Bruce Muirhead has traveled the world, both in person and in his research of global dairy and egg marketing systems. He has a message Canadians will be proud to hear: Nobody does it better.
“It seems to me the way we’ve regulated is much, much, much more efficient than any other system in the world,” said Muirhead, history professor at the University of Waterloo, whose own history is studying Canadian trade and agriculture policy.
Muirhead said supply management has benefited both farmers and consumers. On the consumer side, it has provided a reliable and seamless source of dairy products for Canadians. It’s also very affordable. “Our dairy and eggs, when you normalize the exchange rate—about 40 per cent of U.S. dairy products come from cows on growth hormones—when you look at all that, our dairy farmers are as competitive as American dairy farmers,” said Muirhead.
Muirhead found no evidence that Canadian consumers were paying more for egg or dairy product purchases due to supply management, as compared to pricing for our U.S. neighbours.
“When you look at the prices, very often our stuff is cheaper than theirs. An Ontario corner store sells milk for $4.47 for four litres of milk (four litres sells for slightly more, but still averages under $5 in Manitoba in most groceries). In New England, it is $5.50 to $6.00,” he said.
Globally, the independent Nielsen’s Fresh Milk Price Report puts Canadian milk prices somewhere in the middle of the pack, between countries like New Zealand, Australia, the European Union, Russia, China and the U.S.
“The thing is if you can buy milk in the U.S. cheaper than that, it means the dairy farmer is subsidizing the consumer, which doesn’t seem to be a very viable model,” Muirhead said. In the U.S., the federal government pays massive subsidies to its dairy farmers to mitigate their losses and make it appear the system works.
In every other country with cheap agricultural products, with the exception of Canada, farmers are actually called upon to subsidize consumers by having to sell below the cost of production.
At a Shoppers Drug Mart where Muirhead lives in southern Ontario, eggs are often sold as a loss leader for $1.99 per dozen. The chain store takes the loss, not farmers.
It’s much different elsewhere. In Australia, for example, farmers negotiate a price for their eggs with the two main grocery chains, Coles and Woolworth. But they frequently receive a text or email halfway through the month, telling them they aren’t getting the contract price because the store didn’t meet its targets. So farmers are paid a lower price, perhaps 50 cents less per dozen. That’s more the rule than the exception in the world. “In every single other country, those loss leaders come directly out of the farmer’s pocket,” said Muirhead.
What would dairy in Canada look like without supply management?
“We’d be swamped with a tsunami of American dairy products,” said Muirhead. Fluid milk isn’t the greatest export product, due to its bulk and perishability. The big trade is in dairy products like cheese. But in Canada, most major cities are fairly close to the U.S. border, so milk would be shipped from the U.S. and flood Canadian markets. “They would drive our entire sector out of business. The same with eggs,” Muirhead said.
Economies of scale of very large farms is the main reason. Another unfair advantage is labour on many megafarms comes from undocumented immigrants who are not paid minimum wage or have benefits and standards like other workers, said Muirhead, quoting from two Texas A&M studies from the last decade. A high proportion of American dairy farms also use a bovine growth hormone that is banned in Canadian milk production. And U.S. farmers get more subsidies. “I think we’d rue the day,” said Muirhead.
Louis Balcaen was a dairy farmer for 40 years and is a former Dairy Farmers of Manitoba chair, Manitoba Dairy Association president, Canadian Dairy Commission vice-chair and Dairy Farmers of Canada president.
At 77, he is old enough to remember when there were still thousands of Manitoba farmers with dairy cows producing milk, as compared to the 248 dairy farms there are today in the province.
“There was milk produced on almost every farm. A lot of it was separated and people would take the cream and sell it to the butter factory, or sell the whole milk to a cheese factory,” he said.
There were from 500 – 600 farms shipping fluid milk to Winnipeg alone, all located within an hour’s drive of the city, he said. His father was a member of that group, called the Winnipeg District Milk Farmers Co-operative Association, formed in 1923. Balcaen bought his father’s dairy farm in 1962. When he started, there were 92 dairy farms in the La Broquerie area alone.
“Today, there are just nine, and any one of those nine farms produces more milk than the 92 combined,” he said. This is as a result of supply management providing the revenue stability for dairy farms to invest in improvements to feeding, breeding, cow health and equipment to increase production per cow.
Manitoba’s supply management in dairy started in 1972 under The Farm Products Marketing Agencies Act. It followed the lead of marketing boards in Ontario and Quebec that still exist today, producing more than 80 per cent of Canada’s milk.
In addition to 248 dairy farms in Manitoba, there are 11 dairy processing plants, from small niche processors to multinational companies, such as Saputo and Lactalis. The dairy industry in Manitoba generates 6,300 jobs, contributes $105.2 million in taxes and contributes $568 million in goods and services. Nationally, dairy produced $2.9 billion in taxes in 2018, contributed $16.1 billion in GDP and supported 177,781 full-time equivalent jobs. There were just over 10,000 dairy farmers in Canada in 2020.
The whole point of supply management in the first place was for government to get out of constantly bailing out the industry, said Muirhead. There were huge surpluses of dairy and poultry products in the 1950s and 1960s, followed by years of shortages. In 1962, Prime Minister John Diefenbaker’s finance minister, Donald Fleming, expressed concern that the government was responsible for $60 million in subsidies (equivalent to more than half a billion dollars today) to prop up dairy, egg and poultry farmers, and it couldn’t afford that. These subsidies were related to support programs that paid farmers when their incomes fell below a floor price.
