Reforming Dairy Supply Management: The Case for Growth

The Conference Board of Canada, 117 pages, March 6, 2014
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This report shows how to reform dairy supply management using a growth paradigm. Our approach results in greater industry output and employment. Growth creates the resources to compensate farmers equitably.

Document Highlights

Supply management is among Canada’s most contentious public policies. The policy is designed to manage the market risk faced by farmers of supply-managed commodities. But it does so by generating higher prices for consumers and closing off growth opportunities in domestic and international markets. 

This report highlights the case of dairy supply management. We review the reform literature and offer some ideas for reform paths that create a win-win solution for dairy farmers, consumers, and Canada.

The report’s unique contribution is that it links farm-level financial analysis—micro analysis—to macro policy. This allows us to show how different policy actions play out in terms of farm viability and transition paths for the industry. We clearly demonstrate that it is possible to grow Canada’s dairy sector by reorganizing assets under the most efficient producers. And Canada’s most efficient producers will provide Canadians and the world with low prices and high-quality dairy products.

The report was prepared for The Conference Board of Canada’s Centre for Food in Canada (CFIC).

Table of Contents

Executive Summary


Chapter 1—Introduction

  • About This Report

Chapter 2—Achieving Equity Through Efficiency

  • Back to First Principles: Equity and Efficiency
  • The Dairy Farm Landscape
  • Conclusion

Chapter 3—A New Strategic Vision: Industry Growth

  • The International Growth Opportunity
  • Domestic Growth Opportunity: Recapture Market From Substitutes
  • Processing Capacity
  • Transporting Product to Desired Markets
  • Competitor Weakness
  • Grasping the Opportunity: Scenarios
  • Transitional Paths Under Different Scenarios
  • Welfare Implications of Scenarios
  • Conclusion

Chapter 4—Supply Management in Transportation

  • Introduction
  • Supply Management Liberalization: For-Hire Trucking
  • Status Quo: Taxicabs
  • Conclusion

Chapter 5—Options for Reform

  • Understanding Reform Options: A Framework
  • Reforms Under the Current System
  • One-Legged Reforms: The Falling Stool
  • Two-Legged Approach: More Viable
  • Administrative Considerations
  • Approach to Transition: It’s in the FEED
  • Funding Options
  • Conclusion

Chapter 6—Implications

  1. Dairy Industry Should Embrace a Growth Paradigm.
  2. Domestic Supply Management Reform Should Be Linked to International Trade.
  3. Quota Should Be Dealt With Equitably and Efficiently.
  4. Reform Should Be Funded Through Dairy Levy.
  5. Farmers Should Reorganize to Realize Gains.

Appendix A—Bibliography

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