Print Page

Consumers — And Farmers — Would Prosper From Reformed Dairy Policy

Reform means ending price setting, opening export markets, and compensating farmers fairly for milk production quota

Ottawa, March 6, 2014 – Consumers would enjoy a long-term reduction in dairy prices and the industry could be even more profitable than it is under the existing supply management system, under a reform proposal released today by The Conference Board of Canada.

The report, Reforming Dairy Supply Management: The Case for Growth, proposes a three-part reform in which Canadian consumers could eventually save an estimated $2.4 billion annually, and farmers could gain almost $2.5 billion from exporting high-quality dairy products to markets where demand is growing rapidly.Cows in stalls

"A  win-win reform package needs to be accompanied by a new vision for industry growth," said Michael Bloom, Vice-President, Industry and Business Strategy.
"Dairy producers and rural communities have a lot to gain from reform under a growth scenario. More efficient producers are more likely to see an upside. But we have to change the way we do business."

Highlights

  • Supply management reform needs to co-ordinate three policies: liberalizing prices, unwinding milk production quota and reducing trade barriers.
  • A temporary consumer levy on dairy products could serve as transitional funding as the system is reformed.
  • Under reform of supply management, consumers would see lower prices over the long-term and Canadian producers would more than make up for lower domestic prices through export sales.

The report argues that the transition to a new system must address issues of funding, efficiency, equity, and duration (FEED) in a comprehensive manner.

"Supply management reform must coordinate the three major aspects of supply management: price setting, quota, and trade barriers. Cutting out any single part of the reform makes the entire system unstable," said Bloom.

Production quota reform

Production quota is, in effect, a licence to produce milk, which serves to limit the supply. Quota has become a valuable asset in the dairy industry, with large sums of money tied up in its purchase and sale.  Any policy change must address quota reform; the Conference Board recommendations that it be done through a  book value buyout-(the price paid for the quota at purchase). Such a reform would cost an estimated $3.6 billion to $4.7 billion, according to the report.

This approach is particularly important for farmers who have recently bought quota and therefore not yet realized the full value of the quota, which takes about 10 to 15 years. A market value buyout is unfair because it would compensate farmers for quota where they have already realized a return, effectively paying them twice for the same quota .

Price reform

The buyout cost could be funded through a consumer levy on dairy products, as was done in Australia. In the short-term, Canadian consumers are unlikely to see a significant change in dairy prices from current levels, which the Organisation for Economic Co-operation and Development has estimated costs about $2.6 billion more than prevailing world prices, or $276 per family. Within about five years, prices would likely settle at about the world average and consumers would see this amount returned to them in lower prices.

Trade reform

While price and quota reforms are taking place, trade policy negotiators need to gain access to international markets for Canadian dairy products. The worse-case scenario is one in which the domestic market opens to dairy imports before Canadian farms are ready to compete by scaling up production.

This report is one of 20 being produced by the Centre for Food in Canada. Since 2010, the Centre has been engaging stakeholders from business, government, academia, associations, and communities in creating a Canadian Food Strategy —one that will meet the country’s need for a coordinated, long-term strategy on industry prosperity, healthy and safe food, household food security, and environmental sustainability.

The strategy will be launched at the 3rd Canadian Food Summit 2014: From Strategy to Action, March 18-19 at the Metro Toronto Convention Centre.

For more information contact

Corporate Communications
613-526-3280
corpcomm@conferenceboard.ca


Monthly Newsletter

Get updates about Conference Board research and events by signing up for our monthly newsletter.
 
 
 

RSS Feed

RSS Feed  Subscribe to the Conference Board’s News Release RSS Feed

Access Our Research

Access to The Conference Board’s reports is free of charge to professional journalists upon request.

Access Our Experts

We have a team of experienced researchers and economists who are able to comment on current events or share their expertise for news features.


Recent News Releases

L’âge plutôt que le sexe est devenu un facteur d’inégalité des revenus

September 23, 2014

Age Rather than Gender Becoming the New Income Divide

September 23, 2014

Bon à savoir : épargner plus profite à l’économie et à la société

September 22, 2014


Recent Speeches and Op-Eds

If I had $100-billion ... How to restore Ottawa’s fiscal health

September 12, 2014

To beat terrorists online, let’s raise our social media game

September 08, 2014

A Call to Recalibrate Corporate Values

September 03, 2014


Connect with Us