Change Supply Management to Benefit Consumers and Free Trade is a positive, forward-looking presentation that explores how bold, inclusive reform can deliver real benefits for all Canadians—not just a protected few.
Existential threat places Canada at a pivotal crossroads. Part of our response can include becoming a greater agricultural trading superstar. We can remain in the comfort of protectionist supply management or step forward into the global spotlight as a confident free trade leader. By responsibly evolving beyond outdated quota systems, we can achieve four significant national goals: lower Canadian food costs, increase farm productivity, expand export opportunities, and broaden economic growth. With more than 150 global trading partners urging reform, the world is ready to do more business with Canada. We have to open the door. Supply management acts like a doorstop and a tax on virtually every consumer's daily life.
Learning from Global Success Stories
To understand what’s possible, I studied the experiences of Australia and New Zealand — two countries that successfully transitioned from supply-managed agriculture to thriving, competitive farm sectors. Their bold moves led to innovation, global competitiveness, and a new generation of agile, resilient farmers. Notably, both countries implemented transition supports to help producers adjust and succeed.
Current Canadian System
The supply management system in Canada controls the production and pricing of key farm products like dairy, eggs, and poultry. While it ensures stability for farmers by limiting imports and maintaining quotas, it also results in higher food prices for consumers, restricts market innovation, and blocks access to international trade opportunities. The system affects everyone — from your grocery bill to Canada’s ability to lead on the global stage.
Seeking Smart Inclusive Reform
We must support farmers in this transition to modernizing policy to benefit all Canadians. With smart, inclusive reform and transitional support for producers, we can protect what works while unlocking the full potential of our agricultural sector. What follows is a summary of how Australia and New Zealand made this shift — and a call to action for Canada to consider a better, fairer future.
The Case for Change:
Four Goals Worth Pursuing
Canada’s supply management system was created to stabilize farm incomes and ensure local supply. However, it now serves fewer citizens than ever before and imposes higher costs on all consumers. By moving toward free trade with strategic reforms, Canada can pursue and achieve four primary national goals:
1. Lower Food Costs for All Canadians
The supply management or free trade choice relies on higher domestic prices and high import tariffs to protect specific sectors. This leads to artificially inflated prices for dairy, eggs, and poultry. These costs are disproportionately burdensome for low- and middle-income families, who spend much of their income on food. Choosing free trade moves toward a competitive market system that reduces these hidden food costs and allows Canadians access to the same fair prices. Consumers in Australia, New Zealand, and much of the world now enjoy those benefits.
2. Increased Agricultural Productivity
When farmers compete in open markets, they innovate, invest, and improve efficiency to remain competitive. Australia and New Zealand proved that deregulation drives productivity. Their farmers learned to adapt quickly, increasing output per hectare and animal while maintaining quality and safety. Canadian farmers are among the most capable in the world. They can do even better with the right tools and incentives in a modernized, globally responsive system.
3. A Larger Role in Global Export Markets
Right now, supply-managed dairy, eggs, and poultry in Canada are capped by domestic demand. Quotas prevent producers from expanding and selling internationally. Meanwhile, New Zealand has grown into a global dairy powerhouse. Australia has become a key exporter of eggs, wheat, and meat. By freeing up our producers to scale and compete, Canada can capture growing demand in Asia, the Middle East, and beyond. The right supply management or free trade choice can support the agricultural sector and strengthens our trade relationships across multiple industries.
4. Stronger Economic Growth and National Resilience
The supply management or free trade reform isn’t just about agriculture — it’s about unlocking new economic potential. Lower food prices reduce household costs, leaving more money in consumers’ pockets. More efficient farms drive productivity gains. Expanded exports bring in new revenue. Together, these elements raise GDP and improve economic resilience. Canada can use this change as a powerful response in an era of global uncertainty and geopolitical trade tensions. Diversifying our economy and maximizing our competitiveness is not just wise — it’s essential.
Learning from Success: Australia and New Zealand as Examples
To understand what these changes might look like in practice, I investigated how Australia and New Zealand transitioned from supply management to market-based agriculture. Their journeys weren’t without difficulty, Farmers had to adapt, and some left the industry. However, the end result was that both countries emerged with more substantial, more competitive sectors.
Australia gradually dismantled price supports and quotas over the 1980s and 1990s, culminating in complete dairy deregulation in 2000. With a one-time transition package and clear goals, farmers responded with innovation and resilience. Milk prices for consumers fell, exports grew, and farm productivity surged.
New Zealand implemented even more sweeping reforms in the 1980s, removing nearly all subsidies in one of the boldest moves in agricultural history. As a result their dairy sector has some of the most efficient farmers on Earth. Their farmer-owned co-op, Fonterra, feeds the world by exporting to over 140 countries.
Both countries saw a wave of industry modernization, and the adoption of new technology soared. Smaller farms that couldn’t compete often sold or shifted to new opportunities. Those opportunities included niche markets and agritourism. The most successful producers scaled up to become global leaders.
Illustration 1: Supply Management Today
Supply management: built for stability but at a consumer cost and limited exports, and quota-bound farms.
Canada’s Opportunity:
If We’re Willing to Listen and Lead
Canada is one of the only advanced economies that are still holding firmly to supply management in multiple sectors. This stubbornness has cost us trade deals, raised consumer prices, and held back dynamic growth in food exports. More than 150 nations call on Canada to join modern agricultural trade systems. Why do we let a legacy policy for a shrinking group of producers block opportunity for the rest of us?
Let’s not be misled. This is not about abandoning our farmers. It's about helping all Canadian farmers succeed on a more level, competitive global playing field. That is just what their counterparts have done elsewhere. Transition support, investment incentives, and strategic planning can make this a win for everyone. That win can include families shopping for groceries to producers seeking new markets. Importantly it can support young farmers hoping to enter the industry.
Making Canada Work for Everyone
Change is never easy, but achieving progress requires bold thinking. For Canada to stand up for itself we must seize the opportunity. We can develp into the free trade leader to secure our prosperity and food affordibility. To be that global influencer, now is the time to make this shift. Opting for opportunity instead of complacency builds our stronger, more inclusive future. That reflects the values, energy, and innovation that Canadians are renowned for.
The following takes a deeper dive into the research.
Illustration 2: Who Pays The Supply Management Price?
Supply management delivers hidden costs for consumers, the economy and limits export opportunities.
Comparative International Study: Australia and New Zealand's Transition Away from Supply Management
Southern Hemisphere Supply Management
Australia and New Zealand previously operated supply management systems in key agricultural sectors, particularly dairy, eggs, poultry, and certain grains. These systems regulated production volumes and prices to stabilize farmer incomes and domestic markets. However, in recent decades, both countries have dismantled these controls in favor of market-driven systems. The details of the supply management or free trade transition follow below.
Understanding the historical context, timelines of deregulation, and the internal and international impacts can offer valuable insights. Additionally, examining which industries flourished or faced challenges after the transition provides further perspective. Comparing this situation with Canada’s current supply management system is also informative.
Historical Overview of Supply Management Systems
Australia was an early adopter of supply management measures. In the 1920s, it introduced schemes to stabilize dairy prices, effectively inventing dairy supply management. Established in the 1950s, state-level egg marketing boards controlled the number of hens and egg prices.
