Canada and Japan largely stand alone with supply control systems governing, and at times protecting, their respective dairy industries. Realizing supply controls hinder both internal and external competition and deter innovation, two major Canadian universities came together to develop a visionary road map to potentially revamp its government-run dairy supply management system. The scholars predict that failure to fundamentally change internal supply and demand controls may cost Canada half its remaining dairy farms this decade.
There are a number of mega forces working against Canada’s supply management system, which was formed in 1971. For starters, the world is moving to a free-market system. That has become abundantly clear in the three most recent trade deals inked by Ottawa with Europe, Oceania, and North American countries. The authors from Dalhousie University and the University of Guelph who studied the matter predicted those trade pacts will give foreign interests access to 8.14% of the Canadian domestic market.
As these market shifts have taken place, some processors have shuttered plants in recent months to adjust for the fragmented domestic dairy demand. The fettered dairy demand includes the logistical matter that 74% of all dairy farms are in just two provinces — Ontario and Quebec — where 58% of Canadians live.
The same supply controls also limit brand development. That’s because Canada’s provinces carry out internal dairy trade more like small nations when contrasted to commerce between U.S. states. As it stands, Mom and Pop dairy brands struggle to gain market access for artisanal cheeses because it’s a challenge to sell those products across provincial borders.
Then there is the matter of exports.
In Supply Management 2.0, the authors advise that Canadian dairy leaders develop a two-prong plan to reduce general tariffs on dairy products and develop an export strategy. While tariffs should not be eliminated outright, a gradual reduction should happen over a 20-year horizon. The strategists also advise dairy leaders to develop a new class of milk for the export market and a Canadian export brand.
Will the report gain traction, or will dairy leaders double-down to protect the current supply management model? The choice largely is that of Canada’s dairy farmers. However, all of Canada’s citizenry will eventually have a say if our northern neighbors continue to call for financial support to offset losses due to the recently inked trade deals.
