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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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why should they have any special rights?    what is the current justification? 

 

laws and regulations change with the times.  

 

Its not a matter why farmers should have special rights... its a matter of adhering to the our current constitution......its a matter of limitations placed on our government which must be respected.


The clause buried deep in our constitution states very clearly that under certain conditions, when dealing with domestic wants or needs in regards to things "OF" the soil..... the Sovereign COMMANDS a license be issued.  Correct me if I am wrong, but when a license is coupled with an interest.... (Properties of the soil),  the authority (the Sovereign) confers not mere permission but a "grant"......as it states in our constitution....."to grant such Licences without Fee"

 

These few words express a commitment to honour the rights of the domestic population and to protect us from the tyrannical interests.

 

The law has not been revoked... which means that if the marketing boards are dissolved to further international trade interests...  agricultural licenses will still be required current law.... as was the case before 1937.

 

Now I ask ..is it possible that our Ministry of Agriculture is becoming adept in "knowledge filtration" whereby there is a degree of factual information being suppressed from the public at large?

 

Again, my point is.... what will be the consequences to the public if the marketing boards are dissolved?  What will the true cost be to the public in regards to the massive capital losses farmers incur with the dissolution of quota valuations? Did the Province of Ontario have the legal right to place an assessed value on quota in the first place?  If not... what are those consequences?

 

 

 


Greg Edwards said:

why should they have any special rights?    what is the current justification? 

 

laws and regulations change with the times.  

 

seems fairly clear what the outcome would be - where there was a previously restricted supply the market will be able to demand more or less.  the market will determine economic equilibrium.   without massive barriers to entry the supply side will be able to open up.  

the 'capital loss' will depend on individual circumstances, whether someone purchased quota or it was part of the initial distribution.   there could be schemes developed to compensate for losses of value.  or not.    I doubt the public would be favourable to buying back the quota at $26K a cow or whatever it is these days.  I am sure it will be a political issue and the end result will be whatever appeases the most voters.

or maybe it will never happen and this is all just chicken little talk.

Truth be told.... any sector that is represented by a union is technically a cartel... the evil entity the National Post likes to demonize.

 

Our health services, education, communications, law, ... areas that are restricted with prescribed licensing can be called cartels.  .... with wages paid to members which inflate the price of the service.

 

Nurses, doctors, lawyers, dentists, mechanics, daycare providers, radio, ... etc... are all licensed but their licenses come from a provincial/federal jurisdiction.  I wonder how those people would react if their licenses were revoked and canceled without compensation?  If our government can dissolve licenses that are from the Sovereign... then what is there to stop the government from dissolving licenses that are from Provincial/federal agencies?

 

Does the public really want to set the precedent by revoking farmers licenses without compensation or due process?

 

Agricultural licenses are the very foundation of this Province and the country.  If we start to dismantle the licensing of the very foundation of this country.... how many others will fall?

 

Is that the path we wish to travel?

Greg Edwards said:

seems fairly clear what the outcome would be - where there was a previously restricted supply the market will be able to demand more or less.  the market will determine economic equilibrium.   without massive barriers to entry the supply side will be able to open up.  

the 'capital loss' will depend on individual circumstances, whether someone purchased quota or it was part of the initial distribution.   there could be schemes developed to compensate for losses of value.  or not.    I doubt the public would be favourable to buying back the quota at $26K a cow or whatever it is these days.  I am sure it will be a political issue and the end result will be whatever appeases the most voters.

or maybe it will never happen and this is all just chicken little talk.

modernfarmer profile

modernfarmer Author doesn't pull any punches on this one Ending supply management http://t.co/DGVghaQJ via @nationalpost

 

joann, the recent transpacfic talks could do quite a lot for Canada as a whole - particularly manufacturing and export. 

 

I think the general public will throw the dairy industry under the bus (so to speak) if the benefits are more jobs.  It will all be in the spin that will be put on the final decision.   If the man on the street is told that, as a result of the negotiations, we gained 500,000 jobs at the cost of doing away with quotas (which by the way caused you to pay twice as much for dairy products and poultry as compared to south of the border)....yes, I think the general public would be OK with that.

 

I can almost hear the DFO PR machine going into hyperdrive.

 

I am sure there will be some compromises to phase out the quota system and give some value to existing quotas...but I doubt it will make farmers happy.  



Also, I find your comparison to doctors et al irrelevant.  the licencing of the occupations you note does not act as an absolute barrier to growth of the market.   doctors and mechanics from other countries can practice here.   certification is to ensure a common base level of knowledge, not act as a barrier to economic activity.  

 

the barrier to entry into the medical profession is the passing of medical school.   are you implying that all dairy farmers have been to a professional school? 

 

 

I am constantly surprised by the amount of pain people can endure especially when it is not their pain.

 

Correct me if I am wrong but when Mr. Bob Rae was premier during the '90's, as an example, the province paid a Toronto university to keep medical seats empty.... because it was deemed there was too many doctors at the time.

 

That gives the appears of a cartel to a degree.  Restricting the amount of people that could obtain a medical license.  There are numerous barriers to become a doctor, nurse, teacher, etc... but in the end,  approved licenses are required to ply their trade/service in this Province. 

