Dairy Farmers Make Suckers of Consumers

Commentary, Agriculture, Frontier Centre

Canadians are drinking 18 per cent less milk than they did in 1980, consuming 30 per cent less butter and 24 per cent less ice cream. Cheese production is barely holding steady. The Canadian dairy herd has dwindled.

Sounds like a disastrous portrait of a collapsing industry, doesn’t it? In fact, these realities are all the result of careful manipulation of the dairy industry by federal and provincial governments and dairy producers themselves. This systematic conspiracy against consumers goes by the name of “orderly marketing,” and it has resulted in an average profit margin for dairy farms of 25 per cent of operating revenue, almost double the figure for all farms in Canada.

Now, at the beginning of a new year, both the federal and provincial governments dipped into consumers’ pockets yet again to fatten the profits of politically well-connected dairy farmers. Year after year this scandal goes on because consumers don’t know how to fight back.

This time the Canadian Dairy Commission is raising the price for “industrial” milk, which is used to make butter, cheese, yogurt, ice cream and more. This increase, at a time when market conditions should be generating lower prices, will echo through the whole food chain.

Meanwhile Quebec’s Regie des marches agricoles et alimentaires, acting at the request of the province’s dairy producers, has decreed an increase of six cents a litre in the minimum and maximum consumer prices for table milk. So the price of almost all dairy products will be climbing again.

This is a classic example of cartel economics, made legal – we won’t say legitimate – because politicians allow it. Tariff walls as high as 300 per cent give Canadian producers a captive market, while consumers pay inflated prices for basic food items. True, some of the decline in consumption of these products comes from demographic change; we have fewer children now, and more newcomers from places where milk products are not a big part of the diet. But some of the decline in consumption is linked to inflated prices.

If milk producers were competing, rather than running an oligopoly, quality and choice would improve and prices would fall. Instead we have constantly higher prices and shrinking consumption – a system that benefits the few at the expense of the many.

As usual, consumers don’t know how to fight back. One group that does, a little, is the Canadian Restaurant and Food Service Association, which operates an informative website called dairyplanet.ca, which claims that Canadian dairy prices are the world’s highest.

On grocery store hours, Quebec consumers won only after retail chains mobilized public opinion. It’s time – past time – for something comparable to happen in the dairy sector. Have a look at dairyplanet.ca and ask yourself how long consumers should go on being victims.