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Comment by Throaway826 | Hacker News Reader

The main reason the Dairy Supply quota is in place is to stop US dairy producers from dumping dairy into Canada.

That's why the USA has never reached the tarriff limit. The big producers there would just dump 20 million litres at once if they could. They aren't interested in 1 or two.

And if they were able to do that, the Canadian producers would go under. So its kinda simple, the Dairy Supply system is there to protect the Canadian Dairy industry. If it was removed, we would be flooded with cheap, low-quality US milk.

The entire Canadian dairy industry produces less milk than Wisconsin alone. Why does the US need the Canadian market? A: They don't, they just want it anyways.

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Maybe it's obvious, but you left out subsidized. US dairy production is extremely subsidized compared to Canada's. It's not in any sense "free trade". The subsidies would allow the US dairy industry to destroy Canada's (it might even without the subsidies, but the subsidies guarantee it). Once the local industry was destroyed, the US producers/government would be free to increase the price. No country wants that, which is why things like staple foods are subsidized and tariff-protected anywhere in the world where not doing so would give a large neighbor/bloc leverage over them.

That's just a convenient talking point for our government. The model in Canada is effectively a regressive tax on consumers in the checkout line. It conveniently allows for our government to talk about how they don't subsidize farmers, and have a clean budget on that front, but I would prefer to see a model that was actually funded by government taxes such that it could be a progressive tax born more by wealthier Canadians rather than lower income ones being hit hardest.

I also have doubts that our current model is the best way of achieving the goals we had in mind when the programs were created in the 1970s. I know the error bars are quite sizeable, and it's not quite apples to apples, but recent studies that suggest our supply chain management in dairy, eggs, and poultry, costs approximately $244pp per year in higher costs. That's over $10billion per annum Canada wide, equivalent to 2% of the federal budget! I have been discussing this with someone in another thread for days, and the more I look into it, the more I feel like we really need to take another look at the implementation of this program. Dollar amount breaks my brain.

The elephant in the room is that the government is legally required to buy back the quota if change were to happen, and that is an estimated $50 billion dollar bill. Which actually doesn't sound so bad compared to your $10 billion per annum figure, but the $10B is hidden so it is easy to let it be ignored. A one time $50B payout will stick out like a sore thumb and no politician wants to attach their name to that.

When they did it for tobacco back in 2009 it was only around $300 million on the table which isn't nearly as mind boggling and thus much more easily forgotten. Not to mention that very few Canadians realized that tobacco was ever supply managed to begin with so it easily few under the radar. Anything that affects dairy will be headline news.

Yeah, I know that's a colossal elephant to deal with. I mean, I would hope that whatever reforms could lower costs enough that if you did a model similar to Australia, and had a temporary levy to pay for the buyout, the end cost to consumers, even with the levy, was lower prices than prior to the change. That was the case in Australia.

And I know nothing about the market, but I can't imagine it's overly liquid, the fact that all farmers would receive cash for their quota, would definitely be attractive to most. It's already heavily financialized and borrowed against.

And then, you could even do something like NZ did where all the dairy farmers got together and created a coop for processing, NZ is now the largest exporter of dairy in the world! If some of the quota levy went to getting this off the ground, you'd help the farmers retain a bigger piece of the pie with vertical integration of the supply chain. And, hopefully also compete globally and become net exporters, increasing the size of the pie.

I dunno, I have no idea what the fucking solution is, but after spending a bunch of time in the weeds of this shit over the past couple days, I am like, we have created a monster, this can't be the most effective way to achieve the underlying goals of the program.

> dairy farmers got together and created a coop for processing

That isn't going to go over well with the big three (Saputo, Agropur, Lactalis) who own ~75% of the processing quota. I suspect if you dig even deeper you will find it is they who hold the political capital that props up the dairy supply management system. If it were only farmers involved it would have been gone ages ago.

Agreed on all fronts. But, if we're entering an era where we have to be less reliant on our trade relationship with the US, we need innovation to compete, and the status quo of Oligopolies in so many fucking industries really needs to be confronted imo. Doubt it'll happen, but it's an increasingly ugly situation.

Protecting your own country's production capacity and industry doesn't come without cost. It likely would absolutely be cheaper if we allowed our core industries to fail and be replaced wholesale with American exporters, but that's not what the majority want for the country.

