Monday, 9 January 2012

Cartels protect producers, not consumers

Mark Schatzker explains how Canada's agricultural cartels help keep quality produce from Canadian foodies (HT: @acoyne):
But here’s what hasn’t been said about supply management: It is the enemy of deliciousness.
If you have ever wondered why you can buy heritage chickens such as the famed poulet de Bresse in France but not in Canada, or pastured butter the colour of an autumn sunset in Ireland but not in Canada, or why it’s so hard to find pastured eggs here, the reason is supply management.
Great ingredients, as any good cook will tell you, come from small producers who lovingly tend their flocks and the land that sustains them. These artisan producers – the very people attempting to make food local and sustainable – are stifled under supply management because it requires the one thing these starry-eyed pastoralists almost always don’t have: money. A single cow’s worth of dairy quota, for example, costs about $27,000 (up to $40,000 in B.C.). Quota for one egg-laying hen can cost upward of $200.
Now do the math. A tiny egg farm of 500 hens (a typical Canadian farm has 20,0000 or more) can cost more than $100,000. (Exact prices and rules vary across provinces.) Ontario’s minimum allotment of chicken quota – 14,000 units (or about 90,000 birds a year) costs $1.5-million. And a tiny herd of 10 dairy cows costs more than $250,000. How many small farmers have that kind of scratch?
The resulting lack of agricultural diversity is a story told on store shelves across Canada. At my local butcher shop, the choice of chicken is limited to standard factory birds and “natural” factory birds. South of the border, by comparison, delectable breeds such as Plymouth Barred Rocks, New Hampshires and Jersey Giants can be found at farmers’ markets, butcher shops and on the Internet.
And yet the Canadian ag cartels have been able to paint themselves as the stalwart defenders of Canadian product against American imports, which all right-thinking Canadians know have to be less pure and clean than Canadian product.

Meanwhile, the Ottawa Citizen's Kate Heartfield rightly invokes Olson's Logic of Collective Action in explaining the mess:
In fact, the only thing the parties can find to argue about in this complex and vexing area of public policy is which party supports supply-managed farmers most.

The political barriers to reform are built into the system. Almost half the dairy quota goes to Quebec, an electoral battleground. There are only 12,965 dairy farms in this country — plus fewer than 5,000 in all the other supply-managed sectors combined — and every Canadian is a food consumer. But the costs to the consumer are invisible and difficult to quantify, and the complex system that imposes those costs is not widely understood. Dairy, egg and poultry farmers, though, know all about it and they’re heavily invested in the issue — literally, since the value of the quota they hold depends on what happens to prices in the future.

“If a government takes them on, they’re in for a big fight,” says John Manley, former Liberal cabinet minister, now the president and CEO of the Canadian Council of Chief Executives. “Look at what’s happening with the wheat board. It would be 10 times more vicious.”
The whole piece is excellent; it rightly points to New Zealand as example of a thriving free-market agricultural sector.

But Canada's problem is worse than Olson, though; it's Tullock. Even the winners aren't made better off by the system as all the rents are capitalised into the price of quota. But I still think there's a potential solution in buying them out.

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