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Old 09-25-2021, 10:16 AM   #41
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Originally Posted by Mickey76 View Post
He simply means the price of the product (milk,poultry etc.) is based on the cost of production plus a profit factor. The price of quota is not factored in at all. If for example the price of quota doubled tomorrow because 18 Hutterite colonies decided to try and buy more at the same time the price paid to the farmer for the milk or poultry wouldn’t change.
It doesn't matter how they say they calculate the price. And frankly, a cartel saying they're not setting the price to be highly profitable isn't credible.

The ever-rising price of quota in the market demonstrates empirically that prices are much higher than they otherwise would be without the quota system.
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Old 09-25-2021, 10:54 AM   #42
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Originally Posted by Mickey76 View Post
He simply means the price of the product (milk,poultry etc.) is based on the cost of production plus a profit factor. The price of quota is not factored in at all. If for example the price of quota doubled tomorrow because 18 Hutterite colonies decided to try and buy more at the same time the price paid to the farmer for the milk or poultry wouldn’t change.
Yes but the price that people are willing to pay for quota is the NPV of the cash flow that will be generated by the quota discounted by an acceptable return on investment.

The cash flow is dictated by the predicted future cost of production and regulated selling price.

Therefore if the price of quota is marginally greater than zero then prices are too high.
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Old 09-25-2021, 10:55 AM   #43
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Why is it that the only people who defend supply management are people invested in supply management continuing to exist?
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Old 09-25-2021, 11:36 AM   #44
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Why is it that the only people who defend supply management are people invested in supply management continuing to exist?
Narrator: because the system hurts every other Canadian.
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Old 09-25-2021, 12:30 PM   #45
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Why is it that the only people who defend supply management are people invested in supply management continuing to exist?
I've found this to be the case as well (and I know a lot of people tied into the quota system).

I also know that the price of actually obtaining the quota very much is a factor when trying to figure out how long it takes to pay off, and that if the value of quota wouldn't continue to increase, a lot of people wouldn't purchase it.

Because right now in the dairy / laying hen industry, in combination with the barn & other resources (land, equipment, etc) you need in place, buying new quota will take to 20-30 years to pay off if you try to live modestly. After 15-20 years the barn needs to be renovated and you need new cages etc. From the perspective of making money and paying off your debt, it is negligible. The only reason people do it is because the value of their 'asset', the quota itself keeps going up.

From 2002.

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The provinces' milk quotas generally are expressed as the right to produce one kilogram of butter fat daily. In 1998, that was worth roughly $15,000 in Ontario. In 2000, when the stock market was at its peak, it was worth around $20,000. Last month, it was $22,950. In Quebec, in May, it was $29,900.

That translates into some extraordinary statistics. The total value of the milk quota in Canada is now about $20-billion. That means the cost to buy the quota controlled by an average farm is worth just over $1-million.

There are about 1.14 million cows in the country, meaning the value of quota per cow -- that is, the right to sell the milk from that cow -- is about $17,500. That's about seven times more than the cow itself would cost at auction.

Getting into the other supply-managed sectors is even more expensive. The average chicken farm in Canada has 28,000 birds -- and would require $1.5-million in quota to run. The average turkey farm needs $1.4-million in quota.

The quota for an average egg operation -- with about 13,000 hens laying one egg a day -- is $1.75-million. The quota of $135 per hen is roughly six times what it was two decades ago, and has risen about 18 per cent just since February. There are a few agricultural economists across the land who regret the day they told their parents they were leaving the farm to pursue academia.
https://www.theglobeandmail.com/repo...article755831/

Completely bloody insane. I don't want to know what the value of these quotas is today in 2021. I'd expect it to have doubled or tripled.

Some friends I know recently sold $4.5 million in laying hen quota. Their reasoning was simple. They needed a new barn & new cages. They only made $180k in profit per year from their existing operation. The new barn & cages would cost them $3-5 million. If they take the $180k profit per year, and use $80k of it to pay off the debt, and keep $100k to pay themselves, cover incidentals, etc, it will take them 62 years to pay off $5 million. If they use the full $180k per year and apply it towards the debt, it will take them 27 years. So instead they sold the quota.

Its even worse if you buy NEW quota. Right now the cost is $500 per bird.

$5 million for the barn and cages, plus $500 per bird for 9000 birds = $4.5million for the quota.

Thats $10 million in total. How on earth do you pay for that with the income you generate?

Its bonkers.

