In defence of free markets and agriculture

Although I grew up in Saskatchewan, I really know very little about agriculture.  My uncles and aunts were mostly farmers in the Melville/Goodeve districts of East Central, Saskatchewan and I have fond memories of familial visits and occasionally helping out with the harvest once I was old enough to drive a grain truck.

Farming has certainly changed in the last 30 years or so.  A recent trip to the farm of Red Deer MP Earl Dreeshan reinforced for me that in order to survive, farms have gotten bigger and equipment more expensive.  It is big business, modern but still reliant on uncontrollable factors such as weather and markets and therefore extremely risky.

As I stood yesterday at the Walde farm just south of Kindersley, Saskatchewan to celebrate Grain Marketing Freedom Day, I was struck by just how momentous this rural moment was.  Western Canadian Grain farmers now have options—if they choose to, they can still sell their grain through the Canadian Wheat Board.  However, if they wish to sell their wheat or barley directly to a mill or carry it across the border, they now have the liberty to do so.  I believe in free markets and although I do not represent a single grain farmer, I am pleased that western grain farmers are no longer facing a monopsony.

Although western grain farmers were disadvantaged by the former monopsonist single desk at the CWB, it is quite the opposite for dairy, egg and poultry suppliers who are shielded from competition by the monopsonist supply management boards.  Farmers, currently holding a quota costing, in the case of dairy: $28,000 per cow, enjoy tariff protection ranging from 168% for eggs to almost 300% for butter.  The high tariff discourages external competition, while the quota prevents domestic competition.

As indicated, I know little about agriculture, but I have a reasonably good understanding of economics.  Controlling (in fact reducing) supply invariably increases price.  Good for producers; terrible for consumers.  Worse, this market distortion is regressive.  Lower income Canadians allocate a higher percentage of their incomes on food necessities (milk, eggs, cheese, chickens) than do middle and higher income consumers.  Low- income Canadians spend 20% of their income in grocery stores, whereas upper income groups spend less than 5%.  Economists have calculated that Canadians pay 38% more for milk than US consumers and if your family consumes 4 liters/week, that equals $300 per year.

A market economist would consider a system that limits competition and fixes prices to the detriment of the consumer a cartel; however, when the legislation creating the supply management boards was created, Parliament specifically excluded them from the operation of the “Competition Act”.   The supply management system therefore results in a legal transfer of income from millions of Canadian consumers, who pay higher prices for regulated food products, to less than twenty thousand domestic farmers.

It is difficult to justify maintaining a sector of our economy that is protected from competition thanks to a government-sanctioned system that restricts supply to ensure a higher price.  There are 34 Million Canadian consumers but less than 14,000 dairy farmers, 3,000 poultry producers and 1,000 egg farmers.

Possible entry into the Trans-Pacific Partnership is going to necessitate a critical examination of supply management.  I do not represent any of the 14,000 dairy farmers who benefit from supply management; I do, however, represent 140,000 consumers of their artificially priced milk.  Their interest also necessitates a critical review.

As the grain farmers near Kindersley can attest, grain and beef farmers in Western Canada have proven that they can successfully compete without a government-sanctioned cartel.

Brent

5 comments for “In defence of free markets and agriculture

  1. Andrew
    August 3, 2012 at 11:47 am

    I’m disappointed in this posting because it clearly is only stating half the side of this debate. Yes there are tariffs in place restricting access to products, however only after a very healthy amount of product is let in. In fact we let 6% of our dairy product in tariff-free, while the US lets in only 2.5%. We let in 7.5% chicken tariff free, while New Zealand lets in 0%. Many producers feel that we should only discuss supply management after other countries come up to our level in free trade. Second is the idea that free-trade is somehow black and white. Free trade is great on paper, it will never exist in real life. The EU blocks imports of genetically modified crops from North America, despite science continuing to prove they are as safe as conventional grains. That isn’t free trade. To be part of New Zealand’s dairy co-operative produces must by shares equal to the amount of milk they will be permitted to ship. They control close to 90% of the market. That isn’t free trade. The US pays billions to producers whenever they are not meeting their cost-of-production…levels that our treasury couldn’t come close to paying out. That isn’t free trade. Let’s stop pointing fingers at each other in this country, and start pointing them at the ‘free-traders’ of the world that are far more controlled and far more closed than we are.

    Brent, please make sure you share the whole story.

  2. Jay
    August 3, 2012 at 3:40 pm

    Nice to see a Conservative MP taking a stand on eliminating the boards. I wonder how many tax paying new businesses would start up right here in Canada if we were free to sell milk, sell eggs and sell chickens just because we wanted to. Imagine the freedom.
    If Canada is worried about access to other countries markets, let us have tariffs on those specific countries.
    Weekly I cross the border and buy gas, eggs, cheese and milk because of how inexpensive it is. Think of the lost Canadian jobs and tax revenue from this activity that me and many, many other Canadians are doing. My preference would be to buy in Canada from Canadian producers.

    • Robert Halter
      August 13, 2012 at 4:33 am

      Jay if you only knew what you are advocating? When I live in BC its only 5 klms to shop in the U.S. for cheaper goods like you say. Though my father makes the trip at least once a week to save 15 to 20 bucks a week,. an amount he can easily afford in regards to his income. It does however, make a difference to me, but not enough to warrant what I would have to answer to my conscience for doing so. Nor do I shop at Walmart very frequently for the same reason. My point is this. Most of his savings comes from the difference in prices for beef which I believe has always been produced in Canada without any marketing boards or Government subsidies that I know of? So much for the argument that the free market system is whats best for the consumer in this Country eh?

      I am convinced by first hand experience that all this talk about free trade, free markets and the capitalist way is exactly that. Just talk and isn’t based on any foundation of truth whatsoever. Which if we profess or fashion our lives on the premise of it. All we our doing is revealing, to the powers that be, is how stupid we are. And it would be naive to think they give a damn about us and would not use this knowledge to take advantage of us.

      All of our worlds are under attack by a group of people who believe they are entitled to most, if not all of the proceeds of our livelihoods and the sooner more of us come to the realization of this the better. Because with this knowledge we become enabled to band together and put a stop to their proposed agenda.

  3. Farmer
    August 5, 2012 at 8:38 pm

    If you are uninformed about the facts of supply management, you should at the very least do your research before making such statements as a public figure. Please visit yourmilk.ca for the real story.

  4. August 7, 2012 at 1:11 pm

    It is great to see a member of parliament with the courage to stand up to the Supply Management Lobby. This system of agriculture production represents a hidden tax on staple foods such as milk, chicken and eggs which is estimated to be in the order of 60%. When you see people complaining about HST and/or GST taxes just think what an uproar these Supply Management taxes would generate if they were visible.

    You don’t need to be a farmer to understand that restricting supply, enforcing inefficiencies, limiting innovation and preventing domestic market access with expensive entry fees (quota) is going to increase consumer prices – That is what Supply Management does and it is the poor consumer who pays the price.

    Scare stories about preventing the import of poor quality foreign food have no substance and play on consumer fears – Canada already imports 7% of chicken and exports about the same amount. Ironically, those chicken exports are subsidized by the Supply Management System because cartel farmers produce at one price for the domestic market and another much lower price for the export market. These export chickens are of course grown in the same barns as their domestic counterparts but they are sold for a lower price (because nobody outside of Canada would pay our high domestic prices).

    So what does Supply Management achieve for Canada? It makes a few cartel farmers very rich and very happy and so far most of our politicians are either milked, plucked or feathered into believing they are doing something good for Canada – Shame on them for behaving like Sheep (which fortunately do not fall under the Supply Management umbrella).