By the 1980s and 1990s, state governments strictly regulated the farmgate price of drinking milk. The farmgate price is the payment farmers receive for their product at the farm, before transportation, processing, marketing, or handling costs are added. The Australian system often used quotas or pooling arrangements to ensure a stable local supply. Under these policies, farmgate prices for fluid milk (for drinking) were about twice as high as those for manufacturing milk (for processing or producing cheese, butter, or yogurt).
Wheat Board Monopoly and Broader Objectives
In the grains sector, the Australian Wheat Board, formed in 1939, maintained a monopoly on wheat exports for decades. Overall, Australia's supply management aimed to protect farmers from market volatility through administered pricing and limited import competition. This is similar to the current approach in Canada.
In New Zealand, after World War II, the government heavily managed the agricultural sector. By the 1970s and early 1980s, government included subsidies, price supports, and input grants. That support accounted for up to 40% of some farmers' incomes. Marketing boards controlled key exports. For example, the New Zealand Dairy Board had exclusive rights to export dairy products. While the New Zealand Egg Marketing Authority, established in 1953, managed the distribution of eggs. These measures insulated farmers from global market fluctuations and ensured a stable domestic supply.
However, by the early 1980s, the negative impacts of these interventions became clear. The supply management or free trade decision loomed. New Zealand's economy was stagnating, and agricultural productivity was falling behind. Both government and economic leaders recognized the need for reform in response to these economic and fiscal pressures.
Australian Journey to Dairy Deregulation
Australia began gradual reforms in the dairy sector in the 1980s, with complete deregulation by the year 2000. In the mid-1980s, the federal government started to phase down support prices for manufacturing milk. As a result, domestic price premiums were reduced from approximately 40% above world prices to about 10% by 2000. On July 1, 2000, a significant reform eliminated all remaining dairy price supports and quotas overnight. This change marked the end of state-administered farmgate prices for drinking milk. It merged the separate "market milk" and "manufacturing milk" pools into a single, market-driven system.
A$1.73 billion dollar transition package for farmers supported deregulation, funded by a temporary levy of 11 cents per liter on retail milk. The one-time, upfront nature of the reform had an immediate and significant impact on producers. It fully exposed Australian dairy farmers to world market prices, with no government-backed minimum prices or supply quotas in place.
Reform of Australia's Poultry and Egg Sector
Australia's poultry and egg sector reform began earlier, primarily at the state level. By the late 1980s, Australian states started dismantling their hen quota systems and egg price controls. For instance, in 1989, New South Wales passed legislation to abolish its egg marketing board and the associated quotas. That ended a system in place since the 1950s. Other states took similar actions during that period.
Consequently, by the early 1990s, egg production in Australia transitioned to an open market. Supply and demand determined producer prices and there were no longer restrictions of flock size by government quotas. The underlying philosophy was that efficient farmers would prosper. Market forces would force high-cost producers to adapt or exit the market. Egg production now operates as a free market where large, efficient farms dominate, and smaller operators succeed only in niche segments.
Unlike Canada, Australia did not establish a nationwide quota system for chickens. Instead, contracts organized production and processing. Over time, these arrangements evolved into more market-driven models. That was especially so following competition law reforms that restricted collective output controls. By the 2000s, Australia's entire poultry supply chain was deregulated, except for food safety and animal welfare standards.
Deregulation of Australia's Grains Sector
The primary grain sector supply management or free trade reform concluded when the federal government abolished the Australian Wheat Board's export monopoly. That had made it the only buyer and exporter of Australian wheat. This system pooled returns and provided growers with a uniform price.
However, after a scandal and rising pressure from competition, the federal government deregulated wheat exporting in 2008. The Wheat Export Marketing Act 2008 eliminated the monopoly on bulk wheat exports. The result was an official end to the system after more than 50 years.
This change allowed multiple grain trading companies, including multinational agribusinesses, to buy grain directly from farmers and export it.
Around the same time, the federal and state governments dismantled related boards for barley and other grains. Some state governments had already deregulated their barley boards during the 1990s. By 2008–2010, Australia had fully transitioned to an open-market system for all major grains.
Illustration 3: Smart Supply Management Reform
Smart supply management reform can bridge the gap between the current challenges and a more prosperous, competitive agricultural future using compensation and training support programs.
New Zealand's Deregulation Journey
New Zealand implemented a rapid and comprehensive reform of its agricultural sector. In 1984, a newly elected government facing a fiscal crisis ended nearly all farm subsidies and price supports as part of a broad free-market reform package. Within a few years, New Zealand's agricultural sector shifted from one of the most heavily subsidized to the most market-oriented.
By 1990, New Zealand's agriculture had become the most deregulated sector, with farmers facing global prices and no domestic protections. Between 1984 and 1987, the government eliminated input subsidies, guaranteed minimum prices, and concessionary loans. The government quickly implemented these reforms, avoiding lengthy phase-outs and completely removed support.
New Zealand Dairy Industry Reform
After the government removed subsidies in 1984, dairy farmers no longer received payments for milk production. However, supply management continued into the 1990s because the New Zealand Dairy Board retained its monopoly on dairy exports.
Then the Dairy Industry Restructuring Act of 2001 changed the industry by dissolving the Dairy Board's monopoly and allowing dairy companies to export independently. Two large farmer-owned cooperatives merged with the Dairy Board. The combination in 2001 created Fonterra to support this transition. The private mega-cooperative became the dominant processor and exporter, collecting approximately 95% of the nation's milk. However, under the new law, the government required Fonterra to accept milk from any new farmers and share market access. That served to check any abuse of its dominant position.
As a result, by 2001, New Zealand had a fully deregulated dairy market. The government no longer set prices or imposed quotas, and it eliminated the compulsory marketing board.
New Zealand Poultry and Egg Sector Reform
During the 1980s, the New Zealand government made the supply management or free trade choice. Poultry sector subsidies and production and price controls were eliminated. By the late 1980s, the government removed all price and production controls in the egg industry. It disbanded the Egg Marketing Authority. As a result farmers could keep as many hens as they wished without purchasing a quota.
These changes immediately reduced egg producer prices, resulting in a more competitive and efficient industry structure. The government also liberalized chicken production similarly. By the 1990s, market dynamics determined output and pricing. Contracts, not quotas, drove integration among breeders, growers, and processors.
By 1990, the chicken and egg industries in New Zealand operated without direct government management, functioning under general trade and competition laws.
New Zealand has a smaller grain sector, as it imports part of its grain needs. However, the government eliminated any remaining marketing controls during the reform era. Between the late 1980s and 1990s, it either restructured or abolished producer boards for wool and meat.
For example, the government dissolved the Wool Board in 2003. Regarding wheat and barley crops, the government maintained minimal intervention historically. After the 1980s, farmers gained full exposure to market prices and could sell to any buyer, domestic or foreign.
The New Zealand government adopted a comprehensive market liberalization approach rather than implementing a sector-by-sector process. This strategy caused nearly all traditional supply management mechanisms in the agricultural sector to disappear within a decade.
