermetically sealed regime marked by tight central control of production, the near-total exclusion of imports, and higher prices for everyone.

And the government has made it quite clear that’s the way it should be. Prime Minister Stephen Harper says he’s ready to defend the so-called supply management system, now and forever.

Beyond history, it’s hard to figure out what makes a dairy farmer so different from a cattle rancher or an apple grower. If open markets are so clearly in the best interests of grain farmers in Western Canada, why aren’t they also good for the dairy farmers of Quebec and Ontario?

The answer, of course, is politics in a country where rural areas are still overly represented in the House of Commons. Supply management has become a proxy for rural entitlement and protection of family farms – a message that helped the Conservatives to a sweep outside the major cities in Southern Ontario in the May election. And by retaining the regime, Mr. Harper presumably calculates he will keep those seats four years from now.

There is no sound economic or policy rationale for keeping supply management. The government is sacrificing the interests of 34 million Canadians for the sake of fewer than 15,000 dairy and poultry farmers.

For a government that claims to put the economy first, the farm-vote calculation is cynical.

Supply management is “a blight on the economic landscape and totally unjustifiable in a world of skyrocketing global dairy prices,” the Organization for Economic Co-operation and Development concluded in its 2008 review of the Canadian economy.

Every year the distortions caused by the system grow larger. Canadians may not realize it when they go to the grocery store, but they’re paying twice the world average for dairy products – and up to three times what Americans pay. That’s a hidden $3-billion a year tax on all of us.

Roughly half the money flows back to dairy farmers, making them richer than other farmers, who work just as hard. Bloated government agencies and marketing boards soak up a significant chunk of the rest.

That’s only part of the cost to consumers. Because Canada must restrict imports to maintain this closed system, our trading partners block the sale of certain Canadian products in their markets. Canada has been shunned from ongoing talks toward a regional Asia-Pacific trade pact because Ottawa won’t budge on supply management.

The OECD also pointed out that supply management hits the poor the hardest because they spend proportionately more on food than other Canadians.

Nor is supply management saving the family farm. Indeed, the system keeps young farmers out of the business by creating prohibitive barriers to entry. When the supply-management system was started in the early 1970s, farmers were allocated free production quotas. If you want to buy a cow and sell milk now, it will cost you an average of $26,000 per cow to buy quota. A typical dairy farm could have $2-million or more needlessly tied up in production quotas.

In all, Canadian farmers have $28-billion of their assets invested in supply management quotas, representing 2 per cent of the country’s gross domestic product. And every year an average of more than 2,500 farms disappear as small operations give way to fewer, larger, factory farms.

Forget all the economic distortions and the steep consumer price. Supply management goes against the Conservative government’s own clearly articulated free-market farm principles and vigorous defence of property rights.

Mr. Harper and Mr. Ritz readily acknowledge that free markets drive innovation, spur investment and create value-added jobs. Yet they are ready to go to the wall to defend a Soviet-style system for some farmers that does just the opposite.

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Ok, I'll bite.

 

Some of the remarks in the posting reflect the statements from the OECD report a few years ago.  A few questions were asked of Dr. Jarrett but, unfortunately, no satifactory answers were given.

 

Barrie McKenna mentions that quota was given "free" in the 1970's.  He is quoted as saying "Beyond history, it’s hard to figure out what makes a dairy farmer so different from a cattle rancher or an apple grower."   Perhaps McKenna would serve the public well if he actually looked back in history to understand WHY quota was given "free".  He is doing a huge disservice to the public by omitting the factual information behind the history of agricultural licenses..... licenses to trade. 

 

He also mentions the current valuation of milk quotas.  The bigger question he should be asking is, if he is a true reporter... how, why and when did agricultural licenses become valuated?  Who is the biggest benefactor of quota valuations?  If Mr. McKenna wants a clue.... its not the farmer.

 

Does the Province of Ontario have the constitutional right to receive a financial "reward" from quota? 


Mr, McKenna compares other enumerated agricultural commodities to wheat and questions the differences in the way they are traded.  One giant omission in the article is the fact that wheat is not indigenous to this country.  And if Mr. McKenna does not think that fact is important then it is very apparent he is not doing his homework in regards to agriculture.

 

But I have a question for Mr. McKenna, one that has been posed to Mr. Ritz with no answer forthwith.  Wheat is not indiginous to our country...... but WHEN was wheat placed in TRUST?  Why does Mr. Ritz ignore that question?

