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Supply management only ag sector to thrive

by Paul Beingessner
Canadian farmer, writer

(Monday, Dec. 8, 2003 -- CropChoice guest commentary) -- I have to admit that I just do not get those farmers and farm organizations that are pushing for an end to supply management in Canada. For those who do not know, supply management involves the dairy and poultry industries, the latter including chicken, turkey and egg production. Under the supply management regime, production is controlled at a national level and matched to domestic consumption. Prices for these products are linked to the cost of producing them. In order to produce commercial quantities of supply managed commodities farmers must own quota. Quota is rationed out among the various provinces.

At various times, supply management has come under fire from foreign governments and companies that want to break into the Canadian market for these commodities; from consumers and consumer groups who think that supply management means higher prices for consumers; from domestic processors who would like access to cheaper inputs from foreign countries; from Canadian farmers who do not want to purchase quota in order to produce supply managed commodities; from Canadian farmers who are not necessarily interested in dairy or poultry production but who think an end to supply management will assist in getting other countries to reduce ag subsidies; and from ideologues of all sorts who think any regulation is bad.

As you can see, the list of those opposing supply management is lengthy. There are also, however, many benefits that accrue from supply management. Consumers do not see the volatile prices that occur in the U.S., and occasionally bring some major price dips, but neither do they pay prices that are significantly higher overall than American consumers pay.

When assessing the level of subsidies that governments give to their farmers, the benefits of supply management are included. But supply management does not mean the transfer of money from the Canadian government to farmers. Farmers receive their income from the end user of their products. This lowers the need for overall government support to agriculture. By contrast, the U.S. regularly puts out large sums to purchase surplus dairy production to prevent price crashes.

By matching production to domestic consumption, supply management should not add to the glut of certain commodities that depresses world prices and hurts farmers everywhere. While it is true that processors and manufacturers might find lower priced ingredients on world markets, that would simply necessitate more government support for affected farmers. The cost would be transferred from consumers to taxpayers as a whole, with a resulting loss of independence among the farmers involved.

Perhaps the least credible of supply management's detractors are those farmers who think that hurting one group of farmers will help us all. There is no proof for this supposition, which merely smacks of mean spiritedness.

A recent report by Statistics Canada describes the dismal state of the farm economy. Total net income for Canadian farmers is at a 30 year low. This situation would be even worse, except for what one farm reporter described as the "stability in supply managed sectors".

There are some legitimate criticisms of supply management. Currently, Canada allows dairy processors to buy milk from Canadian farmers at a reduced price if the products being manufactured are for export. Other dairy exporters claim this allows Canadian companies to export products at an artificially low price. They say farmers can sell to processors at a lower price only because the better price they receive for milk for domestic consumption covers all their fixed costs.

Canada has twice lost this battle at the WTO. If Canada is to defend the tariffs that protect its system of supply management, it must clean up its act in this situation. Dairy farmers cannot expect to have the cake of supply management and also feast on the cake of exports gained in this manner.

Despite these difficulties, supply management has proven a major benefit to the farmers that choose that route. A Saskatchewan politician recently stated that producing a supply managed commodity was the only type of agriculture he would recommend a child of his be involved in. It is a sad but true commentary on the state of farming.

(c) Paul Beingessner (306) 868-4734 phone 868-2009 fax beingessner@sasktel.net