The end of the management of the offer could cost dearly

Canada is one of the last countries to maintain a system for supplying the offer in agriculture. In place for more than 50 years, this model has been the subject of increasing commercial pressure, especially from the United States. At a time when new concessions are feared, this system should be preserved, reform it or end it? And at what price?

In Canada, the supply management system governs the production of milk, eggs and poultry. Its objective is to maintain a balance between supply and demand, stabilize prices and guarantee decent income for agricultural producers.

It is a system that has proven itself and which also ensures food securityspecifies Daniel-Mercier Gouin, retired professor of agroeconomics at Laval University.

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This system is based on three essential elements:

• first of all, it provides producers with guaranteed prices that cover their production costs.
• Then, he established quotas, which constitute the heart of the system.
• Finally, the Canadian milk, eggs and poultry market is protected by high import prices, which reach up to 300 % for certain dairy products.

However, over the business negotiations with the United States and the European Union, openings have been conceded in these sectors.

For example, Today, between 10 % and 14 % of the Canadian dairy market is now accessible to imports. This opening allows the entry of a certain volume of foreign products without a price; High rights apply only beyond these thresholds.

It is this gradual opening that arouses growing concern among agricultural producers subject to the supply management system, which fear that it will ultimately lead to its dismantling.

Quotas values ​​that explode

Each year, depending on the evolution of the market, the authorities set a national production quota in each production area under management of the offer they distribute to already active farmers. These quotas can sometimes be reduced, but they generally increase, carried by demographic growth and by food demand.

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In the dairy sector, for example, quotas have increased by around 27 % in the past ten years. Even if they are attributed free of charge, these quotas gain value in a parallel market.

When a producer sells his dairy farm, he yields the land, buildings and quotas, that is to say production rights.

The first transactions were made at derisory pricesexplains Michel Saint-Pierre, former local agriculture assistant in Quebec and today co-president of the Jean-Garon Institute, a reflection group on agricultural issues. I was at the bank and I financed the first transaction in poultry in the 1970s. It was sold for $ 2.50 per square meterhe recalls.

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Today, a quota in the poultry area is between $ 1,500 to $ 2,500 per square meter in a building in Quebec. It is even more expensive elsewhere in the country. In the egg sector, the quota is estimated at $ 245 per layer. In the dairy sector, it takes $ 24,000 per quota and up to $ 50,000 in Western Canada, where dairy farms are less numerous.

Do the calculation: if I want to sell my farm in Quebec or Ontario with a hundred cows, so around 100 dairy quotas, at $ 24,000 per quota, it already represents $ 2.4 million. It is only for quotas. We have not even talked about the value of the land or buildings yet.

Debt bubble?

According to estimates, the total value of quotas linked to supply management in Quebec is today between $ 12 and $ 15 billion. It is a completely artificial valueestimates Michel Saint-Pierre, who is concerned about the consequences of these amounts on the concentration of farms and on agricultural debt.

Quebec farms are almost twice as indebted as the Canadian averageHe says based on statistical Canada data. The management of the offer ensures a certain stability of prices, which facilitates access to credit. Result: boxes and banks agree to lend themselves based on the value of quotas, sometimes up to 50 % of this value.

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A few months ago, Guy Cormier, president and chief executive officer of Desjardins, warned, during an interview with a journalist from the Canadian press, that a serious crisis could emerge from the agricultural sector. According to him, American threats against the supply management system are worrying.

Michel Saint-Pierre also fears the end of supply management and its effect for farmers who have quotas.

He illustrates his fear by an analogy: The day Uber arrived in the taxi sector, what did the drivers say, especially the youngest? They found it insane. “I paid $ 200,000 to get a taxi license in Montreal,” they said. And suddenly, Uber arrives. That’s the opening of the marketshe explains.

Already, the Federation of milk producers has capped any increase in the value of quotas. On the side of egg producers, the new quotas have not had any value for several years.

In the poultry sector, similar measures will be implemented this summer to supervise the increase in the value of quotas.

The price to abandon this system?

New Zealand is often cited as an example since it was the first to fully open its agricultural market in 1985. This country quickly reoriented itself towards export by focusing on centralized cooperatives.

You can’t compare New Zealand in Canadabelieves the ex-professional Daniel-Mercier Gouin. It is an island with a Clément climate that requires fewer buildings, and New Zealanders have developed the export market 40 years ago.

Australia, for its part, abolished its supply of the offer in 2000. To mitigate the shock in the dairy sector, the government has established a temporary tax of 11 cents per liter of milk for eight years. These funds were used to support producers during their transition. However, despite these measures, several producers have left industry.

Finally, the European Union also ended the management of the offer in 2015.

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In the Netherlands, where a market of quota with market value resembled the Canadian model, the government announced the end of the system almost a decade in advance, without planned compensation.

The transition was difficult, but farmers had time to prepare for it.

Between reform and rupture, a choice to make

In the debate on supply management, a point deserves to be underlined: the milk, eggs and poultry sectors depend neither subsidies or government aid programs.

Thanks to this system, it is not the taxpayers who financially support these productions.

If we abolished the management of the offer, Canada would have no choice but to follow the example of the United States or Europe, that is to say subsidizing producersexplains Daniel-Mercier Gouin.

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The other agricultural sectors – pumps, pork or beef – already benefit from aid programs funded in part by public money.

It is not true that we will leave the producers alone in front of the market. So the real question is: how much will the government cost an abandonment of supply management?

We are not in a position to declare the end of the system or even to weaken it by pricing concessions: it is too fragileconsiders Michel Saint-Pierre. In addition to being indebted, we do not have winning conditions to massively embark on export.

Indeed, south of the border, the only state of Wisconsin produces more milk than all of Canada.

For the co -author of the book Our drift agriculturerecently published by Leméac editions, an awareness of the value of this system is essential, not to mention the creation of mechanisms to correct its flaws, in particular with regard to the value of quotas.

It would be preferable to adapt it to current realities or to consider a framed transition rather than a precipitated outingbelieves Mr. Saint-Pierre.

We must avoid at all costs to find us cornered at the foot of the wall.