As we're seeing with this trade war as a whole, tightening economic integration with an asymmetric partner puts your sovereignty at risk as well. If we have no industries of our own, and are utterly dependent on a single unreliable superpower, then we lose the freedom to decide on our own future as the rug could be pulled out from under us at any time. The only way to mitigate that risk is to diversify trade and ensure self-sufficiency in our own industries.

Yes. I am well aware of this. I just find it hard to believe that dairy, poultry, and eggs are some special snowflake type of farm that requires the quota and supply chain management, while every other type of farm, we can manage with direct subsidies.

For reference, there are about 190k farms in Canada, 8% of those farms are dairy, poultry, and eggs whose viability is ensured with supply chain management. The other 92% of farms, are managed with direct government assistance (AgriStability, AgriInsurance, AgriInvest, and AgriRecovery). The latter costs the government $1.5-$2 billion most years. While the recent report on supply chain managed farms suggests the cost born by Canadians to be around $10 billion. Even if that number is off by an order of magnitude, we're looking at $1 billion for 8% of farms, and $1.5-$2 billion for the other 92% of farms.

All I'm saying is it seems like the solution to help ensure viability in dairy, egg, and poultry farming is wildly inefficient and merits a look from first principles. Is there a solution to achieve the same outcome at a lower cost? The world has changed drastically since the policies were implemented in the 1970s.

I admit I am far from an expert, but I have spent an inordinate amount of time reading about this shit out of curiosity in the past couple days. Broke my brain when I saw the numbers around the costs born by canadians in the checkout aisle due to supply chain management.

I am not sure if this factors into it but an interesting difference between dairy and eggs and most other types of farms is that those are highly perishable. Grain can be stored and released gradually to even out market gyrations but dairy is just lost if they don’t match supply closely with demand in real time.

Yeah, that's a fair point but it still seems like a huge delta.

And my rabbit hole over the last couple days has led me to spend a bunch of time looking into Fonterra, which is the farmers processing Coop that happened in NZ when they got rid of their quota system. It's turned NZ into the largest milk product exporter on earth, and their whole strategy is processing milk into more shelf stable products. Cheese and Butter is about 20% the remainder is skim milk powder, whole milk powder, whey protein, and caseins.

Anyhow, all of this is to say, that there are solutions that ensure no milk goes to waste by processing it into more shelf stable ingredients, all of which have massive demand on the global markets. Whether we do much of this in Canada, I am not sure, but, feels like a missed opportunity if not, and likely partially caused by a lack of necessity to innovate due to the artificial moat.

Eggs, haven't looked into but presumably similar to milk in that it can be processed into shelf stable powders.

But, on the poultry front, beef, pork, etc, are all in the 92% of farms group, managed by subsidies, so, while chickens have a shorter lifespan, I don't see why we can manage cow and pork farms with subsidies, but not chicken.

> Anyhow, all of this is to say, that there are solutions that ensure no milk goes to waste by processing it into more shelf stable ingredients […]

* https://en.wikipedia.org/wiki/Government_cheese

It should also be noted that Canada does not permit dairy products produced with Bovine Growth Hormone, which makes our industry less competitive that American where the practice is widespread.

> does not permit dairy products produced with Bovine Growth Hormone

It should also be noted that this is misleading. The dairy products are permitted to be produced with rBGH and you will almost certainly find some on the shelves as not all dairy products in Canada come from Canadian cows. What isn't permitted is giving it to cows in Canada as it is concern for reasons of animal welfare.

I know you already know that, but the audience needing your message doesn't and they are prone from messaging like that to think there is some reason to be afraid of the milk even though it perfectly satisfies Health Canada concerns. It wouldn't be allowed across the border if it were deemed dangerous. It is worth reminding that Canada happily allows all and every drop of American milk across the border as long as someone is willing to pay the tariff.

Isn't growth hormone in your milk a bad thing? Isn't that a loophole that should be closed?

Not to the extent that you consider your milk good. Cows cannot produce milk without the hormone. That is the reason why a recombinant version works. What loophole would you close, exactly?

I guess giving cows extra growth hormone

That has the effect of producing more milk, so the concentration in the milk remains the same. It makes no difference to the milk.

It does affect the wellbeing of the cow, though, which is why it is against the law to give it to them.

I probably wouldn't want to drink milk from an unhealthy cow though

The broader context is that approximately any country that wants a healthy, stable dairy industry (often regarded as a component of national security) has to provide government support to their farmers one way or another. “Stable” is particularly important for dairy because recovery when lots of dairy cattle are culled is expensive and takes years.