“Farmers would have two good years in dairy and four bad years. You get under supply and too many people get into the industry, then the prices crash and the government is on the hook,” said Muirhead.
The stability that supply management provides has allowed farmers to reinvest in those sectors. If farmers are living hand-to-mouth, which is how it is in much of the world, it’s hard to make any capital investment.
“We see this with dairy farms in the U.S., where they keep farming until their equity is gone, and then they more or less have to get out of farming,” said David Wiens, dairy farmer and current chair of Dairy Farmers of Manitoba.
Supply management has also made it so that processors can’t pit one farmer against another to lower prices. Before supply management, processors could easily wait out farmers because the product is so perishable.
“We can’t put our milk in a bin and store it for six months, waiting for the price to improve. We simply have to move it off the farm every other day,” said Wiens.
By comparison, Wiens knows of dairy farmers in Wisconsin who have been given a month’s notice that a processor no longer wants their milk and the farm is forced into bankruptcy.
Processors also benefit by getting a steady and reliable flow of milk. When the pandemic first struck in March 2020, it created volatility in the dairy sector for about a week, but the marketing system held up. Farmers did have to cut back production for a period, but they did so together, and that spread the losses.
How is price stability maintained? Price is determined using a formula that is based 50 per cent on the average cost of production for dairy farmers across the country, and 50 per cent on the Consumer Price Index. That’s provided dairy farmers and other supply-managed sectors with an enviable record of not having to go through boom and bust cycles—and having to be regularly bailed out with subsidies, as they do in other countries.
Not many countries still have supply management. New Zealand, United Kingdom and Australia all deregulated in the past 35 years. Some countries still running supply management systems include Israel and Korea.
In Manitoba, dairy farms are major contributors to rural economies, too, supporting truckers, veterinarians, nutritionists and feed suppliers. They also create on-farm employment. The industry continues to make significant contributions to well-being of communities, notably through an initiative that demonstrated innovation and community spirit.
In 1992, Balcaen realized there were families in his home community of La Broquerie, 69 kilometres southeast of Winnipeg, struggling to provide nutritious food for their children.
As then-chair of Dairy Farmers of Manitoba (DFM), Balcaen worked with Parmalat (now Lactalis) and bulk milk hauling companies to establish a program that would see Manitoba dairy farmers donating over 14,000 litres of raw milk per month to be processed into one-litre cartons to then-Winnipeg Harvest, now known as Harvest Manitoba, the province’s largest food bank.
In 2009, Bothwell Cheese joined the effort and began turning part of that milk donation into cheese for the food bank. Harvest Manitoba distributes the milk and cheese, along with its other food donations, to 300 community food banks and agencies throughout the province. Saputo also donates dairy products to Samaritan House Ministries in Brandon. In 2021, the current monthly donation of milk by dairy farmers is just over 26,000 litres being processed into both one litre cartons of milk and cheese.
This kind of working relationship provided a helping hand during uncertain times, not only helping families, but also helping to meet the increased demand on food banks during the COVID-19 pandemic. For its part, DFM donated an additional 60,000 litres of milk to support Harvest Manitoba’s effort to help families in need during this extraordinary time.
Waldie Klassen, 80, recalled the origins of supply management in the feather industry. He was on the first board of directors of the Manitoba Chicken Producers, and serving for more than 40 years, serving as chair, when he wasn’t chair of the Canadian Chicken Marketing Agency (now Chicken Farmers of Canada). A member of the Manitoba Agricultural Hall of Fame, he has received numerous awards for his work with chicken organizations in his career.
“It started off with a huge growth in the industry, and then it crashed, and we were going to lose a lot of farmers in Manitoba,” said Klassen, looking back to the 1960s.
The first step was a farmers’ meeting in Morden where everyone agreed to cut back, but production still kept rising and prices kept falling.
“I owned a couple flocks where I still owed the feed company after I finished selling them,” said Klassen.
The chicken farmers marketing board was formed in 1968. Quotas were introduced to stabilize production.
“Our goal was to have enough chicken for the marketplace,” he said.
However, by opting for supply management, chicken farmers gave up hope of ever exporting much to the U.S. That hasn’t been a concern.
“There was always so much agricultural subsidy going into the U.S. that there was no way we could compete,” said Klassen.
One of the stipulations to obtaining supply management is the government would not be involved. The chicken sector has not had a direct subsidy since, he said.
“I think it’s a really big success story,” said Klassen. “It did a lot of good. It kept a lot of small farmers in business. It’s always those people who think they have to have more, more, more all the time that control everything. But it works on co-operation, too. You have to have a certain amount of co-operation if you want to make this system work, and people were willing to co-operate.”
There are 124 chicken and 23 broiler breeder farms in Manitoba, which contribute $350 million to the provincial GDP. They account for 4,500 jobs and pay $85 million in taxes. There are two federally licensed chicken processors, three provincially licensed, and four hatcheries. Chicken consumption in Canada has more than doubled in the last 40 years, from 16.9 kilograms per capita (17.7 per cent of all meat consumption) in 1980, to 35.1 kg per capita (38.4 per cent share of meat consumption) in 2019.
The egg marketing board came in a little later, in 1972, for similar reasons. Today, the egg sector contributes $115 million to the Manitoba economy. There are 170 egg and pullet farms whose birds produce about 76 million dozen eggs per year. The average egg farm has about 15,000 laying hens and produces about 380,000 dozen eggs each year. Manitoba produces about 10 per cent of Canada’s total number of eggs.