Canada's milk system would fare better with more transparency, report concludes

Thursday, March 7, 2013

by SUSAN MANN

Most dairy farmers don’t understand what happens at their industry’s national policy discussion meetings nor how it affects their lives, says the George Morris Centre’s Al Mussell.

But if meetings, such as ones held by the Canadian Milk Supply Management Committee, were more open and discussions were transparent then the supply management system could become more responsive, says Mussell, senior research associate. He made the comments in connection with the release Tuesday of his new report, called Canada’s Supply-Managed Dairy Policy: An Agenda for Reform.

Chaired by the Canadian Dairy Commission, the supply management committee is a permanent body created by the provincial signatories to the National Milk Marketing Plan. It’s responsible for determining policy and supervising the plan’s provisions.

Mussell’s report, also written by Bob Seguin and Janalee Sweetland, is the fourth and final paper in a series on milk supply management in Canada. The report uses the analysis from the first three papers to outline several proposed reforms. It presents an agenda for bold reforms to improve the milk supply management system rather than to dismantle or replace it. They are:

• Make and mandate growth as a top objective of the system
• Improve the efficiency of the system and the governance of supply management agencies
• Eliminate the provincial balkanization of the dairy market
• Improve milk allocation efficiency to processing plants
• Liberalize milk quota transfers and milk pricing
• Improve the broader trade positioning.

Mussell says their package of reforms should be implemented as a group. “If you were to take any one in isolation, it might not be very effective.”

Mussell’s report describes how increased dairy market growth and improved efficiencies in milk supply management can create a reduction in costs and that makes reduced pricing feasible, which in turn creates the prospect of a reduced requirement for trade protection.

As for what the industry should tackle first, “we were thinking these things were more or less simultaneous moves,” he says. But one process that could begin any time is to make supply management governance more transparent and effective.

“I’d like to see the agencies and milk supply management create the burning platform” for change, he says, noting many people don’t want to rock the boat because they think the system is working okay. But behind the scenes “it’s not working so great. There are some real problems with it.”

Sean McGivern, president of Practical Farmers of Ontario, has long advocated for changes to the system and agrees with some of Mussell’s recommendations, but he has several of his own suggestions. McGivern says quota should have zero value and there should be a cap on the volume of quota owned by any one producer.

McGivern says the supply management system is “really a socialist model with a capitalist agenda and I just don’t see how you marry the two together and then expect consumers to pay the price that’s not set by market forces.”

Dairy Farmers of Canada spokesperson Therese Beaulieu says they and the provincial marketing boards have been working on changes to the system since 2010. For example, they’ve done a study to identify the challenges to growing the market. “A lot of the findings are the same as what’s in the George Morris Centre study.”

The industry knows the growth in the dairy market is in specialty cheeses and yogurt. In the fall of 2012, the provincial boards reached a national agreement to supply milk on demand for yogurt and defined specialty cheeses.

Working on governance in the supply management system is “one of our main objectives this year,” she says. “We’ve identified that it has to happen this year.”

Mussell agrees the industry is already working on changes. “I think the challenge is to push them to move this further, faster.”

The Conference Board of Canada commissioned the series of reports and the George Morris Centre published the last two, he says. The centre is a Guelph-based think tank that specializes in agriculture policy. BF