 

The source determines the nature of the rights.  Mr. McKenna would serve the public well if he investigated where and what agricultural rights exist in Canada especially in regards to agricultural licenses.  History will provide those answers if he takes just a little time to look. 

Hemmm... silence on such an important topic.

 

While I continue to question the validity and intent of Mr. McKenna's published opinions concerning agricultural marketing, I partially concur with his final assessment about defending a Soviet-style system.

 

When former Minister of Agriculture, Mr. Steve Peters, was asked who had the power to dissolve the marketing boards in Ontario, he informed us that the Province unequivocally retained that power.  The boards are creatures of the Province.  They are corporations (not under the authority of the Corporations Act) formed through legislation and given Assent by the Queen in the Right of Ontario. One comes to the conclusion that the Provincial agencies under the jurisdiction of  OMAFRA and the Ontario Farm Products Marketing Commission are, in reality, extensions of the government itself.  The government has the ability to create/dissolve marketing boards with/without the consent of the farmer.  The key word in the legislative authority is.... MARKETING.

 

When one digs into our Canadian Charter of Rights and Freedoms, one will find a clause concerning licenses to trade.... marketing licenses.

 

It states that when a "person" wants to trade under certain conditions, the Sovereign commands licenses be issued but "taking especial Care to insert therein a Condition, that such Licence shall be void, and the Security forfeited in case the Person to whom the same is granted shall refuse or neglect to observe such Regulations as We shall think proper to prescribe as aforesaid."

 

What that clause means is the fact that when a license is given there is a due process to void any such license.  After all, is not "due process" a right?

 

But we see otherwise in agriculture.  OFPMC gave marketing boards the authorization "to cancel or reduce, or refuse to increase, a quota fixed and allotted to any person for the marketing of a regulated product for any reason that the marketing board considers proper".  That clause emphasizes wide discretionary powers and appears to be the foundation of a Court decision in 1987 whereby the Court concluded the marketing board has "absolute discretion as to how that control is to be exercised"

 

ABSOLUTE DISCRETION.

 

Through legislation, our government empowered agencies of the Province with ABSOLUTE freedom to judge leaving farmers without due process.

 

Our Constitution stipulates that care must be taken to insert regulations to protect the integrity of the licenses.  The marketing agencies, acting as extensions of our Province, appear to have more strength than the limitations expressed in our Constitution. 

 

OMAFRA apparently believes in its absolute powers as another agency of the Province, Agricorp has a similar clause found in the New Grains and Oilseeds RMP.  It states"OMAFRA and Agricorp have absolute discretion to refuse of withhold any payments to any participant." (pg. 7)  Where is the due process?

 

It is really hard to believe that our own Province, through legislation, has created agencies that would appear to promote collectivist anarchism.  Maybe Mr. McKenna is onto something.

"The ultimate tragedy is not the oppression and cruelty by the bad people but the silence over that by the good people" Martin Luther King Jr.

 

A number of years ago, someone near and dear to me had the distinct pleasure of having a casual (unquestionably enlightening) conversation with the Honourable Eugene Whalen.  Through his conversation, it was admitted that when the marketing boards were being formed, an existing template was used as the foundation for the boards.  If the truth be known, the genesis of Ontario's marketing boards'  existed before the Natural Products Marketing Act, [1937].  ... long before 1937.

 

I mention this because there appears to be a collective effort to demonize the Ontario marketing boards of which, the Milk Board, is presently garnering extraordinary media attention.  But is the public getting the whole picture or is there a suppression of truth?

 

The Financial Post recently posted a commentary byWillian Watson: Milking our gullibility

(Oct 26/11 http://opinion.financialpost.com/2011/10/26/william-watson-milking-...)

 

Mr. Watson takes issue with milk pricing and makes reference to the marketing board as a "cartel".  It appears public condemnation against "cartels" will somehow create efficiencies in the market and hence save industry and consumer alike. 

 

By definition a cartel is a  syndicate, combine, or TRUST formed especially to regulate prices and output. 

 

So where did the marketing boards get their powers?  If you believe our government, they will tell you the powers came from an Act in 1937.  While that answer does have an element of truth, clearly other information is being suppressed.

 

Truth is, agricultural commodities played important roles in society, since the beginning of time.  Agricultural commodities were some of the earliest forms of "currency". 

