OTTAWA — Farms in the heavily protected dairy, poultry and egg sectors, concentrated primarily in Central Canada, are far more likely than those in other sectors to be high-priced operations owned by corporations, according to an internal 2011 analysis done by Agriculture Minister Gerry Ritz’s department.
The figures were assembled last November as senior officials in Agriculture and Agri-Food Canada scrambled to respond to Prime Minister Stephen Harper’s announcement that Canada will put the controversial supply management system on the table as a price to enter the proposed Trans-Pacific Partnership (TPP) free trade negotiations.
The federal government and farm lobby groups in the protected sectors defend the system, saying it has created a strong dairy, poultry and egg production network that can withstand price volatility and doesn’t depend on government subsidies that are common in other countries.
But a critic said Friday the figures suggest one group of Canadian farmers is pampered at the expense of other farmers — and the general public.
“The original intent of supply management was to protect family farms, but the intent and outcome are just worlds apart,” said Brian Lee Crowley, managing director of the Macdonald-Laurier Institute, an Ottawa-based think-tank.
He noted that the number of dairy farms has plunged 90% since the system was introduced, because larger producers with a guaranteed cash flow have an incentive to acquire quota — enough quota for a single cow is pegged at $28,000 — from smaller operations.
“We’ve seen the emergence of a quite privileged and very small class of farmers who have this special legal right to control the supply of what they produce, and therefore maintain a high price at the expense of consumers.”
Crowley said the protected farmers use surplus cash to fund sophisticated publicity, advertising and lobbying campaigns to pressure politicians to stick with the system.
Canada’s major trade partners, including members of the proposed TPP deal such as the U.S., Australia and New Zealand, harshly criticize the Canadian system that uses quotas and sky-high tariffs to shield dairy, poultry and egg producers from competition.
Critics of the system inside Canada say supply management, in addition to inflating prices to the particular disadvantage of low-income consumers, compromises Canada’s ability to argue in favour of lower trade barriers for non-protected sectors like beef and pork.
The internal summary obtained under the Access to Information Act showed that the three sectors are more likely to be owned by corporations rather than individuals, and the average farm has a much higher earnings and overall net worth.
The supply-managed sector rejects any suggestion that faceless corporations have replaced the family farm. Individual farmers incorporate, they say, for the same reason other businesspeople do – to reduce taxes and limit legal liability.
Dairy Farmers of Canada spokeswoman Therese Beaulieu said 99% of dairy farms are family-owned and operated, “even the larger ones.”
The average size of a Canadian dairy farm is 78 milk-producing cows, while just 1.5% of farms have more than 300 cows, according to DFC figures.
The rationale for supply management in the 1960s is the same as it is today — to protect farm families from world price volatility while they try to sell a perishable product to a relatively small number of processors, Beaulieu said.
The internal analysis from Ritz’s department paints a relatively rosy picture for farmers protected from competition:
- Eighty-three per cent of poultry producers, 73% of dairy producers, and 46% of egg producers had farms worth $250,000 or more, according to 2009 figures. Just 30% of all farms across Canada, including those three sectors, are worth more than $250,000.
- Fifty-eight per cent of poultry, 42% of dairy, and 33% of egg farms were owned by corporations that year. For all farms across Canada, including the supply-managed ones, the average is 21%.
- Poultry and egg producers were earning a little more than $120,000 in net income annually in 2005, and after a dip in 2006 that figure has risen gradually to around $135,000 in 2009.
Dairy producers saw their average earnings rise from around $97,000 in 2005 to $106,000 in 2009.
Grains and oilseeds producers were earning an average of more than $60,000 in 2009, almost triple 2005 figures.
Hog producers had the opposite experience, seeing average earnings plunge from around $110,000 in 2005 to less than $40,000 in 2009.
Beef producers were at the bottom, with an average net income under $20,000 for all five years.
- The supply managed sectors “have significantly higher net worth on an average than Canadian farms as a whole.” The average net worth for a poultry farm in 2009 was more than $3.7-million, for eggs just under $3-million, and for dairy close to $2.5-million. For farms as a whole it was just under $1.4 million.
- Poultry farms have almost tripled in net worth from 1999 to 2009, while other farms inside and outside supply management have doubled in value over that period.
- Rough figures indicate the cost of milk production in Canada, where farmers face considerable costs due to long winters, is somewhat higher than the U.S., and roughly double the cost in Australia and New Zealand.