Konrad Yakabuski’s latest piece in the Globe and Mail “Supply-managed Canada cries over spilt milk prices” is long on ideological opposition to supply management and short on facts; and, frankly, completely misses the mark.
In the article, Mr. Yakabuski laments the fact that the CDC increased the price of industrial milk by 2.76% beginning on September 1st, 2016. This decision should not come as a surprise to anybody – one of the legislated objectives of the CDC is to “provide efficient producers of milk and cream with the opportunity to obtain a fair return for their labour and investment”. What Mr. Yakabuski fails to mention in his article is that currently, less than 30% of Canadian dairy farmers are able to cover their costs of production. This decision will help fill the gap between costs of production and producer revenue, and help more Canadian farmers to make ends meet.
Mr. Yakabuski also doesn’t seem to understand the inherent contradiction when he correctly points out that the world is currently awash in excess milk; while at the same time suggesting that it would be in Canada’s best interests to play a bigger role in the already oversaturated global dairy market. The fact is, dairy is not a major export commodity. Currently, only 9% of all global milk production is exported, and the market is saturated with countries such as New Zealand, who are at a competitive advantage due to lower costs of production – costs that even New Zealand farmers can’t cover at current world prices. Canada can play a role in the global niche export market, but is at a natural competitive disadvantage compared to warmer countries due to the high costs of production related to our climate.
In addition, Mr. Yakabuski seems to be drawing a direct link between increases in the farm-gate price to increases in the retail price. The truth is, there is no direct link between the price a farmer receives, and the retail price. Producers are at the beginning of the value chain, processors are in the middle, and retailers are at the end – the retailers have always set the retail price themselves. What Mr. Yakabuski doesn’t mention is that, in 2014, the CDC announced a price decrease, and the price that farmers receive for their milk went down significantly. We had hoped that consumers would see a corresponding savings at the store; however, the retail prices for dairy products nonetheless went up by 1%. It is also significant to mention that if we look at the latest evolution of the Canadian consumer price index (CPI), the CPI increase of dairy products is well below the increase of all other food commodities – yet no one is talking about the poorest Canadians not being able to purchase fruits and vegetables.
Mr. Yakabuski goes on to reference the current global dairy crisis, which is tied to factors including an oversupply of milk on the world market. When speaking of the impact on New Zealand, he correctly notes that the “recent turmoil in the global market has hit New Zealand farmers (and their bankers) hard”, and continues by stating that “milk prices have fallen below production costs for many farmers, and, with so much of the national economy tied to the dairy sector, the entire country is feeling the pain”. On this, we are in complete agreement – which is exactly why Canada is focused on serving our domestic market.
Furthermore, he continues by noting that the European Commission recently “announced its second €500 million ($719 million Canadian) aid package in less than year to help dairy farmers adjust. The plan includes €150 million to entice less efficient farmers to voluntarily reduce their milk production.” That makes more than 1 Billion Euros in bailout money to dairy in Europe in less than a year – compared to Canadian dairy, which earns a fair return for our production via the market. Perhaps more important in this quote is the 150 million Euros that are on offer to entice less efficient producers to voluntarily reduce their production. Although voluntary, this is a supply management measure which aims at bringing production in line with demand. While Mr. Yakabuski is correct in noting that a reintroduction of the milk quota in Europe is politically not an option and legally not possible – this simply means that the EU commissions hands are tied. It does not mean that they wouldn’t take the option if it was available – instead, they’ve opted for voluntary supply management (with reward).
Meanwhile, in Canada, we believe that Canadians will continue to see the value in local Canadian dairy products. In a survey we did last summer, Canadian consumers overwhelmingly supported Canadian dairy farmers, putting value on the quality standards we observe on Canadian dairy farms. We are proud of our system – and Canadians care about where their milk comes from – because Canadian milk matters.
Source: Dairy Farmers of Canada
