Canada’s
provincial marketing boards have carved up their food-processing sector so that
it’s now a problem, says Al Mussell in his most recent policy paper.
While
food-service and retail companies have increasingly become national, they’re
finding it difficult to buy from Canadian food processors who are also
national.
One of the reasons
is that provincial marketing boards allocate scarce supplies among their
provincial processing plants.They can't buy from farmers in other provinces.
In the chicken
industry, this constrained the processors so Ontario processors bought chickens
from Quebec farmers and Quebec processors bought from Ontario farmers – until the
provinces banned them from buying out-of-province birds.
The situation is
similar for the dairy industry where milk marketing boards allocate supplies
via plant supply quotas.
Mussell says this
needs to change in a world moving to large-volume efficiencies and where the
gap between Canadian and U.S. prices therefore continues to widen.
“Differential
growth among provinces, and also
among primary, further processed, and niche products is an ongoing challenge in
chicken, despite a landmark federal-provincial
agreement reached in 2014 that acknowledges these factors,” writes Mussell.
“Managing
differential growth in table and processed eggs is
also a challenge, especially where processing is concentrated
in specific provinces and in which there are
pressures to limit levies used to implement sustainable breaker egg
pricing,” writes Mussell.
“The
magnitude of these various issues will challenge provinces
to cooperate effectively at the national level, even when
the significance is much greater than on other matters
in which they have cooperated quite
effectively."
Another
challenge is marketing surplus skim milk powder.T he World Trade Organization has already ruled that dairy supply management amounts to a subsidy on exports.
“Canada’s
dairy export limitations will further tighten when the Nairobi protocol comes
into full effect in 2021, greatly
exacerbating the impact of the structural surplus of skim - unless milk pricing
accepted as non-subsidized
is implemented for dairy exports,” Mussell warns.
(The Nairobi protocol will ban export subsidies).
He
doesn’t say how much strain this would put on public acceptance – i.e. a much lower price for milk and dairy products
destined for export than Canadians will have to pay for the same milk and
products from the same farms and milk-processing plants.
The
full paper is available online from Agri-Economic Systems at www.agrifoodecon.ca .
There is one solution to this provincial balkanization, and that's to make supply management national with no provincial marketing boards.
That would free farmers to trade quota from coast to coast and free processors to buy from any farmer.
That should be a huge benefit to both farmers and processors, but provincial politics will stand in the way. But that's just another of the many costs of having bureaucrats managing markets instead of allowing competition to allocate resources.