The US and Canada use different, incompatible means for accomplishing this, so you can arbitrarily paint either as “cheating” the other by saying “well (Canada/The US) does X to the tune of (a dollar amount) and the other does zero of that, they’re cheating!”, i.e. by lying by omission.

Because of the way the US subsidizes theirs, Canada could be vulnerable to dumping. So there are protections in place. This is not remotely a big deal so long as both sides are competent and operating on something resembling good faith…

>So its kinda simple, the Dairy Supply system is there to protect the Canadian Dairy industry. If it was removed, we would be flooded with cheap, low-quality US milk.

Flooded? Cheap? Yes. Low quality? Doubtful. If quality were the sticking point, you'd expect this would be amicably resolved with equal standards for both domestic and imported milk.

Ok, if not blanket-ststement lower quality, it's definitely less regulated than CDN dairy.

>it's definitely less regulated than CDN dairy.

Again, if that were the sticking point that can be fixed with rules around imports. The fact that these negotiations always end with quotas and/or tariffs strongly suggests the reason is political (ie. lobbying).

It's not wild to imagine Canada wants to protect a domestic food producing industry.

Same how all countries, including the US, heavily subsidize and protect their agricultural sector.

I'd call this strategic, not political (although ofc it involves lobbying, again, like in every other country including the US)

>It's not wild to imagine Canada wants to protect a domestic food producing industry.

It's still protectionism, even if it's for a "good cause". During the mercantilist era protectionism was considered the obvious thing to do. After all, why would you want to make yourself poorer and enrich your enemies in the process? That doesn't mean it wasn't protectionism.

>I'd call this strategic, not political (although ofc it involves lobbying, again, like in every other country including the US)

For every policy that benefit some interest group there's almost always a fig leaf "strategic" justification for it. Jones act? It's to protect domestic ship building. Banning discounted medicines from abroad? They aren't been certified safe by the FDA. Tariffs on sugar? Food security and American Jobs™, of course!

The US dairy industry is heavily subsidized. Countries generally don't let another country dump heavily subsidized products into their economy if it competes with local industry (provided they have any choice).

Pray tell, what's with the whining about Chinese overproduction then?

It follows then that the USA also wants to protect its industries, such as timber, oil and gas, and maple syrup, from Canadian producers that are happy to dump their stuff south of the border for cheaper than US competition.

The US sets the price it pays for Canadian oil, a discount from the market price.

I don't know about timber, but the US maple syrup industry is healthy, just unable to keep up with demand. I think that's a consequence of geography and the time investment required to get mature trees, not Canada undercutting.

Canadians don't negotiate when selling their oil? US just sets the price? Amazing.

I don't really know how the discount is built into the price, but it's a result of the fact that only about 10% of the oil Canada produces can make it to a port to be sold to non-US buyers.

https://en.wikipedia.org/wiki/Western_Canadian_Select

The price is “discounted” as in “it's cheaper than the global market price”, because of the shipping difficulties, but it's not a “discount” in the sense of “americans get a discount because we're nice neighbours and they have a coupon”.

A common point of political contention up here are various pipeline issues, precisely because it potentially permit access to more markets, improving the sale price. (However it would also raise the price of gas in Canada for the same reason, with all the implications that comes with that).

> […] from Canadian producers that are happy to dump their stuff south of the border for cheaper than US competition.

The USD and CAD are not 1:1, as the CAD is 'lower value', so of course stuff made in Canada will generally be less expensive. (The trade off is that imports are more expensive for Canadians.)

The US has the same on dairy imports into the US for the same reason.

> The main reason the Dairy Supply quota is in place is to stop US dairy producers from dumping dairy into Canada.

Yet the same rules apply to European cheese: limited quantities that can only be imported through an established dairy cartel member. Anti-Americanism is a convenient marketing tool, along with the nostalgic myth of the independent family farm. The reality is oligarchs like https://en.wikipedia.org/wiki/Saputo_Inc.

I’m dumb and misread the comment. Please ignore.

It sounds like you misread my comment.

Sorry, I did. I thought you were accusing American companies (which they can be) of being oligarchies. You’ll have to forgive me, I’ve been doing the lord’s work defending the United States a bit here and trying to clear up confusion that others have with respect to trade.

I didn't know the US had royalty... You should consider moving to the EU if you want to do work for lords and ladies.

That doesn’t make any sense. But happy to answer any questions you may have!

The main reason for the dairy supply quota is to protect a politically powerful cartel, everything else is justification

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