In Defense of Supply Management I
It never ceases to amaze me how certain topics will hit the news and, over the following few weeks, it unexpectedly becomes open season on that subject. Countless experts come forward with a similar story or complaint. The most recent example is the criticism of the most successful marketing system farmers in Canada have. I am speaking of supply management.
The latest round of comments about supply management began when the master of bluster, Donald Trump, discussed Canada’s “unfair” attack on some U.S. dairy farmers. It was apparent that he knew very little about the dairy trade between Canada and the United States. A bully never cares about the truth, even after his own constituents, the Wisconsin dairy farmers, quickly contradict him.
We should not have been surprised when this occurred. Nor should we have been surprised when the other experts in the main stream media, academia and economists as well as several politicians, also raised criticisms of supply management. I would counter that supply management has worked successfully for everyone. Farmers, consumers, taxpayers and the government have benefited from supply management for over 50 years.
In this two-part commentary, I’d like to explore some of these common misconceptions. Next week, I will address some specific myths around supply management, but today I would like to remind readers that a system that benefits the farmer does not bring harm to the consumer.
The very success of supply management is dependent on the producers’ ability to be price setters, based on transparent cost of production formulas. Along with import controls and production volumes, these cost of production formulas enable producers to earn a fair return for their labour, management, and investment. In return, producers agree to produce only what the market needs, rather than overproduce and dump unneeded product into an already saturated world market. Doing the latter would only lead to increasingly lower farm gate prices and begin a spiral to the bottom. That is the crux of the U.S. problem, in spite of the billions of dollars in subsidies provided by the U.S. treasury.
Careful consideration of supply and demand is the norm in most of our economic sectors. For example, auto companies will only make enough cars to supply projected demand. Every successful business knows it must consider supply and demand in order to be profitable. That is because it makes sense and helps businesses stay in the game. So what is wrong with farmers using supply management as a tool to survive and thrive? What is wrong with independent nations choosing their own food sovereignty policies? To do otherwise would be short-sighted.
Opinions expressed in the CFFO Commentary are those of the author, and do not necessarily represent CFFO policy.