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Canada’s dairy industry is a rich, closed club

So you want to be a dairy farmer?

You buy a plot of land and a few dozen cows.

Then, you try to sell your milk to neighbours or maybe the local grocery store.

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Not so fast. That's prohibited. Canada's dairy business – now the target of Canada's trade rivals in the Trans-Pacific Partnership trade talks – is one of the most closeted industries in the country.

The so-called supply management system is operated by farmer-run provincial marketing boards, which have a mandate to meet consumer demand and provide stable incomes for producers. Similar systems also govern chicken, egg and turkey production.

To get in, farmers must buy quota, which gives them the right to produce a set amount of milk and sell it at fixed prices. Membership doesn't come cheap. Quota for a single cow ranges from $25,000 in Ontario and Quebec to $42,500 in B.C. Setting up a typical 70-cow farm would cost more than $3-million, plus land.

Steep tariffs and strict import quotas limit what other countries can sell here.

"I describe it as the last Soviet-style economic regime on the planet," said John Manley, president of the Canadian Council of Chief Executives, which has long advocated a phase-out of supply management.

And yet for decades now, Canadian governments have staunchly defended Canadian farmers against a relentless barrage of challenges to the tariff wall and other policies – from foreign governments and the World Trade Organization, to the restaurant industry, dairy processors and consumer groups.

So who are Canadian farmers, and why have they been so successful in protecting their system?

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When the supply management system was created in the late 1960s, there were nearly 140,000 dairy farms in Canada. Today, there are fewer than 12,000, and every year a few hundred disappear as farmers leave the business. Together, these farms sustain 112,000 full-time jobs and generate $5.9-billion in farm-gate revenues, according to the Dairy Farmers of Canada.

The industry is heavily concentrated in Quebec and Ontario, which together produce roughly 70 per cent of the country's milk. Quebec alone is home to nearly half of the country's dairy farms – 5,894 – and pockets 37 per cent of dairy farm revenues.

The numbers suggest the industry's political clout should be waning. Across Canada, there are just 13 federal ridings with more than 300 dairy farms – eight in Quebec and five in Ontario.

But the industry continues to have outsized influence. Many Conservative MPs grumble privately about supply management. But on the record, they and members of every other federal party stand as a monolithic block in defence of the status quo.

Last June, MPs from all parties voted unanimously to urge the government to "respect its promise" to shield the dairy industry from any fallout from the European free-trade deal. The vote had echoes of a similar 2005 motion, when 100 per cent of MPs similarly stood up in the Commons to express unwavering support for supply management in global trade talks.

Speaking in Quebec City Thursday, Prime Minister Stephen Harper vowed to "protect our system of supply management," while pursuing entry into the TPP trade deal.

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Dairy farmers are well organized, politically active and often well known in their local communities. And they are in virtually every rural riding across Canada, ready to dial up their MP when they're not happy.

The industry also has a sizable war chest – to build goodwill, encourage consumption and to defend supply management. The industry raises an estimated $100-million nationally from levies on milk for marketing purposes, plus membership dues from farmers.

Dairy farmers don't just produce milk. They are also in the processing business, making everything from butter to yogurt and ice cream. Two of Canada's largest dairies – Agropur and Gay-Lea Foods – are co-operatives owned by Canadian dairy farmers. And while farmers fight to keep the world out of their business, the dairies they own are expanding beyond Canada's flat market. Agropur of Longueuil, Que., for example, has been aggressively buying plants in the U.S. – a country bent on ending supply management.

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About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

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