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Is supply management really driving up food prices in Canada?

Volatility in categories like eggs and dairy suggests that supply management might not be effectively stabilizing prices

Many Canadians argue that supply management should be eliminated as it drives up retail food prices. However, examining the data from the last decade reveals that there is little evidence to support the claim that supply management significantly increases food costs, though there are caveats to consider. 

Using Statistics Canada’s database of selected food products, we analyzed the price increases of all food items from 2017 to the present. We [Dalhousie University's Agri-Food Analytics Lab] compared the price increases of supply-managed products to the overall increase across all food categories. The average price increase since 2017 for all categories has been 30.2%. Among supply-managed items, only three exceeded this average: Cream at 30.9%, Butter at 30.7%, and Eggs at 37.9%. Here are the rest of the supply-managed products: Whole Chicken: 17.5%, Chicken Breast: 20.1%, Chicken Thighs: 14.5%, Chicken Drumsticks: 1.9%, Milk (1 liter): 25.3%, Milk (2 liters): 25.9%, Milk (4 liters): 25.4%, Cheese: 20.7%, Yogurt: 27.1%. All of these are below the average increase for all food products tracked by the federal agency.

READ: Canada’s inflation rate falls to 2.7% in April as price growth slows across economy

This data underscores how specific supply-managed items have performed relative to the broader food market. Notably, products like butter, cream, butterfat products, and eggs are exceptions, having increased more than the average since 2017, but not by a significant margin.

food inflation graph
food inflation graph

We also examined how food inflation has been influenced by supply-managed products over the last decade. The graph shows the black line representing the overall food inflation rate. Compared to the lines representing supply management categories, there are no significant spikes or drops, indicating a stable inflation rate for general food items over the ten years.

The Fresh or Frozen Poultry (Orange Line) category shows more fluctuation compared to the general food line. Inflation rates for poultry have peaks and troughs, reaching as high as around 12% and dipping below -5% at times. This volatility is likely due to factors such as changes in feed prices, demand, or supply chain issues.

Dairy Products (Green Line) display a moderate level of fluctuation but remain largely within a 0% to 10% range. This suggests some stability but with periodic adjustments possibly influenced by production costs or market demand. Finally, Eggs (Blue Line) exhibit the most volatility among the categories shown. The inflation rate for eggs peaks at over 20% and has sharp declines, including a significant drop below -5%. This could be due to factors such as avian influenza outbreaks, which historically impact egg production and prices.

 Based on the evidence over the last decade, it is challenging to conclude that supply-managed products have significantly exacerbated the cost of food for Canadians. However, there are sources of concern. Supply-managed food categories appear to fluctuate as much or even more than many other food products, especially eggs. The intention of supply management is to stabilize prices over time, but this data suggests otherwise. Therefore, it's not entirely fair to claim that supply management consistently drives food inflation higher, though it does seem to contribute occasionally. Month-to-month increases for dairy, poultry, and eggs are much higher than the average for April, as indicated by the latest CPI report from Statistics Canada. Price volatility is a significant reason why a food category can be perceived as expensive by Canadians, and supply management is not preventing that from happening.

Additionally, our analysis spans only ten years, not considering that supply management product prices may have been inflated compared to other categories. Anecdotal evidence suggests that many of these products tend to be cheaper in other parts of the world, including the United States. 

Beyond price volatility, supply management inflates prices for processors, particularly dairy, which in turn suppresses innovation up the food chain. Discussions with dairy processors indicate that industrial milk in Canada is much too expensive. In fact, industrial milk prices are the highest in the industrial world. For supply management to better serve Canadians, reducing retail price volatility and lowering industrial prices should be key objectives for policymakers.

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