Dairy producers need to stop whining… get on with Plan B if there is one

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Observers of the NAFTA negotiations and that would include the entire Canadian dairy industry knew that the Canadian government was going to capitulate to increasing American dairy imports under a new agreement. More dairy imports happened with the Canada/EU free trade agreement and the Trans Pacific Partnership trade deal. Its always been a simple equation; the political ramifications from upsetting ten thousand dairy farmers is a lot less than that from hundreds of thousands of voters in just the auto industry. Considering that the ag community generally votes Conservative they should be lucky the Liberal government didn’t give away even more concessions. The reality is from a political perspective, agriculture is going to be thrown under the bus in trade agreements. There isn’t a lot of political or public relations value for the dairy industry in whining about what was going to happen anyway. That negative approach doesn’t go over well with consumers who already don’t understand what supply management is – except that it seems to mean higher retail prices.
What the industry should be doing is moving aggressively forward with a Plan B to deal with all these anticipated new dairy imports which will still amount to less than 15% of their market. One would presume that the supply managed commodities -dairy, eggs and poultry – with their sophisticated planning and management expertise would have long-ago developed “what if” strategies in anticipation of what was going to happen with the loss of market share from concessions in trade agreements. Surely, they were not relying completely on their deadly lobbying machine that has seen every provincial and federal political party and government tow the line in favour of maintaining supply management. Foreign trade negotiators are unaffected by that lobby and know instinctively that Canada will offer ag concessions to make a deal. So there we have it – now what.
One thing that supply managed commodities need to perhaps be reminded of – the right to operate their production and pricing-controlled marketing scheme is not an entitled right. It was given to them 50 years ago by the people of Canada under federal and provincial enabling legislation. I would suggest such legislation would never even be considered in today’s political and economic situation. Having said that – supply management has proven to be the best food marketing system in the world – it provides the best quality and fairly priced food products that benefits producers, processors, marketers and consumers. One only has to compare it to the production and marketing disaster in the dairy industry in the USA. The reality is most dairy producers in the US and elsewhere wished their industries were supply managed like in this country. But I digress.
The brain trust in the supply managed commodities along with their partners in government – they are interlocked by means of legislation – need to come up with a long-term strategy. Compensation will surely be the main route to retire any excess production. It should be specifically targeted to buying out willing producers by buying their quota particularly in Quebec and Ontario where the majority of small-scale milk producers operate. It will work – there are successful precedents.
Alberta is in a particularly favourable position to re-evaluate its position in the national supply management scheme specifically in dairy production. Unlike BC and eastern Canada, Alberta has the space, feed and expertise in large scale livestock operations that could see significant expansion in milk production. From an economic perspective more of the dairy industry needs to move west. One would hope that a compensation package would focus on removing small inefficient milk producers in eastern Canada – but that would raise the ire of those provinces.
The biggest roadblock to real change in supply management in dairy appears to be intransigence in significantly altering the distribution of quotas across Canada. That has to do with provinces protecting their own interests. But really is it fair that Quebec controls up to 40% of milk production whilst having only 23% of the population. Focused compensation could force that production level back to a fairer share for other provinces. Can it be done? Alberta in the past has forced changes in increasing its share of national chicken production quota by using the threat of withdrawal from the national scheme. Is it far-fetched to take that perspective – after all Quebec doesn’t want our oil – well we don’t want their dairy products. It would be a good start to discussions. Will Verboven is an agriculture opinion columnist and ag policy consultant.