How The Transition Effects Farmers and The Industry
As result of the supply management or free trade choice, both Australian and New Zealand farmers experienced significant challenges and gains in efficiency. In Australia's dairy sector, the impact of overnight deregulation in 2000 was particularly severe for farmers focused on fluid milk. In Queensland and New South Wales the impact was greatest. After the controls were lifted, farmgate prices for drinking milk initially dropped by 35–40% in those regions.
The impact was also felt in the export-oriented southern regions with their more substantial prices. The average milk price farmers received fell by 11% in New South Wales and 16% in Queensland in the first year. This led to a notable wave of farmer attrition.
Most Adjustments Happened Quickly
Within two years of deregulation, many Australian dairy farmers exited the industry. Particularly impacted were those with higher production costs or nearing retirement. Some older farmers chose to retire with their compensation packages, while others shifted to different agricultural enterprises or left farming altogether. The number of dairy farms in Australia declined from about 12,500 before deregulation to around 7,500 just a few years later, reflecting a drop of more than 50% by the 2010s.
A similar trend occurred in the egg and poultry sectors. Once quotas ended, smaller producers that could not compete at the market price were forced out of business. Following New Zealand's egg deregulation in the late 1980s, the number of commercial egg farms declined rapidly. This trend continued to concentrate production in the hands of fewer and larger farms. In both countries, deregulation hastened consolidation. Larger, more efficient farms gained market share while many small or marginal producers were forced to shut down.
Despite significant losses with the supply management or free trade transition, the industries demonstrated resilience. They adapted to the changing circumstances. In Australia's dairy sector, the remaining farmers swiftly improved their productivity. That helped mitigate the impact of lower prices on overall output. Many who continued farming expanded their herd sizes. Their investments in better feed and pasture management increased milk production per cow.
The Impact of Drought
National milk production declined after 2000 due to drought conditions and some farmers exiting the industry. However, production would have remained stable or even grown without these factors. Shortly after deregulation, in a year with typical weather, Australia produced 4% more milk than before the reforms. As a result, the average Australian dairy farm became significantly more efficient. Farmers increased individual output by approximately 25%, thus offsetting much of the lost price support.
Similarly, New Zealand farmers had to dramatically enhance the efficiency of their operations to survive following the removal of subsidies in 1984. After the supply management or free trade change, they cut costs, diversified their operations, and focused on productivity. A notable example is New Zealand's sheep sector. The elimination of subsidies in the 1980s led to the culling of millions of sheep and the closure of many unprofitable farms. The result was a national flock decrease by nearly half by the early 1990s.
Nevertheless, the sheep industry rebounded by shifting toward higher-value products. They also improved breeding practices. This allowed producers to generate more meat and wool per animal, thus sustaining overall output with far fewer sheep. Many former sheep farmers transitioned their pastures. Some shifted to dairy farming or forestry, illustrating a significant reallocation of resources.
Internal Agricultural Sector Restructuring
The internal restructuring of the agricultural sectors in Australia and New Zealand resulted in leaner but more competitive farm industries. The farmers who remained tended to be lower-cost producers with larger-scale operations. In Australia, the average size of dairy herds grew significantly, with many regions experiencing a doubling in herd size. In New Zealand, the dairy sector expanded dramatically after reforms. Land allocated for dairy farming increased, and the number of dairy cows tripled from the 1980s to the 2010s. Profitable dairy farms absorbed resources from less competitive sectors.
However, not all adjustments had positive outcomes for rural communities. Areas that once had numerous small family farms faced economic decline as those farms closed. For example, Queensland's dairy industry shrank drastically. As a result, that forced the state to rely on milk transported from southern Australia.
Similarly, some rural towns in New Zealand lost population when local farms could not survive without subsidies. Conversely, other regions experienced growth; for instance, New Zealand's South Island underwent a dairy boom in the 1990s and 2000s.
Parts of Victoria in Australia attracted investment in dairy processing due to expanding exports. Governments provided transitional assistance to alleviate these challenges. Australia offered lump-sum payments and short-term debt relief.
During the 1980s New Zealand had retraining programs. Nevertheless, farmers had to adapt to the market. The result was a more efficient but concentrated farming sector. The outcome was a great divide between successful larger farms and struggling higher-cost producers who exited the market.
Consumer Prices and Product Availability
A key promise of supply management or free trade deregulation was that consumers would benefit from lower prices. This promise was fulfilled in some cases, while the outcomes were mixed in others. One of the most notable consumer successes occurred in Australia's dairy market. Following the repeal of supply management, retail milk prices dropped significantly.
In the year after the 2000 dairy deregulation, Australian consumers experienced an 18% decrease in prices for brand-name milk. Generic "store-brand" milk displayed an approximately 29% decrease, adjusted for inflation. Due to these price reductions, consumers saved an estimated A$118 million on milk purchases in the first year. Additionally, other Australian dairy prices, such as cheese and butter, decreased. Consumers benefited when the hidden costs of supporting high farmgate prices were eliminated.
In New Zealand, the supply management or free market choice had an immediate impact on retail prices. However, it was not as dramatic because many subsidies had been funded by taxpayers rather than consumers. As a result, exposing the dairy market to competition and world prices has generally kept New Zealand's dairy prices in line with global levels. In the late 1980s, New Zealand consumers saw egg prices decline as producer prices were cut following deregulation. More recently, increased competition in grocery retail in New Zealand, including introducing new milk brands, has sometimes led to price wars that benefit consumers.
Free Trade Has No Lower Price Guarantee
Supply management or free trade deregulation does not guarantee consistently lower food prices. Retail market dynamics and global price fluctuations play significant roles. For instance, after Australia experienced an initial drop in milk prices, things changed. Costs eventually rose again due to factors like drought, which increased expenses, and the concentration of the retail sector. Similarly, domestic milk prices in New Zealand have occasionally risen despite low farmgate payouts, largely due to shifts in global dairy demand. There are instances in New Zealand where consumer dairy prices have increased, driven partly by world price cycles and retail mark-ups.
The egg sector in Australia demonstrates how market structure can influence outcomes. Currently, two supermarket chains, Coles and Woolworths, dominate 80% of grocery sales, giving them substantial power to set retail egg prices. These retailers often conduct "reverse auctions" for supply, forcing egg farmers to accept low farmgate prices. While one might expect low farm prices to lead to cheap eggs, these retailers have been accused of increasing their profit margins.
As a result, Australian consumers pay more for eggs than Canadians, even though Australia does not impose egg quotas. As Canadians know, retail competition is essential to making markets work for consumers. This situation suggests that, without supply management, the benefits to consumers depend on healthy competition at the retail and processing levels. When processors or retailers hold oligopoly power, they may capture a larger share of the value, ultimately leaving farmers and consumers worse off.
Consumers Found Greater Product And Brand Variety
On the positive side, post-deregulation, consumers in Australia and New Zealand gained access to a greater variety of products and brands. Domestic markets opened to more imports , increasing choice. This was especially in Australia after tariffs fell. Domestic producers also innovated. For instance, Australian dairy companies developed new dairy beverages and specialty cheeses to compete. New Zealand's egg industry diversified into free-range and specialty eggs as niche markets.
The end of strict controls meant year-round availability improved in some cases. There were no more seasonal shortages of eggs or milk, at times caused by quotas. In New Zealand, removing the state monopoly allowed multiple dairy companies to emerge. All are small compared to Fonterra. However, they offer consumers alternative products and pricing. Thus, from a consumer perspective, the internal impact was generally positive regarding price in the short term and variety in the long term.
