Canadian consumers would enjoy a long-term reduction in dairy prices and the country's dairy industry could be even more profitable than it is under the existing supply management system, under a reform proposal released by The Conference Board of Canada.
According to its website, The Conference Board of Canada is an independent, not-for-profit applied research organization made up of specialists in economic trends, organizational performance and public policy issues. It does not lobby.
The report, Reforming Dairy Supply Management: The Case for Growth, proposes a three-part reform in which Canadian consumers could eventually save an estimated $2.4 billion annually, and farmers could gain almost $2.5 billion from exporting high-quality dairy products to markets where demand is growing rapidly.
"A win-win reform package needs to be accompanied by a new vision for industry growth," said Michael Bloom, Vice-President, Industry and Business Strategy. "Dairy producers and rural communities have a lot to gain from reform under a growth scenario. More efficient producers are more likely to see an upside. But we have to change the way we do business."
Under the proposal:
• • Supply management reform needs to coordinate three policies: liberalizing prices, unwinding milk production quota and reducing trade barriers.
• • A temporary consumer levy on dairy products could serve as transitional funding as the system is reformed.
• • Under reform of supply management, consumers would see lower prices over the long-term and Canadian producers would more than make up for lower domestic prices through export sales.
The report argues that the transition to a new system must address issues of funding, efficiency, equity and duration in a comprehensive manner.
"Supply management reform must coordinate the three major aspects of supply management: price setting, quota, and trade barriers. Cutting out any single part of the reform makes the entire system unstable," said Bloom.
Production quota is, in effect, a licence to produce milk, which serves to limit the supply. Quota has become a valuable asset in the dairy industry, with large sums of money tied up in its purchase and sale. Any policy change must address quota reform; the Conference Board recommendations that it be done through a book value buyout (the price paid for the quota at purchase). Such a reform would cost an estimated $3.6 billion to $4.7 billion, according to the report.