This is dairy welfare

We now know the terms of dairy farmers’ compensation: each Canadian will give $46 each to dairy farmers over the next 8 years while paying exorbitant retail prices for many dairy products. Eggs and poultry are coming next. And don’t hold your breath because more money given to dairy farmers won’t change much of anything at the grocery stores. We’ll have more variety due to more foreign products coming in, but prices won’t drop anytime soon.

But the announcement last week by the Minister of Agriculture, Marie-Claude Bibeau was expected. A total of $1.75 billion will be given for losses after trade pacts were struck with the European Union and Pacific nations. The announcement does not include the looming trade deal with the Americans and Mexico. Losses are assumed, but no one knows exactly how much each farmer will lose.

Supply management is a quota system that allows dairy farmers to produce our domestic needs, and the system is inherently designed to fulfill domestic requirements. Few products can come into Canada due to the high tariffs on imports, but that is slowly changing. With these two trade deals, more foreign products will be coming into the Canadian market, tariff-free.

However, trade deals are only giving more market access to partnering countries. The implication that we need less milk from our own dairy farmers is purely hypothetical; if the system remains unchanged, obviously less milk will be required from our own dairy farmers. But innovation, plus plans to conduct more research, develop new products, and apply demand-driven economics could, in fact, increase our need for domestic production. The program announced last week has no plan, no strategy at all, just payments for 8 years and a hope that things will improve. It’s like giving an illicit drug to someone with a substance abuse problem. The program announced last week does not fix anything. (Story continues below player)

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In fact, it could actually make things worse. Some estimates suggest that all 10,600 dairy farms own about $24 bn worth of quotas. The compensation package roughly equates to about 8% of the total value of dairy quotas in the country, and that amount is no coincidence. This percentage is what dairy farmers ceded in market shares with the two trade deals. In other words, Ottawa is buying back dairy quotas without buying them back. The government is giving our dairy farmers options but without offering dairy farmers a buy-out program, like we have seen in other countries where supply management was dismantled. It’s a missed opportunity but buying out dairy farmers would have been political suicide in these weeks before an election. Just ask Maxime Bernier.

According to Statistics Canada, the average dairy farm is worth $5 million, and the average dairy farmer earns $160,000 a year. The program, which will be coordinated by the Canadian Dairy Commission, will not cover potential losses incurred by dairy processors, artisan cheesemakers, goat’s milk and cheese producers, or many other specially product makers. Many bright entrepreneurs in our dairy industry will be hard hit by more competition. This points to how fixated our policymakers are on the quota system. Ottawa has the affluent in dairy covered, and the rest can fend for themselves. This needs to change.

Global markets and trades are such that it’s impossible for a closed, exclusive system like supply management to survive. Signing trade deals is necessary, and yes, financially supporting our dairy sector will become a necessary evil. Most countries do it. But supply management needs a reboot. We could lose almost half of the 10,600 dairy farms we have by the year 2030, even with the compensation program. A new plan for supply management should clearly focus on farm and processing competitiveness and should have proper coverage of all markets in Canada. Right now, half of our dairy farms are in Quebec, simply because most of the processing occurs in that part of the country. If we are to maintain supply management and regularly awarded subsidies, all Canadians should have dairy farms. Because of operational and input costs, both Ontario and Quebec have an advantage over the Prairies or the Maritimes.

By just offering payments to dairy farmers, everyone loses – dairy farmers most of all. Farmers deserve more than just a cheque once a year. Otherwise, we should just call it dairy welfare.

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