This is a follow up to our Supply Management and Quota 101 posted a few weeks ago.  If you haven’t already read that please take a minute (its only a short read), then come back and dive a little bit deeper.

Really, this is a story of the haves (industries and individuals that have supply management and quota) and the have-nots (industries and individuals that do not have supply management and quota). You see quota and supply management are both very valuable, they provide stable markets and guaranteed long-term profitability to those that have them.

Those two conditions, stable government controlled markets and guaranteed long-term profitability are conditions that make money. That means that producers that hold quota, have consistent income from their farm which allows them to make long-term investment decisions and even receive bank loans (very uncommon for most other farms).

This investment is passed along into the entire agricultural investment chain, making not only the producers money but every business serving those producers or handling their products money as well, hence the supply managed industries (haves) and everyone else (the have-nots).

Now for the battle fronts:

Consumers vs. “Inflated” Retail Prices

The most common debate heard in the media is that consumers are being forced to pay inflated prices at the grocery store. There are obvious economic arguments that support this battle, mainly the claim that any limit on supply causes inflation in prices.

But what is the reference for these claims for higher consumer prices? In general, Canadian prices for supply managed commodities are compared to US prices. However the production of most agricultural commodities in the States is not based on a completely free market either.

American farmers benefit from many government supports including policies that increase the supply of animal feed and therefore suppresses the price of animal commodities such as poultry, eggs and dairy. The US provides farm supports to offset lows in cyclical markets that Canadian supply managed farms don’t require.

So, Canadian consumers pay only at the cash register. American consumers may at times have cheaper prices at the grocery store, but pay top ups through their taxes.

New Farmers vs Cost of Quota

This is a debate that rages in the agricultural community and most strongly amongst young farmers looking for a future in farming. There are very few types of farming that provide stable guaranteed income like producing supply managed commodities. This means that there are a lot of young farmers that want to get into those fields, as well as a lot of farmers from around the world that would like to move to Canada and start capitalizing on our secure market.

A stable and profitable business opportunity means getting your hands on quota is expensive.  For example, dairy quota is capped at $25,000 per unit (approximately 1 cows worth of milk measures in kg of butterfat per day).  In poultry the prices seem less severe. For broilers (meat birds) in Ontario, quota costs approximately $74/unit (1unit= around 13kg/year), laying birds are $170/unit (1 unit=1 hen), turkey quota prices are not publicly available but are stated to be approximately $7/kg/year.

These numbers may seem more reasonable then $25,000/unit in dairy but the numbers of units per farm are many times higher in poultry then dairy. No matter which type of quota desired, it typically costs a lot of money to get started.

Small Farmers vs. Minimum Quota Units

Some small farmers would like to purchase quota but are unable to because they are required to purchase a minimum quantity of quota.  For broiler chickens, its the equivalent of 91000 birds/year, or 14,000 birds/cycle, and that number of birds is impossible to raise on a small farm, not to mention raising the $1,036,000 price tag. (Some exceptions have been made for certified organic farms.)

That makes the minimum purchase of 10 units of dairy quota ($250,000) look almost reasonable. Turkeys require a minimum purchase of 2000kg/year and layers do not have a minimum purchase requirement.

Farmers that can’t afford to purchase the minimum amount or don’t want to produce that quantity are sometimes allowed to have small numbers of livestock without quota.

In Ontario, producers are allowed to raise 100 laying hens, 300 broilers and 50 turkeys without quota, all of these special cases come with restrictions on how the poultry products can be marketed.

As for producing dairy without quota, there is no allowance for marketing or sale off farm of dairy products without quota. Dairy cows can be raised without quota for personal milk consumption, feeding calves and other livestock, but the milk cannot be marketed off farm. There are currently major legal battles being fought in Ontario over raw milk (unpasteurized) and direct marketing of milk products to willing consumers without quota.  We encourage our readers to look into that situation themselves if they are interested.

Domestic Supply vs. International Trade

The Canadian government has decided that Canadian dairy and poultry producers should be expected to stably supply the Canadian market. To maintain stable markets it is then necessary to protect these producers from imported products produced around the world where government supports, cheaper labour, different welfare regulations, market conditions, and better climates allow for cheaper production.

These foreign producers want access to our market and Canada’s supply management systems are frequently cited as irritant or barrier in trade discussions. There is domestic and foreign pressure on the Canadian government to end supply management in Canada.

Calves at Sunholm Farms

Come back next week for more discussion of quota and supply management, and even a discussion of supply management and its impact on sustainability.

If you have specific questions about supply management don’t hesitate to get in touch, we will do our very best to find you the answers.