Jen Gerson: Screw Big Dairy
It is right and proper to question supply management.
In ordinary days, there would be little hay to be made about this tweet from CPC leader Erin O'Toole. Laying numbers on everyday items — like a plate of breakfast — is a stock standard way to communicate a complicated topic, like the effects of inflation. It makes rising prices relatable to ordinary people.
"Oh, that sip of coffee cost me a few more pennies. That'll add up!"
Fine, fine.
And I won't even take this opportunity, however sorely I am tempted, to tease Gerry Butts for a tone deaf joke about the breakfast's cholesterol level. (Like, just eat a pancake, man!)
No, what makes the tweet catnip is the sight of a Conservative politician complaining about the cost of a plate of food in which fully half of that plate is supply managed; a policy that his own party has made every awkward attempt to avoid attacking for crass political reasons.
Many of you readers have listened to the likes of me complain about supply management over the years, but for those of you whose eyes glazed over until you started to notice your rent money disappearing into your grocery bill, here's a very quick primer.
The supply management system insulates eggs, dairy, and poultry from the vicissitudes of the free market, assuring established farmers in these few sectors a guaranteed return to produce a pre-ordained supply of these products. The federal and provincial governments oversee the system via various dairy commissions.
Some government involvement in dairy has been a feature of our agricultural system since the late 19th century, however the system as it exists today came into effect in the '70s. It consists, broadly, of three policy mechanisms. Prices are set internally to assure farmers receive a healthy profit for their labour, farmers are protected from competition though ruinous import tariffs, and then supply is managed via a quota system.
As one might expect, this has created extraordinary economic distortions, assuring that a container of milk in Canada is radically more expensive than an identical product south of the border. (Yes, American milk is subsidized too, although less than it once was. And from a consumer's perspective, so what? If the Americans want to subsidize cheap milk to send north, all the better for shoppers.)
In order to keep production at a steady level, the system has to keep newer, cheaper players from entering the market, and this is accomplished via a quota system that has led to absurd economic incentives and outcomes. According to this report from the Canadian West Foundation from 2016, the quota was valued at about $28,000 per cow. That means that the value of the right to own one milk-producing cow far outweighed the actual value of the animal — and someone seeking to start a dairy farm would need to pay for millions of dollars worth of quota in addition to cows, land, food, and farm equipment.
The quotas themselves are a multi-billion dollar racket; this is roughly akin to the way a license to run a taxi costs hundreds of thousands of dollars in some cities, many multiples of the value of the car itself. When a government creates a regulatory system that imposes artificial scarcity, the value of the thing regulated radically increases.
Since the supply management system was introduced, much of the agriculture has consolidated; this, combined with the value of the quotas they possess mean that most dairy farms — far from being quaint, picturesque family homesteads — are multi-million dollar operations, with farmers themselves making six-figure profits after paying their own wages.
The system has also proved a obstacle in multiple free-trade deals, arguably making it difficult for other agriculture sectors to compete globally.
And who pays for all of this?
Well, of course, you do.
You pay for it in radically reduced options for cheese, butter and milk. And you pay for it with inflated grocery bills. The average family pays hundreds of dollars more per year in groceries than it would absent a supply management system. This is essentially a hidden consumer tax folded into your grocery bill to support a wealthy, politically well-connected corporate cartel.
And it's not a cartel to be messed with.
Big Dairy is more powerful in Canada than the NRA is in the U.S. — and that's not a joke. According to the CWF reports, dairy organizations spend an estimated $100 million per year on advertising and lobby efforts. This ensures that the systems' enablers who don't directly benefit financially from supply management are utterly convinced that if the system collapses, Canadian consumers will instantly be inundated by hormone-addled rat malk from the U.S.
It's also why Conservatives in this country have constantly abased themselves by paying fealty to a system better suited to Juche.
(The fact that most dairy farms are concentrated in Ontario and Quebec doesn't hurt, either.)
Max Bernier, now leader of the PPC, was fundamentally correct in his critiques of supply management. And he built a real political following among Conservatives by skewering this Canadian sacred cow and serving it up for BBQ. The irony of all ironies is that all Max Bernier needed to do to win over Conservatives in the long run was to simply tell the truth about Canadian milk.
Alas, it was not to be — after he lost to this guy.
Bernier, driven mad by the demons of lactose, went off the straight and narrow and anointed himself the official sayer of all things unsayable in Canadian politics — including a few items that are unsayable for good reason.
But I digress.
COVID-19 changed a lot of things. Not least among them, our assumption that we lived in a world in which our grocery shelves would always be amply stocked. After the last few years of panic buying and supply chain disruptions, the dairy cartel might have been able to convince a few of us skeptics that the system was a necessary evil. It might be worth paying a few extra hundred dollars for our groceries if that money secured us more local control over our food supply.
Instead, they raised prices to record-breaking levels to ensure their own producers continued to make bank during an inflationary cycle.
So, honestly, screw them. There was an opportunity here to build goodwill with consumers by assuring us they'd take the financial hit with the rest of us; that they'd keep their end of the food chain affordable when everything else went to hell.
But, nah, of course they didn't. Because Canadians will put up with absolutely anything. Including expensive breakfasts.
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Canadian dairy producers also used to hype the higher quality of their product, but that’s really only possible when Canadians are deprived of the ability to sample the competition. Canadian butter has taken a downwards turn this year with a weird change in consistency that’s make it sticky and no longer softens at room temperature. If you see New Zealand butter at Costco, grab some and try it: it’s like our butter used to be. Canadian cheese also tends to be insipid and dull. Again, contrast a New Zealand cheddar to the bricks you can get from a Canadian producer like Armstrong. The funny thing is that Armstrong used to be pretty good, until they were bought out by the Saputo conglomerate and trended towards the orange plastic it is today. This same conglomerate also deprives us of the pleasures of European cheeses with a restrictive import quota. Even when CETA increased those quotas, apparently large Canadian distributors were merely acquiring the quota and declining to actually import the product. This is an industry that’s been gaslighting the Canadian public about benefits that are easily dismissed if you look beyond Canada’s borders. Unfortunately, like so many Canadian programs and policies, Canadians simply take their word for it.
The NAFTA negotiations were a lost opportunity to end Canadian protection of the dairy, poultry, airline, media and telecom industries and blame it on Trump to deflect the political consequences.