 

Do these licenses give a person the "right" to ply their trade/service... or do the licenses allow the person the "privilege" to ply their trade/service?  There is a huge difference between the 2 words.

 

The dispensation of any license depends on the criteria established at the time and for the circumstances involved.  This country was founded and built by virtue of licenses.

 

Most farmers in Ontario hold a Sovereign license for production... production of any/all indigenous commodities.,.... for personal consumption.

 

Taking the commodities past the farm gate onto Crown owned property...our roads... is another matter.  That aspect is marketing..... and there is a special provision in our constitution addressing that component of which requires a license.

 

And that is the difference between the classes of people in our society of which I am trying to establish.  What is the source of the license people possess?

 

The source determines the nature of the rights.

 

Greg Edwards said:



Also, I find your comparison to doctors et al irrelevant.  the licencing of the occupations you note does not act as an absolute barrier to growth of the market.   doctors and mechanics from other countries can practice here.   certification is to ensure a common base level of knowledge, not act as a barrier to economic activity.  

 

the barrier to entry into the medical profession is the passing of medical school.   are you implying that all dairy farmers have been to a professional school? 

 

 

Greg, your assertion that immigrant doctors can easily practice here after receiving certification is completely misleading. It is not that simple. The profession protects itself well and is not easily entered by immigrants, for many reasons seemingly unrelated to qualification. There are many examples if you care to look into it.

Greg Edwards said:



Also, I find your comparison to doctors et al irrelevant.  the licencing of the occupations you note does not act as an absolute barrier to growth of the market.   doctors and mechanics from other countries can practice here.   certification is to ensure a common base level of knowledge, not act as a barrier to economic activity.  

 

the barrier to entry into the medical profession is the passing of medical school.   are you implying that all dairy farmers have been to a professional school? 

 

 

Thank you John.  You are absolutely right.

 

I wonder how the cities were to react if, as an example, taxis were allowed to operate without licenses.  Let the market place set the price and standard....... if you follow the arguments forwarded about dairy.

 

How much is the public overpaying because of the taxi cartels? 

 

Or are we just going to be selective about which cartel to protect and which cartel to dismantle?

 

 

John Schwartzentruber said:

Greg, your assertion that immigrant doctors can easily practice here after receiving certification is completely misleading. It is not that simple. The profession protects itself well and is not easily entered by immigrants, for many reasons seemingly unrelated to qualification. There are many examples if you care to look into it.

Greg Edwards said:



Also, I find your comparison to doctors et al irrelevant.  the licencing of the occupations you note does not act as an absolute barrier to growth of the market.   doctors and mechanics from other countries can practice here.   certification is to ensure a common base level of knowledge, not act as a barrier to economic activity.  

 

the barrier to entry into the medical profession is the passing of medical school.   are you implying that all dairy farmers have been to a professional school? 

 

 

I guess we just see things differently. 

Sure John you are not going to see some medical professional from a 3rd world country who got thier license from a cracker jack box open up shop here in Canada...but those who are skilled and have the proper training can come here.   Much has changed in recent times in terms of recognizing skilled labour from other countries.  The academic community is very very open in terms of cross-border human capital.

 

All I see you doing is trying to draw some analogies, I don't think that is how this fight will be won. 

I have lots of friends in the dairy industry that I would like to see prosper, or at least not get hurt.  I hope the folks at the dairy organizations are a little better at defending the quota system are working on a case to defend the quota system that is built on a economic cost/benefit.

I don't think you quite understand Greg.  I don't believe the farmers, nor the marketing board, need to work "on a case to defend the quota system". 

 

The Province of Ontario introduced marketing rights valuations through a division of the Ministry of Finance decades ago against the expressed wishes of the farmers.

 

The Province of Ontario vastly benefited from quota valuations.  That means the public received benefits from a quota valuation system.

 

Now, if the public wishes to dismantle a complex system, after years of receiving benefits, there will be a cost to the public.  Even if the farmers do not receive a single penny for their quota.... the agricultural financial statements will reflect a tsunami of capital losses when the quota is dissolved.

 

How does the Province of Ontario propose to deal with $50 billion of capital losses in a single fiscal period?  I posed that question to the C.D. Howe Institute in response to their suggestion that quota be removed.  I am still waiting for an answer.

 

The Province created this mess.... and the Province will have to solve this financial mess during an economic downturn.

 

That means people like you will have a monumental negative fiduciary interest in regards to dissolving agricultural licenses.

 

Greg Edwards said:

I guess we just see things differently. 

Sure John you are not going to see some medical professional from a 3rd world country who got thier license from a cracker jack box open up shop here in Canada...but those who are skilled and have the proper training can come here.   Much has changed in recent times in terms of recognizing skilled labour from other countries.  The academic community is very very open in terms of cross-border human capital.

 

All I see you doing is trying to draw some analogies, I don't think that is how this fight will be won. 

I have lots of friends in the dairy industry that I would like to see prosper, or at least not get hurt.  I hope the folks at the dairy organizations are a little better at defending the quota system are working on a case to defend the quota system that is built on a economic cost/benefit.

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