Farmers, consumers 'shackled' by marketing boards: think tank
A farmer works a field in Sheffield Mills in Nova Scotia's Annapolis Valley on April 22, 2010.
Published Tuesday, August 28, 2012 6:22AM EDT
MONTREAL -- A Quebec-based conservative think-tank has released a paper arguing farmers and consumers are "shackled" by agricultural marketing boards that control sales and, in some cases, supply of products such as milk and eggs.
The report, released Tuesday by the Montreal Economic Institute, claims marketing boards haven't helped stabilize or increase farm income or preserve the number of family farms.
It says Canadian consumers are paying an extra $3.9 billion a year because there's no competition between producers to improve productivity, which normally leads to lower production costs and a drop in prices.
"It's not to the advantage of the buyers of these products and it's not to the advantage of the producer either," report author and economist Mario Dumais said of the marketing boards.
A marketing monopoly means a board controls the sale of products. Some marketing boards, such as those in the dairy and poultry sectors, also set quotas on how much will be produced and by whom. Farmers have to buy the quotas.
According to figures in Dumais' report, the estimated value of quotas in Canada is about $30 billion. Quotas in the dairy sector average out to $1.4 million per farm.
Dumais says quotas need to be gradually eliminated to open the market and promote competition. But he understands farmers might be hesitant.
"When you do things which change things, usually you don't have everybody agreeing on the topic," said Dumais.
"But I can understand farmers to be very reluctant to such a change because a farmer who has quotas in his hand which are worth $1.4 million or even more ... he might be very afraid to lose the money he might have spent to buy these quotas."
Dumais, a former general secretary for the Cooperative federee de Quebec, a co-operative of farmers, reached his conclusions by looking at supply-managed sectors in Canada and comparing them with those in other parts of the world.
It is a controversial suggestion. Supply management is fiercely defended by some farm groups.
The National Farmers Union has called the supply management system "a win, win, win situation."
The organization says on its website that the system ensures farmers are paid a price that covers the cost of production and keeps foreign companies from dumping their surplus in the Canadian market. The NFU says without supply management, taxpayers would end up paying twice as much for their poultry and dairy products -- at the store and through increased government business risk management program costs.
Dumais says Canada could follow examples set in other countries by abandoning mandatory membership in marketing boards and by imposing a temporary tax to buy back farming quotas.
Ending monopolies held by the marketing boards would involve challenging the Agricultural Products Marketing Act, adopted by the federal government in 1949, as well as various federal and provincial measures that allow the existence of the marketing board systems.
Dumais thinks farmers can survive and prosper.
"I think our farmers ... are very, very efficient, dynamic entrepreneurs and if we give them the possibility to develop their creativity and their entrepreneurship, we would be surprised to realize how they can internationally become competitive."