 

Agricultural commodities, properties OF the soil, played pivotal roles in the British Colonies of North America in regards to currency. Agricultural commodities were used as a currency for a longer period than the gold standard.  Our warehouse and elevator receipts are still protected under the Bank Act today. 

 

Currency is a Public Trust.

 

In the 17th century, the Crown passed a number of Royal Proclamations in regards to agricultural commodities and the trading of such.  One Royal Proclamation dealt with "Restraining the Disorderly Trading" of an agricultural commodity in the North American Colonies.

 

If Mr. Watson is familar with different financial aspects, he will recognize restrains against disorderly trading is a mechanism to control and balance market conditions from excessive volatility at a time when there is no justification for market swings.   The Royal Proclamation was issued for the protection of the currency... the agricultural commodities.  It was issued to protect the Crown's interests in currency valuations.

 

Was the Royal Proclamation amended?  I believe so.

 

Was the Royal Proclamation revoked?  I don't believe so.... but if anyone has information otherwise... I am interested in seeing it.

 

The Royal Proclamation reads like today's legislation and regulations under OFPMC.

 

But then one has to ask.... is the restraining of disorderly marketing the same as controlled marketing?

 

No.... but that's whole other dimension of marketing.

 

Yes, the Honourable Eugene Whalen was correct.  There was an existing template to form marketing boards in Ontario which can be found in modern times during the 17th century and it deals with the different aspects of "Public Trusts".

 

And yet... the farmers and the farm groups remain silent as their defense.

 

 

Oppression can only survive through silence (Carmen de Monteflores)

Discussion of the extremely polarizing CWB debate and the implications for all involved. Is supply management next on the hit list?

As I am not a western grain grower, I will not comment on the debate that is brewing in our western provinces but I would like to point out a few facts that were not mentioned at the AgMedia Roundtable discussion OntAG Administration posted for our viewing pleasure.

The panel appeared to miss the point about the Ontario Wheat Board.  A few years ago, our Minister of Agriculture held  a plebiscite on the future of the corn, bean and wheat boards.  Please remember the Ontario Wheat Board had special status conferred to them by legislation in 1958 (along with 7 others boards).  But the voting process was totally skewed as non-wheat growers were given an opportunity to vote on the future of the Wheat board.  The voter turnout was dismal to say the least as many were suspicious of the intrusive information farmers had to verify on the ballot and return to a non-governmental agency.

In the end, the Minister went ahead and dissolved the Ontario Wheat board with all its vested powers, a supply managed board,  only to create a new grain organization. 

 

It should be mentioned that Andrew Coyne wrote a commentary for McLeans a few months ago called the $25,000 Cow.

http://www2.macleans.ca/2011/08/15/the-25000-cow/

 

In the commentary he mentions that John Manley wrote in an open letter to the new government after the recent election  that “the time is right” to phase out supply management.

 

John Manley, it should be noted, co-authored a paper called "Towards a North American Union" in which advocates "open roads" and the "seamless movement of goods".

 

So, why don't we look at what the Ontario Wheat board had and what the CWB has.

 

The CWB is a near-monopoly.... it is not a monopoly.  Section II of the Act details the "CONTROL OF ELEVATORS AND RAILWAYS".  The CWB also has price setting powers.

 

The government, under those 2 sections alone, gave the CWB the power to control marketing of wheat in a large prescribed area.  Marketing includes the value of the wheat and also the movement of the wheat.  Correct me if I am wrong, but I believe the Ontario Wheat board also had those powers,... even though they chose not to exercise them.

 

A few things come to mind.  Wheat was placed in trust.

 

Wheat is called "field gold" as it is still deemed as a form of currency.

 

Our govenment is trying hard to harmonize all financial securities into one single entity.... but the CWB has the power to set financial rates.

 

The CWB has the power to control the movement of grain on the railroads.  That is a big one.  Farmers controlling wheat movement on railroads.... not the government controlling the movement of wheat..... not big business controlling wheat on the railroads..... its about the farmers rights to  roads, railroads, rivers and ports.

 

How can John Manley move his agenda forward with "open roads" and the "seamless movement of goods" if farmers control wheat in respect to the railroads and pricing?

 

We must also keep in mind one other very important fact.  While the government appears to be "liberating" farmers by giving "marketing freedom" (Mr. Ritz's words).... I have not read ANYWHERE that the government is dissolving the farmers obligations to the Public....... in effect... if the Crown deems it necessary, it still has the power to take the wheat from the farmers at a price they can set.