Last edited by Azure; 09-25-2021 at 12:47 PM.
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Old 09-25-2021, 01:25 PM   #46
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I cant speak to the nuts and bolts of the system but any system that intentially cause the waste of any food in a world where billions still live in permanent hunger is immoral and needs to be changed, at the very least excess milk should be turned into something we can ship to areas of malnutrition and given away for free, turn it into cheese or milk powder
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Old 11-04-2021, 07:21 AM   #47
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Prior to the pandemic, Canadians were already getting fleeced by this dubious arrangement. The Organization of Economic Co-Operation and Development says that Canada’s “market price support” averaged $2.9 billion per year between 2000 and 2017. Of this overcharge, $2.6 billion a year, or nearly 90 per cent, went to milk.

To put things in perspective, the infamous bread-fixing scandal that outraged consumers across the country allegedly overcharged customers by between $2.5 billion and $5 billion in total over the course of 14 years.

Now, things are about to get a lot worse, with Canada’s de facto dairy cartel announcing large, across-the-board price increases in 2022. The Canadian Dairy Commission (CDC), the Crown corporation that controls the price dairy farmers get for their milk, has recommended a stunning 8.4 per cent increase in the cost of wholesale milk — which will affect virtually every dairy product, from cheese to yogourt — and a staggering 12.4 per cent increase in the price of butter.
https://nationalpost.com/opinion/sab...he-cheese?s=03
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Old 11-04-2021, 07:53 AM   #48
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Originally Posted by Azure View Post
This is somewhat outside the control of the farmers. The cost of everything is going up. This is the post covid inflation people have been talking about. Who knows? Maybe it's the excuse to do away with inefficiencies in the market. We may see some farmers supporting change, as they will have a great deal of difficulty finding laborers and other staff, who will demand higher wages, potentially crashing the business of many farms.
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Old 11-04-2021, 07:57 AM   #49
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Increases are far beyond what inflation seems to be at.
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Old 11-04-2021, 08:26 AM   #50
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Increases are far beyond what inflation seems to be at.
I disagree. I think we're seeing prices adjust to not only this year's inflation, but due to what's gone on the last two years. As restaurants reopen, dairy demand will increase and shoot up all at once. Dairy prices were likely artificially suppressed by restaurants being closed.

I also think the true rate of inflation is greater than the 4.4% reported rate.
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Old 11-04-2021, 08:36 AM   #51
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I don’t know the formula they use to increase pricing for supply management but there is going to be a lot of shock pricing at the grocery store in the next 12 months. Most agricultural crop prices have doubled or tripled and there are critical shortages. . We are not talking 5-10 percent. Oats last year was $3 per bushel today it is over $10, Flax was $15 per bushel now it is over $45, Wheat was $7 per bushel now $13. If you fed oats to livestock you are looking 3x the feed cost and you probably can’t get them. It doesn’t look good.

Last edited by Mickey76; 11-04-2021 at 08:58 AM.
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Old 11-04-2021, 09:01 AM   #52
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Originally Posted by Azure View Post
Increases are far beyond what inflation seems to be at.
That's true, but keep in mind that every sector experiences inflation differently. Gas is up 32.8%, food 3.9%, meat 9.5%, and housing 4.8%.

https://www.bbc.com/news/business-58986399

Not to defend Canadian Dairy (because it's stupid to propose an 8% increase without providing justification), but feedstuffs are up A LOT. If I had to render a guess, I would imagine in the range of 35-40% minimum in Alberta in the last year and a half. Ontario actually had an EXCELLENT harvest, but I would guess in the range of 30-35% there due to market demand. Feed stuffs represent about 2/3 of the total cost to produce an animal commodity.

Also keep in mind the boards set the price for that commodity that the processor has to pay, factoring in a cost of production. Today, that is helping many stay in business because there is an incredible amount of market volatility in inputs. The retailor charges whatever the heck they want at the end of the day, and really is the one making the biggest cut.
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Old 11-04-2021, 09:17 AM   #53
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The problem with using volatile input costs as a benchmark for a big raise is that they're volatile. Does anyone think they'll drop it next year if feed prices decline?

If only there was some other way to set prices that would take real time feedback...
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Old 11-04-2021, 09:53 AM   #54
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That number is meaningless unless you compare the support in other countries. Based on this Canada's total producer support (which includes market price, tariffs, as well as government subsidies) is below OECD average as a share of Gross Farm Receipts and total GDP. We just do it through high retail prices whereas other countries support through taxpayer subsidies.

Not sure why right wingers are so against supply management; they love user fees rather than subsidies. Why should non-dairy consumers' tax dollars subsidize people who consume a lot of dairy?
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Old 11-04-2021, 10:43 AM   #55
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That number is meaningless unless you compare the support in other countries. Based on this Canada's total producer support (which includes market price, tariffs, as well as government subsidies) is below OECD average as a share of Gross Farm Receipts and total GDP. We just do it through high retail prices whereas other countries support through taxpayer subsidies.

