This will be the first in a three part instalment on agriculture.

Last year, Canada’s 230,000 farms generated $3.5 billion in profit on $36.5 billion in sales. While on first glance this may seem like a healthy business, this is a sector in crisis. $3.5 billion in net income, or profit, divided amongst 230,000 farms is an average profit of $15,000 per farm. These numbers are even worse when you realize that most farmers and their families don’t pay themselves, and rely on their profit as “salary”. In addition, farmers make major investments in their farm businesses, and for many the return on investment has been less than what a GIC would return. No wonder many farmers often have to make ends meet by working off the farm.

Thirty years ago, in 1974, Canada’s farming sector generated $3.8 billion in profit on $8.8 billion in sales (in 1974 dollars). In 2004 dollars that would be $15.4 billion profit on $35.7 billion in sales. In other words, last year, farmers made only 1/4 the profit they made 30 years ago, and last year was the best in the last five for Canadian farmers. This drop in income during the last thirty years has occurred despite the increase in population from 22 to 32 million, and despite the per capita growth in the economy.

Clearly, at a macro-economic level, Canada’s agricultural policy isn’t working. However, the one sector of agriculture that is working is that part under supply management, introduced by Eugene Whalen in the early 1970s. Milk, eggs, chickens, turkeys, and hatching eggs are all under supply management in Canada.

Supply management is a system where the market is managed by government controls. The three essential pillars of this system are production quotas, pricing controls and import controls. Supply management is like a three-legged stool. Knock one of the three legs out, and the whole system fails to work.

I support supply management because supply management works. Consumers get a nutritious basket of high-quality products that are among the least expensive in the world, produced by their friends and neighbours. Governments have not had to spend billions to bail out supply managed markets, like we have had to do for agriculture in free-trade markets, since supply managed markets are insulated from disruptive trade shocks. Finally, it allows the hard-working family farm to receive their fair share of the supermarket price and make a decent living and a stable income.

Unfortunately, there are two big threats to supply management. First, the federal government has been using over quota tariffs (i.e. import controls) as a bargaining chip at the WTO to win concessions in other trade areas; in other words, they are threatening one of the three pillars of supply management. Governments should never play one sector of agriculture off of another, but that is exactly what this government is doing. Second, there are loopholes that allow food manufacturers to avoid the over quota tariffs (import controls) by using blends to formulate their products using imported milk, eggs, chicken, and turkeys, instead of using Canadian products. This government has failed to protect supply management by closing these loopholes. In Wellington-Halton Hills, we have hundreds of farms that rely on supply management, and this government’s inaction on these two fronts is threatening their very survival. Supply management is one of the only bright spots in agriculture, and this government needs to do more to protect a system that works so well for consumers, governments, and farmers.