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The Rural Voice, 1989-10, Page 161 treleaven's Iucknow feed mill limited COMPLETE LINE OF ANIMAL FEED AND VETERINARY SUPPLIES HOG — BROILER — LAYER TURKEY — BEEF — DAIRY VEAL — FISH — PET FOODS 14 THE RURAL VOICE SUPPLY MANAGEMENT — DANGER SIGNS Adrian Vos, from Huron County, has contributed to The Rural Voice since its inception in 1975. "When men are easy in their circum- stances, they are natural enemies to innovations." —Joseph Addison: The Freeholder In my last column I wrote that the cost of production (COP) of regulated commodities is derived from the average COP of a random number of Canadian farmers. Before my copy of The Rural Voice hit the bottom of my mailbox, and before I could read Gisele Ireland's tribulations with her daughter's marriage, an irate dairyman called me to point out that the lower 30 per cent of those examined are eliminated and the average COP is from the remaining 70 per cent. This, however, doesn't change my contention that COPs can better be derived from a model farm. Every time a random number of producers is selected, the inefficient are still included — those who either accept a low income or keep afloat with off - farm income. This affects the final calculation. Despite this, the Con- sumers Association of Canada has not been able to threaten the system itself seriously. A much greater danger to supply management as it is now is the chal- lenge the U.S. has given through the General Agreement on Tariffs and Trade (GATT) since we placed ice cream and yoghurt on the import con- trol list. Should the GATT trade panel agree with the U.S., it could mean that the pricing system for industrial milk would have to be altered drastically. Either our processors of these products would be put out of business because of their higher input costs, or Canadi- an prices would have to drop to allow our processors to stay in business and use milk from Canadian cows. Fluid milk would not be affected. This is not fair to the Canadian producer of industrial milk. The unfairness lies with the different view of what constitutes a subsidy. In Canada, we make the consumer pay the dairy farmer directly by fixing the price. This doesn't allow our farmer to compete on the free market and necessitates import controls. In the U.S., consumers pay the farmer through direct subsidies not tied to the price of the product. This means that the U.S. farmer can sell his milk through the capitalist method of supply and demand. The American system is somewhat similar to that of our pork industry. Subsidies for pork are, as in the U.S., not tied to price. Therefore, Canadian pork producers can compete with their American counterparts on quality and efficiency. They win on both counts to such an extent that the Americans demanded, and got, protective tariffs, called "countervail duties." Once this is sorted out, which could take a few years, pork and hog exports will resume and grow. Which system, free market or sup- ply regulated, is the more defensible is a matter of opinion. The problem is that these systems are not compatible and hinder free world markets. Chicken producers are in a position roughly similar to that of the industrial milk producers. In their case, it is not the GATT but the Free Trade Agree- ment that threatens. Under this agree- ment, Canadian processors can bring in more cheap U.S. chicken than before, thereby cutting their purchases from Canadian producers. It seems possible that chicken producers will have to emulate egg producers, who sell breaking eggs to bakeries at a price below the COP. If they didn't, pies and such would all be imported from the U.S. The chicken marketing board is seeking answers and is studying vari- ous ways to sell its product to proces- sors. It will be interesting to see what, if any, changes they will adopt.0