This restriction keeps the price of milk stable, and high enough that farmers can make a profit. It may seem strange to some, but the goal is to ensure that we don't have to bail out our farmers.
The alternative is as in the US, where anyone can produce milk, and the price craters, and farmers need to be constantly bailed out.
Canadians watch crazy things like for example the US Federal government buying millions and millions of gallons of milk, making cheese, and storing it for decades. All to reduce supply/create demand, and keep the price artificially high. I suppose one bonus is the US government gives some of this cheese to the poor.
The other crazy part is the US federal government has repeatedly bought dairy farms out, to reduce supply. Literally bought entire farms, and closed them down.
Canada wants a stable supply of milk. We don't want to rely upon a foreign power for basic food-stuffs. And we don't want to spend untold billions. Thus, supply management.
Meanwhile, the US runs around saying we're crazy commies because we have price and supply control, says free market is perfect, then spends endless billions over decades to pretend the market works.
Oh and also, the US screams about how our market isn't "open", how we unfairly manipulate the market, then... wants to inject super cheap, underpriced milk, all of the result of US federal tax dollars spending billions.
Finally, it is illegal to use growth hormones in Canada on cattle. Not so in the US. With the excess supply issues in dairy in the US, maybe the US should do the same?