 

If it is truly about marketing freedom, then the government must dissolve the farmers obligations also.

 

So I ask, is Minister Ritz really looking out for the farmer but giving them "marketing choice" or is it about taking back powers vested to the farmer?

joanne, you have written or copied a lot of text here.   I think much of it is interesting reading but it is mostly focused on the past.  I think those who have a stake in the current arguement should think about justifying the existence of the quota regime on a go-forward basis. 

The current arguements against it are the same ones repeated in the past and I think they are relevant.  It seems untenable to argue that the current system results in much higher prices in Canada as compared to any other OECD country.  Who bears the cost of the system - the consumer.  Quota industries should prove why this is acceptable.

Is it not also the case that the system has resulted in stagnant growth in the overall demand for dairy products?  Why could that be - possibly because in todays economy people are struggling.  

It seems clear that the argument in the OP that the system does not transfer businesses very well i.e. allow new entrants into the industry - seems to me that this results in poor growth and innovation.   What person in thier right mind would want to take on the debt associated with starting out in a quota industry?  

Food for thought.   I suspect that the public at large might have a lot of support for killing the quota system.  

Dairy Farmers of Canada comment on Canada and the TransPacific Partnership

OTTAWA, Nov. 14, 2011 /CNW/ - The Canadian government has formally indicated its desire to join the TransPacific Partnership negotiations this weekend. Prime Minister Harper was also very clear that Canada will not pre-negotiate its entry in the TPP, as it relates to agricultural supply management, intellectual property rights or other broad Canadian interests.

"Supply management has not stood in the way of Canada's ability to successfully negotiate trade agreements in the past and it is unlikely to do so in the future," said Wally Smith, President of Dairy Farmers of Canada.

Canada has concluded trade deals including the NAFTA, and bilateral with Jordan, Columbia, Peru, Costa Rica, Chile, Israel, EFTA (Switzerland, Norway, Iceland and Liechtenstein) while balancing Canadian interests. Other trade negotiations are underway as well, including one with the European Union (CETA).

"Every country recognizes the importance of their agricultural and other economic sectors, said Wally Smith. "The Government recognizes that agriculture is important to the Canadian economy and that the stability of supply management can be counted on to provide over 215,000 jobs in various regions across the country." Indeed, the Canadian dairy sector is first or second in importance in agriculture in seven provinces out of 10, according to Agriculture and Agri-Food Canada.

"The Canadian government understands the importance of stability in markets - agricultural or financial, as stated recently at the G-20 meeting," said Smith. "Supply management allows farmers to negotiate with processors in a more balance way in a concentrated dairy sector. Canadians - from farmers to consumers - have not had to deal with wild fluctuations observed in world dairy markets in recent years."

"Supply management allows farmers to make a living from the marketplace in Canada," explained Smith. "The government has no desire to see our farmers have to compete against the treasuries of other countries."

The Canadian dairy industry is more generous in its imports than most other developed countries. Canada imports over 6% of the dairy products consumed in Canada. By comparison, the United States imports about 3% of dairy products and Europe even less.

Hi,

 thanks Joe for posting our release. We have certainly been participating to conversations about supply management and trade for a long time and saw that there was quite a bit of distorsion in media reporting on TPP and the APEC meeting in the last week. I hope our release clarifies a number of things related to trade and the support of the Goverment on supply management.

 

 

Thanks Therese,

Alot of people are watching supply management news with interest....

We will be including the release in our Canadian email newsletters tomorrow.

Take care,

Joe

Don't get me wrong.... presently I do not have a solid position on the current status of marketing boards.  I do not have enough information to take a position on the matter one way or the other..... and I question whether the public has enough information also.

 

It is not really a matter of making a choice on the future of our domestic supply boards.. .. who reaps the rewards or suffers punitive measures from the dissolution of the boards...... its a matter of living with the consequences of those choices.

 

Correct me if I am wrong but the second Act of Ontario deals with the liberty and security of person... civil rights.  The roots of those rights that you presently enjoy can be traced back to the Magna Carta and beyond.

 

The first Act of Ontario deals with property rights.  The roots of which can be found in the Magna Carta and beyond.

 

Our Constitution did not invent or elicit our rights, our Constitution is really a Statute .....a vehicle to recognize and protect pre-existing rights..... to authenticate and guarantee claims.

 

The rights from the past, as you casually dismiss, are in reality limitations put on our government for expressed purposes.