However, essential food prices remain influenced by world commodity trends. This means more volatility in some food prices year to year for consumers in Australia and New Zealand even if average price levels may be lower than under a protectionist system. For example, if global dairy prices spike (or crash), domestic prices tend to follow. Supply management smooths out those swings at the retail level in Canada.
Competitiveness and Industry Sustainability
By removing artificial supports, Australia and New Zealand compelled their agricultural sectors to become economically self-sufficient. In the long run, this enhanced competitiveness. That arguably improved financial sustainability, even if environmental sustainability did not always follow. Removal of quotas and guaranteed prices incentivized farmers to reduce costs, innovate, and respond to market signals.
For instance, after 2000, Australian dairy farmers significantly increased their herd productivity. They adopted new technologies, which bolstered the industry's competitiveness. The focus shifted to areas with comparative advantages. In Australia, the state of Victoria, with its favorable climate, grew to account for a more significant portion of national milk production. This allowed Victoria to compete in global markets while less efficient regions scaled back. This specialization made the overall Australian dairy sector more cost-competitive internationally.
Similarly, New Zealand's agricultural sector substantially transformed toward greater efficiency. Farmers diversified into higher-margin products. That included deer farming, wine grapes, and kiwifruit. In addition, they adopted low-cost pastoral farming techniques for dairy and meat, maximizing output per hectare without relying on subsidies. As a result, New Zealand's dairy sector became the country's largest export earner in the decades following deregulation. It is now widely regarded as one of the most competitive in the world. As a result, New Zealand consistently ranks among the lowest-cost milk producers globally. This highlights the efficiency gains achieved through deregulation.
Improved National Economic Sustainability
In both countries, economic sustainability improved at the national level. Governments reaped fiscal benefits by not having to finance costly subsidy programs. New Zealand, for instance, saved hundreds of millions of dollars annually, which helped improve its strained public finances in the 1980s and allowed for the reallocation of funds to other areas, such as research and trade promotion.
In Australia, consumers rather than taxpayers funded the dairy support through higher prices. Hence, the benefit came in greater efficiency—the economy no longer lost deadweight from distorted prices. Both countries' agricultural sectors became export-oriented, seeking growth through global markets rather than domestic price guarantees. This outward focus further drove competitiveness.
Farmers began to treat farming unequivocally as a business. They invest in improvements when market signals were favorable and diversify or downsize when returns were poor. Over time, productivity growth in deregulated sectors outpaced that in more managed economies.
However, deregulation also exposed these industries to greater income volatility, which poses challenges for sustainability at the farm level. Without supply management or subsidies, farm incomes rise and fall with global commodity cycles.
Market Forces Delivered Changes
For example, New Zealand dairy farmers enjoyed high milk payouts during China's dairy import boom in the early 2010s but then saw payouts crash by over 50% in 2015 when global milk prices collapsed. As a result, many highly leveraged farmers struggled to service debts during the downturn, prompting questions about the resilience of a fully exposure-based system.
After the end of the export monopoly, Australian grain growers faced uncertain pricing from year to year. As a result, farmers had to actively manage price risk through futures, storage, and other strategies, which some found challenging. The absence of a safety net means individual farmers must be financially prudent. They often need private insurance or hedging strategies to cope with droughts and price slumps. In New Zealand, some critics argue that deregulation has made farmers heavily reliant on export markets, making them vulnerable to geopolitical events or trade disruptions.
However, agricultural sectors in both countries have proven adaptable and self-sustaining without supply management. Decades later, Australia and New Zealand remain major agricultural producers and exporters, indicating their industries have found a sustainable footing in the new market-driven environment.
Illustration 4: Benefits Possible For All Canadians
Benefits for all Canadians: lower prices for affordable groceries, innovative farms, more choice, global trade opportunities, and broad economic benefits, and a boost to national pride and Canada's sovereignty.
External and International Impacts Include Trade Agreements and Global Market Positioning
By making the supply management or free market choice to eliminate costs, Australia and New Zealand became global leaders. Now positioned as leaders in free agricultural trade with significant international implications. Both countries became founding members of the Cairns Group in the 1980s. It is an alliance of agricultural exporting nations that advocated for removing global trade barriers and subsidies. Their credibility in trade negotiations was strengthened by their decision to remove their farm protections. As a result, that enables them to urge countries like the US, European Union, Japan, and Canada to cut subsidies and tariffs from a principled standpoint.
New Zealand, in particular, played a pivotal role in Word Trade Organization agriculture discussions, often emphasizing how its farmers thrive without government support and calling for a "level playing field." This approach helped energize efforts during the Uruguay Round (1986–1994) to restrict farm subsidies in wealthy countries. It is widely recognized that the reforms in New Zealand and Australia served as a model and provided moral support in international discussions advocating for agricultural trade liberalization.
New Zealand and Australia's lack of supply management facilitated their entry into bilateral and regional free trade agreements in agriculture. New Zealand has been particularly proactive in pursuing free trade agreements. For instance, it was the first developed country to sign a free trade agreement with China in 2008. They also established free trade in agriculture with Australia as early as 1983 through the Closer Economic Relations Agreement. Australia and New Zealand were also founding participants in the Trans-Pacific Partnership (TPP) negotiations.
Canada Protectionist Policies Impact Free Trade Talks
Canada's protectionist policies regarding dairy and poultry became a significant point of contention in the TPP discussions. In 2010-2011. Australia and New Zealand initially opposed Canada's involvement in the negotiations due to its support for supply-managed sectors. They were concerned that Canada would not open its dairy and poultry markets, which conflicted with the TPP's goals for free trade. By the 2000s, Canada was isolated from the World Trade Organization, defending its supply management system against 146 other countries.
Ultimately, Canada had to agree to discuss its supply management system. Later, it made some concessions regarding market access in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to participate in the negotiations. This situation highlights how New Zealand and Australia's liberalized agricultural regimes gave them the leverage to demand greater openness from their trading partners. In contrast, Canada's retention of supply management restricted its trade opportunities. That causes it to miss early involvement in some Asia-Pacific trade agreements and to make last-minute concessions in agreements like the Canada-EU Free Trade Agreement (CETA) and the United States-Mexico-Canada Agreement (USMCA).
On the global market stage, Australia and New Zealand emerged as significant agricultural exporters following the reform but also encountered intense international competition. New Zealand's share of the global dairy market surged after deregulation. Today, the country accounts for approximately one-third of the world's cross-border dairy trade, particularly excelling in exports of whole milk powder and butter. Being unsubsidized meant New Zealand could not simply undercut its competitors through government support. Instead, it concentrated on niche markets and value-added branding, such as grass-fed and seasonal dairy products, and focused on markets with preferential access.
Australia And New Zealand Are Major Dairy Exporters
Although Australia is a more minor dairy exporter than New Zealand, it remains among the top global dairy exporters. It capitalized on its proximity to Asia to supply milk products to rapidly growing markets like China, Indonesia, and Singapore. However, Australian exporters competed directly with American and European producers in the grains and beef sectors, who often benefited from subsidies or export programs. This sometimes disadvantaged Australian farmers, especially when competitors dumped surplus grain or meat with government backing.
