Consumers milked by dairy lobby
I love milk as much as the next lactose-tolerant guy, but my cereal habit is an increasingly difficult habit to sustain.
Not only are my beloved Cheerrios becoming more expensive by the minute it seems, but so too is the milk I pour all over said Cheerrios. Of course, I would love them both to be cheaper, but there is a reason why they are that expensive and I am sure that competition in the market will ensure that they remain reasonable in price, right?
The Cheerrios are fine. It’s the milk that I am worried about. Why is it that other countries can consume safe and quality dairy products without having to take out a second mortgage?
The fact is Canada has a very strong dairy-industry lobby. The lobby has pushed for and sustained what is known as Supply Management for years and have not once loosened their grip.
Supply Management is an arrangement wherein an organization (in this case the Canadian Dairy Commission) implements a system that mandates regulated supply of products with the stated intent of “stabilizing revenues and avoiding costly surpluses.”
Unfortunately, this manipulation of the market means that consumers are paying for these “stabilized revenues” and individual producers are boxed-in from pursuing expansion of their operations.
According to the Dairy Farmers of Ontario (DFO), the fixed pricing that is a result of supply management is meant to be based on production costs.
Using various indicators, including a representative sample of 100 Ontario dairy farms, provincial COP (Cost of Production) is determined which is done in other provinces and subsequently used to determine the national COP.
From there, the price is also buoyed by administrative costs including promotion of milk and milk products, transportation cost (from farm to dairy), administration of DFO and for research. While these costs are not explicitly built into the price, they are inevitably paid by the consumer in the end—this is the only revenue stream in this process.
The results are profit margins that far exceed any other agricultural industry in the country, and even exceed the average Canadian small business to the tune of 200-300 per cent, according to the Consumers’ Association of Canada.
The question that remains is two-fold: firstly, why are we punishing consumers? Secondly, why is it that only the dairy industry is privy to this special treatment?
I have many friends who are farmers, as I come from a rural area of central Ontario.
Most are not in the dairy business and constantly struggle, while their colleagues in the dairy industry are given special privileges with supply management.
It appears to me that we need to make a decision: we either do supply management for other major agricultural sectors or we phase out supply management.
The fairness factor here is pretty clear; the government is picking and choosing who to support and who not to support.
With that said, it is pretty clear that a vote to expand supply management is a vote to further bloat bureaucracy and punish the consumer.
Bureaucracy is important, but we also know that it is inherently inefficient in many ways and we must be cautious when proposing major expansion of the bureaucracy.
This goes without mentioning the clear inconsistency with market principles that this practice promotes.
I see that there can be a place for regulation and for other government intervention into the economy, but we should err on the side of allowing the market to run its course rather than meddle in industry affairs.
This is especially salient given that other jurisdictions have functioning dairy industries that provide the safe and quality dairy products that we are all looking for. It appears that this government intervention is misguided.
Let’s hope that our elected officials of any political stripe will start standing up for the consumer rather than the dairy lobby.
I don’t want to be milked for another penny.