Supply management-So What?!

This often misunderstood AND maligned marketing system is generally difficult for most non-farmers to understand. So what does the farmer get out of it?

In big picture terms, dairy farmers get stability. They get a fair price for their milk, based on actual farmers’ costs or cost of production. The processors MUST pay the agreed price, their milk MUST be picked up and processors must take it, if it meets all health requirements. Your neighbour cannot steal your market from you and farmers large and small, have equal opportunities for success or failure.

This is important for Canada, because for many other kinds of farmers, this is not necessarily true. Canadians have heard over and over again about the catastrophic problems sometimes with pork farmers and recently with grains and oil seeds farmers.

Remember what happened to Canadian beef farmers when BSE forced the abrupt and devastating closure of the US border?! Much of this pain can be laid at the door of international trade, a heavy reliance on export markets and the subsidies paid by foreign governments to their farmers!

Not only do these abrupt changes in fortune affect farmers, they affect Canadians too. Agricultural products are a large part of the national GDP. These financial ups and downs also impact rural Canada, which relies on farmers to keep their economic engine running.

And in the end it costs us all, because both the federal and provincial governments end up paying dollars out to stabilize agriculture.

Contrary to this woeful picture, supply managed farmers do not receive subsidy dollars. Dairy farmers share many of their costs. They also share both their lowest value markets and their best ones. This has been successful in developing AND maintaining regional dairy farms, so all regions of the country can benefit.

This same stability has allowed dairy farmers and their organizations, to concentrate on investing in their industries. Again, consumers have benefited, as milk is one of the safest, most tested food products shipped from the farm.

This unique Canadian system is all about what is good for Canada, Canadian farmers, processors and consumers .

Key to the success of these farmers is their desire to focus on the Canadian domestic market and their willingness to share both the profits and any pain, with each other. They are responsible for any costs if they make a mistake. They cannot over-produce and then expect the government to bail them out.

The system is designed to supply Canada with all the healthy fresh dairy products she needs. At the same time, the stability in the industry, has resulted in one of the lowest percentages of consumer income spent on dairy products, in the world.

Sounds pretty good, right? So why then, would ANY Canadian government ever think of risking this group of farmers in the International trade arena? And why do right wing think tanks and economists continually attack these self reliant, productive, successful, responsible farmers?

Dietitians of Canada

More consumers need to access this site! Canadians are in need of clear, simple, diet and nutritional information and this site has it.

Fast facts - The rest of the Australian story!

The Australian Bureau of Statistics observes that average milk price increased continually between 1994 and 2004 in all Australian state capitals.

Australian deregulation meant that prices dropped in the first 6 months and then started going up again. After deregulation in the Australia – from 1999 to 2004, retail prices increased by $0.35 (26%) in the best case scenario and up to $0.80 more (60%).

Again, according to the Australian Bureau of Statistics, the 2004 price of a 2-litre milk carton in Australia is about $2.69 to $3.15. In Quebec, for example, the price of a 2-litre in 2004 was $2.14 - $2.79 ($0.35 to $0.55 cents LESS) source:Dairy Farmers of Canada

Farmers know what happens when there are a few processors or buyers for their products and they have no power to counter this consolidation. The examples below ARE the reason farmers refuse to give up what control they have left. Time after time, the same old tired, incomplete logic of the economists is trotted out for the Canadian public to swallow. Experience has taught them these truths:

· in the Canadian experience with BSE, farm prices caved while store prices remained the same – and increased after a year (farm prices have yet to reach the level they were before BSE)

· prices for milk in Australia keep going up;

· in the U.K. experience, farm price went down while retail prices went up

· Coffee farmers have seen their price cut in half within a few years as production increased. Because there are only 3 major companies who supply coffee to the world, prices consumers pay for coffee went up. And that increase did not reach the farmers.

The concept of the consumer seeing price decreases is dangled repeatedly before the public as an excuse to lure governments and everyone else in. When it comes to food, however, the real control is usually in the hands of a few large processors or manufacturers and the huge food retailers of this country. In this climate, what happened to Canadian farmers when BSE struck, is exactly what happened in Australia when they de-regulated their dairy industry.

Last year’s study by Professor Daniel Mercier-Gouin on supply management has shown that, over 20 years, it is the 2 countries that have totally “deregulated” their dairy sector – New Zealand and Australia - that consumer prices have increased the most! see http://www.go5quebec.ca/en/documents.php.

The subsidy-based system, like the one advocated by Valentin Petkantchin, only leads to larger farms (45% of Australian farmers expanded after deregulation) and more farmers needed off-farm jobs (27% work off-farm, despite dairying being a 7-days/week job). These statistics are from the MEI paper.

De-regulation would mean an increase in retail price for consumers, subsidies to farmers and force our family farms to get big or get out.

The Big Leagues weigh in...? What Consumers need to know!

There are some important pieces of information missing from Mr.Petkantchin's study. So let's take a look at one of the most glaring, from the country we are supposed to emmulate.

Australia: Cost of Groceries rises above rate of inflation
14 Feb 2006 Source: just-food.com

According to data released by the Australian Bureau of Statistics, the cost of groceries rose by 3.6% in 2005, above the 2.8% inflation rate. This trend was mirrored in the December quarter, with the consumer price index showing a rise in the cost of food of 1.8% when the rate of general inflation was just 0.5%.

The rise in food prices can be attributed to an increase of 6.8% in the cost of vegetables and 5.8% increase in the price of fruits. Dairy products saw large increases, with consumers paying 6.2% more for cheese by the end of the year while milk prices rose by 5.9% throughout the year.
However, the price of lamb and mutton declined by 2.5% and food additives and condiments were 1.7% cheaper, providing minor offsetting price falls.