To address these challenges, Australia and New Zealand consistently utilized diplomatic channels to contest trade-distorting practices. For example, both countries actively participated in the World Trade Organization case against the European Union's sugar subsidies and have been outspoken critics of U.S. farm bills.
Freed from supply management, both countries also adjusted their product mix to better meet international demand. New Zealand shifted heavily into dairy and specialized meats (like lamb), industries where it could be a world leader. It moved away from less competitive areas (e.g., grain farming, where it could import cheaper feed instead). Australia capitalized on its strengths in extensive livestock and broadacre cropping. It became one of the world's largest beef and lamb exporters and a top wheat and sugar exporter.
In sectors like wine and horticulture, Australia's lack of supply constraints allowed rapid scaling up when global opportunities arose. For example, the Australian wine boom of the 1990s targeting the United Kingdom and European Union markets.
Real Impact From International Markets
Exposing farmers to global markets has some downsides for Australia and New Zealand. Their agricultural sectors are now very sensitive to global price changes and trade issues. For instance, during the 2008 global financial crisis, a decrease in Chinese demand caused dairy prices to drop. This had a major impact on New Zealand's economy. Since the dairy sector relies heavily on exports, a downturn can significantly affect national GDP and rural lending.
Australian grain farmers faced challenges when world wheat prices fell or when importers implemented strict quality requirements. They no longer had a pooled system to cushion these impacts. Despite this, both countries have generally thrived in export markets.
They developed international brands, such as "New Zealand butter" and "100% Pure New Zealand" meats, as well as Australian wheat, which is known for its high protein content. Often, they filled market niches that were left by more prominent, subsidized competitors. Notably, when the European Union imposed milk quotas (before 2015) and the U.S. restricted dairy exports, New Zealand could reliably supply markets in Asia and the Middle East.
By the 2010s, Australia and New Zealand had established themselves as dependable suppliers of agricultural commodities globally. This achievement was largely due to their decision to free their industries to respond to global demand.
Competition with Other Exporters
Australia and New Zealand have had to compete openly with other exporting nations without supply management. This competition has been intense, as many rivals benefit from government support or protective policies. For example, New Zealand's dairy farmers compete with European farmers who have traditionally received subsidies. Until recently, European farmers had production quotas under the European Union's Common Agricultural Policy.
Similarly, U.S. dairy and grain producers receive various forms of federal support. As a result, Australian and New Zealand farmers often face lower world prices than they would have if all subsidies had been removed. To survive against subsidized competition, they have had to become highly efficient, and in many ways, they have succeeded. Australian and New Zealand farmers typically have some of the lowest production costs in the world, allowing them to maintain market share even when prices are depressed.
The Fonterra Success Story
New Zealand's dominant dairy cooperative, Fonterra, functions similarly to a private supply management system. It balances supply with global demand by adjusting the price it pays farmers. When there is an oversupply, the payout drops, prompting farmers to produce less the following season. In this way, Fonterra and similar companies have become the new mechanism for managing supply, using market signals rather than government mandates.
Post-Wheat Board Challenges For Australian Growers
After the era of the Australian Wheat Board, Australian grain growers had to develop marketing skills and strategies to compete with significant grain traders from the U.S. and the Black Sea region. Many Australian growers struggled with this transition initially. A study of wheat farmers in Victoria found that many were "intensely opposed" to losing the Australian Wheat Board export monopoly because it required them to negotiate and manage grain sales, which they were not experienced in.
However, over time, Australian grain farmers adapted by using futures markets, exploring storage options, and forming grower groups to enhance bargaining power. They also diversified crops and focused on improving quality to differentiate Australian grain.
Research and Development Drive New Zealand's Edge
A positive outcome of Australia and New Zealand's international competition strategy is that it has driven innovation. For example, New Zealand has significantly invested in agricultural research and development. They focus on pasture science, animal genetics, and farm management techniques to maintain competitive edge.
The private sector and the New Zealand government collaborated to market their products globally. For example, initiatives like ZAG or the Zespri Innovation Fund in kiwifruit and the "NZ Inc." approach for meat and dairy products. This partnership has effectively replaced outdated marketing boards with a more voluntary, business-driven model.
Australian Farming Technology Advances
Meanwhile, Australian agriculture has progressed by developing drought-resistant crop varieties, implementing precision farming techniques, and improving supply chain efficiency to cut costs and remain competitive. The absence of supply management has compelled both countries to continuously innovate, creating a competitive environment that, though challenging for producers, has led to a more dynamic agricultural sector. Australia's dairy industries have been described as the most dynamic and efficient, while New Zealand's dairy sector is recognized as a global powerhouse. Such achievements might not have been attainable had these industries continued to be inward-looking and protected.
Global Agriculture Policy Lessons
Internationally, Australia and New Zealand's transition away from supply management has largely enhanced their standing as competitive exporters and free-trade advocates. This transition enabled them to sign trade deals and access markets (rather than protect a small domestic market). Still, it also required them to contend with powerful global competitors , at times on an unequal footing.
Other nations, especially Canada, have closely observed the experience of Australia and New Zealand and considered it a possible model (or cautionary tale) for integrating previously sheltered farm sectors into the global market.
Comparison with Canada's Supply Management System
Canada currently has a supply management system for dairy, eggs, and poultry similar to the pre-reform systems used in Australia and New Zealand. This system employs production quotas to match supply with domestic demand and sets high import tariffs, ensuring Canadian farmers receive stable prices and income. It has been remarkably resilient, having been in place for dairy and poultry since the 1970s, even as other countries have shifted towards liberalization. Comparing this system with the outcomes of deregulation in Australia and New Zealand highlights significant trade-offs.
Advantages of Canada's Supply Management System
Supply management provides participating farmers with a predictable income by reducing significant price fluctuations. This system protects Canadian dairy and poultry farmers from global price crashes and eliminates their dependence on direct government subsidy payments. In Canada, a poor crop or a global surplus won't immediately threaten the viability of a dairy or egg farmer's business.
In contrast, a significant drop in world prices in New Zealand can cause severe financial stress for farms. Advocates say this stability helps retain a few more small family farms. However, Canadian family farms have declined by 90% since the 1970s. In comparison, the number of U.S. family farms has declined by 96%.
No Cost to Government Budgets
Unlike subsidy programs, Canada's supply management system does not require taxpayer funding; the costs come from consumers' pockets. This was also the case with Australia's dairy support before 2000, which was funded through consumer prices. In contrast, New Zealand's subsidies placed a burden on taxpayers.
As a result, Canada avoids the financial drain associated with farm subsidies—a key argument in favor of supply management. Political support for this system is broad in Canada, partly because it does not use tax dollars to benefit farmers directly but regulates the market.
Price Stability for Consumers
Canadian consumers pay higher prices for milk, poultry, and eggs than they might in a free-market system. However, these prices remain relatively stable over time. Supporters of this system argue that unregulated markets can lead to unpredictable spikes or drops in retail prices. For example, Canadian chicken prices have increased at a slower rate than the more volatile prices of pork and beef. Their prices can be more affected by factors like disease outbreaks, feed costs, and operational expenses.
