Canada’s herds are small, with the average farm managing about 150 cows and the largest boasting a few thousand head.Christinne Muschi/The Canadian Press
Lenore Newman directs the Food and Agriculture Institute at the University of Fraser Valley and Evan Fraser directs the Arrell Food Institute at the University of Guelph.
More than 50 years ago, Canadians decided our food security and farm sustainability shouldn’t be solely in the hands of the global market and created a “supply management” system to stabilize income for producers of dairy, eggs or poultry. Today, thanks to U.S. President Donald Trump, our producers are facing an existential threat. We must prepare for the worst to protect our nation’s food supply and our rural economies.
Supply management dates to 1972 and has three pillars: production, import controls and pricing mechanisms. Farmers buy quota that gives the right to produce a specific amount of product, and prices are set to ensure stable profit for producers. Imports are capped at firm limits.
The reality is more complicated than the President’s claim that we charge a tariff on American dairy, chicken, or turkey. But it is true that we make it impractical to allow anything beyond the agreed-upon import limits to enter our country. The result, according to Trump, is that we are not giving U.S. producers access to Canadian consumers (of course, the U.S. achieves similar outcomes with its own agricultural subsidies, but this argument is unlikely to hold much water with Americans).
U.S. dairy industry presses Canada for changes to quota
Supply management is a polarizing issue. It has its own critics even within Canada among proponents of competitive markets, who say it obstructs the free market and contributes to higher prices and creates an oligopoly. But removing or weakening supply management would damage our dairy industry and its 9,256 farms.
Canada’s herds are small, with the average farm managing about 150 cows and the largest boasting a few thousand head, according to our research. Meanwhile, in the U.S., herds average 337 animals and the largest operators manage upward of 100,000 cows. Dairy prices in the U.S. are lower, even accounting for the strength of their dollar, currently averaging about $1.45 Canadian a litre of milk compared to $1.70 here, when buying a four-litre container.
If supply management were removed, Canada’s dairy industry could not scale fast enough to compete with U.S. behemoths, and the social and environmental implications of such a transition would be terrible. Smaller farms, unable to compete on price, would close; we need only look to the U.S. to see this contraction in action. And our farmers would struggle in a harsher climate with higher land costs than their American counterparts. While our chicken, turkey and egg industries are a bit more competitive on price compared to the U.S., they would still struggle if supply management falls.
Up to now, proposals to change policy have been a ‘third rail’: an issue too emotionally and politically charged to touch. Indeed, the newly passed Bill C-202 prevents Canada from making concessions that affect agricultural supply management as part of trade talks. But experts have said the new law does not fully shield the supply management as Ottawa can easily get around it. In these turbulent times, old bets are off. Canada must prepare for the worst and develop strategies in case the system comes under unbearable pressure in negotiations.
Opinion: Let’s not unilaterally surrender one of our few bargaining chips – supply management
First, supply managed industries should double down by promoting local products. Canada boasts world-leading quality, and this needs to be shouted from the rooftops. The federal government could backstop this by ensuring standards are uniform across the country and helping create a national branding campaign that embodies the high standards consumers expect. This messaging should also be linked with an aggressive campaign to increase exports to emerging middle-class customers, such as in the Middle East and Asia Pacific.
Second, governments, producers, consumer groups and other stakeholders must realize it’s time for a frank discussion on how to lower domestic prices. One step would be to massively increase applied research to ensure our farms are as efficient as possible. This would mean moving agriculture more firmly into both provincial and federal governments’ innovation agendas and better supporting alternative protein industries that are now able to produce food using technologies such as precision fermentation and cellular agriculture. These novel systems will never replace traditional farming but are an important complement to livestock by supporting food security and diversifying the industry.
Third, federal and provincial governments should also consider how to protect the value of supply management quotas. In Central Canada, a single cow’s worth of quota is valued at about $25,000; each cow is effectively an investment that pays a dividend in milk. Other industries have been disrupted by new players, and we can learn from those examples. When Uber was introduced in Canada, it obliterated the value of taxi medallions; in Toronto, the value of a taxi “quota” fell from $360,000 in 2012 to under $100,000 just two short years later. Learning from this, policy makers need to protect farmers from losing their investments. Concurrently, we should study whether a shift to a more European system of subsidies could support or even partially replace the current system.
Lastly, we need to acknowledge that some farmers will likely not survive if supply management changes. Much as we helped tobacco farmers and cod fishers transition to other livelihoods, part of preparing for the worst will involve helping some farmers make new lives.