Cost of buyout must be set … and soon

Recent weeks have seen urban media commentators expounding on the need to eliminate supply management in Canada.

Recent weeks have seen urban media commentators expounding on the need to eliminate supply management in Canada.

All those words of wisdom are the fallout from Canada begging to get in on the Trans-Pacific Partnership (TPP). It’s a free trade group that facilitates more favourable trade arrangements.

Canada wants in desperately and, according to popular notion, is prepared to give up our cherished supply management for poultry, eggs and dairy products. The assumption is that the other members of TPP want supply management eliminated so that they can export their poultry and dairy products into Canada —without tariffs.

Be that as it may, what needs to be done quickly is to identify the cost of ending supply management in Canada. Curiously, no one seems to want to tackle that issue, at least publicly.

The government will only do so when they have formally committed themselves to the process and created a spin as to how being part of TPP will be much better for the economy than maintaining supply management for a few farmers.

The supply management boards may want to show the cost, but don’t want to be seen as having given up the fight to preserve the status quo.

Clearly, if government is going to destroy the economic well-being of one sector of the economy in favour of another, those most affected will have to be fairly compensated by the federal government.

Dairy, poultry and egg farmers in Canada have spent billions — yes, billions — over the past 50-year history of supply management buying production quotas, building up herds and flocks, building and acquiring land, infrastructure and technology and investing a lifetime of work sometimes for generations to provide themselves with a living.

They all need to be compensated for that so that they can either retire from the industry or have the financial resources to start over under the brave new world of free trade in poultry, egg and dairy production.

I expect that if compensation formulas are truly fair, most present producers should be receiving cheques of a million dollars or more. I expect that will retire a significant portion of primary production. That’s going to have a sudden economic shock as processors adjust to importing product from other countries (that would be mostly the U.S.) to keep up with the ongoing demand.

There will be those that want to stay in production, but they will have to expand to stay in business. That will see the average 150-head dairy operation expand to more mega-sized operations of at least 1,500 cows. That’s still small compared to some American dairy operations that have 5,000 to 10,000 dairy cows in production. One can quickly see that at that size, the number of dairy farms in Alberta will decrease to only a handful.

The poultry supply management side will probably react differently. Anyone who has toured broiler operations in the southern U.S. knows that a few-million bird operations would easily satisfy the Alberta market.

In fact, there may be no more broiler or turkey operations left in Alberta because our small demand could be satisfied by cheap imports from the U.S.

Hence, I would see broiler and turkey operations to be completely bought out, as there is little hope of continuing production as in the dairy industry. Eggs are in a similar situation, but large-scale operations may still be viable in Alberta due to logistical and perishable concerns with transporting eggs over long distances — but it could be done.

So there you have it — rather than go through an excruciating debate on how to save supply management, the government and the industry should just throw in the towel and come up with a fair compensation formula to buy out the sector, and then cut them loose to sink or swim in the free-market. It’s been done before with the end of the Crow subsidy program for grain producers.

As to the billion-plus cost to taxpayers — not to worry — according to self-styled media experts, consumers have been ripped off by the billions with high prices caused by supply management. In the new world of free market poultry and dairy products, consumers will recoup those billions with much lower retail prices — or will they?

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