Supply management helps to reduce price volatility, ensuring that Canadian shoppers encounter steady prices and no shortages, even when global markets fluctuate. Additionally, it guarantees a consistent local supply of perishable items, enhancing food security.
High-Quality Food Security
Supporters of supply management maintain that it upholds high-quality standards and food security in Canada. By ensuring domestic and planned production, Canadians enjoy year-round access to fresh milk, eggs, and chicken produced under safety and animal welfare regulations. In trade negotiations, Canadian officials position supply management as culturally and strategically important, akin to how some countries protect their staple crops.
Avoiding the Subsidy Race
Unlike supply management, many countries support their farmers through direct subsidies, as seen in the U.S. and European Union. However, Canada has chosen to rely on market mechanisms instead. This approach avoids the significant government expenditures typical in the U.S. and European Union and protects Canadian farmers from the uncertainties associated with annual subsidy politics. This system can be seen as a form of supply control that addresses the issue of farm price instability without the need for compensatory payments—essentially offering a different solution to the same problem.
Disadvantages of Canada's Supply Management
Canada’s supply management system, while designed to support farmers and stabilize prices, carries several significant disadvantages that impact consumers, innovation, and international trade.
Higher Prices and Limited Competition
Canada’s supply management system is designed to stabilize prices and ensure consistent income for farmers, but it comes with serious drawbacks. One of the main concerns is how heavily it restricts market competition. By enforcing strict production quotas and imposing high tariffs on imports, the system drives up prices for everyday essentials like dairy, eggs and poultry. This artificial inflation hits all consumers, but especially burdens lower-income families who already struggle to afford basic necessities.
Stifled Innovation and Trade Barriers
Beyond higher costs, supply management discourages innovation and efficiency within the agricultural sector. When producers are guaranteed a profit regardless of performance, there's little incentive to improve productivity or adapt to changing market demands. This leads to stagnation and a failure to meet evolving consumer preferences. Additionally, supply management creates barriers in international trade negotiations, making it harder for Canada to secure new trade deals and expand export opportunities. While the system aims to protect farmers, it ultimately limits growth, harms consumers, and reduces the global competitiveness of Canadian agriculture.
Additionally, supply management complicates international trade negotiations. It has severely restricted Canada’s potential to secure broader trade agreements. This diminishes our export capabilities and undermines the overall competitiveness of Canadian agriculture and industry on the global stage. Overall, while supply management attempts to protect farmers, it poses significant challenges that ultimately harm consumers, hinder the agricultural sector's progress, and closes free trade doors to industry.
Higher Consumer Prices
One significant drawback is that Canadian consumers pay more for dairy, eggs, and poultry than global prices. For instance, Canadian milk prices are approximately twice as high as those in the U.S. for an equivalent volume. Additionally, Canada's over-quota tariffs, which range from 200% to 300% on dairy and poultry products, effectively eliminate the possibility of cheaper imports.
A 2018 analysis confirmed that Canadians pay considerably more than Americans or New Zealanders for items like butter and cheese, primarily due to the supply management system. This is a regressive expense, and lower-income families, who spend a greater portion of their income on food, are disproportionately affected by these price premiums. Essentially, Canadian consumers end up subsidizing farmers through their grocery bills.
Supply management quietly raises prices far beyond the dairy aisle. From butter and cheese to powdered eggs and milk ingredients, these high-cost products are found in everything from baked goods to frozen meals. That means higher prices not just at the grocery store, but across restaurants, cafés, and the entire hospitality sector — and consumers end up footing the bill every time.
In contrast, Australia's deregulation removed this implicit consumer tax. As a result, Australian consumers now pay significantly less for dairy products than Canadians, for example, roughly half the price for a liter of milk. Critics in Canada often highlight this disparity.
Limited Industry Growth and Export Opportunities
The supply management system in Canada restricts production levels to meet domestic demand, preventing dairy and poultry farmers from easily scaling up to access export markets. When a Canadian dairy farmer wishes to expand significantly, they must purchase costly additional quotas. However, they can only sell their milk within Canada. Exports are limited due to World Trade Organization restrictions on subsidized exports from Canada.
This situation has hindered the growth of some of Canada's most dynamic producers, who could otherwise become major exporters. In contrast, New Zealand's deregulated system has allowed its dairy sector to grow rapidly and achieve global dominance. As a result, Canadian industries miss out on potential economies of scale and opportunities in the global market.
Additionally, Canadian processors that utilize dairy or eggs encounter high input costs. That makes them less competitive in export markets for value-added products such as cheese or processed foods. Consequently, the broader Canadian agri-food economy may be losing valuable opportunities due to the limitations of the supply management system.
Supply management drives higher hospitality industry costs (restaurants, caterers, and food service providers), negatively impacting productivity and employment across this vital sector. This, in turn, puts another hit on consumers' pockets.
Trade Isolation and Retaliation
Canada's commitment to preserving supply management has complicated its trade relationships. This issue has created challenges in joining the Trans-Pacific Partnership (TPP) and has been a point of contention in negotiations with the U.S. regarding NAFTA and the USMCA.
Countries like New Zealand, Australia, the U.S., and the European Union have pressured Canada to reduce or eliminate supply management in exchange for broader trade benefits. During World Trade Organization negotiations, Canada found itself without allies to defend its supply management system. Virtually all other nations—including developing countries—sought better access to the Canadian dairy and poultry markets.
Canada Loses Trading Clout
As a result, Canada has lost some negotiating leverage. For instance, Canada made concessions on dairy imports to secure agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the USMCA, opening small import quotas that gradually undermine supply management. While Canada has managed to maintain the core of its supply management system, this has come at the expense of market access for other sectors. Some trading partners have traded gains in dairy access for concessions from Canada in other areas.
If Canada pursues deeper trade integration, particularly with rapidly growing Asian economies, supply management could pose a significant obstacle. This policy has made Canada somewhat of a "holdout" in global agricultural trade, often forcing Canadian negotiators to play defense.
Innovation and Efficiency Concerns
Canadian supply-managed farms, which have guaranteed prices and market share, may have fewer incentives to innovate or reduce costs than their counterparts in New Zealand. New Zealand's experience demonstrated that competition led to rapid efficiency gains. While there are many progressive supply-managed farmers in Canada, the system can promote a status quo mentality. For many, merely meeting their quota is sufficient, with little reward for exceeding it or exploring new markets.
Moreover, the high cost of obtaining quotas—often tens of thousands of dollars per cow for dairy quotas—ties up farmers' capital in purchasing licenses rather than investing in productivity. This creates a significant barrier to entry for young, aspiring farmers. As a result, it becomes increasingly difficult for new and potentially innovative farmers to enter the dairy or poultry industries, which could lead to an aging farmer population and a lack of dynamism in the sector.
Despite supply management, Canadian dairy farm numbers have declined by over 90% since the early 1970s. This indicates that consolidation occurs even within a supply-managed system. The remaining farms have had to invest heavily in purchasing quotas, which, from an economic perspective, inefficiently ties capital up in unproductive assets.
Illustration 5: Reforms Can Boost Free Trade Leadership
Canada could be a future global free trade leader in agriculture and industry by opening the door to this opportunity. A proud, forward-looking Canada could thrive on the global stage through smart supply management reform, innovation, and the benefits of expanding international trade.
