Canada's supply management (), abbreviated SM, is a national agricultural policy framework used across the country, which controls the supply of dairy, poultry and eggs through production and import mechanisms to ensure that prices for supply-managed farmers are both stable and predictable. The supply management system was authorized by the 1972 Farm Products Agencies Act, which established the two national agencies that oversee the system. The Agriculture and Agri-Food Canada federal department is responsible for both the Canadian Dairy Commission and its analogue for eggs, chicken and turkey products, the Farm Products Council of Canada. Five national supply management organizations, the SM-5 Organizations — Egg Farmers of Canada (EFC), Turkey Farmers of Canada (TFC), Chicken Farmers of Canada (CFC), the Canadian Hatching Egg Producers (CHEP) and the Ottawa-based Canadian Dairy Commission (CDC), a Crown corporation — in collaboration with provincial and national governing agencies, organizations and committees, administer the supply management system.
In the dairy industry, the supply management system implements the federated provincial policy through the Canadian Milk Supply Management Committee (CMSMC), CDC, three regional milk pools — Newfoundland's, the five eastern provinces (P5) and the four western provinces — and provincial milk marketing boards. Since 1970, the CMSMC has set the yearly national industrial raw milk production quota or Market Sharing Quota (MSQ) and the MSQ share for each province to ensure Canada to match production with domestic need and to remain self-sufficient in milk fat. Each province allocates MSQs to individual dairy farmers. In 2017, there were 16,351 dairy, poultry and eggs farms under supply management. 2016 Canadian Census of Agriculture
While many federal and provincial politicians from major parties "have long maintained support for a supply-managed system for dairy, poultry and egg farmers", there has been ongoing debate about SM. Proponents of the framework tend to claim that it is designed to ensure that these farms can be profitable and Canadian consumers have access to a "high-quality, secure" supply of what they claim to be "sensitive products" at stable prices without shortages and surpluses. Opponents of the system tend to view it as an attempt by members of the supply managed industries to form a publicly supported "cartel" and profit at the expense of purchasers. Supply management's supporters say that the system offers stability for producers, processors, service providers and retailers. The controls provided by supply management have allowed the federal and provincial governments to avoid subsidizing the sectors directly, in contrast to general practice in the European Union and the United States. Detractors have criticized tariff-rate import quotas, price-control and supply-control mechanisms used by provincial and national governing agencies, organizations and committees. Canada's trade partners posit that SM limits market access.
The Organisation for Economic Co-operation and Development (OECD) maintained in 2017 that Canada's "export growth would be boosted if Canada phased out its Canadian dairy supply management policies". Supply management was one of many issues in Comprehensive Economic and Trade Agreement (CETA), a free-trade agreement between Canada, the European Union and its member states and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) negotiations and the United States Mexico Canada Agreement (USMCA). Under the October 1, 2018, United States Mexico Canada Agreement, the supply management system remained fundamentally intact however some modifications to the milk class system have weakened supply management.
Mandate Canada's supply management system, which encompasses "five types of products: dairy, chicken and turkey products, table eggs, and broiler hatching eggs," "coordinates production and demand while controlling imports as a means of setting stable prices for both farmers and consumers." The dairy supply management system is administered by the federal government through the Ottawa-based Canadian Dairy Commission (CDC) a Crown corporation. The Agriculture and Agri-Food Canada federal department is responsible for both the Canadian Dairy Commission and its analogue for eggs, chicken and turkey products, the Farm Products Council of Canada.
Supply-managed sectors
As of 2018, there were about 12,000 dairy farms, 2,800 chicken farmers, 1,000 regulated egg farmers who produce table eggs and broiler hatching eggs, and 551 turkey farmers, that operated under supply management. According to the 2016 Canadian Census of Agriculture, there were 193,492 farms in Canada; about 12 per cent of Canadian farms were under supply management.
Regulatory framework
There are five national organizations, known jointly as the SM-5 Organizations, that administer or support agricultural supply management systems. According to a CBC article, "The SM-5 Organizations say federal-provincial agreements for each of the supply-managed sectors weave together the legislative jurisdiction of both levels of government to 'ensure a seamless regulatory scheme'... "designed to enable farmers to get a reasonable return while stabilizing the supply of agricultural products to Canadian consumers."
The supply management system was authorized in 1972 through the Farm Products Agencies Act and subsequently the national agencies that established the system were created. The Canadian Milk Supply Management Committee, which is chaired by CDC is "responsible for the administration of supply management for the dairy industry". By 1983 all provinces except Newfoundland had signed the National Milk Marketing Plan (NMMP) which replaced the 1971 Interim Comprehensive Milk Marketing Plan. The goal of the NMMP agreement was to manage the supply of raw industrial milk to meet Canadian needs, to establish provincial MSQs and to raise fees to remove surplus.
