Managing Supply

Achieving supply management in Canada was not as easy as one would expect
Jim Knisley
Monday, 04 March 2013
By

The chronology of supply management in Canada’s poultry industries seems straightforward and linear, but disguised are the challenges, controversy, drama and crises that set the clock in motion.

The legislative chronology began when the Farm Products Marketing Agencies Act was passed in December 1971, and given Royal Assent on Jan. 12, 1972.

The Act provided an essentially parallel structure at the federal level, which was intended to dovetail with existing provincial plans.

In conjunction with provincial legislation, the federal act enabled poultry producers to establish national marketing boards and utilize supply management. The Egg Farmers of Canada were first off the mark in December 1972 and began operations in June 1973, while the Turkey Farmers of Canada (TFC) followed in 1974 with the Canadian Turkey Marketing Agency (CTMA). The Canadian Chicken Marketing Agency commenced operations a few years later in 1979 and in 1986 the Canadian Broiler Hatching Egg Marketing Agency (CBHEMA) began operating under a supply-management system.

Canadian pullet growers are still working today to establish their own agency.

The journey to supply management in Canada’s poultry industry involved interprovincial wrangling, constitutional challenges, the collapse of markets post- war, internal confrontations and a series of false starts and dead ends. It was a journey in which Britain and the United States played significant parts.

Fred Beeson, then editor and publisher of Canada Poultryman (now Canadian Poultry), played a key role throughout the early years in defining the need for change, promoting (and perhaps originating) the idea of supply management and providing coverage of the long, strange quarter-century trip.

From the export-led boom of the war years, through the struggles to retain international markets, to the interprovincial confrontations and court and constitutional challenges, Beeson and his magazine were there.

Prior to the Second World War and during the Great Depression, the Canadian poultry industry was hardly an industry. Beeson once said that, “During the depression, ’30’s agricultural production costs were hardly considered. It was enough, the producer was told, that he could scrape up sufficient food for his family and keep off relief.” Producing eggs and chickens was for the most part a secondary industry on most farms. Small flocks were kept in small poultry houses and the eggs and birds were sold locally to generate some cash for the farm.

But when the war happened, it all changed. Struggling for survival, Britain went all in to the war and needed food – a lot of food. Canada rallied to the cause, not only sending its sons and daughters, but also organizing itself to supply food, with eggs being a key component. After the United States entered the war, it also found the need for imported food (particularly chicken). Responding to the dire needs, the Canadian government set up a top-down apparatus to stimulate food production and delivery.

And it worked. There was a dramatic shift from food grains to feed grain. Prices were stabilized, production surged and exports boomed.

In 1945, Britain took almost three million cases of eggs from Canada.

Then, the war ended, and no one was certain what would come next. Some argued that the egg export industry would be a permanent feature of the Canadian economy. Others insisted that the exports were a wartime bubble that would pop.

In January 1946, Beeson wrote: “With the war over, poultry producers find themselves at the crossroads. Will subsidies be maintained, will the overseas market continue and what price will it net producers?”

Later that year, Beeson penned that the shape of the crossroads was becoming clearer. Denmark, Canada was told, had begun to sell eggs to Britain at 14 shillings less per 30 dozen cases than Canada. He wrote in June 1946, “How then can Canada continue to hold her position in the British market when other European countries are getting into production also?”

It was a critical question because half of Canada’s total egg production was being exported to Britain.

S.C. Barry, associate chief of the Dominion Marketing Service, said at the hatchery services convention in October 1946 that the British market was the key to prosperity. He said that Canada “must hold a substantial portion of that market, that it is the main force which will influence the barometer of prosperity in the industry.”   

The stresses and strains of emerging from a long wartime economy were also being felt across agriculture.

In February 1947, the Canadian Federation of Agriculture met with the federal cabinet and its brief said, “We believe it is highly desirable to have order and system in our production and marketing programs all the way through from the farm to the world market.”

But calling for order was far easier than achieving it. Change was in the wind.

