Mythbusting the critique of the dairy quota system

It's hard to get straight facts about the much maligned quota system which governs Ontario dairying. Despite the fact that every single major farmer organization supports the system - from the National Farmers Union to the Ontario Federation of Agriculture to the Christian Farmers Federation of Ontario - the major media outlets tell us time and time again just how awful it is. From staunchly conservative papers like the National Post and Maclean's to liberal papers like the Toronto Star, even in academia such as this paper from the University of Calgary's School of Public Policy, the average Canadian hears nothing but opposition to supply management.

It seems that everyone is against supply management except for farmers themselves, for whom it has done exactly what it was intended to do - keep milk prices consistent and fair. So where's the truth to it all? What is supply management really doing for Canada? We're going to break down some common misconceptions about the quota system, and what its real impact is on Canadians.


Myth: The quota system, with the total cost for a single head of milking cattle being above $20,000 in most provinces, makes it impossible for new farmers to break into the industry

"if you’re a new farmer, [supply management] is a major barrier to entry: as much as 75 per cent of start-up costs." - Maclean's Magazine 15/08/11

Fact: The reality is that the quota system has several options set up to provide a start-up quota to new farmers. As an example, Dairy Farmers of Ontario, the body responsible for transfer of quotas, offers the New Entrant Quota Assistant Program, which will loan new farmers 12kg of quota for up to 16 years without cost - which, in Ontario, is currently a $300,000 value.

Also, quotas are not the majority of start up costs for most new farmers. With average farm land prices at $4000/acre, a single pedigreed Holstein heifer at $2600 - $3400, and state of the art milking technology running a $210,000 price tag, dairying is a tough game to break into, which is why New Entrant program exists to lessen the burden.


Myth: Supply management is effectively a subsidy from the Canadian consumer to farmers, since dairy prices are much higher in Canada than in countries without supply management.

"Canadians pay up to three times as much for milk than their neighbours to the south... dairy production quotas alone cost the economy $28-billion per year. That’s thousands of dollars per household." - National Post 20/09/13

Fact: unlike most major dairy producing countries, Canada does not directly subsidize farmers a single nickel. The United States, a country without supply management, provides over $4 billion in direct subsidies annually to the dairy industry. In no sense of the word is supply management a "subsidy", it is in fact supply management which allows dairy farmers to continue farming without any subsidies whatsoever. And, the quota system itself does not cost the economy a single penny since quota exchanges are entirely farmer-run, farmer-operated, and farmer-funded, and are not government institutions.

As to the allegation that Canadian dairy costs 300% that it does in the USA, the current average retail difference between US and Canadian milk is $0.44/L or a 29% increase, the current retail different between US and Canadian cheddar is $0.93/kg or a mere 6% increase. This is actually lower than the general difference between the two countries in food prices, which are 57% higher on average in Canada than in the US.


Myth: Eliminating supply management would reduce the price of dairy products for consumers.

"There is no question that phasing out supply management brings benefits to almost all members of society, excluding the producers, through lower prices and especially to low-income people." - Professor Ian Lee, Carleton University Sprott School of Business

Fact: When Australia eliminated supply management of dairy in June 2000, the price of milk rose three times as fast in the proceeding 3 years as it had in the preceding three years - having increased only $0.9/L from 1997-2000, but having increased $0.27/L from 2000-2003. Over the same time period, milk prices in both Canada and New Zealand (Australia's neighbour which has retained its supply management system) remained near-constant. The only side effect that Australia's experiment in eliminating supply management has produced is making farm gate prices for milk more volatile.