The commentary in Friday鈥檚 Times 91原创, 鈥淪upply management supports B.C. farmers,鈥� omitted what should have been the second part of the heading 鈥� 鈥� at the expense of every consumer.鈥�
Written by Al Sakalauskas and Dave Eto, the executive directors of two of the three cartels that control the production and prices of basic food commodities that every 91原创 family needs (dairy products, eggs and poultry), it was a self-serving justification for an outdated system that, according to a recent study by the University of Calgary, takes $220聽(after tax) out of the pocket of every 91原创 family yearly just for dairy products alone.
That鈥檚 because the price of milk, cheese and yogurt is kept artificially inflated by astronomical import tariffs and controlled domestic prices and production through supply management. If the inflated cost of poultry and eggs is added in, the subsidy paid by consumers is well into the hundreds of dollars annually.
Sakalauskas and Eto argue that 鈥渋t doesn鈥檛 cost taxpayers a nickel in subsidies or bailouts.鈥� In fact, it costs every consumer in the country, including low-income consumers, plenty at the grocery store check-out. In fact, while paying a taxpayer-supported subsidy is not a measure I advocate, it would actually be far more progressive, because the taxes paid by higher-income earners would be going to pay subsidies to keep prices more affordable for all.
Why do people stock up with milk when they visit the U.S.? Ask our friends from the B.C. Dairy Association. Why has per capita consumption of dairy products steadily declined? Prices are certainly a factor.
The commentary makes a number of other specious arguments. By the writers鈥� own admission, there are only 1,100 diary, poultry and egg farmers in B.C., yet the four million residents of B.C. act as a siphon to transfer money to this elite, the lucky ones who hold production quotas. If you want to get into the agriculture business in these sectors, forget it, unless you are prepared to fork over tens or hundreds of thousands of dollars to the quota owners to allow you to be a producer.
These quotas were free when the system was established more than 40 years ago and have subsequently increased in value, like taxi licences, and have become a commodity in themselves.
The limit on production not only keeps up prices, but it deters new market entrants and eliminates any possibility of developing an export industry.
Why does Canada export beef and pork, and why are beef and pork prices competitive and reasonable (compare the price of pork to chicken)? Beef and pork producers manage to operate successfully (and yes, support the 鈥渇amily farm鈥�) without a supply-management system.
The authors state that supply management does not inflate prices (empirical evidence, not to mention extensive research, suggests just the opposite). They say that prices in New Zealand, a country with a similar climate to many parts of B.C. and with about the same population, which is one of the world鈥檚 largest exporters of dairy products, are so high that the New Zealand government has launched an investigation.
New Zealand milk prices are now about the same as in Canada, owing to several factors, including high amounts of exports and export prices and a recent drought. Normally, higher prices will lead to increases in production and thus lower prices over time; that is how the free market system works. That will happen in New Zealand; it won鈥檛 happen in Canada where the price is set by regulation. And, if the free-market system is so good for producers, why do 91原创 marketing boards oppose it?
According to the authors, if we allowed import of U.S. eggs and poultry we would be importing the products of factory farms. There are factory farms in the US 鈥� and in Canada. Remember that B.C., according to the B.C. Ministry of Agriculture, has only 287 licensed poultry producers and 132 licensed egg producers. Some of them operate on a large scale. There are factory and family farms on both sides of the border. Selective use of statistics is misleading at best, dishonest at worst.
The frenzied lobbying and PR campaign by the supply-managed sectors in Canada is increasing as the facts are brought before the public. This costly and inefficient (for everyone except the producers) system has been allowed to develop and dominate our agricultural industry for too long, to the detriment not only of consumers but the whole food processing industry and the economy. We don鈥檛 build walled gardens for pork, apples, beef, blueberries or any other agricultural commodity except dairy, eggs and poultry. It is time these industries stood on their own feet.
Hugh Stephens is an associate faculty member in the School of Business at Royal Roads University
