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Comment by vintermann | Hacker News Reader

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.

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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

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