Does supply management really increase food prices in Canada?

Does supply management really increase food prices in Canada?
Does supply management really increase food prices in Canada?

Using Statistics Canada’s database of selected food products, we analyzed price increases for all food products from 2017 to present.

We compared price increases for products under supply management to the overall increase in all food categories. The average price increase since 2017 for all categories has been 30.2%. Among the products under supply management, only three exceeded this average:

  • cream at 30.9%
  • butter at 30.7%
  • eggs at 37.9%

Here are the rest of the products under supply management:

  • whole chicken: 17.5%
  • chicken breast: 20.1%
  • chicken thighs: 14.5%
  • chicken drumsticks: 1.9%
  • milk (1 liter): 25.3%
  • milk (2 liters): 25.9%
  • milk (4 liters): 25.4%
  • cheese: 20.7%
  • yogurt: 27.1%

All of these products are below the average increase for all food products tracked by the federal agency.

This data highlights how certain products under supply management have performed relative to the broader food market. Notably, products like butter, cream, butterfat products, and eggs are exceptions, having increased more than average since 2017, but not significantly.

We also looked at how food inflation has been influenced by supply-managed products over the past decade. The graph shows the black line representing the food inflation rate. Compared to the lines representing the categories under supply management, there are no significant spikes or declines, indicating a stable inflation rate for general food products over the ten years. And that’s a problem.

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All of these products are below the average increase for all food products tracked by the federal agency. (Sylvain Charlebois)

The fresh or frozen poultry category (orange line) shows more fluctuations compared to the general food line. Inflation rates for poultry have peaks and troughs, reaching up to around 12% and sometimes dropping below -5%. This volatility is likely due to factors such as changes in feed prices, demand or supply chain issues.

Dairy products (green line) show a moderate level of fluctuations but remain largely within a range of 0% to 10%. This suggests a certain stability but with periodic adjustments possibly influenced by production costs or market demand.

Finally, eggs (blue line) show the greatest volatility among the categories presented. The egg inflation rate peaks above 20% and experiences marked declines, including a significant drop below -5%. This could be due to factors such as avian flu outbreaks, which historically affect egg production and prices.

Based on evidence from the last decade, it is difficult to conclude that supply managed products have significantly exacerbated the cost of food for Canadians.

However, there are causes for concern. Supply-managed food categories appear to fluctuate as much or more than many other food products, especially eggs. The goal of supply management is to stabilize prices over time, but this data suggests otherwise. Therefore, it is not entirely fair to claim that supply management systematically increases food inflation, although it appears to contribute occasionally. Moreover, the monthly increases for dairy products, poultry and eggs are much higher than the average for April, as indicated in the latest CPI report from Statistics Canada.

While some claim that supply management stabilizes retail prices, they are not entirely right.

Furthermore, our analysis only covers ten years, without considering that the prices of products under supply management may have been inflated compared to other categories. Anecdotal evidence suggests that many of these products tend to be less expensive in other parts of the world, including the United States.

Beyond price volatility, supply management inflates prices for processors, particularly dairy, which suppresses innovation in the food chain. Discussions with dairy processors indicate that industrial milk in Canada is far too expensive. In fact, industrial milk prices are the highest in the industrial world. For supply management to better serve Canadians, reducing retail price volatility and lowering industrial prices should be key objectives for policy makers.

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