Conference Board critical; dairy industry bristles
Thursday, November 26, 2009
by SUSAN MANN
A Conference Board of Canada report concludes Canada’s dairy supply managed system limits its competitiveness but a Canadian dairy industry spokesperson says the system is preferable to competing in uncertain export markets.
“The world dairy market has just seen the biggest decrease in the price of milk ever,” says Therese Beaulieu of Dairy Farmers of Canada.
Beaulieu says the report, released Nov. 23 by the non-profit economic, public policy and labour think-tank, rehashes arguments and propaganda made previously by other detractors of Canada’s supply management system.
In a press release, Conference Board senior vice-president Glen Hodgson says supply management largely meets its stated goal of improving producer incomes. “But it also prevents milk producers from capitalizing on opportunities in global markets, while thwarting Canada’s international trade objectives and reducing competitiveness and innovation.”
Beaulieu says the report “ignores the fact that without regulations protecting the small player or provider of raw material in any supply chain, the primary producer is left holding the small end of the stick.” Perfect competition exists only in theory, she adds.
Peter Gould, Dairy Farmers of Ontario general manager, says compared to many other agricultural sectors, dairy is healthy while the others are experiencing “dire straights.”
Report author Danielle Goldfarb says the report contains a lot of information that’s new for those outside the system.
In doing the report, the Board’s goal was to analyze how the system works. Goldfarb says dairy farmers understand the inner workings of supply management, but lots of Canadians, including many policy makers, don’t.
The Board also wanted to examine the system in light of new opportunities for the industry.
The Board plans to do further research on supply management, including analyzing if the system should be abandoned and if any possible alternatives exist.
Goldfarb says it’s understandable that dairy farmers want to defend the system. “It’s clearly boosted their incomes and profits above what they would otherwise be.”
It’s remarkable the system, introduced in the 1970s, still exists given all the complicated things that must be done to keep supply management functioning, such as price setting, matching production with demand, quota allocation and import restrictions, Goldfarb notes.
One lost farmer opportunity outlined in the report is the ability to seize global opportunities in places like China and India where dairy demand is expected to continue its long-term growth, especially among the middle classes.
“Canada’s higher-price system limits its competitiveness in these emerging markets,” the report states.
Beaulieu questions what export opportunities there are currently.
A study released this summer by the International Farm Comparison Network found that only two per cent of world milk produced could achieve costs of production if sold at the summer world price of US$20 per 100 litres. The study measured the cost of milk production in 46 countries. The Network is an organization of dairy researchers with a mission to create a better understanding of world milk production.
When farmers don’t have supply management they don’t have a say in the marketplace because they are price takers, Beaulieu says. Consumers don’t benefit because distributors and others holding market power don’t pass along any savings they get from cheaper raw materials. BF