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It’s time to put supply management out to pasture

Supply management may well be doomed.

Canada is facing mounting pressure in free trade talks to abandon the protectionist regime that shields the multibillion-dollar dairy, chicken and egg business from market forces.

But one group of Canadian farmers is confidently pushing to make it bigger. The Pullet Growers of Canada wants the federal government to okay the country's first new supply management agency in nearly three decades.

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To all the city folk out there, pullets are young hens raised specifically to lay eggs for human consumption. It's a $100-million-a-year business involving more than 550 farmers across the country. Collectively, they raise 23 million birds a year.

The Farm Products Council of Canada, which regulates supply management in Canada, wants to hear what Canadians think about the idea in advance of public hearings slated for later this year. A decision on the application is expected before the summer.

The response should be a flat "no." It's not a question of the chicken or the egg, or even the chicken and the egg. The right answer is neither.

Expanding supply management now would be foolhardy.

On the other hand, there are plenty of good reasons for Ottawa to get out of the supply management trap.

The regime is a multibillion-dollar transfer from millions of taxpayers and consumers to a dwindling pool of farmers. The result is less choice for consumers and artificially high prices.

And it's dubious economics.

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Supply management stifles innovation effectively keeping new farmers out of the business and by limiting output. Canadian milk production is now lower than it was in the 1960s – the opposite of the trend in most other major industrialized countries, such as the U.S. and Australia, as the Conference Board of Canada pointed out in a recent report.

It's not even clear it's been good for the family farm. The number of dairy farms has shrunk to 14,000 in 2010 from 135,000 in the late 1960s.

The protectionist regime also disqualifies a large swath of Canadian agriculture from export markets at a time when global demand for protein is exploding.

And supply management sabotages export opportunities for other industries because the system is a stumbling block in trade talks.

But in the cloistered world of Canadian agriculture, what's good for consumers and the economy isn't always the main policy driver.

Indeed, there's no indication yet that the federal government is planning for a post-supply management world – even after agreeing to put everything on the table in the ongoing Trans-Pacific Partnership trade negotiations.

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Farmers often get what farmers want.

So what would supply management in pullets mean? In their application to Farm Products Council, pullet growers argue that supply management is vital to getting a "fair return" and producing "superior eggs."

The result is that Canadians will pay more for eggs laid by their hens. If Ottawa grants the industry's request, pullet prices would be set at a new higher level as production is tightly controlled and parcelled out across the country – as it already is for chickens, eggs and milk.

And to make the system work, imports would have to be shut out – further antagonizing Canada's trading partners. The industry says it has already had talks with federal officials on how to do this.

The industry insists its application is not a "money grab." Their only, desire, is to cover production costs.

But they offer scant evidence in their application that the industry isn't profitable now. It's hard to imagine how 550 Canadian pullet farmers would stay in business if there was no money in it.

The pullet industry says it has spent two years consulting widely as it prepared its application, talking to pullet farmers, egg farmers and various provincial and federal officials.

There's no hint in the application that expanding supply management might be important to the rest of the country. In a discussion of the industry's communications strategy, for example, the Pullet Growers of Canada says it's not overly preoccupied with its public image because its "only real customers are egg producers."

It's time to force farmers out of the supply management echo chamber, where the voices of consumers and food producers are seldom heard.

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