Risks of Complacency and Market Disconnect in Canadian Supply-Managed Industries
Canadian supply-managed industries primarily focus on serving a guaranteed domestic market, which can make them less responsive to global market trends.
This presents a long-term risks
If the system were ever to suddenly open, whether due to a trade agreement or a ruling in a trade dispute, Canadian producers might find it challenging to compete with more efficient foreign competitors. In contrast, producers in Australia and New Zealand have developed resilience through decades of competition.
Additionally, supply management can sometimes result in overproduction or waste if not properly calibrated. For instance, Canada occasionally faces issues with surplus milk disposal because producers respond to price signals that do not accurately reflect actual end demand. This system is administered and requires continuous fine-tuning by bureaucratic agencies. In contrast, a free market tends to self-correct—albeit often in a harsh manner—through price fluctuations.
The Trade-Off of Supply Management in Canada
Canada's supply management system provides stability and predictability for its agricultural sector, but this comes at the cost of higher prices and missed growth opportunities. Australia and New Zealand's experiences showcase the potential advantages of liberalization, such as increased competitiveness, export success, and lower consumer prices. However, these benefits also come with significant challenges and vulnerabilities that can arise during the transition.
Canadian policymakers must navigate a classic trade-off between protection and competition. Notably, Australia and New Zealand implemented transition measures to ease the shift: Australia offered levy-funded payouts, while New Zealand pursued comprehensive economic reforms supported by social safety nets.
Canadian transition Planning
If Canada decides to move away from supply management, it will likely require similar careful transition planning, including compensation for quota holders, similar to the approach taken in Australia.
Case Studies of Post-Transition Outcomes
Case Study 1:
New Zealand's Dairy Boom
New Zealand's dairy industry is one of the most notable success stories following deregulation. In the early 1980s, New Zealand's dairy farmers relied heavily on subsidies and a protected market in the UK—an unstable situation after the UK joined the EU.
Subsidy Removal Shock
Removing these subsidies in 1984 was a shock; within two years, the payout to New Zealand dairy farmers dropped by about 40%. Despite this challenging start, the industry survived, transformed, and thrived. Farmers transitioned to large-scale, low-cost, pasture-based dairy practices. They converted marginal land previously used for less productive farming, such as sheep on rugged terrain, into intensive dairy grazing.
The formation of Fonterra in 2001 created a farmer-owned cooperative capable of competing globally in marketing, research, and development. With no production quotas, New Zealand's dairy output rapidly expanded to meet growing Asian demand. From 1980 to 2018, the country's annual milk production roughly tripled, making dairy New Zealand's top export, even outpacing tourism.
Global Reach and Innovation
Today, Fonterra exports to over 140 countries, and since the deregulation of exports, several smaller processors have also emerged. The industry has focused on innovation in product development, creating specialized milk proteins, infant formula bases, and niche products such as organic dairy. Additionally, New Zealand dairy farms operate at some of the lowest production costs in the world.
However, the sector has also faced its share of challenges. Farmers encounter significant price volatility and endure low payout periods that test their resilience, such as 2015-2016. Furthermore, the rapid expansion of dairy farming has raised environmental concerns, particularly regarding water pollution linked to dairy operations.
Despite these issues, New Zealand's dairy industry is a remarkable example of an economic sector that has greatly benefited from deregulation. They evolved from a subsidized domestic-focused industry to a global leader.
Case Study 2:
Australian Dairy Industry Consolidation
Australia's dairy sector presents a mixed picture. Before 2000, it was a somewhat fragmented industry, characterized by many small farms tied to local liquid milk markets. The deregulation in 2000 led to dramatic consolidation. Within five years, dairy farms fell by about 25%. It has ultimately dropped by more than half since deregulation. Small family farms, especially in Queensland and parts of New South Wales, struggled to survive the 18% decline in farmgate prices. Regions that could not compete with the efficient irrigated farms in Victoria essentially saw their dairy sectors shrink.
However, the case of Victoria, Australia's largest dairy state, illustrates how deregulation could also benefit specific industry segments. Victorian farmers, already focused on lower-cost production and exports, seized new opportunities. They no longer needed to separate their milk into "quota" and "export" markets, allowing all milk to pursue the highest return. Many Victorian farms expanded and modernized.
Victoria's Deregulation Advantage
Initially, Australian dairy output peaked around deregulation but then declined due to a severe drought in the early 2000s. Analysts believe that without that drought, production would have grown modestly. Despite having fewer farms today, Australia produces only slightly less milk than it did at its peak and remains one of the world's largest dairy exporters. The industry also adopted new competitive strategies; for instance, some farmers ventured into niche markets like goat dairy or farmhouse cheese for domestic consumers, as the mainstream market became dominated by efficient commodity producers.
Farmers and Rural Communities Impacted
The struggles of this transformation are evident at the farm level, where many individual farmers, particularly in high-cost regions, lost their livelihoods. Communities in northern Queensland that once boasted dozens of dairies now have only a handful left. Additionally, Australian dairy processors faced new competition, including imports of cheese and butter from New Zealand, which resulted in further consolidation at the processing level. Brands like the "Dairy Farmers" Co-Op were acquired by larger firms.
While the Australian dairy industry emerged leaner and remains internationally competitive, this transformation involved significant pain. It included losing many smaller producers and increasing vulnerability to drought and global downturns without a domestic buffer.
Case Study 3:
Grain Marketing Post-Deregulation (Australian Wheat)
For over 50 years, Australian wheat growers relied on the Australian Wheat Board's single-desk system to market their grain, which helped pool risk and returns. The abolition of this single desk in 2008 marked a significant turning point. A case study in Victoria's Western Wimmera region, a central wheat-growing area, revealed that many farmers initially felt disadvantaged and "disenfranchised" by deregulation.
Under the new system, growers were required to decide when and to whom to sell their wheat, navigating fluctuating prices, contract terms, and counterparty risk—responsibilities that the Board had previously managed.
Mid-Sized Farms Hit Hardest
Mid-sized family farms, ranging from 2000 to 4000 acres, were hit the hardest. They were large enough to be significantly exposed to wheat markets but not large enough to easily absorb losses or hire marketing specialists. These farmers reported increased financial costs for storage and marketing services and lost opportunities due to errors in market timing, which negatively impacted their incomes compared to the previous pooled system.
Despite these challenges, grain deregulation also illustrates eventual adaptation and some benefits. New grain marketers entered the market, giving farmers more options. Multiple companies began competing to offer forward contracts, cash bids at harvest, or grain pool products.
Farmers Develop Marketing Skills
Savvy farmers could compare prices or utilize hedging tools to secure favorable prices—something impossible under the one-size-fits-all pool. Some growers have become more skilled in marketing, formed cooperative groups to negotiate sales collectively, or invested in on-farm storage to better time the market.
Moreover, competition among exporters has improved the supply chain. For instance, rail and port facilities have had to improve their efficiency to attract grain over their rivals. More than a decade later, Australia's wheat export volumes remain strong, and the industry has adjusted to the freer market. Many farmers are now more comfortable managing price risks.