Not sure why right wingers are so against supply management; they love user fees rather than subsidies. Why should non-dairy consumers' tax dollars subsidize people who consume a lot of dairy?
I wouldn't characterize this conflict as right wing vs left wing. The current system in place prevents small businesses from operating and favors largely corporations.

To play devil's advocate, a truly right wing perspective would be one that has neither subsidies nor supply management. It would rely entirely on the market in a sink or swim sense. What you're discussing is the conflict between two left wing approaches.....although I debate whether systems like unions, supply management systems, etc... are in any way left wing. Left wing, by definition, is anti-establishment. Unions and supply systems have now become establishments in their own right. I'm not sure how you can look at a system with a million dollar entrance fee (the cost of dairy licenses for a small farm) any other way.
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Old 11-04-2021, 11:36 AM   #56
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Originally Posted by bizaro86 View Post
The problem with using volatile input costs as a benchmark for a big raise is that they're volatile. Does anyone think they'll drop it next year if feed prices decline?

If only there was some other way to set prices that would take real time feedback...
If input costs go down, yes, the price the PROCESSOR pays the farmer goes down. Does that mean the IN STORE cost goes down? NO. This is why supply management prices are based on a cost of production model.

Beef is NOT supply managed. When beef prices took off at the start of the pandemic, do you think farmers were being paid more for their beef? No. The price the farmer was being paid was below average because the processing capacity was down, and there was lots of beef cattle waiting to be slaughtered.

Just because you as a consumer are paying more at the grocery store, it DOES NOT mean that farmers are being paid more for their efforts.
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Old 11-04-2021, 11:44 AM   #57
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I wouldn't characterize this conflict as right wing vs left wing. The current system in place prevents small businesses from operating and favors largely corporations.

To play devil's advocate, a truly right wing perspective would be one that has neither subsidies nor supply management. It would rely entirely on the market in a sink or swim sense. What you're discussing is the conflict between two left wing approaches.....although I debate whether systems like unions, supply management systems, etc... are in any way left wing. Left wing, by definition, is anti-establishment. Unions and supply systems have now become establishments in their own right. I'm not sure how you can look at a system with a million dollar entrance fee (the cost of dairy licenses for a small farm) any other way.
You can't make money as a small business in agriculture. It's all economies of scale. Tiny farms are not a thing because if your margin is really low and diminishing, you need to be bigger to make the same amount of $.

The "entrance fee deterrent" is to prevent an over-supply in the market, resulting in negative returns, resulting in no one wanting to produce.

Do you think you can just start crop farming if you are 18 and have no assets? It's pretty much the same thing here. The quota system isn't perfect, but it ensures local agriculture economy and consistent adequate supply. Supply management ensures we have milk, eggs, chicken, and turkey available on store shelves until unplanned pandemics happen.
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Old 11-04-2021, 12:06 PM   #58
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I don’t know the formula they use to increase pricing for supply management but there is going to be a lot of shock pricing at the grocery store in the next 12 months. Most agricultural crop prices have doubled or tripled and there are critical shortages. . We are not talking 5-10 percent. Oats last year was $3 per bushel today it is over $10, Flax was $15 per bushel now it is over $45, Wheat was $7 per bushel now $13. If you fed oats to livestock you are looking 3x the feed cost and you probably can’t get them. It doesn’t look good.
Everything except Canola is going to start falling soon and is already trending downwards.

US farm futures report is coming out soon and will probably indicate good levels of inventory in the US which should also drive down the price.

Beans & corn are already dropping.

Canada had a down year in terms of crops, but will probably improve next year which should help the futures.

There is no way prices stay that high.
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Old 11-04-2021, 01:09 PM   #59
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That number is meaningless unless you compare the support in other countries. Based on this Canada's total producer support (which includes market price, tariffs, as well as government subsidies) is below OECD average as a share of Gross Farm Receipts and total GDP. We just do it through high retail prices whereas other countries support through taxpayer subsidies.

Not sure why right wingers are so against supply management; they love user fees rather than subsidies. Why should non-dairy consumers' tax dollars subsidize people who consume a lot of dairy?
Why does what other countries do have anything to do with us?

We could easily choose to have neither subsidies nor quotas/proce fixing. You'd probably keep tariffs in that situation.

When I was 7 my mom told me if one of my friends does something stupid I shouldn't do it just to follow along. That applies here. Bad policy in other countries doesn't require bad policy here.

And this is bad policy that disproportionately hurts poor children, which I'd suggest is one of the worst kinds of bad policy there is.
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Old 11-04-2021, 01:10 PM   #60
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All I want is some cheap cheese. Everytime I find this thread, I'm hoping something has been announced to take down supply management and the subsidizing of Ontario and Quebec Dairy Farmers and over-tariffing of European cheeses.
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