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New AGÉCO Group studies
Deregulation in the dairy sector would hurt farmers without benefiting consumers

For Marcel Groleau, Chairman of the Fédération des producteurs de lait du Québec (FPLQ), “this study shows that the deregulation and opening of markets as proposed by the WTO would not benefit either consumers or farmers. Our model provides benefits and must be preserved. It encourages production of quality home-grown food at reasonable prices and enables family farms to earn fair income from the marketplace without government financial support. Supply management also favours local agriculture, which reduces greenhouse gas emissions caused by the transportation of food.”

These studies are updated summaries of studies published in 2004 and 2006. They were produced under the direction of Daniel-Mercier Gouin, Vice-President of AGÉCO and holder of the Chair in Agricultural Policy Analysis. Mr. Gouin is also a professor in the Département d’économie agroalimentaire et des sciences de la consommation at Université Laval and holds a Doctor’s degree in Development Economics. The studies were made public at a meeting of the leading partners of GO5 Coalition for a Fair Farming Model, Supply Management. The studies analyze the comparative performance of regulatory systems in Canada, the United States, France, Australia and New Zealand.

The authors of the studies also consider that following deregulation, “alternative dairy support programs similar to income support programs applied in other sectors of Canadian agriculture would have to be implemented, thereby resulting in a significant increase in budgeted costs.” Moreover, in a context of significant price instability on world dairy product markets, the authors confirm that the current model protects Canadian consumers against sharp price swings. In particular, the study mentions a 150% rise in the world price of certain dairy products. “Consumers of certain countries that depend on the international market obviously have to foot the bill for such price fluctuations. This is not the case with Canadian consumers,” the study says.

The case of Australia
Falling farmgate prices, rising retail prices: intermediaries pocket the profits

The AGÉCO Group has also updated its analysis of the Australian case. On July 1, 2000, Australia deregulated its dairy industry after several decades of government intervention. The authors conclude, in particular, that the number of farms has decreased by 40% since deregulation. However, the negative impact on farms has not translated into benefits for consumers. “In fact, after a significant reduction in the first months after the reform, the retail prices of fluid milk quickly reverted to and even exceeded their pre-reform level, while the farmgate price clearly remained lower. The expected benefit for consumers thus does not appear to have materialized and instead seems to have ended up in the coffers of intermediaries in the form of higher profit margins,” they conclude.

The studies also show that “the situation of Australian fluid milk producers is not very encouraging. They were hit with a major rollback of their dairy revenues and their net income”. Eight years after the reform came into force, the adjustments made by the fluid milk producers still have not allowed them to regain their pre-reform level of profitability, the study adds.

Since the GO5 Coalition for a Fair Farming Model, Supply Management was established in 2003, it has received the support of 30,000 individuals and organizations who believe in a strong and prosperous agricultural sector in Quebec. Its initiatives seek to preserve supply management at the end of the current round of WTO negotiations. For more information, visit the GO5 Coalition’s Web site at http://www.go5quebec.ca/fr/etude.php. The two studies are also available on the Web site.

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