Instead of demonizing food retailers, the Feds should end the anti-competitive inventory management system

Commentary

A recently released report from the Canadian Competition Bureau confirms what grocers have been saying all along: There is no “greed” happens in the food retail market and profit margins for retailers are low.

And while the agency noted that consumers would be better served if there were more competitors in the nutritional food market, it emphatically omitted any mention of Canada’s anti-competitive management system for dairy, poultry and eggs, which has driven the price of staples in Canada for decades.

If the federal government really wants to lower the cost of food for Canadian families, it should explore ways to end the inventory management system rather than demonize food retailers operating on slim profit margins and threaten them with windfall taxes.

In Canada, it is illegal to produce and sell dairy, chicken, turkey or egg products without a government-issued quota. The rights are jealously guarded by producers and the amount of allowed production is strictly controlled.

Many Canadians were then shocked by a dairy farmer posted a video thousands of gallons of fresh milk dumped down the drains on his farm last winter. He had produced more than he was legally allowed to sell, so he had to throw the excess away. He couldn’t even donate the extra milk to local food banks. Canadian dairy producers are dumping as much as possible 300 million gallons of milk thrown away each year under a system designed to artificially inflate product prices. What an insult to families struggling to pay their grocery bills.

The Canadian dairy and poultry organizations are very influential lobbyists. Politicians of all stripes avoid talking about inventory control policies at all costs. Questioning Canada’s inventory management system means risking losing precious votes in Quebec, where most dairies set aside dollars to campaign against re-election of those who violate the political covenant.

While dairy producers like to advocate for poverty, the numbers tell a different story. Profit margins for Canadian dairy products farmers are around 24 percent, making it one of the most lucrative industries in the country. Of course, it’s not hard to maintain high margins when competition is literally made illegal and prices are fixed.

If other industries manipulated prices, such as the dairy and poultry organizations, the Competition Bureau would step in and break up the cartels. In supply management, however, the silence is deafening.

Studies show that supply management costs the average family an extra $300 to $444 a year in their grocery bill, even before the pandemic and current inflation rates. While ending inventory management wouldn’t solve all inflationary problems, an extra $500 or so to spend on groceries would be very welcome for many struggling families.

Canada is one of the last countries in the world to maintain a food production quota system. Most of the others were Soviet countries and they ended when the Soviet Union fell apart in the 1990s. Venezuela has a rigid supply management system that has served its citizens terribly.

Australia and New Zealand were among the last developed countries to end their inventory management systems. Producers in those countries claimed that ending the system would kill their industries. Instead, the dairy industry and other previously supply-driven industries flourished as the free market opened up.

Supply management hinders innovation and efficiency. There is little incentive to improve production practices or diversify products when there is guaranteed income and protection from competition. If the market were to open up, Canada could see an explosion of new, local and creative producers.

Supply management indirectly hinders Canadian consumers and exporters in international trade negotiations as other countries object to protectionism and market manipulation.

Proponents of inventory management try to argue that the policy protects the family farm. That is incorrect. Currently there are approx 12,000 dairy farms in Canada; that is less than a tenth of what existed before supply management came into the picture. Supply management centralizes production around large operations and marginalizes small producers who cannot afford quotas.

Yes, some quotas will need to be bought off as the system is phased out. It doesn’t get cheaper to wait though, and let’s face it, the quotas are bogus assets created by the government.

Canada has some of the most abundant and productive agricultural land in the world and should pay some of the lowest prices for food in the world. Instead, consumers pay a premium for essential foods to support a relatively small number of supply-driven producers.

If the Competition Bureau wants to live up to its name and stand up to cartels robbing Canadian consumers, it needs to adopt Canadian supply management policies.

The excuses to keep the system alive are few and Canadian families are paying the price.

The views expressed in this article are the views of the author and do not necessarily reflect the views of The Epoch Times.