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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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if a case is not made and put in front of the public then the battle will surely be lost.    you have referenced a lot of legal mumbo jumbo - the public at large will gloss over that in a heartbeat.   if this gets into the political arena then it will be a political fight...

 

trying to debate the legalities within a self-created system is not going win over the popular vote.

I am not looking for a popular vote.

 

But you make a valid point.  The public at large does not have all the facts in front of them and papers such as the C.D.Howe Institute paper "Free our Food" does little to enhance the discussion.

 

In response to an editorial I asked them: "How many sovereign licenses exist in Ontario/Quebec today and what is the value of those licenses? How does the Institute propose to pay for the securities farmers own today?  What is the true cost to the public to phase out the old marketing licenses?" and "Where is the constitutional authority to empower the Government to charge a fee for farmers to obtain marketing licenses?"

 

It's been more than 1 &1/2 years.  Still no reply.

 

So I ask. If there is a considerable financial penalty to the public in regards to the dissolution of the Ontario agricultural quota system, should not Advisory groups, of which the media such as Andrew Coyne gleam their information, make the discussion truly relevant by including all dimensions of the discussion? 

 

If leading advisory groups such as the Howe Institute suppress the truth about agricultural licenses in their discussion papers, do those papers constitute expressions of fallacies by deluding the Public about farmers' rights?

 

Recently I asked a staff member of the Farm Credit Corporation the question about quota valuations.... what would happen if all the quota was dissolved and Ontario expericenced a one time $50 BILLION capital loss?

 

The expression on his face told volumes.

 

Such a pity the media is focused on the perceived greed of farmers.  It is a masterful deflection of the truly important matters that the public will face sooner or later.

 

 

 

Greg Edwards said:

if a case is not made and put in front of the public then the battle will surely be lost.    you have referenced a lot of legal mumbo jumbo - the public at large will gloss over that in a heartbeat.   if this gets into the political arena then it will be a political fight...

 

trying to debate the legalities within a self-created system is not going win over the popular vote.



Greg Edwards said:

if a case is not made and put in front of the public then the battle will surely be lost.    you have referenced a lot of legal mumbo jumbo - the public at large will gloss over that in a heartbeat.   if this gets into the political arena then it will be a political fight...

 

trying to debate the legalities within a self-created system is not going win over the popular vote.

 

 

 

 

Greg, where would you rather live - in a country that is run by popular feelings or by law? It is frightening to think that so many people have so little understanding of all that "legal mumbo jumbo" and think that when they have cast their ballot, their democratic duty is fulfilled.

 

Greg, would you be satisfied if milk was "free"? My standard answer is that if you don't like the price of food or how it is produced, you should really grow your own.

 

Also, your earlier reference about cracker jack box degrees was extremely ill-informed and shows a profound lack of understanding of that field. I was speaking of doctors who passed Canadian certification standards and are unable to procure work in the area of their specialty. It is not a matter of qualification.

 

john - you have me all wrong.  I have lots of friends who are in the dairy business, I wish that they prosper.  all I am saying is that someone needs to be beating the 'pro quota' drum in such a manner that the general public will be able to understand it and get on-side.   do you really think the public at large cares all that much about a self-created regulatory system?  would they care to understand all its inner workings?  I would bet that they do not.   

'free' -  don't be absurd. no one is arguing for free commodities. however, some markets are 'free' and I think people generally understand the concept of a market and supply and demand.  the quota systems absolutely halt free markets.

but if you really think I should be allowed to 'grow my own' would you also not think that I should be free to buy milk from the US?     

in a country that desperately needs more Drs. as we are losing them to the US I somehow don't believe your statement. perhaps the people you are looking at are similar to a lobster fisherman trying to find work in Alberta.  are you saying they could not be a G.P.?    

lets take another example - academia - researchers and professors move across boarders all the time. a friend of mine just left for the United Emriate to teach at a university there. 

another example - professional accountants - I am a CA and after writing a 4 hour reciprocity exam have the ability to be a CPA in the USA.  I have countless friends that have relocated around the globe with the Canadian CA qualificaiton without any problem whatsoever. 

 

thanks for the discussion, I will watch from the sidelines.  

My apologies on mistaking your intent. I see now where you are coming from.

 

I could give names on the issue of immigrant doctor cert. issues.

From the Globe:

 

To see the opportunity for foreign dairy products in China, look no further than supermarket shelves in its fast-modernizing cities. In the grocery section of a central Beijing Wal-Mart, cans of baby formula promise contents from the United States, New Zealand and Australia. In the dairy case, butter from New Zealand sits alongside American cheese, sales of which are growing as upper-middle-class palates acquire a taste for more Western foods.

Dairy opportunities
Chinese consumers’ suspicion of local milk
means big business for foreign milk producers

Chinese consumers’ suspicion of local milk has changed little since the 2008 scandal in which half a dozen babies died and scores more were sickened by melamine-laced milk powder. Even now after sweeping industry reforms Chinese newspapers still carry occasional reports of quantities of melamine-laced milk being seized by inspectors.

That translates into big and growing business for foreign milk producers. China imported some 406,000 tons of milk powder alone last year, a number which is expected to grow to about 550,000 this year.