According to the Bureau, adverse weather conditions were responsible for the increasing cost of fruit and vegetables, while higher fuel prices affected a number of food categories including milk, bread, restaurant meals and take away and fastfoods.

The Big Leagues weigh in !!

I can tell we must be really irritating a lot of major players. More WTO negotiations are closing in and the BIG players are pulling out all the stops. Just like clockwork, major 'Economic think tanks' publish more stuff to tell Canadians what they should and should not do.

The Montreal Economics Institute joins a long line of economists who delight in trying to prove that Canadian dairy farmers are wrong. This years' attempt is " Reforming dairy supply management in Canada: the Australian example".

They have a really detailed report with major headings designed just for easy media pickup like : "Even with a temporary reprieve from the latest WTO talks in Hong Kong in December 2005, the supply management system in Canada’s dairy industry will have to be reformed in the longer term. The system clearly benefits certain milk producers, but on the other hand it holds Canadian consumers hostage and stifles entire industries that have to pay more for their milk. It erects an obstacle to competition throughout the Canadian dairy industry, penalizing the most dynamic producers by means of extravagantly expensive quota."

Or how about this one? "By protecting inefficient producers, the current system makes the Canadian industry less competitive."

It's this kind of dangerous, mis-leading kind of half truth that I am trying to balance. Just which industries' are we "stifling" anyway? Most Canadian dairy companies are performing extremely well. They are showing healthy profits. They have shareholders who are receiving dividends. I can tell you my dairy farmer friends would love to make as much return on their investment as those poor big processors.

The referrence to "certain milk producers" would also make you think there is a huge group who are on the outside looking in. This is just plain wrong. Supply management is all about co-operative, inclusive, regional, marketing. More about this later.

And the big finish is always the same old thing: "it holds Canadian consumers hostage". "IT' of course, refers to our Canadian marketing system for milk.

To prove their point they have taken a look at Australia, the most recent country to de-regulate their dairy industry. The report is full of graphs and data. The author presents various tired, standard economic theory to set the stage. The downside of Australia's de-regulation is ignored and even flaunted.

Economists also develop their arguments using a "set of assumptions." If you begin with incorrect assumptions, you get incorrect projections. Garbage in results in garbage out, as they say.

What did Dairy Farmers say to Macleans?

Several letters to the Macleans "Mail Bag" ensued. Obviously, there was much more behind the story, as their letters outline (see Jan. 30th issue http://www.macleans.ca/ ). Many took the time to give part of the real story and the background they were familiar with. Interestingly, Macleans seems to have a very right wing view about the WTO. The author of the story neglected to include a wealth of more balanced information. Interviews with dairy farmers in the know, included representatives from Dairy Farmers of Canada.

This is their as yet UNPUBLISHED response to the magazine:

Letter to the editor

MacLean’s not credible or fair in dairy industry attack

Informed Canadians should be very disturbed by the inaccurate and unbalanced attack on Canada’s dairy farmers in the Jan. 16 issue of MacLean’s.

The “article” was not the business news story that it pretended to be but it was really an editorial that almost exclusively featured the views of two individuals with large personal financial interests.

The first, Mr. Birch, is the export broker who is making money from the monopoly export quota that he alone holds and stands to make a windfall of millions of dollars, if he can keep that quota by overturning a case which he lost in court and is currently trying to appeal.

The second, Mr. McIlroy, is not simply a “Toronto-based trade lawyer” but the lawyer representing Mr. Birch in his legal troubles and a paid lobbyist working to undemine Canadian dairy interests in the World Trade Organization negotiations.

This critical context was not included in the “article”.

I traveled from my farm near Ottawa and spent more than an hour with the author who was preparing this article. A staff person from Dairy Farmers of Canada also attended and we provided a wide variety of facts that could have balanced the article for your readers. The information countered many of the opinions in the article and had facts that could have corrected many inaccuracies.

The author quoted five words from my comments. “It doesn’t cost Canadians anything.” Counting words can’t measure balance in a story but it is interesting to note that McIlroy’s direct quotes accounted for more than 100 words and his paraphrased comments seem to account for about 600 more words.

Like many Canadians, if I read MacLean’s, I expect it is credible and fair. After being personally involved with an article on my own industry, I will have difficulty believing any stories written in MacLean’s.

The WTO of Smoke & Mirriors. What is Really going on here?

The most recent example of inaccurate information being presented to the public showed up in December in MacLeans(Dec. 16th issue). The article, entitled "A raw deal-WTO talks for a new global trade pact are on the brink of collapse, and Canada shares the blame" by ANDREA MANDEL-CAMPBELL,( http://www.macleans.ca/ ) was attempting to give an overview of the WTO talks as they unfolded in Hong Kong.

I saw biased comments about dairy farmers and very little real or accurate documentation about the issues.

To understand the failings of the article, one needs to understand a little about Canadian dairy farming and its uniquness in the world.

Canadian dairy farmers operate under a system of marketing called Supply Management. This system is generally misunderstood, poorly understood, not understood at ALL, vilified and attacked by many.

For one thing, big business hates us with a vengance. Essentially, supply management is a regulated form of collective farmer marketing.

Because we market collectivly, across Canada, individual farmers receive a fairer price for their products (milk, chicken, eggs). Of course, there is far more to supply management,than this bare outline, but receiving a fair price for their products is NOT happening in many other sectors of agriculture. This makes the group of farmers under supply management an apparent oddity in the Canadian farm marketing landscape.