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The Rural Voice, 1979-01, Page 18The Voice of A Farmer by Adrian Vos Supply management, the pros and the cons For years we have heard the opponents of supply management marketing boards. complain that the use of production quotas encourages inefficient production. For as many years the supporters of the system have contested this view with counter arguments. However, some facts have come to Tight lately that give some support to the opponents. Lets list some arguments, pro and con. 1. Con. By guaranteeing a producer a profit, the inefficient producer is kept in business. One who would fall by the wayside in a free market system. I.Pro. Not true: the cost of production formula is such that an inefficient producer will fail. And see how milk production has increased from 8,000 lbs per cow to 12.000 lbs, allowing a decrease in the number of cows. 2.Con. The cost of quota alone increases the price of product greatly. 2. Pro. This is definitely not true. The cost of quota is spread over so many years that the cost per hundred weight of milk, or per dozen eggs. is insignificant. 3. Con. By prevent, new producers from entering the business. young progressive farmers can't contribute to efficiency. 3.Pro. Letting in an unlimited number of young farmers. would bring in the inefficient as well. Not all young farmers are efficient. Lately it has been reported that milk production per cow in Canada has steadly decreased in the last two years. Where are the great expectations of five to ten years ago, that eventually each cow ould produce 18,000 lbs of milk per year? Instead it dropped from over 12.000 to barely over 11.000 lbs. In the United STates, where there are no restricting quotas, the trend is just the opposite. From this it appears that the opponent win argument number one. There is no argument with no. 2. It is so obvious that the proponent are right, as the cost of quot is never included in the formula. On no. 3, it seems to be a stand-off. In times of low prices it would not just be the inefficient farmer who would go bankrupt. Rather it would be the beginner, efficient or not and the established farmer who has not been able to save up for bad years, whatever the reason, efficient or not. To correct the problem of the inefficient producer, marketing boards will have to come to grips with this weakness in the system. It could well be that Mr. Whelan is right when he claims that quota value reflect the profitability of a commodity. As grantees of a monopoly, the supply management boards do have a grave responsibility to the consumers. If efficiency improves, this should b e reflected in the price, through the cost of production formula. If the cow gives more milk on the same feed cost, the shopper should get part of the extra profit, and the price should be decreased. If efficiency decreases. as suggested by the decrease in PG. 18 THE RURAL VOICE/JANUARY 1979 unit production of milk this shmild trigger an immediate' investigation in depth. An organization should be free to set their own rules, but the rules must reflect the justness of the system or the privilege of the monopoly could be lost. In that case the efficent producer and the inefficent one would suffer alike. No farmer, or any other citizen, likes to see his freedom of action curtailed, but this is curtailed from the time of birth. A child gets punished for crossing the street withouth looking for traffic. This to protect himself. A student gets punished for disrupting classes. THis is to protect the right of other students to learn. A driver gets punished for breaking traffic laws. This to protect others from hurt. All laws to protect citizens also restrict the freedom of these same citizens. When a majority of producers of a commodity want to protect their income. they may be granted the right to produce no more that the market can absorb. in order to guarantee a profit on their production. The only way to accomplish this in an equitable manner, is to give each producer a proportionate share of the production for that market. However, his freedom is immediately restricted, as well as the freedom of the buyer (consumer) in bargaining for the lowest possible price. Now it becomes imperative for the proponents of supply management to prove that the restriction of freedoms is to the common eood. All these arguments are well known to those who have been reading and listening to the urban and western Canadian media. The average price of a farm product, calculated over a complete price cycle. is about the same, with or without a price setting mechanism. So price setting doesn't increase the price to the consumer, unless the price setting method is not equitable. Assuming that it is, the steady price is better for both consumer, who is not continuously frustrated by ever changing prices, and better for the producer who can plan ahead, because he will know within fairly close limits what his income will be within a given time. He can then implement improvements in order to increase his efficiency. The system then is good for both producer and consumer. Where the marketing boards may fall down, is in passing part of the increased efficiency on to the consumer, in order to off -set the cost to their freedom. If some of that increased efficiency income is not passed on, the income of the complacent farmer may become such that he, upon reaching a certain income plateau. will cease to look for n�r:,.,.luents. On -the other hand, if all the savings by the good farmer are passed on to the customer. even the good farmer may stop making improvements. It would behoove the price setting marketing boards to weigh very carefully what, if any, measures should be taken. The example of the production decrease of the Canadian cow in a quota. verses the American free enterprise cow, should set off an immediate action. It should remind the other quota boards that it could happen to them as well. In some commodities a supply management system is unavoidable, but it should be considered a last resort, for difficulties are legion.