Milk Price Fixing Must End

Agriculture, Frontier Centre, Role of Government, Rural, Uncategorized, Worth A Look

Milk is good food. Responsible parents keep the family fridge well stocked with it, knowing that milk’s calcium fortifies bones, makes teeth strong and helps fight osteoporosis. Milk is also full of healthful nutrients including vitamin A, thiamine, riboflavin and more.

In short, milk is not optional, unlike french fries or snack cakes or chicken wings. Despite this, Quebec government policy treats milk as though it were a luxury like a BMW or a Cuban cigar.
This week’s price hike of 4.6 cents a litre is just the latest in a long line of unjustifiable price increases. Milk now retails here for as much as 40 per cent over the prices consumers pay in the rest of the country.

Sylvain Charlebois, a marketing professor at the University of Regina, is right to describe the Quebec situation as a “hidden tax on families.” Charlebois was part of a research effort last fall that found that a family of four in this province pays an extra $300 a year for milk, eggs and poultry because of “supply management,” the government-mandated price fixing that subsidizes farmers at the expense of consumers.

Supply management operates across Canada, but as Charlebois notes, Quebec is the only province where the retail price of milk is also regulated.

Supporters of this conspiracy against consumers – that is, the farmers who profit from it – argue that the policy is needed to save the small family farm. The average dairy herd in Quebec numbers about 50 cows. In Ontario in 2004, the average herd was about 65 cows, compared to Saskatchewan at 85 and Alberta at 94.

If Quebec really wants to subsidize inefficient small farms – an issue we’d like to hear fully debated – then all Quebec taxpayers should shoulder the load. Making even the poorest families pay an extra $300 a year to prop up farmers who average $52,000 a year is unfair and unwise.

Charlebois points out that dairy farmers aren’t the only ones profiting from Quebec’s high prices. They receive only 71 cents per litre of milk sold. Out of this week’s 4.6-cent price hike, farmers will get 2 cents.

However modest this increase might seem, since 2004 the price of milk in Quebec has jumped by 15 per cent, almost double the rate of inflation. Even those in favour of Canada’s system of supply management – and we are not, as you will have noticed, among them – have to acknowledge that this amounts to gouging consumers.

Supply management gives the dairy industry monopolistic control over the price and supply of dairy ingredients. Consumers have no choice but to pay whatever they are charged. According to the Canadian Consumers’ Association, in 2003 the average dairy farm made a profit margin of 25 per cent – double that of the average Canadian farm and triple that of the average Canadian business.

Supply management is also a straightjacket, keeping new producers out of the market unless they can buy precious quota, propping up the inefficient, and stifling innovation.

It is time to take the brakes off competition in the milk business.