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