Dairy prices fairly stable . . . thanks to supply management

Many consumers have become painfully aware over the recent increase in food prices – particularly in fresh vegetables and fruit.

Many consumers have become painfully aware over the recent increase in food prices – particularly in fresh vegetables and fruit. That should come as no surprise as most of those products are imported and have to be paid for in American dollars – an expensive hit with a 70 cent loonie. Interestingly, there is a presumption that prices for many perishable products will decrease once Canadian production comes on stream later this spring and summer. Don’t hold your breath for that to happen – commercial growers will want comparable wholesale prices from buyers or else their production will find its way to higher prices in American markets. Considering that hundreds of refrigerated trucks return empty to the US every day, accessing that market is not that difficult or expensive.

One significant food that is much less affected by the high American dollar are Canadian dairy products. That’s because under the dairy supply-managed production and marketing system that we have in Canada, we are more or less self-sufficient in dairy products and therefore much less affected by a high US dollar. What supply management also provides is price stability. Prices go up or down primarily reflecting the cost of production of milk on the farm. Recent statistics show that dairy products have increased by only 1 per cent whereas produce prices on average have increased by as much as 15 per cent and are not likely to decrease in the near future. That pricing difference between the two food groups is never mentioned in frenzied mainstream media reports on food price increases. Compare that to past media reports when the loonie was at par and milk prices were cheaper in the US – the implication then was that Canadian dairy producers and the supply-management system were ripping off consumers. Price stability is good news for supply management marketing, but curiously the Canadian dairy producers lobby does not seem eager to want to publicize this good news to consumers.

One of the inevitable suggestions that arise whenever produce prices increase is that we should not be relying on high priced imports and grow more of our own food. As admirable as that may be, there are a couple realities that impact more of our own production. First, increased production is restricted by our climate, and then there is the reality of the marketplace. The latter being that growing crops in the southern US is so efficient and cost effective that it’s almost impossible to compete on a long term basis. Besides, once production down there increases again to normal levels, retail produce prices will moderate and self-sufficiency ideas will quickly fade from the fickle consumers mind. The only way around that situation is to apply supply-management to other primary food production sectors. It’s proven successful for dairy, eggs and poultry production and could be applied to some other food commodity sectors. But that would require buy-in from all the production, processing and marketing players for a particular food product.

Interestingly whenever food prices increase significantly, the one sector hardest hit is organic fruit and vegetables. It seems that when consumers are faced with a choice between their wallet and trendy food products their threshold of price pain seems to be around 10 per cent. When it gets above that line most consumers that buy organic will instead choose to buy regular normal food. So much for people’s moral principles and sustainability notions about organic food. It would seem that a $5 bag of regular carrots suddenly looks a lot safer, appetizing and nutritious than a $10 of organic carrots. It all proves the shallowness of organic food philosophy. But I digress.

There is something of a side-benefit to sudden higher food prices; it causes the urban media and city folks to pay a bit more attention to primary food production. When rationale for higher prices is attributed to weather calamities in other countries and foreign currency values, consumers are suddenly confronted with the reality that cheap food does not magically appear at their local grocery stores every day. To the amazement of many, they are told most of that food is imported from far away and is at the whim of weather, currency and other cruelties of the marketplace. But what shocks most Canadian consumers is that their assumed entitlement to the cheapest food in the world is suddenly challenged. I would suggest city consumers need more such shocks so they can better appreciate where food comes from and that it’s produced by hard working growers and not grocery stores.