Comment: Santa Claus loves milk, especially Canadian milk

Trade compensation given quickly with few strings attached will be an expensive and wasteful exit strategy

Dairy farmers have a marketing budget exceeding $130 million a year. It is a monster of an organization, and very few Canadians can appreciate this.

In haste, Minister Marie-Claude Bibeau chose a Saturday, hours before a long-awaited economic update, to offer more non-COVID-related compensations to supply-managed farmers.

Compensations were expected, but how it was done was a little strange. Few in the industry knew what was going on before the announcement.

When giving money away, governments would want as much press as possible. Not this time. Since it was done hours before Minister of Finance Chrystia Freeland’s update on our dreadful deficit, one must wonder if these sums are not intended to be blended with other COVID-19-related expenditures. What’s $2 billion in funding when the deficit is over $400 billion? It is just noise really at this point. It all seemed strangely improvised.

Egg and poultry farmers are getting what was expected though, $691 million over several years. This sum is given in compensation for recent concessions made with Europe and Asia when trade deals were ratified. These sectors are highly integrated and competitive, so funds will be used wisely.

But dairy farmers are getting a holiday bonus. Instead of waiting seven more years to get the $1.75 billion promised last year, they will receive the bulk of their compensation package by the end of 2023. Direct payments will be given, more than $50,000 per farm per year. As an increasing number of Canadians are trying to make ends meet when feeding themselves and their loved ones during the pandemic, each Canadian is giving $36 to asset-rich dairy producers. The average dairy farm in Canada is worth almost $6 million. That is why the announcement was made so quickly, on the weekend. Farmers in other sectors like grains, affected by embargoes and other trade issues, still get nothing. And their farms are not worth nearly as much.

In dairy, the ones directly affected by trades with Asia and Europe are dairy processors and artisan cheese makers. Since we are seeing more foreign products at retail, small artisan cheese makers, dairy processors, goat cheese makers and other Canadian-made specialty products are losing market share. But with the announcement, they still get nothing, not one dime, simply because they do not benefit from the same effective lobby dairy farmers have. Dairy farmers have a marketing budget exceeding $130 million a year. It is a monster of an organization, and very few Canadians can appreciate this.

What needs to be underscored is that supply management is designed to compensate farmers for actual losses. When unpacking pricing formulas, compensations given to dairy farmers are purely based on hypotheticals and potential losses are unclear, at best. Our entire dairy production system will essentially be overcapitalized. Make no mistake, this is about politics, pure and simple. Funds should have been used to encourage some farmers to exit the industry right away to help the sector become more competitive. Funds given will now do the complete opposite as underperforming dairy farmers will remain in the system for a few more years. We may end up making too much milk and witness the horror of milk dumping we have seen, over the years, yet again. Aging farmers will eventually exit the industry, but it is an expensive way to run an exit program. So much waste.

Most people do not understand how supply management works. Other than dairy boards themselves, most Canadians see supply management as some obscure method of keeping our country food secure. The minister of agriculture herself, Marie-Claude Bibeau, clearly doesn’t understand the system, and neither do many other politicians, public servants and yes, many dairy farmers. Most dairy farmers just want a fair price for their milk and could not care less about the system itself. One reporter asked how compensation levels were calculated during the announcement. Bibeau could only say that the formula was complicated.

In Canada, the ones who do understand how supply management works are trade negotiators. They understand the politics of it. To sign trade deals, negotiators needed to buy peace with supply-managed sectors, especially dairy. Canada offered to make concessions, not the other way around. Therefore, these so-called compensation funds are needed.

But we are not done yet. Ottawa is still on the hook for compensating farmers for NAFTA 2.0. Stay tuned. For dairy farmers, trade deals are a gift that keeps on giving.

Sylvain Charlebois is professor of food distribution and policy at Dalhousie University and senior director of the Agri-Food Analytics Lab.

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Sylvain Charlebois is senior director, Agri-Food Analytics Lab, and professor in food distribution policy, Dalhousie University.

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