March 7, 2014

The Ottawa-based think-tank, the Conference Board, says Canada's supply management system is costing consumers of dairy products billions of dollars, while also acting as a drag on the industry, reported CTV news.

Canada's dairy industry is dependent on a protectionist system of quotas and high tariff walls, which artificially pushes up prices in the domestic market.

The system inflates prices for Canada's dairy products, including milk and cheese. As a result, Canadian consumers pay CAD2.6 billion (US$2.26 billion), or about US$251 per family, more a year than those in other countries, argues the report.

Though the country's dairy farmers are among the most prosperous, the policy has stalled progress and innovation in Canada's dairy industry. It has also shifted farmers' focus from the global market, which has grown by 7% annually over the past two years.

In addition, as farmers focus on the slow-growing domestic market, their income and job creation are limited.

The report suggests that Canadian dairy industry follow the example of New Zealand and Australia, and points out the need to phase out the supply management.

"Should Canadian dairy achieve significant success in the export markets (over the next decade), reaching export volumes half that of New Zealand, Canada's annual production would grow from eight billion litres to 20 billion litres," the report estimates.

"Canadians would benefit to the tune of CAD1.3 billion (US$1.18 billion) from efficiency gains. Under this scenario, the number of dairy farms would actually increase by 2.1% over 10 years, with the average herd size simultaneously increasing to 187."