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SW Saskatchewan | The history of supply management is that it has always maintained a profitability above the non-supply managed sectors.
One of the reasons is that the cost of production formulas tend to lag and are based on old, more expensive technologies so that real profits are higher than shown by the formula. Plus the fact that supply management allows them to capture a significant portion of these "advances " for their own pocket, rather than sharing with consumer, processor etc.
Of course, no mountain can grow to the sky, so one assumes that their will be a limit to the growth of quota value. The "securitization" of quota for loan purposes was the most recent major boost to quota values.
No one is really anxious of get rid if the system. Producers tend to be happy with it- it has given them higher incomes. Processors like the "stability" it offers- they can live with any system once they know the rules are stable. The banks sure don't want to see their security on these loans disappear.
And finally the politicians like it-- the votes in play are in rural Ontario and Quebec. The west isn't going to change its vote over supply management. The big cities don't care. So keep those voters who do care happy.
The big threat to supply management was globalization and freer trade. It looks as if that has been moved to the back burner, and even NAFTA is in for a rough ride.
The one adjustment that will stress supply management is how they handle new quota as the market grows. The governments of the growing provinces of Alberta and BC want more production to occur in their provinces, the grain growing provinces of Sask and Manitoba feel they should get more quota because their lower feed grain prices give them a cost of production advantage. And no province wants to give up the golden goose. Can horse thieves share the spoils so everyone is happy?
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Canadian Farm Debt