But very little of that is Canadian milk, and trade lobbyists warn Canada is missing the boat on this growing opportunity because of dairy industry protections back home. “Apart from the barrier that these programs of supply management have been to Canada making other gains in trade negotiations—quite apart from that, they’re bad for Canadian consumers, and they’re bad for Canadian producers,” said John Manley, the former industry minister who now heads the Canadian Council of Chief Executives, in an interview in Beijing late last year.

Canadian forays into the Chinese dairy market have been modest: about C$9 million in a trade category that includes dairy products, eggs and honey, at the peak in 2009. Exports dropped to $4.19 million in 2010, after China tightened import regulations.

Compare that modest number with New Zealand, whose exports in that category were the equivalent of US$1.41 billion in 2010. Most of those are through dairy co-operative Fonterra, owned by a majority of the country’s farmers, which also owns two large dairy farms in China and is now constructing a third.

Canada, Manley said, needs to be more like New Zealand. “If you look at what New Zealand has accomplished in dairy since they unwound their own protections, they have become a dominant supplier around the world,” he said. “It’s a country the size of Toronto. So what could our dairy farmers do if they were actually getting access to markets? It’s not as though there’s too much food in the world. There are huge markets for food and we think producers could be getting into that.”

Such access does carry some risk in this emerging market. Fonterra almost saw its business in China come to a crashing halt over the 2008 milk scandal. Its Chinese partner Sanlu Group, in which it held a 43% share, faced a recall of 10,000 tons of milk powder and eventually went bankrupt, its senior executives imprisoned. However, the company has weathered the storm and today sells its products both commercially under its own brands and wholesale to Chinese companies, gaining market share through training sessions with local partners that include everything from improving feed quality for dairy herds to working with local bakeries to show them how to use their dairy products.

“They have got a good reputation and they’ve managed to build on it,” said David Oliver, a New Zealander who is a Beijing-based dairy consultant. “A country’s wealth increases and people consume more dairy products. When I first came here 15 years ago, you’d go to a supermarket and there might be a little bit of UHT milk and that’s it. … It’s a good market, and it’s going to be a better market.”

Securing access to that market, however, would mean major changes to the supply management system in the Canadian dairy industry. A government-determined quota system ensures producers earn a guaranteed income, but also limits ambitions to expand—a double-edged sword, especially since improving technology means smaller herds are producing more milk than ever before.

In a written statement, Agriculture Canada said there are no plans to change its system of supply management, which leaves dairy production focused almost completely on the domestic market and limits exports to very specific products like ice cream, powdered milk and protein concentrates. Last week, the department handed out $130,000 to the Dairy Farmers of Ontario to develop more niche markets for specialty cheeses.

Agriculture Minister Gerry Ritz is in Beijing this week promoting Canadian beef, grains and livestock genetics as part of Prime Minister Stephen Harper’s visit to China, which has a heavy emphasis on trade. Ritz has so far maintained publicly there are no plans to change the system. But an eventual review is not entirely out of the question, given the recent legislated end to the Canadian Wheat Board’s 60-year monopoly on marketing wheat and barley.

Such supply management programs would likely come under some review if Canada seriously pursues joining the Trans-Pacific Partnership, free-trade negotiations under way among nine Pacific Rim countries including the United States, Australia and New Zealand, in which such protectionist measures are decidedly unwelcome.

“I think there is some concern. I think people are looking at that [Wheat Board experience], but the dairy industry is very strong and their lobby is very strong,” said Doug Yungblut, past-president of the Agricultural Institute of Canada and now an agricultural consultant in Waterdown, Ont. He said that, while the industry could expand production if the system were reformed, most dairy producers are content to live with the status quo. “It’s doing so well for so many people, they don’t want out of it.”

Still, the opportunity for Canadians in China is clear, given the continuing crisis of faith in China’s domestic industry.

“[Imported milk] is more secure and safe, and there are fewer fakes,” said Li Youhe, 60, as he examined milk powder brands on the shelf at Wal-Mart for his now three-year-old granddaughter. She was a tiny baby at the time of the scandal, when his family switched to formula from New Zealand and Germany; today, he purchases a domestic brand of children’s milk powder, on the reassurance that it is made with ingredients imported from Europe.

Canadian entrepreneurs at home and abroad still see opportunity. Zhao Youming, a Chinese agrologist running the private Canada-China Agriculture and Food Development Exchange Centre based in Hamilton, said in a telephone interview that his efforts to sell Canadian dairy products to China have so far been largely unsuccessful because of the lack of supply, though he is consulting with dairy associations on plans to open Canadian agrifood stores in Beijing and Shanghai.

“I travel to China many times. In the supermarket I see dairy products from Australia and New Zealand, but not so much Canadian,” he said. “From my point [of view], I think this is a good opportunity, because Canadian products are seen as good.”

Hi Greg,

the answer to that uninformed comment by Mr. Manley came the Monday after. Bottom line, we may not be exporting dairy products to China, but we are exporting dairy genetics there - and they love it. http://www.theglobeandmail.com/report-on-business/international-new... 

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