The overseers of Canada’s dairy supply management system have to be thanking their lucky stars that American and international dairy prices have shot up dramatically this year, just as our petro-fuelled currency has surged past the U.S. greenback.
Because the soaring Canadian dollar cheapens foreign dairy products, relative to those produced in this country, any corresponding price hike on the world market helps preserve the integrity of the Canadian tariff regime protecting supply management.
If the gap between domestic and world prices otherwise grows too large, non-Canadian dairy staples could potentially enter Canada at a competitive cost, even after importers pay duties of between 241 and nearly 300 per cent.
In short, supply management has dodged a bit of the Canadian currency bullet, as potential foreign rivals have lost some of their competitive edge because of spiking international dairy prices — attributed to ethanol-related feed cost increases and burgeoning milk demand in China.
(The phenomenon has actually created room for Canada to offload 7,000 additional tonnes of excess skim milk powder — a 70 per cent increase — onto the international marketplace this year, according to Laval Letourneau, Chief of Commercial Operations at the Canadian Dairy Commission.)
Yet, in the U.S., where milk prices have reached "record" highs, producers still aren’t collecting as much per litre (or hundredweight) as their Canadian counterparts. Nor are American consumers paying quite as much at the grocery checkout as their Canadian cousins, although the gap appears to be narrowing. (In August, CNN breathlessly reported on "skyrocketing" whole milk prices reaching an average of $3.80 per U.S. gallon and as much as $5 in many regions of the country.)
Like it or not, this is where the fallout of a higher dollar immediately poses a bigger challenge for supply management backers.
With 104-cent loonies burning a hole in their collective pockets, Canadian consumers are feeling their oats and demanding cross-border parity on everything from books to automobiles. With a vengeance, they’ve resumed their habit of shopping in places like Syracuse and Buffalo, resurrecting a reputation as "cheese heads" in search of cut-rate cheddar.
At this point in history, re-educating an increasingly militant Canadian consumer about the need for supply management and the benefits of a system engineered to avoid the "boom-bust" cycle will be an uphill battle, to say the least. Doubly so when no less a figure than federal Finance Minister Jim Flaherty fans public sentiment against made-in-Canada pricing for consumer goods.
Indeed, when Flaherty recently harrumphed about price-tag disparity on the latest Harry Potter release, he necessarily conjured up PR trouble for Canada’s dairy, poultry and egg producers.
The minister’s incantation naturally created an other-wordly opening through which the likes of McGill University economist William Watson could emerge to slam supply management as a "protection racket" in an Ottawa Citizen column last month. (Imagine that, an individual ensconced in a tenured position at a government-subsidized institution railing against a lack of competition!) It will take no small degree of wizardry to quell this sort of anti-supply management publicity.
From the Archives:
Op / Ed, November 2007
