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Jim Lee in his closed chicken processing plant in Welland Ont. (Glenn Lowson for The Globe and Mail)
Jim Lee in his closed chicken processing plant in Welland Ont. (Glenn Lowson for The Globe and Mail)

Fowl play: How supply management is thwarting Canada’s agri-food industry Add to ...

Jim Lee is standing inside his ominously quiet chicken processing plant.

Running at full tilt, Cami International Poultry Inc. of Welland, Ont., would normally be slaughtering, cleaning and chilling as many as 15,000 chickens a day.

Instead, the plant is closed. All but a handful of Cami’s nearly 60 workers are at home collecting employment insurance. A 1.6-kilometre conveyor belt that snakes through the $5.5-million plant sits idle. A few stray feathers on the floor near the loading dock are the only obvious hint of the plant’s usual vocation.

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Cami has operated just three days so far in March and six in February. “It’s frustrating as hell,” said Mr. Lee, 55, a second-generation chicken processor who studied agricultural science at the University of Guelph.

“We have so much potential to go serve the market and we’re being hand-tied. And the worst thing is I’m being punished for doing the right thing.”

The simple answer why the six-year-old factory is running on empty is that Cami can’t get enough live chickens. The Chicken Farmers of Ontario, which parcels out quotas for birds to processors, won’t let him buy more live chickens. And he’s struck out importing more from Quebec, or anywhere else.

Cami’s struggles are a microcosm of what’s wrong with a large swath of Canada’s agri-food industry. Supply management – the system that tightly controls every facet of dairy, egg and chicken production in Canada – is thwarting companies like Cami from doing all the good things Ottawa says it wants from businesses – innovating, exporting and taking risks.

Critics of supply management have typically focused on the high cost paid by consumers. Cami’s predicament demonstrates how lost export opportunities and the stifling of agricultural innovation is harming a much broader swath of the economy. Supply management is sapping economic growth, jobs and productivity, up and down the food chain, not to mention the hit on government revenues.

Canadians may not know what they’re missing. The global market for protein is exploding as the middle class grows in emerging markets such as China, India and Indonesia. And it’s driving demand for milk, cheese and chicken, and to a lesser extent, pork and beef.

The Canadian agricultural sector is severely limited in what dairy and poultry products it can export because of the protectionist regime Canada maintains at home to prop up incomes for an ever-shrinking number of farmers.

Economists say the benefits to farmers pale next to the billions of dollars in lost exports – today, and in the coming decades. Instead, the United States, Australia, New Zealand and the European Union are grabbing a vast market that could be Canada’s.

A land of plenty – and constraint

Canada has all the competitive advantages to be a food-export colossus, including land, climate, feed and genetic technology. But it has consciously decided, through its policy decisions, to forsake the fastest-growing part of the market, lamented Colin Carter, a professor and director of agricultural economics at the University of California-Davis.

“That’s where the action is in terms of economic growth, in these emerging markets,” explained Prof. Carter, a Canadian, and an expert on global commodity markets. “It means there will be a shift in global demand for agricultural products, and trade. And for the most part, Canada is not participating in that market.”

Canadian exports of processed agricultural to emerging markets are stagnant, and aren’t likely to grow in the future because the country isn’t selling what the world is buying, according to Prof. Carter. Global demand for milk products, for example, is expected to grow by 34 per cent by 2021. Demand for chicken is forecast to increase 30 per cent over the same period. Canada’s exports of processed agricultural products, including such items as fresh meat, vegetables and sweeteners, totalled $13.7-billion (U.S.) in 2011, with 80 per cent destined for the U.S. and Japan.

“I’m not harping on what we’ve lost in the past,” Prof. Carter said. “It’s about looking forward and seeing where the opportunities are, and identifying what constraints are in place. And it’s supply management.”

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