Supply management is a set of policies that control the price of products like milk, cheese and eggs in Canada.
The longstanding policy has come under fire recently from several Canadian politicians including Conservative party leadership hopeful Maxime Bernier, who is a prominent voice against the controls.
The U.S. dairy industry has also complained that Canada's dairy supply management controls are contrary to free-market principles and don't let U.S. farmers compete fairly.
Bruce Sargent is a fourth generation dairy farmer, whose family operates a farm near Toronto.
He says, there's another side of the story, that more Canadians need to hear.
The Morning Edition host Craig Norris spoke with Sargent. The following has been edited for length and clarity.
Can you explain then why intervention in the marketplace is a good thing in this case?
The major question I get all the time is why are these commodities, turkey, chicken, eggs, dairy, supply managed, and there's very good reason for it. These products have short shelf lives. They are usually served fresh. And they have a long planning period to come into production. A cow takes ten months to have a calf to be able to make milk. So we can't respond to changes in demand instantly and the only way to stop a cow from milking in the middle of its cycle, isn't one we want to undertake...if you get what I am saying.
You can't just stop a cow from making milk, so that's why these commodities work best. They're also food staples, which a grocery store will often use as a loss leader to attract customers. And the important thing is that in Canada, that loss can't be transferred to the farmer. In the U.S. we see that that loss is transferred to the farmer, and we see that in Australia as well.
Milk is cheaper in the U.S. They don't have supply management. Consumers here would probably like cheaper prices...
Statistically, they are very close, and the big thing to remember is that there is the exchange rate on top of that as well. And so a lot of people assume that they should just be the exact same price. There are also costs in Canada that aren't the same in the U.S. We have longer winters than a lot of regions in the U.S. We have higher electricity costs. There are so many things that go into the cost of milk that we can't just assume that we should have the same prices as them, but we already are very competitive.
How could the Trump presidency further exacerbate things for your industry?
Trump jumping in a couple of weeks ago really reflected his ignorance towards the topic. So he was standing up for Wisconsin dairy farmers, that 75 of them had lost their processor. But what really happened was that processor decided to vertically integrate and make their own dairy farm.
Those farms now, thankfully, have homes that their milk is going to. But that can't happen in Canada. There can't be non-family corporate ownership of quota, so that a corporation can't purchase quota and vertically integrate and cut the family farm out.
What do you think would happen to the dairy industry here without supply management?
If we assume that the U.S. is the perfect free market situation, their average herd size is twice what Canada's is. So without supply management it wouldn't be unreasonable to assume that we would lose the bottom half of our average, we would lose almost half of our dairy farms. So those farms are competitive and efficient and hardworking families that are successful right now because they are paid fairly.
In the U.S., the farmer has zero power to negotiate contracts for the price of their milk. They are price takers. And so they have to work with whatever they are given no matter what their costs are, and that is not a fair market for them to operate under.
A lot of people say that we are treated unfairly because we are guaranteed to be paid, but I would say that it is unfair to assume that a farm can operate under whatever price the processor gives them and we have seen in Wisconsin that they have actually lost 50 per cent of their dairy farms in less than 20 years under that model.
To bring this back down to the every day consumer, when was the last time that you felt good about the value that you were paying at the pump for oil, for gas?
Now assume that milk is going to trade on an open market, like oil, and dairy farmers are going to be paid based off of that system, and the value they could get per litre could fluctuate $0.30 per day. Today it could be $1.00, the next day $0.80, only because of speculation on the open market.
Costs are still the same, you still have to work 13 hours per day, but because economists on Bay St. have traded your commodity, your value has gone down $0.30 in a day per litre.
You've said not enough Canadians are aware of what you've just said. What do you do to get the word out?
We're doing videos, we're reaching out, we're writing letters to the editor, we really want this conversation to be national, but it needs to include the farmers.
It's not fair for this conversation to be happening between academics and economists and politicians and the farmers be omitted. Because when an economist looks at supply management, they see supply, demand and dead weight loss and they're done, get rid of it.
But there are a ton of business case examples for why it works and people need to hear them.