Last week, Canadian Grocer published an article titled “Udderly ridiculous: Fluid milk prices fluctuate across Canada”, wherein it is argued that, due to supply management and interprovincial trade barriers, the price of 2% milk is higher in some provinces, and some stores, than others. The article also suggests that milk prices could shift due to the pending TPP trade agreement. The article is wrong, on both counts.
While it is inarguable that the price of milk is higher in some stores than others, the suggestion that this comes as a result of supply management is completely false. Supply management is about governing price at the farm level, so that Canadian dairy farmers can count on some stability in their revenues that allows them to cover their cost of production - from the sale of milk, not from government subsidies. This farm ‘target’ price is based on national indices, and all farmers from across the country get a very similar price for their product. Whatever discrepancy can be observed between cities, store banners or brands are the result of decisions made after the milk has left the farm gate, not because of supply management.
The report referenced in this article, as a matter of fact, confirms what DFC argues all the time: prices vary because retailers set the retail price. Farmers do not set retail prices - retailers and restaurants have always charged what they feel the market will bear. The price paid by the consumer is related to many factors, which can include: retailer competition, brand positioning, cost of competing items and specials to get consumers in the store. None of these factors is related in any way to the share the farmer receives – which typically only represents a tiny fraction of the final price.
Furthermore, making a comparison between a convenience store in downtown Toronto and a wholesale warehouse like Costco is baffling. At Costco, you receive a bulk discount. At a convenience store, you are paying a premium for convenience. On everything! Certainly the price of any product, perishable or not, also varies from convenience store to convenience store (since when are prices at privately owned convenience stores harmonized?).
In terms of interprovincial trade barriers, while a few provinces offer regulations at the retail level, most don’t - and these regulations are not under the umbrella of supply management, contrary to what the representative of Field Agent asserts. Moreover, farm milk does cross provincial boundaries to be processed where the capacity exists; and standards for farm milk are harmonized nationally, so any claims that supply management is an interprovincial barrier is a red herring.
Finally, as I told the Winnipeg Free Press earlier this week, it is doubtful that the TPP will have much of an impact on retail milk prices in Canada, because retailers hold the final decision for price in their stores. Any difference in retail price between cities, store banners or brands are the result of decisions made in the food value chain, after the milk has left the farm gate.
The truth is, the biggest determinant of how much we pay for dairy, poultry and egg products isn’t supply management – it’s where and when we shop.
David Wiens, board member, Dairy Farmers of Canada
Correction: An earlier version of this letter was attributed to Wally Smith, president of Dairy Farmers of Canada