 

And buried deep in our present Canadian Constitution is where you will find the origins and purposes of the marketing rights........ licenses to trade. .... licenses for the protection of the domestic public.... licenses from the Sovereign.

 

Quota is a license with a quantitative value.

 

As for the capitalization of quota and the repercussions.... I think that question should be posed to the Ontario Minister of  Agriculture first and foremost.

 

Did the Province of Ontario lawfully obtain the right to capitalize marketing licenses?  Who was/is the single biggest benefactor from valuation of marketing licenses?  Why did the Province of Ontario impose marketing rights valuations against the advice of farmers in the first place?

 

I asked the previous 2 provincial ministers a few questions.   How many Sovereign licenses to trade exist in Ontario and what is the current value of those licenses?  

 

I am still waiting for a creditable answer. Neither said that NO licenses exist.... which begs the question..... does the Province even know?

 

If  those licenses were to be dissolved, what would be the effects of capital losses on the financial statements of the affected farmers and the Province itself?

 

What are the financial consequences to the dissolution of Ontario marketing licenses?

 

Are the marketing licenses, farmers rights to trade as allowed under our Constitution..... are those rights what define our Sovereign Food Supply laws?

 

What are the social consquences of dissolving Consititutional rights in regards to our food?

 

I would like answers those questions first... then we can deal with the idealistic scenario the C.D. Howe Institute and the OECD would like to present to the public.

 

I just want a honest and informed debate in regards to agriculture and the proposed "open roads" and "seamless movement of goods".  I would really hate to burn the bridge to domestic food supply laws using greed and ignorance as the torch.


Greg Edwards said:

joanne, you have written or copied a lot of text here.   I think much of it is interesting reading but it is mostly focused on the past.  I think those who have a stake in the current arguement should think about justifying the existence of the quota regime on a go-forward basis. 

The current arguements against it are the same ones repeated in the past and I think they are relevant.  It seems untenable to argue that the current system results in much higher prices in Canada as compared to any other OECD country.  Who bears the cost of the system - the consumer.  Quota industries should prove why this is acceptable.

Is it not also the case that the system has resulted in stagnant growth in the overall demand for dairy products?  Why could that be - possibly because in todays economy people are struggling.  

It seems clear that the argument in the OP that the system does not transfer businesses very well i.e. allow new entrants into the industry - seems to me that this results in poor growth and innovation.   What person in thier right mind would want to take on the debt associated with starting out in a quota industry?  

Food for thought.   I suspect that the public at large might have a lot of support for killing the quota system.  

there are other industries with licenses, for example - broadcasting.   but these have a finite life...in other words they allow for the the market to reset itself every so often.  this is not the case under the quota system. 

 

I don't know the legalese which you seem to be looking for.  I suspect the dairy farmers association would have all that, they might be the only ones who understand it all. 

 

but does the history and legal background really matter?  the system is set up to manipulate supply and therefore hold prices at a sub-optimal level...basic supply and demand.   consumers end up paying higher prices than they would under a free market.   who benefits?  I would assume the producer and the related organizations. 

 

I am not taking anything away from the dairy industry - it is darn hard work and they deserve to be compensated fairly.   I just hate it when we allow outright manipulation of the market, regardless of the industry. 

the source determines the nature of the rights.

 

how many industries receive their licenses from the Sovereign?  the 2 provincial ministers did not acknowledge nor deny the existence of those licenses.

 

how many classes of people have rights entrenched in the constitution when it comes to "trade"?

 

does legal background matter?  does the foundation of your house matter?  if the foundation is removed or destroyed.... everything built on it will come down and we are left with what?.

 

there is an important reason why those licenses are entrenched in the constitution.

 

Greg Edwards said:

there are other industries with licenses, for example - broadcasting.   but these have a finite life...in other words they allow for the the market to reset itself every so often.  this is not the case under the quota system. 

 

I don't know the legalese which you seem to be looking for.  I suspect the dairy farmers association would have all that, they might be the only ones who understand it all. 

 

but does the history and legal background really matter?  the system is set up to manipulate supply and therefore hold prices at a sub-optimal level...basic supply and demand.   consumers end up paying higher prices than they would under a free market.   who benefits?  I would assume the producer and the related organizations. 

 

I am not taking anything away from the dairy industry - it is darn hard work and they deserve to be compensated fairly.   I just hate it when we allow outright manipulation of the market, regardless of the industry. 

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