In 1972, the national marketing agency to administer the supply management system for eggs, Egg Farmers of Canada (EFC), was established. In 1974 one was set up for turkey farmers, Turkey Farmers of Canada (TFC), and the chicken marketing agency, Chicken Farmers of Canada (CFC), was created in 1978, and the Canadian Hatching Egg Producers (CHEP) agency was established in 1986.National agencies
The National Farm Products Marketing Council, now the Farm Products Council of Canada, established by the 1972 Farm Products Agencies Act, oversees the national supply management system agencies for eggs, chicken, and turkey.
The Farm Products Council of Canada "oversees the various agencies in an effort to promote an efficient and competitive agricultural sector while ensuring that the marketing system operates well, in the interests of producers and consumers."
In Ontario, for example, the 2017 Agricultural Products Marketing Act (FPMA) "allows the Minister of Agriculture and Food to enter into contracts with the federal government to have national marketing agencies perform marketing functions within Ontario on behalf of the Ontario government" through the Ontario Farm Products Marketing Commission.
Milk supply management The milk supply management system is a "federated provincial policy" with four governing agencies, organizations and committees—Canadian Dairy Commission, Canadian Milk Supply Management Committee (CMSMC), regional milk pools, and provincial milk marketing boards.
Canadian Dairy Commission (CDC)
The Ottawa-based Canadian Dairy Commission (CDC) composed mostly of dairy farmers, was created in 1966. The federal government is involved in SM through the CDC in the administration of imports and exports. The CDC establishes "support prices for butter and skim milk powder (SMP) and operates surplus removals at the support prices, removing butterfat and SMP from the market for export or later sale. It also facilitates the process for the setting of Market Sharing Quota (MSQ) for industrial milk nationally." According to the CDC website, it operates as an agency supporting "farmers, processors and consumers." CDC, under CEO Serge Riendeau—a former farmer, dairy producer and Agropur Cooperative Director—also "manages programs that target the industry, upholds milk quality standards and supports Canadians working in the dairy industry". Riendeau is responsible for "cooperating and negotiating with dairy industry stakeholders to reconcile their interests and maintain compliance with the supply management system". Riendeau, who was a farmer and dairy producer before becoming President of Agropur Cooperative in 1992, advocates for the "supply management system" and "was instrumental in the establishment of a national strategy to promote the use of Canadian dairy ingredients."
The Canadian Milk Supply Management Committee (CMSMC)
In 1970, the Canadian Milk Supply Management Committee (CMSMC), was established to set the national industrial milk Market Sharing Quota (MSQ) which is then allocated among the provinces. The national MSQs "ensure that Canada is self-sufficient in milk fat."
The CMSMC, which is chaired by the Ottawa-based Canadian Dairy Commission (CDC), administers SM for the dairy sector with the CDC performing a role of supervision, support and regulation.
Regional milk pools There are three regional milk pools—Newfoundland's, the Eastern Canadian Milk Pooling P5 Agreement which includes Prince Edward Island, Nova Scotia, New Brunswick, Québec and Ontario and the Western Milk Pooling Agreement (WMP) which includes Manitoba, Saskatchewan, Alberta and British Columbia, that operate under the supervision of the CDC. They pool milk sale revenues, costs and markets, and harmonize pricing and establish daily quotas.
Under GATT's Article XI supply management enjoyed an exemption. When Article XI was lost during the Uruguay round of negotiations (1986-1993), tariffs were introduced to protect Canada's domestic dairy. The loss of Article XI was one of the driving forces behind the formation of a milk pooling agreement. When the WTO replaced GATT in 1995, it was recognized by Canada's Dairy Industry Advisory Committee that expanded regional milk pools would be needed to adapt to changes.
Provincial marketing boards Dairy producers must hold a quota or permit to sell their products to a processing plant. These quotas, or Market Sharing Quota (MSQ), avoid overproduction. In the SM system, provincial marketing boards, allocate production quotas or MSQs on milk for example, based on regional milk pools recommendations which include daily milk quotas.
The provincial milk marketing boards are responsible for most of the regulation of milk marketing, organization of dairy producers, quota administration and transfers, and producer-processor settlement. Individual provinces regulate their own marketing systems with marketing boards that may engage in product promotion, collective sales, and price negotiation. Marketing boards have regulatory control over the feeding, treatment, and conditions of animals on farms, as the board is in direct control of the quota allotted and can directly sanction farms who violate board policy. In Ontario the FPMA authorizes the province to control and regulate the production and marketing of Ontario farm products [except dairy products] including their prohibition. The Dairy Farmers of Ontario regulate the dairy marketing system.
During the 2015 TPP negotiations, as the United States, New Zealand and Australia called for an end to SM, the role of the provincial marketing boards was challenged. By October 2015, however, it was agreed that in exchange for an opening the market to other countries, marketing boards could continue to perform their decision-making role in production quotas and farm gate prices.
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