Many economists, businessmen, financiers and politicians wanted a quick return to the prewar-free enterprise system with the removal of controls and subsidies. For example, in May 1947, Beeson wrote of the prospect of the removal of feed subsidies and higher prices for grain without the possibility of higher prices for eggs or chicken. “To maintain production it is absolutely necessary to continue a stabilized price relationship between costs and selling prices.” He continued, “Removing subsidies on grain will crumble the poultry industry as surely as the stabilized price has built it up these last few years.”

A year later, the situation had deteriorated to the point that the B.C. Poultry Industries Council called for national action and Beeson called for the passage of a national Natural Products Marketing Act that would work in conjunction with provincial marketing legislation. This would allow the establishment of a national board so that “the industry can regulate and control its own future.”

While Canada dawdled its way to a national board, Australia acted. It faced a similar situation in terms of both the British export market and its legislative framework – there were state marketing boards, but no national body. But, in January 1949, the Australian government established the Australian Egg Board to co-ordinate with the state agencies and buy and sell eggs and egg products intended for export. The board was to have 10 members, six of whom were producers.

In June of that year, Beeson called for the formation of a national export board to handle surplus production.

But with the decline and collapse of the British egg market and the re-emergence of the U.S. as an agricultural power and exporter, the 1950s and 1960s were marked by unstable prices, uncertain supplies, and fluctuating producer and processor revenues.

The instability came at a time when, building on its wartime need for production and efficiency, poultry emerged as an industry utilizing scientific and industrial developments in husbandry, feed, housing, lighting and animal health. As Beeson wrote, the days of the barnyard flock and poultry as a secondary enterprise aimed at generating a few extra dollars for the farm were over. Poultry producers’ flocks now numbered in the thousands or tens of thousands and poultry was no longer a sideline for thousands of farmers.

Key in all this was rural electrification. This was a singular goal of provincial governments and agencies following the war and changed everything for farmers. For poultry producers it enabled the construction of modern barns with lighting, feed and ventilation systems that dramatically raised productivity.

The economist Paul Krugman wrote recently in the New York Times that “electrification, for example, was a much bigger deal than the Internet.” It was a singular force in driving economic growth deep into the 20th century, he said.

Despite all the advances, the Canadian poultry industry remained unstable. In 1961, the B.C. broiler industry was facing overproduction and shipping its surpluses to Alberta, Saskatchewan and Manitoba. Beeson wrote that none of the provinces wanted the products either, as it helped break their prices.

In January 1962, British Columbia formed a broiler board to rein in production and stabilize prices. It was the first and only poultry board operating in Canada at the time. “Here we were with no surplus broilers in B.C., none in the neighbouring provinces and a rising price,” Beeson wrote after the board’s establishment.

Beeson argued in April 1964 that the industry needed more than the marketing control allowed under some provincial laws. The editorial said, “One cannot help but feel that it is not marketing control that is needed, but production control. Our feeling is that it is this form of control that all other poultry groups need to ensure a continuing healthy marketing setup.”

“If an industry has a surplus,” the editorial continued, “there is no known method of maintaining a satisfactory price with or without a board short of destroying the surplus.”

In November 1964, with turmoil continuing and emotions at their peak, Beeson weighed in again in his editorial and pulled no punches: “Hoping the other fellow will go broke is a poor way of evaluating the profit prospects of a business. That’s the present state of affairs, let’s face it.”

He continued: “Don’t let us waste time pointing fingers at one another. Far better to face the fact we are not living in a period of scarcity anymore. We can, in any one season, quite easily double our production across Canada. In fact that’s the way we have been heading for several years; not making it because too many go broke each year.

“It may well seem that we harp on this problem of overproduction and consequent low prices eternally in these editorials. We don’t apologize because this is the number one problem of the industry.”

Through the 1960s, other provinces joined B.C. in forming provincial boards including Quebec and Ontario in 1965, Saskatchewan and Nova Scotia in 1966, and Manitoba in 1968. The boards had authority to regulate pricing and production through marketing quotas but only within the province – often they faced cheaper product from other provinces or from the United States.

This culminated in 1970, with Ontario and Manitoba shipping large volumes of eggs to Quebec. In response, the Quebec government allowed the provincial egg marketing board to restrict the imports. In retaliation, the other provinces restricted the movement of Quebec chicken into their provinces, and the result was known as the “Chicken and Egg War.”

