What Is Supply Management?

A look at how Canada ensures we have enough dairy, chicken and eggs

Until the COVID-19 pandemic, Canadian shoppers have rarely experienced empty shelves at the grocery store. And even when supply chain disruptions were causing shortages of everything from toilet paper and construction materials to cars and computers, Canadians always had a stable, consistent supply of eggs, poultry and dairy products.

That’s thanks to a uniquely Canadian system called “supply management”. It matches what farm businesses produce (supply) to what consumers want (demand), resulting in a quality product at a price that’s fair to both farmers and shoppers.

How did we get supply management in Canada?

Today, Canada’s dairy, egg and poultry (chicken and turkey) farmers run their farms under supply management. This system was first set up in the 1960s to try to balance how much food was being produced with how much the marketplace actually needed. At the time, many farmers were struggling to make sure they were able to earn more money than it cost them to produce food. To make sure Canada would still be able to produce its own food – this is called food security – the government helped set up the supply management system to manage how food is produced and sold.

What does supply management do?

Matching food production with Canadian demand helps minimize food waste, offering consumers a reliable supply of fresh, high-quality food at a reasonable price and farmers fair and stable returns for their work.

For farmers, the system means they know exactly how much they can produce and what price they will receive when their products go to market. Those prices are reviewed regularly and set at a level that ensures farmers are paid enough to cover their production costs.

Each dairy, poultry and egg farmer in Canada must have what is called quota – this is a special permit that tells them exactly how much they’re allowed to produce in a year. The quota levels are set by provincial organizations called marketing boards, and they work closely with dairy, egg and poultry processors to monitor demand and make sure farmers are producing enough to satisfy the Canadian market.

To keep this system in balance, the government controls how much poultry, eggs and dairy can imported into Canada. It’s a complicated system governed by trade agreements between nations that spell out what amount of food products can come into Canada with little or no tariffs (a form of tax). This helps prevent the Canadian market from being flooded with eggs, dairy and poultry from other countries.

What goes into the price you pay at the grocery store

Even though media reports and social media posts may say otherwise, the supply management system does not set retail or restaurant prices for eggs, poultry or dairy products. Grocers, retailers and restaurants set their own prices, and they can often vary quite a bit between locations – but the price the farmer receives doesn’t change.

So why can consumer prices be so different? That’s because what happens on the farm is only the first step in what is called the supply chain – the system that helps get food from the farm to the grocery store shelf. This involves farmers, but also:

• Processors – companies that buy food from farmers and prepare it to be sold, such as turning milk into yogurt, for example. All dairy, egg and poultry products in Canada must be processed or graded and inspected before it can be sold in a grocery store.
• Distributors – businesses who are the link between processors and grocery stores. They buy food in large quantities to sell to different retailers.
• Retailers – stores that deliver products to consumers. This part of the supply chain also includes restaurants, schools, hospitals, caterers and others that prepare and sell food.

The price that consumers pay for a product includes all the costs every member of the supply chain system must pay to get food from the farm to the table.

The benefits of a stable system

Consumer choice. Being able to match production with market demand means that farmers can produce exactly what consumers are looking for, from organic milk to omega-enriched eggs and free-range chicken. That’s because they know they’ll have a market for their products and that they’re going to be paid a fair price.

Social responsibility. Dairy, egg and poultry farmers across Canada are frequent supporters of food banks and hunger programs, regularly donating milk, eggs and meat to help ensure people who are hungry have access to safe, healthy food options.

Sustainable innovation. That predictability of the supply management system means poultry, dairy and egg farmers don’t have to suffer through wildly fluctuating prices. Their stable income means they can plan for and make investments into innovation on the farm, sustainable production practices and animal welfare improvements.