March 13, 2013 – Canada’s controversial but politically untouchable dairy supply management system can be reformed, while addressing the concerns of wary politicians, consumers tired of overpaying for milk and cheese, and farmers worried about their future. In “Putting the Market Back in Dairy Marketing,” authors Colin Busby and Daniel Schwanen call for better representation of consumer interests in milk marketing decisions, a cap on milk prices, and steps to measure efficiency and open new markets for dairy farmers.
“These are politically feasible reforms that could be achieved in the near-term, reducing costs for consumers and bringing lasting benefits to dairy farmers and agrifood producers, through greater efficiency and access to growing international markets,” commented Colin Busby.
Canada’s system of dairy supply-management, note the authors, restricts the availability of milk to Canadian households, food processors and restaurants, in service of maintaining a higher price for milk and dairy products than Canadians would otherwise pay. The beneficiaries of the outdated system are Canadian dairy farmers who own production “quotas.” New dairy farmers must purchase quota, often at prices they can ill afford, to sell milk in Canadian markets.
The system relies on an import tariff on dairy products and federal legislation under which Ottawa delegates power over interprovincial trade and exports to the provinces. But the lynchpin is the Canadian Dairy Commission (CDC), a federal Crown corporation created by the Dairy Commission Act.
The authors say that current restrictions on the Canadian milk supply are unnecessary to meet the twin objectives of the CDC to provide a fair return for farmers and a continuous and adequate supply for consumers. “Consumers can have a better deal on milk without denying efficient farmers the opportunity to earn a fair return,” said Daniel Schwanen.
The paper recommends:
- changing the membership of the CDC board of directors to ensure consumer and industrial users’ interests are represented in decision-making, consistent with the regulatory set-up in many other industries;
- capping prices for milk set by the CDC, until a reasonable benchmark is reached for an “efficient farm,” using national and international comparisons; and
- restoring to the federal government the powers over export and interprovincial trade that it delegated to the provinces so that interprovincial trade can expand, and efficient farmers who wish to operate entirely outside of the quota system may export outside of Canada.
“A sharper focus on efficiency would also benefit the industry, where many new farmers are beset by debts, high quota values make entry difficult, and opportunities to access new markets are lost.” added Daniel Schwanen.
Click here for the full report.
For more information contact: Colin Busby, Senior policy Analyst; Daniel Schwanen, Assistant Vice-President of Research, C.D. Howe Institute, 416-865-1904; email: cdhowe@cdhowe.org