Supply management does a body good
NationalPost.com – FullComment
Oct 24, 2011. By Wally Smith
The Free Your Milk campaign launched recently by the Canadian Restaurant and Foodservice Association (CRFA) would have Canadian consumers believe that the price they pay for milk and dairy products in grocery stores will drop if only milk marketing boards and supply management are dismantled.
Based on the experience of every other jurisdiction in the world, it’s not likely.
In New Zealand, where farmers have the lowest cost of production in the world thanks to their climate, consumers pay between $1.35 to $2 a litre for milk. Canadians, who generally buy their milk in four-litre bags, pay on average $1.22 a litre. Even though New Zealand consumers pay more for the milk they drink, their farmers get paid less. Canadian consumers pay less for their milk, and our farmers earn more.
In other countries in the world that have either abandoned supply management or never had it in the first place, farmers invariably get paid less but, more often than not, consumers don’t see those lower prices reflected in prices they pay. The United Kingdom did away with supply management in 1995. Since then, prices paid to farmers have dropped. Milk prices in grocery stores have risen.
Even in the United States, consumer milk prices fluctuate wildly. In fact, Canadian prices have been lower than U.S. prices for 11 of the past 16 years. U.S. prices are lower today, but they’re on the rise again, increasing 10.2% in 2010 alone.
The U.S. experience is a key reason why milk marketing boards and supply management were introduced in Canada. Before milk marketing boards, when the price of milk increased, farmers increased supplies. Prices dropped, and dairy farmers went bankrupt. Less supply drove prices up again and the vicious cycle repeated itself. Supply management stopped that cycle in Canada, bringing stability to the market.
Moreover, American consumers pay twice for the milk they drink and dairy products they consume. First, they pay at the grocery store. Second, they pay through their taxes. The American dairy industry is heavily subsidized by taxpayers, as is the dairy industry in the United Kingdom and Europe. Canadian dairy farmers receive no government subsidies. In an effort to cut public spending, the U.S. Senate is now considering a form of supply management for dairy.
The retail price of milk in Canada has risen in lockstep with the Consumer Price Index over the last 20 years, while prices paid to Canadian farmers have actually increased less that the CPI over the same period, proving that it is retailers who set the price, not farmers. Today, Canadians pay less of their disposable income for milk and dairy products than they did a decade ago.
The CRFA correctly notes that milk consumption in Canada has dropped 18% in the last 20 years. However, milk consumption has dropped 20% in the United States over the same period. The decline is the result of changes in consumer taste and demographics. In both countries consumption of cheese, yogurt and other dairy products is increasing.
Nor does the CRFA mention that of the $2 cost of a glass of milk sold in a restaurant, Canadian dairy farmers receive 21¢. They receive 69¢ for the cheese on an $18.50 pizza. In a survey CRFA conducted of its own members last August, rising energy costs, government red tape, minimum wage costs and sales taxes were at the top of the list of concerns. Prices of dairy products weren’t on the radar.
The supply management system is working and not just for dairy farmers. As the experience in other countries shows, it is working for Canadian consumers, taxpayers as well as the food industry.
Wally Smith is the president of Dairy Farmers of Canada.http://fullcomment.nationalpost.com/2011/10/24/wally-smith-supply-management-does-a-body-good/
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