WTO and Agriculture  —  Supply management

Supply management is the mechanism by which milk, poultry and egg farmers in Québec and Canada adjust their production in order to meet local consumer needs. Products are mainly intended for the domestic market and not as exports.

Supply management was implemented in Canada in the early 1970s. The government had come to the realization that, without production discipline, the Canadian market would regularly have an overabundance of agricultural products, which would, in turn, trigger a sharp decline in producer prices. To ensure the survival of Canadian farms, at the time, the government bought back surplus production, resulting in substantial costs to public treasuries. This solution is still widely used in many countries.

The federal and provincial governments and agricultural producers therefore implemented a supply management system, a production management model based on collective marketing and production planning adjusted to the needs of the Canadian market.

A FAIR FARMING MODEL BASED ON THREE PILLARS

1-Production management
Agricultural producers undertook to provide the Canadian market with quality products in sufficient quantities. They also undertook not to produce surpluses. This is why dairy, chicken, turkey, table egg and hatching egg producers operate under a quota system, where each producer undertakes to supply a small share of the Canadian market. If there’s surpluses, producers will support the cost of them.

2-Import control
The federal government committed itself to limiting imported products to ensure Canadian market requirements are primarily met by Canadian production.

3-A pricing policy that covers production costs
The federal government also introduced mechanisms to enable producers to receive prices that guarantee reasonable returns and a decent living from their production.

In 2003, in Québec, milk, poultry (chicken and turkey) and egg (table and hatching eggs) production represents:
  • 8,944 farms
  • 14,617 farm operators
  • 62,483 direct and indirect employees
  • 2.2 billion dollars in revenues for farms
  • 37% of farm revenue in Québec

SUPPLY MANAGEMENT, A FAIR AGRICULTURAL MODEL THAT:

  • assures consumers of a nutritious basket of high-quality products that are among the least expensive in the world;
  • introduces stability into the market and contributes to the success of processing companies, which realize attractive earnings in Canada;
  • does not cost public treasuries one cent;
  • stabilizes producers' revenue and allows a better distribution of the consumer dollar among the various links in the food chain, from producer to retailer;
  • ensures local food production;
  • avoids the transportation of food over thousands of kilometres;
  • avoids the dumping of surplus food on the markets of developing countries;
  • promotes efficient and human-scale agriculture throughout Canada that respects resources and people.
SUPPLY MANAGEMENT BENEFITS...
 
  • consumers, who have access to local, quality products at affordable prices
    • According to a survey conducted on 19 occasions by Dairy Producers of Canada since May 1997 in the State of Vermont and in the province of Québec, dairy products are 14,4% less expensive in Canada than in the United States
    • Chicken was the first animal product in Canada to obtain technical recognition from the Canadian Food Inspection Agency for its Canadian Food Safety and Quality Program (CFSQP). Through this program, consumers are always assured that the chickens they eat are healthy and raised in the best possible
  • governments, that do not pay subsidies to support the income of their farmers
    • A Québec dairy farmer does not receive any subsidy to support his or her income. In the United States, a dairy farmer would receive $76,000, while a French farmer would receive $54,000 in aid as part of the new Politique agricole commune (PAC).
  • the agri-food industry, which is assured a stable and predictable supply
    • According to the firm Samson Bélair Deloitte & Touche, in 2001, Canadian dairy processors posted a 21% return on their shareholders' equity, ranking them at the top of the Canadian agri-food sector.
  • farmers, who obtain a better share of the price paid by consumers
    • The price for a dozen eggs (grade A large) is around $2.50 in food markets. Of this price, the farmer receives $1.44 for a dozen, which represents nearly 58%. That enables the farmer to cover his or her production costs and obtain a decent income without subsidy.
    • Canadian dairy farmers obtain roughly 50% of the price paid by consumers for a basket of dairy products, compared to 20% for American farmers.
  • society, as a whole, which enjoys thousands of jobs created locally by local family farming that respects the environment.
    • Milk, chicken and egg production generates more than 60,000 jobs and represents nearly 40% of farming revenues in Québec. Production of these products occurs throughout Québec and contributes to maintaining economic activity in the regions.
    • Supply management helps preserve the smallest farms: the average dairy farm in Québec has 55 cows, whereas the average dairy farm in the United States has 140 and in California, 660. In the table eggs sector, the average farm in Québec has around 35,000 laying hens, whereas in the United States there are farms with 8 million laying hens.
  • developing, countries, which are not subjected to the dumping of surplus products by Canadian farmers under supply management and are using this model as a basis for developing local farming
    • Civil society farming associations and organizations in Canada, India, Brazil and many countries in Africa met in Ottawa on May 16, 2005 and declared their strong interest "in preserving and promoting producer-led orderly marketing mechanisms, such as supply management, collective marketing, farmer cooperatives and single desk selling, which are currently under threat for all countries in the Doha negotiations."
  • Supply management thus helps create a stable and equitable economic environment that benefits every link in the food chain.