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Buy out dairy quota with a retail price premium?

A former Liberal MP and a University of Calgary researcher are calling for an immediate phase-out of quotas

Drop the price of milk to the U.S. level, but then add a temporary premium to compensate dairy farmers for the loss of their quota.

That’s the plan proposed in a July 10 Globe and Mail opinion piece by Martha Hall Findlay and Jack Mintz of the School of Public Policy at the University of Calgary.

Hall Findlay is a former Liberal MP and leadership contender who has been a frequent critic of the Canadian supply management system.

Their plan is similar to one they say was used to phase out supply management in Australia.

“Compensation and transition payments were funded by maintaining and collecting a small portion of the system’s existing price supports for a limited period of time. Some farmers cashed out for a decent retirement; those who stayed in the business became more efficient and more productive,” Hall Findlay and Mintz wrote.

They propose an immediate phase-out of import quotas, which would bring the price of milk to the U.S. level.

“A more gradual approach would also delay Canadian farmers’ ability to begin exporting, and allow competitors from Australia, New Zealand and the United States to secure and consolidate their export-market shares,” they wrote.

They acknowledge that would eliminate quota value, which they say is “somewhere in between” full value of $23 billion based on $30,000 per cow, and a Conference Board of Canada suggested “book value” of between $3.6 billion and $4.7 billion.

Compensation would be through a “Fairness for Farmers Fund,” financed by a “Transition Price Supplement” (TPS) or premium over the U.S. price level.

“For consumers to benefit immediately, the TPS must be low enough that the retail price (the transition price) is still lower than current supply-managed prices. The lower the TPS, the longer the transition period — and the higher the TPS, the shorter the transition period,” Hall Findlay and Mintz wrote.

They quote 2012 retail milk prices of $1.62 per litre in Canada and $0.92 in the U.S.

“Even with an additional 25-cent supplement per litre, the price to consumers would still be significantly lower than it was under supply management,” they wrote.

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