Lessons from the Transition
It is essential to note the challenges encountered during this transition. They demonstrate that eliminating a marketing monopoly places responsibilities and risks on individual producers, which can be stressful and require developing new skills.
Realizing the benefits of price competition took time and education, potentially necessitating a new generation of farmers. This case study teaches us that transitional support—such as training in marketing and providing tools for risk management—is just as vital as financial assistance when ending a long-standing supply management system.
Case Study 4:
Egg and Poultry Sector Outcomes
The egg industries in both Australia and New Zealand illustrate a significant consolidation following deregulation. Before these reforms, thousands of small egg farms operated under quota protections. For instance, Australia had over 3,200 layer farms in 1979, many of which were small-scale. However, after quotas were abolished in the late 1980s (in New Zealand) and around the same time in most Australian states, the number of farms plummeted. In Australia, by 1986, the farm count had already halved following initial quota challenges and continued declining thereafter.
Rise of Large-Scale Producers
Today, a few large companies dominate egg production; some Australian farms manage up to 500,000 hens and fulfill large retail contracts. Similarly, New Zealand experienced consolidation, with only about 130 commercial egg producers remaining by 2009, where the top 20 companies accounted for 75% of production.
This transition has brought benefits such as economies of scale and lower production costs. Eggs are produced efficiently, leading to low per-unit farm costs that theoretically allow for lower consumer prices. Large operations have the capital to invest in modern cage or barn systems and meet supermarkets' volume demands. These industries have also been agile in responding to consumer preferences, notably by increasing the production of free-range eggs in response to growing consumer concerns about animal welfare, mainly because larger producers have the resources to scale up free-range facilities.
Challenges for Small Producers and Regional Diversity
On the downside, the decline of small-family egg farms has resulted in job losses for many and reduced regional diversity in production. It has also created market power imbalances: large retail chains can pressure the few remaining significant egg suppliers regarding pricing. Farmers complain that while farmgate prices are low due to this bargaining pressure, retail egg prices remain relatively high, benefiting retailers more than consumers.
After deregulation, the egg industry in New Zealand experienced a volatile "boom and bust" cycle. Periods of overproduction led to price crashes and bankruptcies among some farmers, followed by shortages until production was adjusted. This illustrates the chaotic nature of finding a new equilibrium in a free market.
Vertical Integration and Processor Dominance
Large processors—often vertically integrated firms—have solidified their control in the poultry meat sector, improving efficiency but leaving contract growers with limited power. This ongoing issue has sparked calls for a Code of Conduct to ensure fair dealings. Despite these challenges, both countries maintain stable supplies of eggs and poultry meat for consumers, with prices reflecting feed costs and international grain markets rather than policy distortions.
Interestingly, neither country has seriously considered reinstating a quota system for these sectors. This indicates that, despite some complaints, the industry and consumers have primarily adapted to the realities of a deregulated market.
Illustration 6: Example Shows Protection to Prosperity
New Zealand’s successful transition from a closed, protected agricultural system to a free-trading superpower exporting to 140 countries. This is an outstanding success story for Canada to follow.
Conclusion Supply Management Or Free Trade: Canada's Choice
Australia and New Zealand's retreat from supply management is historically significant and offers valuable insights. Historically, both nations shared Canada's approach to protecting farmers through quotas, price controls, and agricultural boards. However, economic pressures led them to pursue a different path. The deregulation processes varied in pace—Australia's dairy sector underwent a gradual change, while New Zealand experienced a swift economy-wide transition—but both ultimately resulted in liberalized markets for dairy, poultry, and grains.
The internal transitions brought painful adjustments
Many farmers exited the industry, and rural landscapes changed. Nonetheless, these changes also fostered renewed competitiveness, efficiency, and innovation among those who remained. Consumers sometimes experienced lower prices, although the outcomes varied based on market dynamics. Internationally, these reforms positioned Australia and New Zealand as agricultural export powerhouses and advocates of free trade, albeit at the cost of greater exposure to global market volatility.
In contrast to Canada's supply management system, which prioritizes stability through protected prices and secured farm incomes, Australia and New Zealand embraced a liberalized model emphasizing competition and growth. While Canada's system ensures known prices and domestic supply, it increases consumer costs and keeps industries inward-focused. The experiences of Australia and New Zealand illustrate the potential benefits of liberalization, including increased export revenue, more competitive industries, and lower consumer prices. However, these transitions can also bring risks, such as farm attrition, shifts in market power, and volatility.
Crucially, case studies emphasize that transitional assistance—whether financial or structural—can significantly ease the shift away from supply management. For Canada, any decision to maintain or reform its supply management system will require careful consideration of these factors.
Market Success And Prosperity Demonstrated
Australia and New Zealand's experiences demonstrate that agricultural sectors can survive and even thrive without supply management, albeit with substantial upheaval and adaptation. Once liberalized, it is difficult to revert to previous systems; instead, new policies and industry strategies emerge to address the challenges, such as cooperatives like Fonterra, risk management tools, and retailer codes.
Ultimately, Canada's direction will depend on its priorities: whether to preserve a stable status quo for farmers and consumers or embrace a more market-driven approach that offers opportunities and uncertainties. The insights from our southern hemisphere counterparts provide a roadmap for what to expect on either path, incorporating lessons from successes and struggles in the transition away from supply management.
Canada can seize this opportunity to increase productivity and trade diversification. Responsibly ending supply management presents a prime opportunity to lower food prices and in turn would increase productivity, exports, and increase Canada's GDP.
FAQs Investors ask about change supply management to benefit consumers and free trade
1. Will removing supply management hurt Canadian farmers?
Not if done responsibly. Other countries have successfully made the supply management or free trade choice and transitioned with support packages, training, and investment incentives. With the right tools, Canadian farmers can become globally competitive. We need to support public policy to support all farmers and their growth — not to abandon them.
2. Will food prices go down if supply management ends?
Yes, in most cases. After deregulation, countries like Australia and New Zealand saw significant drops in milk, egg, and poultry prices. While global prices may cause some volatility, Canadians currently pay some of the highest prices in the world for basic staples due to quotas and tariffs. As a result, all consumers can benefits from the supply management or free trade choice.
3. What would happen to Canada’s rural communities?
Change can be challenging, but with proper planning, rural communities can adapt and thrive. Investment in productivity, export infrastructure, and regional diversification can bring new opportunities. Some regions may shift focus, while others expand to meet global demand.
4. Would ending supply management threaten Canada’s food security or quality?
Food security and high standards can still be enforced through regulation, inspection, and industry leadership. New Zealand and Australia maintain world-class safety and welfare standards without supply management. Canada can do the same by making the supply management or free trade choice.
5. How would this affect Canada’s trade relationships?
Positively, Canada has lost leverage in past trade deals due to its protected sectors. Opening these markets would unlock new deals, reduce tensions with key partners, and strengthen Canada's position in global trade negotiations.
6. Isn’t supply management essential for protecting small family farms?
Supply management supports some farms, but not all — and the number of farms has declined over 90% since the 1970s. With modern support tools like co-ops, transition funds, and rural investment, family farms can succeed in a more open system — just as in other countries. This red herring gets used in supply management or free trade discussions. However the rates of farm number declines are similar in nations with or without supply management.
Links for Investors Interested in Supply Management or Free Trade
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