However, Manitoba devised a brilliant legal tactic to deal with the situation. Since it could not refer the Quebec legislation to a Manitoba court, it enacted identical legislation of its own, and then referred that legislation to its own Court of Appeal, where the legislation was struck down. This decision made it clear there were limits to what provincial boards and legislation could accomplish without co-ordination by both the provinces and the federal government.

A brief history of supply management on Agriculture Canada’s website says that Bill C-197 was introduced shortly thereafter. The bill “would have enabled a national marketing agency to control production through a quota system and allocated a portion of the national market to each province. It would have prohibited surpluses in one province from being sold in another province and set the price paid producers according to production costs.”

But that legislation died on the order paper.

It was reintroduced as Bill C-176 and was passed and enacted in January 1972, but only after substantial debate. From that, the National Farm Products Marketing Council was established and it paved the way for the creation of the Canadian Egg Marketing Agency, with the forming of the CTMA following shortly thereafter. Chicken took longer because of interprovincial disputes over shares of national production and quotas.

The establishment of a national agency should have put an end to the disputes, but the debates continued. In a February 1980 editorial, Beeson criticized chicken agency members for “jockeying for position in the pecking order,” adding, “…probably it will again take the Minister of Agriculture to put his foot down, heavily, really heavily.” Beeson added: “If it hadn’t been for such provincial bickering four or five years ago the Agency would have come into existence and annual imports would not have averaged more than 5 million pounds instead of fifty million plus a year as of now.”

In a 1975 debate in the B.C. Legislature, D.E. Lewis said: “I have to say quite openly that I feel that the Canadian Egg Marketing Agency is a disaster . . . . I don’t think that CEMA has been beneficial to B.C. or the farmers or the producers.”

“If the present CEMA system is allowed to continue, I can see nothing but chaos in the province,” Lewis said.

Similar debates were held and opinions aired across the country. Surprisingly, the federal Agriculture Minister, the late Eugene Whelan, long a strong supporter of marketing boards, agreed. “CEMA is not the success that producers want it to be. Nor is it the success I want it to be,” said Whelan. “The final verdict will come in the next few months. If the provincial boards live up to their agreements, our chief egg marketing problems will end. If they don’t, the next press conference I call on CEMA will be the last.”

Basically, the problems stemmed from overproduction and the reluctance or inability of provinces and the provincial boards to control it. Compounding the difficulties was a continued rise in U.S. imports. It got to a point where Whelan told the provinces that if they instituted tough, enforceable provincial regulations and agreements to deal with domestic overproduction, he would deal with the Americans.

An example of tough new provincial rules came on April 18, 1975, when the Ontario Farm Products Marketing Amendment Act was signed into law. It gave the Ontario Egg Producers’ Marketing Board, for the first time, authority to establish regulations to carry out effective production control utilizing quotas and providing for the inspection of premises (without a warrant) when it was believed the regulations were not being followed.

With provincial regulation in place, the federal government did its part by imposing strict import quotas for eggs and other supply-managed poultry and poultry products. The U.S. challenged these import quotas at the General Agreement on Tariffs and Trade, but they were upheld.

In 1978, the Supreme Court of Canada was called into the fray. The Court was asked by the Attorney General of Ontario for a ruling on the constitutionality of the provincial and federal rules and regulations, as well as the agreement between the provinces and the federal government.

In its ruling, the court said: “The provincial regulations in question were not aimed at such extraprovincial trade and in so far as it affects this trade it is only complementary to the federal regulations. This is perfectly legitimate, otherwise federal-provincial cooperative action in regulating a commodity in both intraprovincial and extraprovincial trade would be impossible.”

Chief Justice Bora Laskin, writing for the majority, wrote that the federal-provincial agreements establishing supply management were lawful, “even if it be an awkward way of overcoming a want of federal authority to regulate through an agency of its own the marketing of eggs throughout and beyond Canada, including local marketing.”

Taking that the Supreme Court settled the legal argument for supply management, William Stewart, Ontario’s Progressive Conservative minister of agriculture from 1961 to 1975, described the social and economic necessity of egg production as “a disaster course” at the London Poultry Conference in June 1972.  

And Eugene Whelan described the politics of the time, saying: “I went through hell to make sure you had supply
management.”

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