Supply Management and the Dairy Farmers of Canada

Supply management is one of the policies in Canadian politics that seems to never give way. It  is the government policy that controls and protects the milk, poultry and egg industries in Canada. Its function is to fix prices, to apply tariffs on foreign products, to eliminate competition and to manage supply to avoid over-production. This system is defended, for the most part, by the Dairy Farmers of Canada, an advocacy group dedicated to promoting the interests of dairy farms. The Dairy Farmers of Canada have held a consistent grip on Canadian politics, with support from across the political spectrum. This grip has been so tight that only Maxime Bernier from the Conservative Party and Martha Hall Findlay from the Liberal party have openly called for the end of supply management. 

The claim from the Dairy Farmers of Canada is that supply management is the only way in which Canadian consumers can get reliable dairy products. Although they like to make this claim, often loudly, their defense of this outdated system doesn’t hold a glass of milk.

Not only is the dairy lobby uniquely entangled across partisan lines, it is often the most vocal and active political lobby in Ottawa. The Dairy Farmers of Canada often run extensive ad campaigns, have mobilized against politicians who speak against supply management, and have gone so far as to roll tractors onto Parliament Hill to demand that supply management be maintained. The claim from the Dairy Farmers of Canada is that supply management is the only way in which Canadian consumers can get reliable dairy products. Although they like to make this claim, often loudly, their defense of this outdated system doesn’t hold a glass of milk.

The first and most important issue with supply management is that it makes life considerably more expensive for Canadian families and exponentially more expensive for poor Canadian families. Due to artificially inflated prices on eggs, dairy and chicken, Canadian families add an additional $339-$554/year to their grocery bills. The Montreal Economic Institute reported that this additional cost impacts low income households five times more than wealthy households, making supply management a heavily regressive policy. This cost on the poor represents 2.3% of their average income per year, meaning that the low income families are 2.3% poorer as a direct result of supply management.  On the macro scale, OECD estimates state that Canadian consumers pay an additional $2.6 billion in inflated costs because of this policy. 

The Dairy Farmers of Canada claim that supply management is necessary for farming to survive in Canada. The problem with that claim is that only one-eighth of all farmers are protected by supply management. If these claims of economic insecurity had any merit, we would see widespread chaos in non-dairy farming across Canada. In fact, when we look at the data on dairy farms, we see a massive reduction in numbers since the introduction of supply management in 1971. When supply management was first implemented there were 122,000 dairy farms in Canada. In 2011 that number had dwindled to just 13,000, while today the total number is slightly higher than 11,000. The system proclaimed by Dairy Farmers to protect the family farm has systematically shrunk the amount of dairy farms by 90% in just 45 years. There is a clear disparity between what is being said by The Dairy Farmers of Canada’s political lobby, and what the evidence shows.

Supply management benefits a handful of farmers at the expense of all consumers. Sound public policy involves taking into account all citizens in the long run, not just a handful of farmers who happen to be a powerful lobby.

The last reason why supply management needs to be abolished is that it is the epitome of bad public policy. Supply management benefits a handful of farmers at the expense of all consumers. Sound public policy involves taking into account all citizens in the long run, not just a handful of farmers who happen to be a powerful lobby. Supply management is bad public policy because it has created a stagnant dairy industry that lags behind the rest of the world in terms of efficiency gains and product quality. On efficiency, Canadian supply managed farms trail behind their American counterparts on technical efficiency, allocative efficiency and cost efficiency. On quality, Canadian butter ranks among the worst in the world in terms of omega-6 fatty acid content. 

The next step for the Canadian government should be to swiftly implement a phase out plan for supply management so that consumers can be treated fairly, and so that dairy farmers are not rewarded with the selective benefit of government protection.